[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) | 36-6169860 (I.R.S. Employer Identification No.) |
151 N. Franklin Chicago, Illinois (Address of principal executive offices) | 60606 (Zip Code) |
Large accelerated filer [x] | Accelerated filer [ ] | Non-accelerated filer [ ] | Smaller reporting company [ ] | Emerging growth company [ ] |
Class | Outstanding at November 1, 2018 | |
Common Stock, Par value $2.50 | 271,410,714 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions, except per share data) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Revenues | |||||||||||||||
Net earned premiums | $ | 1,853 | $ | 1,806 | $ | 5,453 | $ | 5,185 | |||||||
Net investment income | 487 | 509 | 1,483 | 1,529 | |||||||||||
Net realized investment gains (losses): | |||||||||||||||
Other-than-temporary impairment losses | (3 | ) | (5 | ) | (9 | ) | (9 | ) | |||||||
Other net realized investment gains (losses) | 17 | (19 | ) | 34 | 71 | ||||||||||
Net realized investment gains (losses) | 14 | (24 | ) | 25 | 62 | ||||||||||
Non-insurance warranty revenue (Note J) | 258 | 99 | 744 | 290 | |||||||||||
Other revenues | 10 | 8 | 26 | 28 | |||||||||||
Total revenues | 2,622 | 2,398 | 7,731 | 7,094 | |||||||||||
Claims, Benefits and Expenses | |||||||||||||||
Insurance claims and policyholders’ benefits | 1,312 | 1,480 | 3,978 | 4,053 | |||||||||||
Amortization of deferred acquisition costs | 337 | 309 | 992 | 926 | |||||||||||
Non-insurance warranty expense (Note J) | 235 | 74 | 676 | 216 | |||||||||||
Other operating expenses | 302 | 307 | 903 | 875 | |||||||||||
Interest | 34 | 41 | 104 | 124 | |||||||||||
Total claims, benefits and expenses | 2,220 | 2,211 | 6,653 | 6,194 | |||||||||||
Income before income tax | 402 | 187 | 1,078 | 900 | |||||||||||
Income tax expense | (66 | ) | (43 | ) | (181 | ) | (224 | ) | |||||||
Net income | $ | 336 | $ | 144 | $ | 897 | $ | 676 | |||||||
Basic earnings per share | $ | 1.24 | $ | 0.53 | $ | 3.30 | $ | 2.49 | |||||||
Diluted earnings per share | $ | 1.23 | $ | 0.53 | $ | 3.29 | $ | 2.48 | |||||||
Dividends declared per share | $ | 0.35 | $ | 0.30 | $ | 2.95 | $ | 2.80 | |||||||
Weighted Average Outstanding Common Stock and Common Stock Equivalents | |||||||||||||||
Basic | 271.6 | 271.2 | 271.5 | 271.1 | |||||||||||
Diluted | 272.5 | 272.1 | 272.4 | 272.0 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Comprehensive Income | |||||||||||||||
Net income | $ | 336 | $ | 144 | $ | 897 | $ | 676 | |||||||
Other Comprehensive (Loss) Income, Net of Tax | |||||||||||||||
Changes in: | |||||||||||||||
Net unrealized gains on investments with other-than-temporary impairments | (1 | ) | 1 | (11 | ) | (3 | ) | ||||||||
Net unrealized gains on other investments | (158 | ) | 23 | (746 | ) | 167 | |||||||||
Net unrealized gains on investments | (159 | ) | 24 | (757 | ) | 164 | |||||||||
Foreign currency translation adjustment | — | 41 | (40 | ) | 94 | ||||||||||
Pension and postretirement benefits | 7 | 10 | 24 | 22 | |||||||||||
Other comprehensive (loss) income, net of tax | (152 | ) | 75 | (773 | ) | 280 | |||||||||
Total comprehensive income | $ | 184 | $ | 219 | $ | 124 | $ | 956 |
(In millions, except share data) | September 30, 2018 (Unaudited) | December 31, 2017 | |||||
Assets | |||||||
Investments: | |||||||
Fixed maturity securities at fair value (amortized cost of $38,052 and $38,215) | $ | 39,628 | $ | 41,487 | |||
Equity securities at fair value (cost of $784 and $659) | 795 | 695 | |||||
Limited partnership investments | 2,297 | 2,369 | |||||
Other invested assets | 51 | 44 | |||||
Mortgage loans | 868 | 839 | |||||
Short term investments | 1,290 | 1,436 | |||||
Total investments | 44,929 | 46,870 | |||||
Cash | 310 | 355 | |||||
Reinsurance receivables (less allowance for uncollectible receivables of $29 and $29) | 4,224 | 4,261 | |||||
Insurance receivables (less allowance for uncollectible receivables of $46 and $44) | 2,354 | 2,292 | |||||
Accrued investment income | 406 | 411 | |||||
Deferred acquisition costs | 654 | 634 | |||||
Deferred income taxes | 314 | 137 | |||||
Property and equipment at cost (less accumulated depreciation of $208 and $274) | 332 | 326 | |||||
Goodwill | 147 | 148 | |||||
Other assets (Note A) | 3,589 | 1,133 | |||||
Total assets | $ | 57,259 | $ | 56,567 | |||
Liabilities | |||||||
Insurance reserves: | |||||||
Claim and claim adjustment expenses | $ | 21,604 | $ | 22,004 | |||
Unearned premiums | 4,289 | 4,029 | |||||
Future policy benefits | 10,605 | 11,179 | |||||
Short term debt | — | 150 | |||||
Long term debt | 2,680 | 2,708 | |||||
Other liabilities (includes $52 and $143 due to Loews Corporation) (Note A) | 6,571 | 4,253 | |||||
Total liabilities | 45,749 | 44,323 | |||||
Commitments and contingencies (Notes C and F) | |||||||
Stockholders' Equity | |||||||
Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 271,410,714 and 271,205,390 shares outstanding) | 683 | 683 | |||||
Additional paid-in capital | 2,186 | 2,175 | |||||
Retained earnings | 9,456 | 9,414 | |||||
Accumulated other comprehensive (loss) income | (757 | ) | 32 | ||||
Treasury stock (1,629,529 and 1,834,853 shares), at cost | (58 | ) | (60 | ) | |||
Total stockholders’ equity | 11,510 | 12,244 | |||||
Total liabilities and stockholders' equity | $ | 57,259 | $ | 56,567 |
Nine months ended September 30 | |||||||
(In millions) | 2018 | 2017 | |||||
Cash Flows from Operating Activities | |||||||
Net income | $ | 897 | $ | 676 | |||
Adjustments to reconcile net income to net cash flows provided by operating activities: | |||||||
Deferred income tax expense | 37 | 125 | |||||
Trading portfolio activity | 2 | 8 | |||||
Net realized investment gains | (25 | ) | (62 | ) | |||
Equity method investees | 136 | 89 | |||||
Net amortization of investments | (48 | ) | (30 | ) | |||
Depreciation and amortization | 59 | 66 | |||||
Changes in: | |||||||
Receivables, net | (47 | ) | 18 | ||||
Accrued investment income | 5 | (31 | ) | ||||
Deferred acquisition costs | (24 | ) | (34 | ) | |||
Insurance reserves | 108 | 248 | |||||
Other assets | (193 | ) | (121 | ) | |||
Other liabilities | (107 | ) | (106 | ) | |||
Other, net | 68 | 48 | |||||
Total adjustments | (29 | ) | 218 | ||||
Net cash flows provided by operating activities | 868 | 894 | |||||
Cash Flows from Investing Activities | |||||||
Dispositions: | |||||||
Fixed maturity securities - sales | 6,622 | 4,167 | |||||
Fixed maturity securities - maturities, calls and redemptions | 1,838 | 2,635 | |||||
Equity securities | 69 | 22 | |||||
Limited partnerships | 304 | 160 | |||||
Mortgage loans | 83 | 22 | |||||
Purchases: | |||||||
Fixed maturity securities | (8,244 | ) | (6,877 | ) | |||
Equity securities | (177 | ) | (18 | ) | |||
Limited partnerships | (380 | ) | (85 | ) | |||
Mortgage loans | (112 | ) | (153 | ) | |||
Change in other investments | (10 | ) | (2 | ) | |||
Change in short term investments | 158 | (29 | ) | ||||
Purchases of property and equipment | (87 | ) | (80 | ) | |||
Other, net | 16 | 20 | |||||
Net cash flows provided (used) by investing activities | 80 | (218 | ) |
Nine months ended September 30 | |||||||
(In millions) | 2018 | 2017 | |||||
Cash Flows from Financing Activities | |||||||
Dividends paid to common stockholders | $ | (801 | ) | $ | (761 | ) | |
Proceeds from the issuance of debt | — | 496 | |||||
Repayment of debt | (180 | ) | (391 | ) | |||
Other, net | (8 | ) | (17 | ) | |||
Net cash flows used by financing activities | (989 | ) | (673 | ) | |||
Effect of foreign exchange rate changes on cash | (4 | ) | 9 | ||||
Net change in cash | (45 | ) | 12 | ||||
Cash, beginning of year | 355 | 271 | |||||
Cash, end of period | $ | 310 | $ | 283 |
Nine months ended September 30 | |||||||
(In millions) | 2018 | 2017 | |||||
Common Stock | |||||||
Balance, beginning of period | $ | 683 | $ | 683 | |||
Balance, end of period | 683 | 683 | |||||
Additional Paid-in Capital | |||||||
Balance, beginning of period | 2,175 | 2,173 | |||||
Stock-based compensation | 11 | (6 | ) | ||||
Balance, end of period | 2,186 | 2,167 | |||||
Retained Earnings | |||||||
Balance, beginning of period, as previously reported | 9,414 | 9,359 | |||||
Cumulative effect adjustments from changes in accounting guidance, net of tax | (50 | ) | — | ||||
Balance, beginning of period, as adjusted | 9,364 | 9,359 | |||||
Dividends to common stockholders | (805 | ) | (762 | ) | |||
Net income | 897 | 676 | |||||
Balance, end of period | 9,456 | 9,273 | |||||
Accumulated Other Comprehensive (Loss) Income | |||||||
Balance, beginning of period, as previously reported | 32 | (173 | ) | ||||
Cumulative effect adjustments from changes in accounting guidance, net of tax | (16 | ) | — | ||||
Balance, beginning of period, as adjusted | 16 | (173 | ) | ||||
Other comprehensive (loss) income | (773 | ) | 280 | ||||
Balance, end of period | (757 | ) | 107 | ||||
Treasury Stock | |||||||
Balance, beginning of period | (60 | ) | (73 | ) | |||
Stock-based compensation | 2 | 12 | |||||
Balance, end of period | (58 | ) | (61 | ) | |||
Total stockholders' equity | $ | 11,510 | $ | 12,169 |
(In millions) | Balance as of December 31, 2017 | Adjustments Due to Adoption of Topic 606 | Balance as of January 1, 2018 | ||||||||
Other assets | $ | 1,133 | $ | 1,882 | $ | 3,015 | |||||
Other liabilities | 4,253 | 1,969 | 6,222 | ||||||||
Deferred income taxes | 137 | 21 | 158 | ||||||||
Retained earnings | 9,414 | (66 | ) | 9,348 |
Periods ended September 30, 2018 | Three Months | Nine Months | |||||||||||||||||||||
Prior to Adoption | Effect of Adoption | As Reported | Prior to Adoption | Effect of Adoption | As Reported | ||||||||||||||||||
(In millions) | |||||||||||||||||||||||
Statement of operations: | |||||||||||||||||||||||
Non-insurance warranty revenue | $ | 109 | $ | 149 | $ | 258 | $ | 315 | $ | 429 | $ | 744 | |||||||||||
Total revenues | 2,473 | 149 | 2,622 | 7,302 | 429 | 7,731 | |||||||||||||||||
Non-insurance warranty expense | 82 | 153 | 235 | 240 | 436 | 676 | |||||||||||||||||
Total claims, benefits and expenses | 2,067 | 153 | 2,220 | 6,217 | 436 | 6,653 | |||||||||||||||||
Income before income tax | 406 | (4 | ) | 402 | 1,085 | (7 | ) | 1,078 | |||||||||||||||
Income tax expense | (67 | ) | 1 | (66 | ) | (183 | ) | 2 | (181 | ) | |||||||||||||
Net income | 339 | (3 | ) | 336 | 902 | (5 | ) | 897 | |||||||||||||||
Balance sheet(1) at September 30, 2018: | |||||||||||||||||||||||
Other assets | $ | 3,284 | $ | 305 | $ | 3,589 | |||||||||||||||||
Other liabilities | 6,259 | 312 | 6,571 | ||||||||||||||||||||
Deferred income taxes | 312 | 2 | 314 | ||||||||||||||||||||
Retained earnings | 9,461 | (5 | ) | 9,456 |
(1) | The Prior to Adoption amounts presented in this table include the cumulative effect adjustment at adoption presented in the prior table. |
• | The Company has recalculated its insurance reserves and the transition adjustment from existing law. |
• | The Company has recalculated amounts under special accounting method provisions for recognizing income for Federal income tax purposes no later than for financial accounting purposes and the transition adjustment from existing law. |
• | The Company has not recorded current or deferred taxes with respect to the international provisions since it does not expect to have inclusions in U.S. taxable income for certain earnings of foreign subsidiaries in future years. |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Fixed maturity securities | $ | 449 | $ | 455 | $ | 1,339 | $ | 1,367 | |||||||
Equity securities | 10 | 1 | 32 | 4 | |||||||||||
Limited partnership investments | 23 | 51 | 93 | 157 | |||||||||||
Mortgage loans | 11 | 9 | 36 | 24 | |||||||||||
Short term investments | 6 | 4 | 18 | 10 | |||||||||||
Trading portfolio | 1 | 3 | 6 | 9 | |||||||||||
Other | 1 | 1 | 4 | 2 | |||||||||||
Gross investment income | 501 | 524 | 1,528 | 1,573 | |||||||||||
Investment expense | (14 | ) | (15 | ) | (45 | ) | (44 | ) | |||||||
Net investment income | $ | 487 | $ | 509 | $ | 1,483 | $ | 1,529 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net realized investment gains (losses): | |||||||||||||||
Fixed maturity securities: | |||||||||||||||
Gross realized gains | $ | 42 | $ | 34 | $ | 148 | $ | 139 | |||||||
Gross realized losses | (32 | ) | (18 | ) | (116 | ) | (47 | ) | |||||||
Net realized investment gains (losses) on fixed maturity securities | 10 | 16 | 32 | 92 | |||||||||||
Equity securities | 2 | — | (23 | ) | — | ||||||||||
Derivatives | 1 | (1 | ) | 10 | (3 | ) | |||||||||
Short term investments and other | 1 | (39 | ) | 6 | (27 | ) | |||||||||
Net realized investment gains (losses) | $ | 14 | $ | (24 | ) | $ | 25 | $ | 62 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Fixed maturity securities available-for-sale: | |||||||||||||||
Corporate and other bonds | $ | 1 | $ | 4 | $ | 6 | $ | 8 | |||||||
Asset-backed | 2 | 1 | 3 | 1 | |||||||||||
OTTI losses recognized in earnings | $ | 3 | $ | 5 | $ | 9 | $ | 9 |
September 30, 2018 (1) | Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Unrealized OTTI Losses (Gains) | ||||||||||||||
(In millions) | |||||||||||||||||||
Fixed maturity securities available-for-sale: | |||||||||||||||||||
Corporate and other bonds | $ | 18,348 | $ | 887 | $ | 215 | $ | 19,020 | $ | — | |||||||||
States, municipalities and political subdivisions | 10,171 | 994 | 20 | 11,145 | — | ||||||||||||||
Asset-backed: | |||||||||||||||||||
Residential mortgage-backed | 5,024 | 62 | 115 | 4,971 | (24 | ) | |||||||||||||
Commercial mortgage-backed | 2,165 | 23 | 36 | 2,152 | — | ||||||||||||||
Other asset-backed | 1,732 | 6 | 9 | 1,729 | — | ||||||||||||||
Total asset-backed | 8,921 | 91 | 160 | 8,852 | (24 | ) | |||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 145 | 2 | 2 | 145 | — | ||||||||||||||
Foreign government | 457 | 4 | 6 | 455 | — | ||||||||||||||
Redeemable preferred stock | 9 | 1 | — | 10 | — | ||||||||||||||
Total fixed maturity securities available-for-sale | 38,051 | 1,979 | 403 | 39,627 | $ | (24 | ) | ||||||||||||
Total fixed maturity securities trading | 1 | 1 | |||||||||||||||||
Total fixed maturity securities | $ | 38,052 | $ | 1,979 | $ | 403 | $ | 39,628 |
December 31, 2017 | Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Unrealized OTTI Losses (Gains) | ||||||||||||||
(In millions) | |||||||||||||||||||
Fixed maturity securities available-for-sale: | |||||||||||||||||||
Corporate and other bonds | $ | 17,210 | $ | 1,625 | $ | 28 | $ | 18,807 | $ | — | |||||||||
States, municipalities and political subdivisions | 12,478 | 1,551 | 2 | 14,027 | (11 | ) | |||||||||||||
Asset-backed: | |||||||||||||||||||
Residential mortgage-backed | 5,043 | 109 | 32 | 5,120 | (27 | ) | |||||||||||||
Commercial mortgage-backed | 1,840 | 46 | 14 | 1,872 | — | ||||||||||||||
Other asset-backed | 1,083 | 16 | 5 | 1,094 | — | ||||||||||||||
Total asset-backed | 7,966 | 171 | 51 | 8,086 | (27 | ) | |||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 111 | 2 | 4 | 109 | — | ||||||||||||||
Foreign government | 437 | 9 | 2 | 444 | — | ||||||||||||||
Redeemable preferred stock | 10 | 1 | — | 11 | — | ||||||||||||||
Total fixed maturity securities available-for-sale | 38,212 | 3,359 | 87 | 41,484 | $ | (38 | ) | ||||||||||||
Total fixed maturity securities trading | 3 | 3 | |||||||||||||||||
Equity securities available-for-sale: | |||||||||||||||||||
Common stock | 21 | 7 | 1 | 27 | |||||||||||||||
Preferred stock | 638 | 31 | 1 | 668 | |||||||||||||||
Total equity securities available-for-sale | 659 | 38 | 2 | 695 | |||||||||||||||
Total fixed maturity and equity securities | $ | 38,874 | $ | 3,397 | $ | 89 | $ | 42,182 |
(1) | As of January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The change in fair value of equity securities is now recognized through the income statement. See Note A to the Condensed Consolidated Financial Statements for additional information. |
Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||
September 30, 2018 (1) | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | |||||||||||||||||
(In millions) | |||||||||||||||||||||||
Fixed maturity securities available-for-sale: | |||||||||||||||||||||||
Corporate and other bonds | $ | 7,546 | $ | 197 | $ | 342 | $ | 18 | $ | 7,888 | $ | 215 | |||||||||||
States, municipalities and political subdivisions | 807 | 19 | 2 | 1 | 809 | 20 | |||||||||||||||||
Asset-backed: | |||||||||||||||||||||||
Residential mortgage-backed | 3,409 | 89 | 501 | 26 | 3,910 | 115 | |||||||||||||||||
Commercial mortgage-backed | 968 | 15 | 322 | 21 | 1,290 | 36 | |||||||||||||||||
Other asset-backed | 953 | 9 | 45 | — | 998 | 9 | |||||||||||||||||
Total asset-backed | 5,330 | 113 | 868 | 47 | 6,198 | 160 | |||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 35 | — | 42 | 2 | 77 | 2 | |||||||||||||||||
Foreign government | 188 | 4 | 64 | 2 | 252 | 6 | |||||||||||||||||
Total | $ | 13,906 | $ | 333 | $ | 1,318 | $ | 70 | $ | 15,224 | $ | 403 |
Less than 12 Months | 12 Months or Longer | Total | |||||||||||||||||||||
December 31, 2017 | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | |||||||||||||||||
(In millions) | |||||||||||||||||||||||
Fixed maturity securities available-for-sale: | |||||||||||||||||||||||
Corporate and other bonds | $ | 1,354 | $ | 21 | $ | 168 | $ | 7 | $ | 1,522 | $ | 28 | |||||||||||
States, municipalities and political subdivisions | 72 | 1 | 85 | 1 | 157 | 2 | |||||||||||||||||
Asset-backed: | |||||||||||||||||||||||
Residential mortgage-backed | 1,228 | 5 | 947 | 27 | 2,175 | 32 | |||||||||||||||||
Commercial mortgage-backed | 403 | 4 | 212 | 10 | 615 | 14 | |||||||||||||||||
Other asset-backed | 248 | 3 | 18 | 2 | 266 | 5 | |||||||||||||||||
Total asset-backed | 1,879 | 12 | 1,177 | 39 | 3,056 | 51 | |||||||||||||||||
U.S. Treasury and obligations of government-sponsored enterprises | 49 | 2 | 21 | 2 | 70 | 4 | |||||||||||||||||
Foreign government | 166 | 2 | 4 | — | 170 | 2 | |||||||||||||||||
Total fixed maturity securities available-for-sale | 3,520 | 38 | 1,455 | 49 | 4,975 | 87 | |||||||||||||||||
Equity securities available-for-sale: | |||||||||||||||||||||||
Common stock | 7 | 1 | — | — | 7 | 1 | |||||||||||||||||
Preferred stock | 93 | 1 | — | — | 93 | 1 | |||||||||||||||||
Total equity securities available-for-sale | 100 | 2 | — | — | 100 | 2 | |||||||||||||||||
Total | $ | 3,620 | $ | 40 | $ | 1,455 | $ | 49 | $ | 5,075 | $ | 89 |
(1) | As of January 1, 2018, the Company adopted ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The change in fair value of equity securities is now recognized through the income statement. See Note A to the Condensed Consolidated Financial Statements for additional information. |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Beginning balance of credit losses on fixed maturity securities | $ | 21 | $ | 30 | $ | 27 | $ | 36 | |||||||
Reductions for securities sold during the period | (2 | ) | (2 | ) | (8 | ) | (8 | ) | |||||||
Ending balance of credit losses on fixed maturity securities | $ | 19 | $ | 28 | $ | 19 | $ | 28 |
September 30, 2018 | December 31, 2017 | ||||||||||||||
(In millions) | Cost or Amortized Cost | Estimated Fair Value | Cost or Amortized Cost | Estimated Fair Value | |||||||||||
Due in one year or less | $ | 1,457 | $ | 1,473 | $ | 1,135 | $ | 1,157 | |||||||
Due after one year through five years | 8,017 | 8,197 | 8,165 | 8,501 | |||||||||||
Due after five years through ten years | 16,453 | 16,475 | 16,060 | 16,718 | |||||||||||
Due after ten years | 12,124 | 13,482 | 12,852 | 15,108 | |||||||||||
Total | $ | 38,051 | $ | 39,627 | $ | 38,212 | $ | 41,484 |
September 30, 2018 | Total Assets/Liabilities at Fair Value | ||||||||||||||
(In millions) | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | |||||||||||||||
Fixed maturity securities: | |||||||||||||||
Corporate bonds and other | $ | 183 | $ | 19,260 | $ | 188 | $ | 19,631 | |||||||
States, municipalities and political subdivisions | — | 11,145 | — | 11,145 | |||||||||||
Asset-backed | — | 8,554 | 298 | 8,852 | |||||||||||
Total fixed maturity securities | 183 | 38,959 | 486 | 39,628 | |||||||||||
Equity securities: | |||||||||||||||
Common stock | 101 | — | 4 | 105 | |||||||||||
Non-redeemable preferred stock | 51 | 625 | 14 | 690 | |||||||||||
Total equity securities | 152 | 625 | 18 | 795 | |||||||||||
Short term and other | 252 | 931 | — | 1,183 | |||||||||||
Total assets | $ | 587 | $ | 40,515 | $ | 504 | $ | 41,606 | |||||||
Liabilities | |||||||||||||||
Other liabilities | $ | — | $ | (6 | ) | $ | — | $ | (6 | ) | |||||
Total liabilities | $ | — | $ | (6 | ) | $ | — | $ | (6 | ) |
December 31, 2017 | Total Assets/Liabilities at Fair Value | ||||||||||||||
(In millions) | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets | |||||||||||||||
Fixed maturity securities: | |||||||||||||||
Corporate bonds and other | $ | 128 | $ | 19,148 | $ | 98 | $ | 19,374 | |||||||
States, municipalities and political subdivisions | — | 14,026 | 1 | 14,027 | |||||||||||
Asset-backed | — | 7,751 | 335 | 8,086 | |||||||||||
Total fixed maturity securities | 128 | 40,925 | 434 | 41,487 | |||||||||||
Equity securities: | |||||||||||||||
Common stock | 23 | — | 4 | 27 | |||||||||||
Non-redeemable preferred stock | 68 | 584 | 16 | 668 | |||||||||||
Total equity securities | 91 | 584 | 20 | 695 | |||||||||||
Short term and other | 396 | 958 | — | 1,354 | |||||||||||
Total assets | $ | 615 | $ | 42,467 | $ | 454 | $ | 43,536 | |||||||
Liabilities | |||||||||||||||
Other liabilities | $ | — | $ | 3 | $ | — | $ | 3 | |||||||
Total liabilities | $ | — | $ | 3 | $ | — | $ | 3 |
Level 3 (In millions) | Corporate bonds and other | States, municipalities and political subdivisions | Asset-backed | Equity securities | Derivative financial instruments | Total | |||||||||||||||||
Balance as of July 1, 2018 | $ | 94 | $ | 1 | $ | 273 | $ | 17 | $ | — | $ | 385 | |||||||||||
Total realized and unrealized investment gains (losses): | |||||||||||||||||||||||
Reported in Net realized investment gains (losses) | — | — | (2 | ) | 1 | — | (1 | ) | |||||||||||||||
Reported in Net investment income | — | — | — | — | — | — | |||||||||||||||||
Reported in Other comprehensive income | — | — | — | — | — | — | |||||||||||||||||
Total realized and unrealized investment gains (losses) | — | — | (2 | ) | 1 | — | (1 | ) | |||||||||||||||
Purchases | 67 | — | 55 | — | — | 122 | |||||||||||||||||
Sales | — | — | — | — | — | — | |||||||||||||||||
Settlements | (3 | ) | (1 | ) | (25 | ) | — | — | (29 | ) | |||||||||||||
Transfers into Level 3 | 30 | — | 29 | — | — | 59 | |||||||||||||||||
Transfers out of Level 3 | — | — | (32 | ) | — | — | (32 | ) | |||||||||||||||
Balance as of September 30, 2018 | $ | 188 | $ | — | $ | 298 | $ | 18 | $ | — | $ | 504 | |||||||||||
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2018 recognized in Net income (loss) | $ | — | $ | — | $ | (2 | ) | $ | 1 | $ | — | $ | (1 | ) | |||||||||
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2018 recognized in Other Comprehensive Income | — | — | 1 | — | — | 1 |
Level 3 (In millions) | Corporate bonds and other | States, municipalities and political subdivisions | Asset-backed | Equity securities | Derivative financial instruments | Life settlement contracts | Total | ||||||||||||||||||||
Balance as of July 1, 2017 | $ | 100 | $ | 1 | $ | 218 | $ | 19 | $ | — | $ | 1 | $ | 339 | |||||||||||||
Total realized and unrealized investment gains (losses): | |||||||||||||||||||||||||||
Reported in Net realized investment gains (losses) | 1 | — | — | — | — | — | 1 | ||||||||||||||||||||
Reported in Other revenues | — | — | — | — | — | — | — | ||||||||||||||||||||
Reported in Other comprehensive income | 1 | — | 1 | — | — | — | 2 | ||||||||||||||||||||
Total realized and unrealized investment gains (losses) | 2 | — | 1 | — | — | — | 3 | ||||||||||||||||||||
Purchases | 13 | — | 39 | — | — | — | 52 | ||||||||||||||||||||
Sales | — | — | — | — | — | (1 | ) | (1 | ) | ||||||||||||||||||
Settlements | (11 | ) | — | (13 | ) | — | — | — | (24 | ) | |||||||||||||||||
Transfers into Level 3 | 15 | — | 101 | — | — | — | 116 | ||||||||||||||||||||
Transfers out of Level 3 | — | — | — | — | — | — | — | ||||||||||||||||||||
Balance as of September 30, 2017 | $ | 119 | $ | 1 | $ | 346 | $ | 19 | $ | — | $ | — | $ | 485 | |||||||||||||
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2017 recognized in Net income (loss) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
Level 3 (In millions) | Corporate bonds and other | States, municipalities and political subdivisions | Asset-backed | Equity securities | Derivative financial instruments | Total | |||||||||||||||||
Balance as of January 1, 2018 | $ | 98 | $ | 1 | $ | 335 | $ | 20 | $ | — | $ | 454 | |||||||||||
Total realized and unrealized investment gains (losses): | |||||||||||||||||||||||
Reported in Net realized investment gains (losses) | (1 | ) | — | 5 | (2 | ) | — | 2 | |||||||||||||||
Reported in Net investment income | — | — | — | — | — | — | |||||||||||||||||
Reported in Other comprehensive income | (1 | ) | — | (6 | ) | — | — | (7 | ) | ||||||||||||||
Total realized and unrealized investment gains (losses) | (2 | ) | — | (1 | ) | (2 | ) | — | (5 | ) | |||||||||||||
Purchases | 69 | — | 126 | — | — | 195 | |||||||||||||||||
Sales | (5 | ) | — | (72 | ) | — | — | (77 | ) | ||||||||||||||
Settlements | (7 | ) | (1 | ) | (37 | ) | — | — | (45 | ) | |||||||||||||
Transfers into Level 3 | 35 | — | 42 | — | — | 77 | |||||||||||||||||
Transfers out of Level 3 | — | — | (95 | ) | — | — | (95 | ) | |||||||||||||||
Balance as of September 30, 2018 | $ | 188 | $ | — | $ | 298 | $ | 18 | $ | — | $ | 504 | |||||||||||
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2018 recognized in Net income (loss) | $ | — | $ | — | $ | (2 | ) | $ | (2 | ) | $ | — | $ | (4 | ) | ||||||||
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2018 recognized in Other Comprehensive Income | (2 | ) | — | (2 | ) | — | — | (4 | ) |
Level 3 (In millions) | Corporate bonds and other | States, municipalities and political subdivisions | Asset-backed | Equity securities | Derivative financial instruments | Life settlement contracts | Total | ||||||||||||||||||||
Balance as of January 1, 2017 | $ | 130 | $ | 1 | $ | 199 | $ | 19 | $ | — | $ | 58 | $ | 407 | |||||||||||||
Total realized and unrealized investment gains (losses): | |||||||||||||||||||||||||||
Reported in Net realized investment gains (losses) | 1 | — | 1 | — | 1 | — | 3 | ||||||||||||||||||||
Reported in Other revenues | — | — | — | — | — | 6 | 6 | ||||||||||||||||||||
Reported in Other comprehensive income | 2 | — | 4 | 2 | — | — | 8 | ||||||||||||||||||||
Total realized and unrealized investment gains (losses) | 3 | — | 5 | 2 | 1 | 6 | 17 | ||||||||||||||||||||
Purchases | 18 | — | 90 | 1 | — | — | 109 | ||||||||||||||||||||
Sales | (1 | ) | — | — | (3 | ) | (1 | ) | (59 | ) | (64 | ) | |||||||||||||||
Settlements | (36 | ) | — | (26 | ) | — | — | (5 | ) | (67 | ) | ||||||||||||||||
Transfers into Level 3 | 15 | — | 153 | — | — | — | 168 | ||||||||||||||||||||
Transfers out of Level 3 | (10 | ) | — | (75 | ) | — | — | — | (85 | ) | |||||||||||||||||
Balance as of September 30, 2017 | $ | 119 | $ | 1 | $ | 346 | $ | 19 | $ | — | $ | — | $ | 485 | |||||||||||||
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2017 recognized in Net income (loss) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — |
September 30, 2018 | Estimated Fair Value (In millions) | Valuation Technique(s) | Unobservable Input(s) | Range (Weighted Average) | |||||
Fixed maturity securities | $ | 198 | Discounted cash flow | Credit spread | 1% - 12% (2%) |
December 31, 2017 | Estimated Fair Value (In millions) | Valuation Technique(s) | Unobservable Input(s) | Range (Weighted Average) | |||||
Fixed maturity securities | $ | 136 | Discounted cash flow | Credit spread | 1% - 12% (3%) |
September 30, 2018 | Carrying Amount | Estimated Fair Value | |||||||||||||||||
(In millions) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||
Assets | |||||||||||||||||||
Mortgage loans | $ | 868 | $ | — | $ | — | $ | 847 | $ | 847 | |||||||||
Note receivable | 35 | — | — | 35 | 35 | ||||||||||||||
Liabilities | |||||||||||||||||||
Long term debt | $ | 2,680 | $ | — | $ | 2,734 | $ | — | $ | 2,734 |
December 31, 2017 | Carrying Amount | Estimated Fair Value | |||||||||||||||||
(In millions) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||
Assets | |||||||||||||||||||
Mortgage loans | $ | 839 | $ | — | $ | — | $ | 844 | $ | 844 | |||||||||
Note receivable | 46 | — | — | 46 | 46 | ||||||||||||||
Liabilities | |||||||||||||||||||
Short term debt | $ | 150 | $ | — | $ | 150 | $ | — | $ | 150 | |||||||||
Long term debt | 2,708 | — | 2,896 | — | 2,896 |
For the nine months ended September 30 | |||||||
(In millions) | 2018 | 2017 | |||||
Reserves, beginning of year: | |||||||
Gross | $ | 22,004 | $ | 22,343 | |||
Ceded | 3,934 | 4,094 | |||||
Net reserves, beginning of year | 18,070 | 18,249 | |||||
Net incurred claim and claim adjustment expenses: | |||||||
Provision for insured events of current year | 3,866 | 3,949 | |||||
Decrease in provision for insured events of prior years | (173 | ) | (284 | ) | |||
Amortization of discount | 136 | 138 | |||||
Total net incurred (1) | 3,829 | 3,803 | |||||
Net payments attributable to: | |||||||
Current year events | (658 | ) | (560 | ) | |||
Prior year events | (3,415 | ) | (3,401 | ) | |||
Total net payments | (4,073 | ) | (3,961 | ) | |||
Foreign currency translation adjustment and other | (80 | ) | 110 | ||||
Net reserves, end of period | 17,746 | 18,201 | |||||
Ceded reserves, end of period | 3,858 | 4,008 | |||||
Gross reserves, end of period | $ | 21,604 | $ | 22,209 |
(1) | Total net incurred above does not agree to Insurance claims and policyholders' benefits as reflected on the Condensed Consolidated Statements of Operations due to amounts related to retroactive reinsurance deferred gain accounting, uncollectible reinsurance and loss deductible receivables, and benefit expenses related to future policy benefits which are not reflected in the table above. |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Pretax (favorable) unfavorable development: | |||||||||||||||
Specialty | $ | (53 | ) | $ | (99 | ) | $ | (127 | ) | $ | (134 | ) | |||
Commercial | (5 | ) | (17 | ) | (27 | ) | (94 | ) | |||||||
International | (2 | ) | 1 | (4 | ) | 1 | |||||||||
Corporate & Other | (2 | ) | — | (2 | ) | — | |||||||||
Total pretax (favorable) unfavorable development | $ | (62 | ) | $ | (115 | ) | $ | (160 | ) | $ | (227 | ) |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Pretax (favorable) unfavorable development: | |||||||||||||||
Medical Professional Liability | $ | 15 | $ | 8 | $ | 38 | $ | 30 | |||||||
Other Professional Liability and Management Liability | (45 | ) | (19 | ) | (113 | ) | (88 | ) | |||||||
Surety | (20 | ) | (82 | ) | (50 | ) | (82 | ) | |||||||
Warranty | (1 | ) | (1 | ) | (7 | ) | 5 | ||||||||
Other | (2 | ) | (5 | ) | 5 | 1 | |||||||||
Total pretax (favorable) unfavorable development | $ | (53 | ) | $ | (99 | ) | $ | (127 | ) | $ | (134 | ) |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Pretax (favorable) unfavorable development: | |||||||||||||||
Commercial Auto | $ | 1 | $ | (12 | ) | $ | — | $ | (37 | ) | |||||
General Liability | (5 | ) | (2 | ) | 13 | (19 | ) | ||||||||
Workers' Compensation | (2 | ) | 9 | (14 | ) | (38 | ) | ||||||||
Property and Other | 1 | (12 | ) | (26 | ) | — | |||||||||
Total pretax (favorable) unfavorable development | $ | (5 | ) | $ | (17 | ) | $ | (27 | ) | $ | (94 | ) |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Pretax (favorable) unfavorable development: | |||||||||||||||
Casualty | $ | (5 | ) | $ | 6 | $ | (11 | ) | $ | 7 | |||||
Property | 1 | (7 | ) | 13 | (18 | ) | |||||||||
Energy and Marine | (5 | ) | (6 | ) | (10 | ) | (9 | ) | |||||||
Specialty | 8 | 5 | 17 | 20 | |||||||||||
Healthcare and Technology | (1 | ) | 3 | (13 | ) | 1 | |||||||||
Total pretax (favorable) unfavorable development | $ | (2 | ) | $ | 1 | $ | (4 | ) | $ | 1 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Additional amounts ceded under LPT: | |||||||||||||||
Net A&EP adverse development before consideration of LPT | $ | — | $ | — | $ | 113 | $ | 60 | |||||||
Provision for uncollectible third-party reinsurance on A&EP | — | — | (16 | ) | — | ||||||||||
Total additional amounts ceded under LPT | — | — | 97 | 60 | |||||||||||
Retroactive reinsurance benefit recognized | (12 | ) | (17 | ) | (84 | ) | (60 | ) | |||||||
Pretax impact of deferred retroactive reinsurance | $ | (12 | ) | $ | (17 | ) | $ | 13 | $ | — |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net periodic pension cost (benefit) | |||||||||||||||
Service cost | $ | — | $ | — | $ | — | $ | — | |||||||
Non-service cost (benefit): | |||||||||||||||
Interest cost on projected benefit obligation | 23 | 25 | 70 | 77 | |||||||||||
Expected return on plan assets | (40 | ) | (38 | ) | (120 | ) | (116 | ) | |||||||
Amortization of net actuarial loss | 10 | 9 | 28 | 27 | |||||||||||
Settlement loss | — | 6 | 5 | 8 | |||||||||||
Total non-service cost (benefit) | (7 | ) | 2 | (17 | ) | (4 | ) | ||||||||
Total net periodic pension cost (benefit) | $ | (7 | ) | $ | 2 | $ | (17 | ) | $ | (4 | ) |
(In millions) | Net unrealized gains (losses) on investments with OTTI losses | Net unrealized gains (losses) on other investments | Pension and postretirement benefits | Cumulative foreign currency translation adjustment | Total | ||||||||||||||
Balance as of July 1, 2018 | $ | 20 | $ | 271 | $ | (758 | ) | $ | (138 | ) | $ | (605 | ) | ||||||
Other comprehensive income (loss) before reclassifications | (1 | ) | (148 | ) | — | — | (149 | ) | |||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $(2), $1, $- and $(1) | — | 10 | (7 | ) | — | 3 | |||||||||||||
Other comprehensive income (loss) net of tax (expense) benefit of $-, $42, $(1), $- and $41 | (1 | ) | (158 | ) | 7 | — | (152 | ) | |||||||||||
Balance as of September 30, 2018 | $ | 19 | $ | 113 | $ | (751 | ) | $ | (138 | ) | $ | (757 | ) |
(In millions) | Net unrealized gains (losses) on investments with OTTI losses | Net unrealized gains (losses) on other investments | Pension and postretirement benefits | Cumulative foreign currency translation adjustment | Total | ||||||||||||||
Balance as of July 1, 2017 | $ | 26 | $ | 786 | $ | (635 | ) | $ | (145 | ) | $ | 32 | |||||||
Other comprehensive income (loss) before reclassifications | 1 | 35 | — | 41 | 77 | ||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $(4), $5, $-, and $1 | — | 12 | (10 | ) | — | 2 | |||||||||||||
Other comprehensive income (loss) net of tax (expense) benefit of $-, $(16), $(5), $- and $(21) | 1 | 23 | 10 | 41 | 75 | ||||||||||||||
Balance as of September 30, 2017 | $ | 27 | $ | 809 | $ | (625 | ) | $ | (104 | ) | $ | 107 |
(In millions) | Net unrealized gains (losses) on investments with OTTI losses | Net unrealized gains (losses) on other investments | Pension and postretirement benefits | Cumulative foreign currency translation adjustment | Total | ||||||||||||||
Balance as of January 1, 2018, as previously reported | $ | 25 | $ | 750 | $ | (645 | ) | $ | (98 | ) | $ | 32 | |||||||
Cumulative effect adjustment from accounting change for adoption of ASU 2018-02(1) | 5 | 137 | (130 | ) | — | 12 | |||||||||||||
Cumulative effect adjustment from accounting change for adoption of ASU 2016-01(1) net of tax (expense) benefit of $-, $8, $-, $- and $8 | — | (28 | ) | — | — | (28 | ) | ||||||||||||
Balance as of January 1, 2018, as adjusted | 30 | 859 | (775 | ) | (98 | ) | 16 | ||||||||||||
Other comprehensive income (loss) before reclassifications | (12 | ) | (718 | ) | — | (40 | ) | (770 | ) | ||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $(7), $6, $- and $(1) | (1 | ) | 28 | (24 | ) | — | 3 | ||||||||||||
Other comprehensive income (loss) net of tax (expense) benefit of $3, $197, $(6), $- and $194 | (11 | ) | (746 | ) | 24 | (40 | ) | (773 | ) | ||||||||||
Balance as of September 30, 2018 | $ | 19 | $ | 113 | $ | (751 | ) | $ | (138 | ) | $ | (757 | ) |
(1) | See Note A to the Condensed Consolidated Financial Statements for additional information. |
(In millions) | Net unrealized gains (losses) on investments with OTTI losses | Net unrealized gains (losses) on other investments | Pension and postretirement benefits | Cumulative foreign currency translation adjustment | Total | ||||||||||||||
Balance as of January 1, 2017 | $ | 30 | $ | 642 | $ | (647 | ) | $ | (198 | ) | $ | (173 | ) | ||||||
Other comprehensive income (loss) before reclassifications | — | 228 | — | 94 | 322 | ||||||||||||||
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $(1), $(28), $12, $- and $(17) | 3 | 61 | (22 | ) | — | 42 | |||||||||||||
Other comprehensive income (loss) net of tax (expense) benefit of $1, $(102), $(12), $- and $(113) | (3 | ) | 167 | 22 | 94 | 280 | |||||||||||||
Balance as of September 30, 2017 | $ | 27 | $ | 809 | $ | (625 | ) | $ | (104 | ) | $ | 107 |
Component of AOCI | Condensed Consolidated Statements of Operations Line Item Affected by Reclassifications | |
Net unrealized gains (losses) on investments with OTTI losses | Net realized investment gains (losses) | |
Net unrealized gains (losses) on other investments | Net realized investment gains (losses) | |
Pension and postretirement benefits | Other operating expenses and Insurance claims and policyholders' benefits |
Three months ended September 30, 2018 | Specialty | Commercial | International | Life & Group | Corporate & Other | ||||||||||||||||||||||
(In millions) | Eliminations | Total | |||||||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Net earned premiums | $ | 684 | $ | 782 | $ | 255 | $ | 133 | $ | — | $ | (1 | ) | $ | 1,853 | ||||||||||||
Net investment income | 124 | 144 | 14 | 200 | 5 | — | 487 | ||||||||||||||||||||
Non-insurance warranty revenue | 258 | — | — | — | — | — | 258 | ||||||||||||||||||||
Other revenues | — | 8 | 1 | (1 | ) | 2 | — | 10 | |||||||||||||||||||
Total operating revenues | 1,066 | 934 | 270 | 332 | 7 | (1 | ) | 2,608 | |||||||||||||||||||
Claims, benefits and expenses | |||||||||||||||||||||||||||
Net incurred claims and benefits | 373 | 496 | 172 | 277 | (12 | ) | — | 1,306 | |||||||||||||||||||
Policyholders’ dividends | 1 | 5 | — | — | — | — | 6 | ||||||||||||||||||||
Amortization of deferred acquisition costs | 153 | 127 | 57 | — | — | — | 337 | ||||||||||||||||||||
Non-insurance warranty expense | 235 | — | — | — | — | — | 235 | ||||||||||||||||||||
Other insurance related expenses | 68 | 133 | 36 | 31 | (1 | ) | (1 | ) | 266 | ||||||||||||||||||
Other expenses | 11 | 10 | 3 | 2 | 44 | — | 70 | ||||||||||||||||||||
Total claims, benefits and expenses | 841 | 771 | 268 | 310 | 31 | (1 | ) | 2,220 | |||||||||||||||||||
Core income (loss) before income tax | 225 | 163 | 2 | 22 | (24 | ) | — | 388 | |||||||||||||||||||
Income tax (expense) benefit on core income (loss) | (48 | ) | (36 | ) | (1 | ) | 10 | 4 | — | (71 | ) | ||||||||||||||||
Core income (loss) | $ | 177 | $ | 127 | $ | 1 | $ | 32 | $ | (20 | ) | $ | — | 317 | |||||||||||||
Net realized investment gains (losses) | 14 | ||||||||||||||||||||||||||
Income tax (expense) benefit on net realized investment gains (losses) | (1 | ) | |||||||||||||||||||||||||
Net realized investment gains (losses), after tax | 13 | ||||||||||||||||||||||||||
Net deferred tax asset remeasurement (1) | 6 | ||||||||||||||||||||||||||
Net income | $ | 336 |
(1) | The net deferred tax asset remeasurement as of December 31, 2017 was updated based on the filed 2017 tax return resulting in a $6 million benefit for the three months ended September 30, 2018. |
Three months ended September 30, 2017 | Specialty | Commercial | International | Life & Group | Corporate & Other | ||||||||||||||||||||||
(In millions) | Eliminations | Total | |||||||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Net earned premiums | $ | 692 | $ | 752 | $ | 226 | $ | 136 | $ | — | $ | — | $ | 1,806 | |||||||||||||
Net investment income | 129 | 166 | 13 | 195 | 6 | — | 509 | ||||||||||||||||||||
Non-insurance warranty revenue | 99 | — | — | — | — | — | 99 | ||||||||||||||||||||
Other revenues | 1 | 6 | 1 | — | — | — | 8 | ||||||||||||||||||||
Total operating revenues | 921 | 924 | 240 | 331 | 6 | — | 2,422 | ||||||||||||||||||||
Claims, benefits and expenses | |||||||||||||||||||||||||||
Net incurred claims and benefits | 358 | 610 | 200 | 322 | (15 | ) | — | 1,475 | |||||||||||||||||||
Policyholders’ dividends | 1 | 4 | — | — | — | — | 5 | ||||||||||||||||||||
Amortization of deferred acquisition costs | 151 | 122 | 36 | — | — | — | 309 | ||||||||||||||||||||
Non-insurance warranty expense | 74 | — | — | — | — | — | 74 | ||||||||||||||||||||
Other insurance related expenses | 65 | 136 | 48 | 32 | — | — | 281 | ||||||||||||||||||||
Other expenses | 11 | 6 | (4 | ) | 2 | 52 | — | 67 | |||||||||||||||||||
Total claims, benefits and expenses | 660 | 878 | 280 | 356 | 37 | — | 2,211 | ||||||||||||||||||||
Core income (loss) before income tax | 261 | 46 | (40 | ) | (25 | ) | (31 | ) | — | 211 | |||||||||||||||||
Income tax (expense) benefit on core income (loss) | (88 | ) | (14 | ) | 2 | 35 | 13 | — | (52 | ) | |||||||||||||||||
Core income (loss) | $ | 173 | $ | 32 | $ | (38 | ) | $ | 10 | $ | (18 | ) | $ | — | 159 | ||||||||||||
Net realized investment gains (losses) | (24 | ) | |||||||||||||||||||||||||
Income tax (expense) benefit on net realized investment gains (losses) | 9 | ||||||||||||||||||||||||||
Net realized investment gains (losses), after tax | (15 | ) | |||||||||||||||||||||||||
Net income | $ | 144 |
Nine months ended September 30, 2018 | Specialty | Commercial | International | Life & Group | Corporate & Other | ||||||||||||||||||||||
(In millions) | Eliminations | Total | |||||||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Net earned premiums | $ | 2,039 | $ | 2,278 | $ | 739 | $ | 398 | $ | — | $ | (1 | ) | $ | 5,453 | ||||||||||||
Net investment income | 376 | 450 | 43 | 598 | 16 | — | 1,483 | ||||||||||||||||||||
Non-insurance warranty revenue | 744 | — | — | — | — | — | 744 | ||||||||||||||||||||
Other revenues | 1 | 24 | — | — | 2 | (1 | ) | 26 | |||||||||||||||||||
Total operating revenues | 3,160 | 2,752 | 782 | 996 | 18 | (2 | ) | 7,706 | |||||||||||||||||||
Claims, benefits and expenses | |||||||||||||||||||||||||||
Net incurred claims and benefits | 1,124 | 1,434 | 480 | 907 | 15 | — | 3,960 | ||||||||||||||||||||
Policyholders’ dividends | 3 | 15 | — | — | — | — | 18 | ||||||||||||||||||||
Amortization of deferred acquisition costs | 447 | 375 | 170 | — | — | — | 992 | ||||||||||||||||||||
Non-insurance warranty expense | 676 | — | — | — | — | — | 676 | ||||||||||||||||||||
Other insurance related expenses | 202 | 386 | 102 | 91 | (1 | ) | (1 | ) | 779 | ||||||||||||||||||
Other expenses | 34 | 31 | 6 | 5 | 153 | (1 | ) | 228 | |||||||||||||||||||
Total claims, benefits and expenses | 2,486 | 2,241 | 758 | 1,003 | 167 | (2 | ) | 6,653 | |||||||||||||||||||
Core income (loss) before income tax | 674 | 511 | 24 | (7 | ) | (149 | ) | — | 1,053 | ||||||||||||||||||
Income tax (expense) benefit on core income (loss) | (143 | ) | (108 | ) | (7 | ) | 43 | 30 | — | (185 | ) | ||||||||||||||||
Core income (loss) | $ | 531 | $ | 403 | $ | 17 | $ | 36 | $ | (119 | ) | $ | — | 868 | |||||||||||||
Net realized investment gains (losses) | 25 | ||||||||||||||||||||||||||
Income tax (expense) benefit on net realized investment gains (losses) | (2 | ) | |||||||||||||||||||||||||
Net realized investment gains (losses), after tax | 23 | ||||||||||||||||||||||||||
Net deferred tax asset remeasurement (1) | 6 | ||||||||||||||||||||||||||
Net income | $ | 897 |
(1) | The net deferred tax asset remeasurement as of December 31, 2017 was updated based on the filed 2017 tax return resulting in a $6 million benefit for the nine months ended September 30, 2018. |
September 30, 2018 | |||||||||||||||||||||||||||
(In millions) | |||||||||||||||||||||||||||
Reinsurance receivables | $ | 685 | $ | 729 | $ | 239 | $ | 427 | $ | 2,173 | $ | — | $ | 4,253 | |||||||||||||
Insurance receivables | 942 | 1,189 | 259 | 10 | — | — | 2,400 | ||||||||||||||||||||
Deferred acquisition costs | 315 | 240 | 99 | — | — | — | 654 | ||||||||||||||||||||
Goodwill | 117 | — | 30 | — | — | — | 147 | ||||||||||||||||||||
Insurance reserves | |||||||||||||||||||||||||||
Claim and claim adjustment expenses | 5,509 | 8,584 | 1,689 | 3,551 | 2,271 | — | 21,604 | ||||||||||||||||||||
Unearned premiums | 2,129 | 1,520 | 510 | 130 | — | — | 4,289 | ||||||||||||||||||||
Future policy benefits | — | — | — | 10,605 | — | — | 10,605 |
Nine months ended September 30, 2017 | Specialty | Commercial | International | Life & Group | Corporate & Other | ||||||||||||||||||||||
(In millions) | Eliminations | Total | |||||||||||||||||||||||||
Operating revenues | |||||||||||||||||||||||||||
Net earned premiums | $ | 2,024 | $ | 2,129 | $ | 629 | $ | 404 | $ | — | $ | (1 | ) | $ | 5,185 | ||||||||||||
Net investment income | 394 | 495 | 38 | 587 | 15 | — | 1,529 | ||||||||||||||||||||
Non-insurance warranty revenue | 290 | — | — | — | — | — | 290 | ||||||||||||||||||||
Other revenues | 2 | 24 | — | 1 | 1 | — | 28 | ||||||||||||||||||||
Total operating revenues | 2,710 | 2,648 | 667 | 992 | 16 | (1 | ) | 7,032 | |||||||||||||||||||
Claims, benefits and expenses | |||||||||||||||||||||||||||
Net incurred claims and benefits | 1,152 | 1,459 | 444 | 980 | 4 | — | 4,039 | ||||||||||||||||||||
Policyholders’ dividends | 3 | 11 | — | — | — | — | 14 | ||||||||||||||||||||
Amortization of deferred acquisition costs | 440 | 359 | 127 | — | — | — | 926 | ||||||||||||||||||||
Non-insurance warranty expense | 216 | — | — | — | — | — | 216 | ||||||||||||||||||||
Other insurance related expenses | 203 | 393 | 106 | 96 | (1 | ) | (1 | ) | 796 | ||||||||||||||||||
Other expenses | 32 | 31 | (11 | ) | 5 | 146 | — | 203 | |||||||||||||||||||
Total claims, benefits and expenses | 2,046 | 2,253 | 666 | 1,081 | 149 | (1 | ) | 6,194 | |||||||||||||||||||
Core income (loss) before income tax | 664 | 395 | 1 | (89 | ) | (133 | ) | — | 838 | ||||||||||||||||||
Income tax (expense) benefit on core income (loss) | (223 | ) | (132 | ) | (9 | ) | 108 | 51 | — | (205 | ) | ||||||||||||||||
Core income (loss) | $ | 441 | $ | 263 | $ | (8 | ) | $ | 19 | $ | (82 | ) | $ | — | 633 | ||||||||||||
Net realized investment gains (losses) | 62 | ||||||||||||||||||||||||||
Income tax (expense) benefit on net realized investment gains (losses) | (19 | ) | |||||||||||||||||||||||||
Net realized investment gains (losses), after tax | 43 | ||||||||||||||||||||||||||
Net income | $ | 676 |
December 31, 2017 | |||||||||||||||||||||||||||
(In millions) | |||||||||||||||||||||||||||
Reinsurance receivables | $ | 671 | $ | 654 | $ | 212 | $ | 438 | $ | 2,315 | $ | — | $ | 4,290 | |||||||||||||
Insurance receivables | 969 | 1,103 | 254 | 8 | 2 | — | 2,336 | ||||||||||||||||||||
Deferred acquisition costs | 318 | 223 | 93 | — | — | — | 634 | ||||||||||||||||||||
Goodwill | 117 | — | 31 | — | — | — | 148 | ||||||||||||||||||||
Insurance reserves | |||||||||||||||||||||||||||
Claim and claim adjustment expenses | 5,669 | 8,764 | 1,636 | 3,499 | 2,436 | — | 22,004 | ||||||||||||||||||||
Unearned premiums | 2,020 | 1,409 | 472 | 128 | — | — | 4,029 | ||||||||||||||||||||
Future policy benefits | — | — | — | 11,179 | — | — | 11,179 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Specialty | |||||||||||||||
Management & Professional Liability | $ | 616 | $ | 638 | $ | 1,867 | $ | 1,896 | |||||||
Surety | 153 | 143 | 427 | 403 | |||||||||||
Warranty & Alternative Risks(1) | 297 | 140 | 866 | 411 | |||||||||||
Specialty revenues | 1,066 | 921 | 3,160 | 2,710 | |||||||||||
Commercial | |||||||||||||||
Middle Market | 530 | 513 | 1,555 | 1,450 | |||||||||||
Small Business | 125 | 131 | 364 | 353 | |||||||||||
Other Commercial Insurance | 279 | 280 | 833 | 845 | |||||||||||
Commercial revenues | 934 | 924 | 2,752 | 2,648 | |||||||||||
International | |||||||||||||||
Canada | 66 | 61 | 187 | 164 | |||||||||||
CNA Europe | 94 | 87 | 273 | 238 | |||||||||||
CNA Hardy | 110 | 92 | 322 | 265 | |||||||||||
International revenues | 270 | 240 | 782 | 667 | |||||||||||
Life & Group revenues | 332 | 331 | 996 | 992 | |||||||||||
Corporate & Other revenues | 7 | 6 | 18 | 16 | |||||||||||
Eliminations | (1 | ) | — | (2 | ) | (1 | ) | ||||||||
Total operating revenues | 2,608 | 2,422 | 7,706 | 7,032 | |||||||||||
Net realized investment gains (losses) | 14 | (24 | ) | 25 | 62 | ||||||||||
Total revenues | $ | 2,622 | $ | 2,398 | $ | 7,731 | $ | 7,094 |
(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 Condensed Consolidated Financial Statements for additional information. |
• | Insurance Reserves |
• | Reinsurance and Insurance Receivables |
• | Valuation of Investments and Impairment of Securities |
• | Long Term Care Policies |
• | Income Taxes |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Operating Revenues | |||||||||||||||
Net earned premiums | $ | 1,853 | $ | 1,806 | $ | 5,453 | $ | 5,185 | |||||||
Net investment income | 487 | 509 | 1,483 | 1,529 | |||||||||||
Non-insurance warranty revenue | 258 | 99 | 744 | 290 | |||||||||||
Other revenues | 10 | 8 | 26 | 28 | |||||||||||
Total operating revenues | 2,608 | 2,422 | 7,706 | 7,032 | |||||||||||
Claims, Benefits and Expenses | |||||||||||||||
Net incurred claims and benefits | 1,306 | 1,475 | 3,960 | 4,039 | |||||||||||
Policyholders' dividends | 6 | 5 | 18 | 14 | |||||||||||
Amortization of deferred acquisition costs | 337 | 309 | 992 | 926 | |||||||||||
Other insurance related expenses | 266 | 281 | 779 | 796 | |||||||||||
Non-insurance warranty expense | 235 | 74 | 676 | 216 | |||||||||||
Other expenses | 70 | 67 | 228 | 203 | |||||||||||
Total claims, benefits and expenses | 2,220 | 2,211 | 6,653 | 6,194 | |||||||||||
Core income before income tax | 388 | 211 | 1,053 | 838 | |||||||||||
Income tax expense on core income | (71 | ) | (52 | ) | (185 | ) | (205 | ) | |||||||
Core income | 317 | 159 | 868 | 633 | |||||||||||
Net realized investment gains (losses) | 14 | (24 | ) | 25 | 62 | ||||||||||
Income tax (expense) benefit on net realized investment gains (losses) | (1 | ) | 9 | (2 | ) | (19 | ) | ||||||||
Net realized investment gains (losses), after tax | 13 | (15 | ) | 23 | 43 | ||||||||||
Net deferred tax asset remeasurement | 6 | — | 6 | — | |||||||||||
Net income | $ | 336 | $ | 144 | $ | 897 | $ | 676 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions, except ratios, rate, renewal premium change and retention) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net written premiums | $ | 688 | $ | 695 | $ | 2,062 | $ | 2,066 | |||||||
Net earned premiums | 684 | 692 | 2,039 | 2,024 | |||||||||||
Net investment income | 124 | 129 | 376 | 394 | |||||||||||
Core income | 177 | 173 | 531 | 441 | |||||||||||
Other performance metrics: | |||||||||||||||
Loss and loss adjustment expense ratio | 54.5 | % | 51.7 | % | 55.1 | % | 56.9 | % | |||||||
Expense ratio | 32.3 | 31.2 | 31.8 | 31.8 | |||||||||||
Dividend ratio | 0.2 | 0.2 | 0.2 | 0.1 | |||||||||||
Combined ratio | 87.0 | % | 83.1 | % | 87.1 | % | 88.8 | % | |||||||
Rate | 2 | % | 0 | % | 2 | % | 1 | % | |||||||
Renewal premium change | 3 | 1 | 3 | 3 | |||||||||||
Retention | 84 | 90 | 84 | 89 | |||||||||||
New business | $ | 93 | $ | 60 | $ | 266 | $ | 177 |
(In millions) | September 30, 2018 | December 31, 2017 | |||||
Gross case reserves | $ | 1,591 | $ | 1,742 | |||
Gross IBNR reserves | 3,918 | 3,927 | |||||
Total gross carried claim and claim adjustment expense reserves | $ | 5,509 | $ | 5,669 | |||
Net case reserves | $ | 1,427 | $ | 1,600 | |||
Net IBNR reserves | 3,409 | 3,407 | |||||
Total net carried claim and claim adjustment expense reserves | $ | 4,836 | $ | 5,007 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions, except ratios, rate, renewal premium change and retention) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net written premiums | $ | 697 | $ | 697 | $ | 2,339 | $ | 2,203 | |||||||
Net earned premiums | 782 | 752 | 2,278 | 2,129 | |||||||||||
Net investment income | 144 | 166 | 450 | 495 | |||||||||||
Core income | 127 | 32 | 403 | 263 | |||||||||||
Other performance metrics: | |||||||||||||||
Loss and loss adjustment expense ratio | 63.5 | % | 81.2 | % | 63.0 | % | 68.6 | % | |||||||
Expense ratio | 33.2 | 34.2 | 33.3 | 35.3 | |||||||||||
Dividend ratio | 0.7 | 0.5 | 0.7 | 0.5 | |||||||||||
Combined ratio | 97.4 | % | 115.9 | % | 97.0 | % | 104.4 | % | |||||||
Rate | 2 | % | 0 | % | 1 | % | 0 | % | |||||||
Renewal premium change | 3 | 2 | 3 | 3 | |||||||||||
Retention | 84 | 86 | 85 | 86 | |||||||||||
New business | $ | 123 | $ | 138 | $ | 461 | $ | 432 |
(In millions) | September 30, 2018 | December 31, 2017 | |||||
Gross case reserves | $ | 4,184 | $ | 4,427 | |||
Gross IBNR reserves | 4,400 | 4,337 | |||||
Total gross carried claim and claim adjustment expense reserves | $ | 8,584 | $ | 8,764 | |||
Net case reserves | $ | 3,835 | $ | 4,103 | |||
Net IBNR reserves | 4,069 | 4,033 | |||||
Total net carried claim and claim adjustment expense reserves | $ | 7,904 | $ | 8,136 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions, except ratios, rate, renewal premium change and retention) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net written premiums | $ | 196 | $ | 207 | $ | 762 | $ | 664 | |||||||
Net earned premiums | 255 | 226 | 739 | 629 | |||||||||||
Net investment income | 14 | 13 | 43 | 38 | |||||||||||
Core income (loss) | 1 | (38 | ) | 17 | (8 | ) | |||||||||
Other performance metrics: | |||||||||||||||
Loss and loss adjustment expense ratio | 67.6 | % | 88.4 | % | 65.0 | % | 70.6 | % | |||||||
Expense ratio | 36.3 | 37.5 | 36.8 | 37.2 | |||||||||||
Combined ratio | 103.9 | % | 125.9 | % | 101.8 | % | 107.8 | % | |||||||
Rate | 3 | % | 1 | % | 3 | % | 0 | % | |||||||
Renewal premium change | 8 | 3 | 6 | 2 | |||||||||||
Retention | 67 | 76 | 77 | 79 | |||||||||||
New business | $ | 72 | $ | 69 | $ | 248 | $ | 207 |
(In millions) | September 30, 2018 | December 31, 2017 | |||||
Gross case reserves | $ | 811 | $ | 744 | |||
Gross IBNR reserves | 878 | 892 | |||||
Total gross carried claim and claim adjustment expense reserves | $ | 1,689 | $ | 1,636 | |||
Net case reserves | $ | 677 | $ | 640 | |||
Net IBNR reserves | 775 | 792 | |||||
Total net carried claim and claim adjustment expense reserves | $ | 1,452 | $ | 1,432 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net earned premiums | $ | 133 | $ | 136 | $ | 398 | $ | 404 | |||||||
Net investment income | 200 | 195 | 598 | 587 | |||||||||||
Core income (loss) before income tax | 22 | (25 | ) | (7 | ) | (89 | ) | ||||||||
Income tax benefit on core income (loss) | 10 | 35 | 43 | 108 | |||||||||||
Core income | 32 | 10 | 36 | 19 |
Long Term Care Active Life Reserve - Change in estimated reserve margin (In millions) | |||
December 31, 2017 Estimated Margin | $ | 246 | |
Changes in underlying morbidity assumptions | (213 | ) | |
Changes in underlying persistency assumptions and inforce policy inventory | (86 | ) | |
Changes in underlying discount rate assumptions | 17 | ||
Changes in underlying premium rate action assumptions | 178 | ||
Changes in underlying expense and other assumptions | 40 | ||
September 30, 2018 Estimated Margin | $ | 182 |
September 30, 2018 | |||
Estimated reduction to pretax income | |||
Hypothetical revisions (In millions) | |||
Morbidity: | |||
5% increase in morbidity | $ | 460 | |
10% increase in morbidity | 1,103 | ||
Persistency: | |||
5% decrease in active life mortality and lapse | $ | 31 | |
10% decrease in active life mortality and lapse | 253 | ||
Discount Rates: | |||
50 basis point decline in future interest rates | $ | 140 | |
100 basis point decline in future interest rates | 500 | ||
Premium Rate Actions: | |||
50% decrease in anticipated future premium rate increases | $ | — |
September 30, 2018 | |||||||||||
(In millions) | Claim and claim adjustment expenses | Future policy benefits | Total | ||||||||
Long term care | $ | 2,689 | $ | 9,078 | $ | 11,767 | |||||
Structured settlement annuities | 535 | — | 535 | ||||||||
Other | 16 | — | 16 | ||||||||
Total | 3,240 | 9,078 | 12,318 | ||||||||
Shadow adjustments (1) | 118 | 1,293 | 1,411 | ||||||||
Ceded reserves (2) | 193 | 234 | 427 | ||||||||
Total gross reserves | $ | 3,551 | $ | 10,605 | $ | 14,156 |
December 31, 2017 | |||||||||||
(In millions) | Claim and claim adjustment expenses | Future policy benefits | Total | ||||||||
Long term care | $ | 2,568 | $ | 8,959 | $ | 11,527 | |||||
Structured settlement annuities | 547 | — | 547 | ||||||||
Other | 16 | — | 16 | ||||||||
Total | 3,131 | 8,959 | 12,090 | ||||||||
Shadow adjustments (1) | 159 | 1,990 | 2,149 | ||||||||
Ceded reserves (2) | 209 | 230 | 439 | ||||||||
Total gross reserves | $ | 3,499 | $ | 11,179 | $ | 14,678 |
(1) | To the extent that unrealized gains on fixed income securities supporting long term care products and annuity contracts would result in a premium deficiency if those gains were realized, an increase in Insurance reserves is recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments). |
(2) | Ceded reserves relate to claim or policy reserves fully reinsured in connection with a sale or exit from the underlying business. |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Net investment income | $ | 5 | $ | 6 | $ | 16 | $ | 15 | |||||||
Interest expense | 33 | 39 | 101 | 116 | |||||||||||
Core loss | (20 | ) | (18 | ) | (119 | ) | (82 | ) |
(In millions) | September 30, 2018 | December 31, 2017 | |||||
Gross case reserves | $ | 1,170 | $ | 1,371 | |||
Gross IBNR reserves | 1,101 | 1,065 | |||||
Total gross carried claim and claim adjustment expense reserves | $ | 2,271 | $ | 2,436 | |||
Net case reserves | $ | 91 | $ | 94 | |||
Net IBNR reserves | 105 | 111 | |||||
Total net carried claim and claim adjustment expense reserves | $ | 196 | $ | 205 |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Fixed income securities: | |||||||||||||||
Taxable fixed income securities | $ | 366 | $ | 350 | $ | 1,070 | $ | 1,051 | |||||||
Tax-exempt fixed income securities | 93 | 106 | 298 | 320 | |||||||||||
Total fixed income securities | 459 | 456 | 1,368 | 1,371 | |||||||||||
Limited partnership and common stock investments | 23 | 51 | 96 | 157 | |||||||||||
Other, net of investment expense | 5 | 2 | 19 | 1 | |||||||||||
Pretax net investment income | $ | 487 | $ | 509 | $ | 1,483 | $ | 1,529 | |||||||
Fixed income securities, after tax | $ | 378 | $ | 330 | $ | 1,130 | $ | 994 | |||||||
Net investment income, after tax | 400 | 363 | 1,221 | 1,096 | |||||||||||
Effective income yield for the fixed income securities portfolio, pretax | 4.7 | % | 4.7 | % | 4.7 | % | 4.7 | % | |||||||
Effective income yield for the fixed income securities portfolio, after tax | 3.9 | % | 3.4 | % | 3.9 | % | 3.4 | % |
Periods ended September 30 | Three Months | Nine Months | |||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Fixed maturity securities: | |||||||||||||||
Corporate bonds and other | $ | 8 | $ | 14 | $ | 36 | $ | 85 | |||||||
States, municipalities and political subdivisions | 9 | 4 | 35 | 14 | |||||||||||
Asset-backed | (7 | ) | (2 | ) | (39 | ) | (7 | ) | |||||||
Total fixed maturity securities | 10 | 16 | 32 | 92 | |||||||||||
Non-redeemable preferred stock | 2 | — | (23 | ) | — | ||||||||||
Short term and other | 2 | (40 | ) | 16 | (30 | ) | |||||||||
Net realized investment gains (losses) | 14 | (24 | ) | 25 | 62 | ||||||||||
Income tax (expense) benefit on net realized investment gains (losses) | (1 | ) | 9 | (2 | ) | (19 | ) | ||||||||
Net realized investment gains (losses), after tax | $ | 13 | $ | (15 | ) | $ | 23 | $ | 43 |
September 30, 2018 | December 31, 2017 | ||||||||||||||
(In millions) | Estimated Fair Value | Net Unrealized Gains (Losses) | Estimated Fair Value | Net Unrealized Gains (Losses) | |||||||||||
U.S. Government, Government agencies and Government-sponsored enterprises | $ | 4,430 | $ | (96 | ) | $ | 4,514 | $ | 21 | ||||||
AAA | 3,064 | 221 | 1,954 | 152 | |||||||||||
AA | 6,575 | 459 | 8,982 | 914 | |||||||||||
A | 8,838 | 525 | 9,643 | 952 | |||||||||||
BBB | 13,997 | 417 | 13,554 | 1,093 | |||||||||||
Non-investment grade | 2,724 | 50 | 2,840 | 140 | |||||||||||
Total | $ | 39,628 | $ | 1,576 | $ | 41,487 | $ | 3,272 |
September 30, 2018 | |||||||
(In millions) | Estimated Fair Value | Gross Unrealized Losses | |||||
U.S. Government, Government agencies and Government-sponsored enterprises | $ | 3,735 | $ | 113 | |||
AAA | 488 | 10 | |||||
AA | 1,093 | 19 | |||||
A | 2,558 | 57 | |||||
BBB | 6,319 | 167 | |||||
Non-investment grade | 1,031 | 37 | |||||
Total | $ | 15,224 | $ | 403 |
September 30, 2018 | |||||||
(In millions) | Estimated Fair Value | Gross Unrealized Losses | |||||
Due in one year or less | $ | 231 | $ | 6 | |||
Due after one year through five years | 2,540 | 37 | |||||
Due after five years through ten years | 10,369 | 294 | |||||
Due after ten years | 2,084 | 66 | |||||
Total | $ | 15,224 | $ | 403 |
September 30, 2018 | December 31, 2017 | ||||||||||||
(In millions) | Estimated Fair Value | Effective Duration (In years) | Estimated Fair Value | Effective Duration (In years) | |||||||||
Investments supporting Life & Group | $ | 16,155 | 8.2 | $ | 16,797 | 8.4 | |||||||
Other investments | 25,407 | 4.5 | 26,817 | 4.4 | |||||||||
Total | $ | 41,562 | 5.9 | $ | 43,614 | 5.9 |
(In millions) | September 30, 2018 | December 31, 2017 | |||||
Short term investments: | |||||||
Commercial paper | $ | 895 | $ | 905 | |||
U.S. Treasury securities | 227 | 355 | |||||
Other | 168 | 176 | |||||
Total short term investments | $ | 1,290 | $ | 1,436 |
• | the risks and uncertainties associated with our insurance reserves, as outlined in the Critical Accounting Estimates and the Reserves - Estimates and Uncertainties sections of our Annual Report on Form 10-K, including the sufficiency of the reserves and the possibility for future increases, which would be reflected in the results of operations in the period that the need for such adjustment is determined; |
• | the risk that the other parties to the transaction in which, subject to certain limitations, we ceded our legacy A&EP liabilities will not fully perform their obligations to CNA, the uncertainty in estimating loss reserves for A&EP liabilities and the possible continued exposure of CNA to liabilities for A&EP claims that are not covered under the terms of the transaction; |
• | the performance of reinsurance companies under reinsurance contracts with us; and |
• | the risks and uncertainties associated with potential acquisitions and divestitures, including the consummation of such transactions, the successful integration of acquired operations and the potential for subsequent impairment of goodwill or intangible assets. |
• | the impact of competitive products, policies and pricing and the competitive environment in which we operate, including changes in our book of business; |
• | product and policy availability and demand and market responses, including the level of ability to obtain rate increases and decline or non-renew underpriced accounts, to achieve premium targets and profitability and to realize growth and retention estimates; |
• | general economic and business conditions, including recessionary conditions that may decrease the size and number of our insurance customers and create additional losses to our lines of business, especially those that provide management and professional liability insurance, as well as surety bonds, to businesses engaged in real estate, financial services and professional services and inflationary pressures on medical care costs, construction costs and other economic sectors that increase the severity of claims; |
• | conditions in the capital and credit markets, including continuing uncertainty and instability in these markets, as well as the overall economy, and their impact on the returns, types, liquidity and valuation of our investments; |
• | conditions in the capital and credit markets that may limit our ability to raise significant amounts of capital on favorable terms; and |
• | the possibility of changes in our ratings by ratings agencies, including the inability to access certain markets or distribution channels and the required collateralization of future payment obligations as a result of such changes, and changes in rating agency policies and practices. |
• | regulatory initiatives and compliance with governmental regulations, judicial interpretations within the regulatory framework, including interpretation of policy provisions, decisions regarding coverage and theories of liability, legislative actions that increase claimant activity, trends in litigation and the outcome of any litigation involving us and rulings and changes in tax laws and regulations; |
• | regulatory limitations, impositions and restrictions upon us, including with respect to our ability to increase premium rates, and the effects of assessments and other surcharges for guaranty funds and second-injury funds, other mandatory pooling arrangements and future assessments levied on insurance companies; and |
• | regulatory limitations and restrictions, including limitations upon our ability to receive dividends from our insurance subsidiaries, imposed by regulatory authorities, including regulatory capital adequacy standards. |
• | weather and other natural physical events, including the severity and frequency of storms, hail, snowfall and other winter conditions, natural disasters such as hurricanes and earthquakes, as well as climate change, including effects on global weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, rain, hail and snow; |
• | regulatory requirements imposed by coastal state regulators in the wake of hurricanes or other natural disasters, including limitations on the ability to exit markets or to non-renew, cancel or change terms and conditions in policies, as well as mandatory assessments to fund any shortfalls arising from the inability of quasi-governmental insurers to pay claims; |
• | man-made disasters, including the possible occurrence of terrorist attacks, the unpredictability of the nature, targets, severity or frequency of such events, and the effect of the absence or insufficiency of applicable terrorism legislation on coverages; and |
• | the occurrence of epidemics. |
• | in 2016, the United Kingdom (U.K.) approved an exit from the European Union (E.U.), commonly referred to as "Brexit.” Brexit is scheduled to be completed in early 2019. As treaties between the U.K. and the E.U. have not been finalized, as of January 1, 2019, we intend to write business in the E.U. through our recently established European subsidiary in Luxembourg as our U.K.-domiciled subsidiary will presumably no longer provide a platform for our operations throughout the European continent. As a result of such structural changes and modification to our European operations, the complexity and cost of regulatory compliance of our European business has increased and will likely continue to result in elevated expenses. |
CNA Financial Corporation | ||
Dated: November 5, 2018 | By | /s/ James M. Anderson |
James M. Anderson Executive Vice President and Chief Financial Officer (Duly authorized officer and principal financial officer) |
Description of Exhibit | Exhibit Number |
31.1 | |
31.2 | |
32.1 | |
32.2 | |
XBRL Instance Document | 101.INS |
XBRL Taxonomy Extension Schema | 101.SCH |
XBRL Taxonomy Extension Calculation Linkbase | 101.CAL |
XBRL Taxonomy Extension Definition Linkbase | 101.DEF |
XBRL Taxonomy Label Linkbase | 101.LAB |
XBRL Taxonomy Extension Presentation Linkbase | 101.PRE |
1. | I have reviewed this quarterly report on Form 10-Q of CNA Financial Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: | November 5, 2018 | By | /s/ Dino E. Robusto | |
Dino E. Robusto | ||||
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of CNA Financial Corporation; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: | November 5, 2018 | By | /s/ James M. Anderson | |
James M. Anderson | ||||
Chief Financial Officer |
• | the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2018 filed on the date hereof with the Securities and Exchange Commission (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | November 5, 2018 | By | /s/ Dino E. Robusto | |
Dino E. Robusto | ||||
Chief Executive Officer |
• | the Company’s quarterly report on Form 10-Q for the quarter ended September 30, 2018 filed on the date hereof with the Securities and Exchange Commission (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
• | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: | November 5, 2018 | By | /s/ James M. Anderson | |
James M. Anderson | ||||
Chief Financial Officer |
Document and Entity Information Document - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Nov. 01, 2018 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | CNA FINANCIAL CORP | |
Entity Central Index Key | 0000021175 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 271,410,714 |
Condensed Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||||
Net income | $ 336 | $ 144 | $ 897 | $ 676 |
Changes in: | ||||
Net unrealized gains on investments with other-than-temporary impairments | (1) | 1 | (11) | (3) |
Net unrealized gains on other investments | (158) | 23 | (746) | 167 |
Net unrealized gains on investments | (159) | 24 | (757) | 164 |
Foreign currency translation adjustment | 0 | 41 | (40) | 94 |
Pension and postretirement benefits | 7 | 10 | 24 | 22 |
Other comprehensive (loss) income, net of tax | (152) | 75 | (773) | 280 |
Total comprehensive income | $ 184 | $ 219 | $ 124 | $ 956 |
Condensed Consolidated Balance Sheets - (Parenthetical) - USD ($) $ in Millions |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Fixed maturities securities at amortized cost | $ 38,052 | $ 38,215 |
Equity securities at cost | 784 | |
Equity securities at cost | 659 | |
Allowance for uncollectible reinsurance | 29 | 29 |
Allowance for uncollectible insurance receivables | 46 | 44 |
Accumulated depreciation on property and equipment | 208 | 274 |
Due to related parties | $ 52 | $ 143 |
Common stock, par value (in usd per share) | $ 2.50 | $ 2.50 |
Common stock, shares authorized (in shares) | 500,000,000 | 500,000,000 |
Common stock, shares issued (in shares) | 273,040,243 | 273,040,243 |
Common stock, shares outstanding (in shares) | 271,410,714 | 271,205,390 |
Treasury stock, shares (in shares) | 1,629,529 | 1,834,853 |
General |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General | General Basis of Presentation The Condensed Consolidated Financial Statements include the accounts of CNA Financial Corporation (CNAF) and its subsidiaries. Collectively, CNAF and its subsidiaries are referred to as CNA or the Company. Loews Corporation (Loews) owned approximately 89% of the outstanding common stock of CNAF as of September 30, 2018. The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Intercompany amounts have been eliminated. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, including certain financial statement notes, is not required for interim reporting purposes and has been condensed or omitted. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in CNAF's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2017, including the summary of significant accounting policies in Note A. The preparation of Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. The interim financial data as of September 30, 2018 and for the three and nine months ended September 30, 2018 and 2017 is unaudited. However, in the opinion of management, the interim data includes all adjustments, including normal recurring adjustments, necessary for a fair statement of the Company's results for the interim periods. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Recently Adopted Accounting Standards Updates (ASU) ASU 2014-09: In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue Recognition (Topic 606): Revenue from Contracts with Customers. The standard excludes from its scope the accounting for insurance contracts, financial instruments, and certain other agreements that are governed under other GAAP guidance. The updated guidance requires an entity to recognize revenue as performance obligations are met, in an amount that reflects the consideration the entity is entitled to receive for the transfer of the promised goods or services. On January 1, 2018, the Company adopted the updated guidance using the modified retrospective method applied to all contracts which were not completed as of the date of adoption, with the cumulative effect recognized as an adjustment to the opening balance of Retained earnings. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. Under the new guidance, revenue on warranty products and services was recognized more slowly compared to the historic revenue recognition pattern. In addition, for warranty products where the Company acts as the principal in the transaction, Non-insurance warranty revenue and Non-insurance warranty expense are increased to reflect the gross amount paid by consumers, including the retail seller’s markup which is considered a commission to the Company's agent. This gross-up of revenue and expense also resulted in an increase to Other assets and Other liabilities on the Company's Condensed Consolidated Balance Sheets as the revenue and expense are recognized over the actuarially determined expected claims emergence pattern. The cumulative effect changes to the Condensed Consolidated Balance Sheet for the adoption of the updated guidance on January 1, 2018 were as follows:
The impact of adoption on the Condensed Consolidated Statements of Operations and Balance Sheet was as follows:
See Note J to the Condensed Consolidated Financial Statements for additional information regarding non-insurance revenues from contracts with customers. ASU 2016-01: In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updated accounting guidance requires changes to the reporting model for financial instruments. The guidance primarily changes the model for equity securities by requiring changes in the fair value of equity securities (except those accounted for under the equity method of accounting, those without readily determinable fair values and those that result in consolidation of the investee) to be recognized through the income statement. The Company adopted the updated guidance on January 1, 2018 and recognized a cumulative effect adjustment that increased beginning Retained earnings by $28 million, net of tax. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. For the three and nine months ended September 30, 2018, the Company recognized $2 million in pretax gains and $23 million in pretax losses within Net realized investment gains (losses) for the change in fair value of non-redeemable preferred stock and $1 million in pretax losses and $1 million in pretax gains within Net investment income for the change in fair value of common stock as a result of this change. For the three and nine months ended September 30, 2017, there was a $1 million increase and less than a $1 million increase in the fair value of common stock and less than a $1 million increase and a $7 million increase in the fair value of non-redeemable preferred stock recognized in Other comprehensive income. The Company's non-redeemable preferred stock contain characteristics of debt securities, are priced similarly to bonds, and are held primarily for income generation through periodic dividends. While recognition of gains and losses on these securities are no longer discretionary, management does not consider the changes in fair value of non-redeemable preferred stock to be reflective of our primary operations. As such, the changes in the fair value of these securities are recorded through Net realized investments gains (losses). The Company owns certain common stock with the intention of holding the securities primarily for market appreciation and as such, the changes in the fair value of these securities are recorded through Net investment income. ASU 2017-07: In March 2017, the FASB issued ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The updated accounting guidance requires changes to the presentation of the components of net periodic benefit cost on the income statement by requiring service cost to be presented with other employee compensation costs and other components of net periodic pension cost to be presented outside of any subtotal of operating income. The ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. The Company adopted the updated guidance effective January 1, 2018. The guidance was applied on a prospective basis for capitalization of service costs and on a retrospective basis for the presentation of the service cost and other components of net periodic benefit costs in the Company's Condensed Consolidated Statements of Operations and in its disclosures. The Company expanded the related footnote disclosure, Note G to the Condensed Consolidated Financial Statements, to disclose the amount of service cost and non-service cost components of net periodic benefit cost and the line items in the Condensed Consolidated Statements of Operations in which such amounts are reported. The change limiting the costs eligible for capitalization is not material to the Company’s results of operations or financial position. ASU 2018-02: In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. GAAP requires the remeasurement of deferred tax assets and liabilities due to a change in the tax rate to be included in Net income, even if the related income tax effects were originally recognized in Accumulated other comprehensive income (AOCI). The ASU allows a reclassification from AOCI to Retained earnings for stranded tax effects resulting from the new U.S. Federal corporate income tax rate enacted on December 22, 2017. The Company early adopted the updated guidance effective January 1, 2018 and elected to reclassify the stranded income tax effects relating to the reduction in the Federal corporate income tax rate from AOCI to Retained earnings at the beginning of the period of adoption. The net impact of the accounting change resulted in a $12 million increase in AOCI and a corresponding decrease in Retained earnings. The $12 million increase in AOCI is comprised of a $142 million increase in net unrealized gains (losses) on investments partially offset by a $130 million decrease in unrecognized pension and postretirement benefits. The Company releases tax effects from AOCI utilizing the security-by-security approach for Net unrealized gains (losses) on investments with Other-than-temporary impairment (OTTI) losses and Net unrealized gains (losses) on other investments. For Pension and postretirement benefits, tax effects from AOCI are released at enacted tax rates based on the pre-tax adjustments to pension liabilities or assets recognized within OCI. ASU 2018-13: In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The updated accounting guidance requires changes to the disclosures for fair value measurement by adding, removing and modifying disclosures. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods therein and early adoption is permitted. As of September 30, 2018, the Company adopted the updated guidance and added disclosures on changes in unrealized gains (losses) on Level 3 assets recognized in Other comprehensive income as well as the weighted average rate used to develop significant inputs utilized in the fair value measurements of Level 3 assets. The Company also eliminated disclosures on the amount of transfers between Level 1 and Level 2 assets and the policy for timing of transfers between Levels. Accounting Standards Pending Adoption In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842): Accounting for Leases. The updated accounting guidance requires lessees to recognize on the balance sheet assets and liabilities for the rights and obligations created by the majority of leases, including those historically accounted for as operating leases. The guidance is effective for interim and annual periods beginning after December 15, 2018 and prescribes a modified retrospective transition method but allows entities to utilize a practical expedient and apply the guidance prospectively beginning with the adoption date. The Company has decided to utilize the practical expedient. The Company is currently evaluating the effect the updated guidance will have on the Company's financial statements. It is expected that assets and liabilities will increase based on the present value of remaining lease payments for leases in place at the adoption date; however, this is not expected to be material to the Company's results of operations or financial position. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The updated accounting guidance requires changes to the recognition of credit losses on financial instruments not accounted for at fair value through net income. The guidance is effective for interim and annual periods beginning after December 15, 2019. The Company is currently evaluating the effect the guidance will have on the Company's financial statements, but expects the primary changes to be the use of the expected credit loss model for its mortgage loan portfolio and reinsurance receivables and the use of the allowance method rather than the write-down method for credit losses within the available-for-sale fixed maturities portfolio. The expected credit loss model will require a financial asset to be presented at the net amount expected to be collected. The allowance method for available-for-sale debt securities will allow the Company to record reversals of credit losses if the estimate of credit losses declines. In August 2018, the FASB issued ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The updated accounting guidance requires changes to the measurement and disclosure of long-duration contracts. The standard requires entities to annually update cash flow assumptions, including morbidity and persistency, and update discount rate assumptions quarterly using an upper-medium grade fixed-income instrument yield. The effect of changes in cash flow assumptions will be recorded in Net income and the effect of changes in discount rate assumptions will be recorded in Other comprehensive income. This guidance is effective for interim and annual periods beginning after December 15, 2020, and requires restatement of the prior periods presented. Early adoption is permitted. The Company is currently evaluating the method and timing of adoption and the effect the updated guidance will have on its financial statements. The annual updating of cash flow assumptions is expected to increase income statement volatility. The quarterly change in discount rate is expected to increase volatility in the Company’s stockholders' equity, but that will be somewhat mitigated because Shadow Adjustments are eliminated under the new guidance. In August 2018, the FASB issued ASU No. 2018-14, Compensation -Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. The updated accounting guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing, modifying and adding disclosures. The guidance is effective for annual periods ending after December 15, 2020, and early adoption is permitted. The Company anticipates early adopting this standard in the fourth quarter of 2018. Income Tax Reform Update On December 22, 2017, H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018,” was signed into law (Tax Reform Legislation). Shortly after enactment, the Securities and Exchange Commission Staff issued Staff Accounting Bulletin No. 118 (SAB 118) to provide guidance on accounting for the Tax Reform Legislation impacts when the measurements of the income tax effects are complete, incomplete, or incomplete but for which a provisional amount can be estimated. SAB 118 permits the recognition of provisional amounts, and adjustments to provisional amounts, in subsequent reporting periods within the one year measurement period. The Company has reflected the following incomplete but reasonably estimated provisional items in Deferred income taxes on the Condensed Consolidated Balance Sheet at September 30, 2018. Adjustments to the Company's provisional amounts for the three and nine months ended September 30, 2018 did not impact income tax expense.
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Earnings (Loss) Per Share |
9 Months Ended |
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Sep. 30, 2018 | |
Earnings Per Share [Abstract] | |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Earnings (loss) per share is based on the weighted average number of outstanding common shares. Basic earnings (loss) per share excludes the impact of dilutive securities and is computed by dividing Net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the three and nine months ended September 30, 2018, approximately 900 thousand and 925 thousand potential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were included in the calculation of diluted earnings per share. For those same periods, approximately 1 thousand and 3 thousand potential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were not included in the calculation of diluted earnings per share, because the effect would have been antidilutive. For the three and nine months ended September 30, 2017, approximately 907 thousand and 916 thousand potential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were included in the calculation of diluted earnings per share. For those same periods, less than 1 thousand and approximately 4 thousand potential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were not included in the calculation of diluted earnings per share, because the effect would have been antidilutive. |
Investments |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | Investments The significant components of Net investment income are presented in the following table.
During the three and nine months ended September 30, 2018, Net investment income was reduced by a $2 million loss due to the change in fair value of common stock still held as of September 30, 2018. Net realized investment gains (losses) are presented in the following table.
During the three and nine months ended September 30, 2018, $2 million of Net realized investment gains and $23 million of Net realized investment losses were recognized due to the change in fair value of non-redeemable preferred stock still held as of September 30, 2018. Net realized investment gains (losses) for the three and nine months ended September 30, 2017 included a $42 million loss related to the redemption of the Company's $350 million senior notes due November 2019. The components of OTTI losses recognized in earnings by asset type are presented in the following table.
The following tables present a summary of fixed maturity and equity securities.
The net unrealized gains on investments included in the tables above are recorded as a component of AOCI. When presented in AOCI, these amounts are net of tax and any required Shadow Adjustments. To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group segment would result in a premium deficiency if realized, a related increase in Insurance reserves is recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments). As of September 30, 2018 and December 31, 2017, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $1,115 million and $1,411 million. The following tables present the estimated fair value and gross unrealized losses of fixed maturity and equity securities in a gross unrealized loss position by the length of time in which the securities have continuously been in that position.
Based on current facts and circumstances, the Company believes the unrealized losses presented in the September 30, 2018 securities in a gross unrealized loss position table above are not indicative of the ultimate collectibility of the current amortized cost of the securities, but rather are attributable to changes in interest rates, credit spreads 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 as of September 30, 2018. The following table presents the activity related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held as of September 30, 2018 and 2017 and for which a portion of an OTTI loss was recognized in Other comprehensive income (loss).
Contractual Maturity The following table presents available-for-sale fixed maturity securities by contractual maturity.
Actual maturities may differ from contractual maturities because certain securities may be called or prepaid. Securities not due at a single date are allocated based on weighted average life. Derivative Financial Instruments The Company holds an embedded derivative on a funds withheld liability with a notional value of $174 million and $167 million as of September 30, 2018 and December 31, 2017 and a fair value of $6 million and $(3) million as of September 30, 2018 and December 31, 2017. The embedded derivative on the funds withheld liability is accounted for separately and reported with the funds withheld liability in Other liabilities on the Condensed Consolidated Balance Sheets. Investment Commitments As of September 30, 2018, the Company had committed approximately $605 million to future capital calls from various third-party limited partnership investments in exchange for an ownership interest in the related partnerships. As of September 30, 2018, the Company had mortgage loan commitments of $16 million representing signed loan applications received and accepted. 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. Purchases and sales of privately placed debt securities are recorded once funded. As of September 30, 2018, the Company had commitments to purchase or fund additional amounts of $282 million and sell $87 million under the terms of such securities. |
Fair Value |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | Fair Value Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable. Level 1 - Quoted prices for identical instruments in active markets. Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets. Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are not observable. Prices may fall within Level 1, 2 or 3 depending upon the methodology and inputs used to estimate fair value for each specific security. In general, the Company seeks to price securities using third-party pricing services. Securities not priced by pricing services are submitted to independent brokers for valuation and, if those are not available, internally developed pricing models are used to value assets using a methodology and inputs the Company believes market participants would use to value the assets. Prices obtained from third-party pricing services or brokers are not adjusted by the Company. The Company performs control procedures over information obtained from pricing services and brokers to ensure prices received represent a reasonable estimate of fair value and to confirm representations regarding whether inputs are observable or unobservable. Procedures may include i) the review of pricing service methodologies or broker pricing qualifications, ii) back-testing, where past fair value estimates are compared to actual transactions executed in the market on similar dates, iii) exception reporting, where period-over-period changes in price are reviewed and challenged with the pricing service or broker based on exception criteria, iv) deep dives, where the Company performs an independent analysis of the inputs and assumptions used to price individual securities and v) pricing validation, where prices received are compared to prices independently estimated by the Company. Assets and Liabilities Measured at Fair Value Assets and liabilities measured at fair value on a recurring basis are presented in the following tables. Corporate bonds and other includes obligations of the U.S. Treasury, government-sponsored enterprises, foreign governments and redeemable preferred stock.
The tables below present a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).
Securities may be transferred in or out of levels within the fair value hierarchy based on the availability of observable market information and quoted prices used to determine the fair value of the security. The availability of observable market information and quoted prices varies based on market conditions and trading volume. Valuation Methodologies and Inputs The following section describes the valuation methodologies and relevant inputs used to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which the instruments are generally classified. Fixed Maturity Securities Level 1 securities include highly liquid and exchange traded bonds and redeemable preferred stock, valued using quoted market prices. Level 2 securities include most other fixed maturity securities as the significant inputs are observable in the marketplace. All classes of Level 2 fixed maturity securities are valued using a methodology based on information generated by market transactions involving identical or comparable assets, a discounted cash flow methodology, or a combination of both when necessary. Common inputs for all classes of fixed maturity securities include prices from recently executed transactions of similar securities, marketplace quotes, benchmark yields, spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. Specifically for asset-backed securities, key inputs include prepayment and default projections based on past performance of the underlying collateral and current market data. Fixed maturity securities are primarily assigned to Level 3 in cases where broker/dealer quotes are significant inputs to the valuation and there is a lack of transparency as to whether these quotes are based on information that is observable in the marketplace. Level 3 securities also include private placement debt securities whose fair value is determined using internal models with inputs that are not market observable. Equity Securities Level 1 securities include publicly traded securities valued using quoted market prices. Level 2 securities are primarily valued using pricing for similar securities, recently executed transactions and other pricing models utilizing market observable inputs. Level 3 securities are primarily priced using broker/dealer quotes and internal models with inputs that are not market observable. Short Term and Other Invested Assets Securities that are actively traded or have quoted prices are classified as Level 1. These securities include money market funds and treasury bills. Level 2 primarily includes commercial paper, for which all inputs are market observable. Fixed maturity securities purchased within one year of maturity are classified consistent with fixed maturity securities discussed above. Short term investments as presented in the tables above differ from the amounts presented on the Condensed Consolidated Balance Sheets because certain short term investments, such as time deposits, are not measured at fair value. As of September 30, 2018 and December 31, 2017, there were approximately $45 million and $39 million of overseas deposits within other invested assets, which can be redeemed at net asset value in 90 days or less. Overseas deposits are excluded from the fair value hierarchy because their fair value is recorded using the net asset value per share (or equivalent) practical expedient. Life Settlement Contracts The Company sold its life settlement contracts to a third party in 2017. The valuation of the life settlement contracts was based on the terms of sale. The contracts were classified as Level 3 as there was not an active market for life settlement contracts. Derivative Financial Investments Level 2 investments primarily include the embedded derivative on the funds withheld liability. The embedded derivative on funds withheld liability is valued using the change in fair value of the assets supporting the funds withheld liability, which are fixed maturity securities valued with observable inputs. Significant Unobservable Inputs The following tables present quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurements of Level 3 assets. Valuations for assets and liabilities not presented in the tables below are primarily based on broker/dealer quotes for which there is a lack of transparency as to inputs used to develop the valuations. The quantitative detail of these unobservable inputs is neither provided nor reasonably available to the Company. The weighted average rate is calculated based on fair value.
For fixed maturity securities, an increase to the credit spread assumptions would result in a lower fair value measurement. Financial Assets and Liabilities Not Measured at Fair Value The carrying amount and estimated fair value of the Company's financial assets and liabilities which are not measured at fair value on the Condensed Consolidated Balance Sheets are presented in the following tables.
The following methods and assumptions were used to estimate the fair value of these financial assets and liabilities. The fair values of mortgage loans were based on the present value of the expected future cash flows discounted at the current interest rate for origination of similar quality loans, adjusted for specific loan risk. The fair value of the note receivable was based on the present value of the expected future cash flows discounted at the current interest rate for origination of similar notes, adjusted for specific credit risk. The note receivable is included within Other assets on the Condensed Consolidated Balance Sheets. The Company's senior notes and debentures were valued based on observable market prices. The fair value for other debt was estimated using discounted cash flows based on current incremental borrowing rates for similar borrowing arrangements. The carrying amounts reported on the Condensed Consolidated Balance Sheets for Cash, Short term investments not carried at fair value, Accrued investment income and certain Other assets and Other liabilities approximate fair value due to the short term nature of these items. These assets and liabilities are not listed in the tables above. |
Claim and Claim Adjustment Expense Reserves |
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Liability for Claims and Claims Adjustment Expense [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Claim and Claim Adjustment Expense Reserves | Claim and Claim Adjustment Expense Reserves The Company's property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including incurred but not reported (IBNR) claims as of the reporting date. The Company's reserve projections are based primarily on detailed analysis of the facts in each case, the Company's experience with similar cases and various historical development patterns. Consideration is given to such historical patterns as claim reserving trends and settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions, economic conditions, including inflation, and public attitudes. All of these factors can affect the estimation of claim and claim adjustment expense reserves. Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process. Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve. Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can affect ultimate claim costs. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as workers' compensation, general liability and professional liability claims. Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined. There can be no assurance that the Company's ultimate cost for insurance losses will not exceed current estimates. Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in the Company's results of operations and/or equity. The Company reported catastrophe losses, net of reinsurance, of $46 million and $106 million for the three and nine months ended September 30, 2018. Net catastrophe losses for the three and nine months ended September 30, 2018 included $35 million related to Hurricane Florence. The remaining catastrophe losses in 2018 resulted primarily from U.S. weather-related events. The Company reported catastrophe losses, net of reinsurance, of $269 million and $342 million for the three and nine months ended September 30, 2017. Net catastrophe losses for the three and nine months ended September 30, 2017 included $149 million related to Hurricane Harvey, $95 million related to Hurricane Irma and $20 million related to Hurricane Maria and also required reinsurance reinstatement premium of $6 million. The remaining catastrophe losses in 2017 resulted primarily from U.S. weather-related events. Liability for Unpaid Claim and Claim Adjustment Expenses Rollforward The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves of the Life & Group segment.
Net Prior Year Development Changes in estimates of claim and claim adjustment expense reserves, net of reinsurance, for prior years are defined as net prior year loss reserve development (development). These changes can be favorable or unfavorable. The following table presents development recorded for the Specialty, Commercial, International and Corporate & Other segments.
Specialty The following table presents further detail of the development recorded for the Specialty segment.
Three Months 2018 Unfavorable development in medical professional liability was primarily driven by higher than expected frequency and severity in aging services in accident years 2014 through 2017. Favorable development in other professional liability and management liability was primarily driven by favorable outcomes on individual claims in accident years 2013 and prior in financial institutions. Favorable development in surety was due to continued lower than expected loss emergence for accident years 2017 and prior. 2017 Favorable development in other professional liability and management liability was primarily due to lower than expected claim frequency in accident years 2012 through 2015, primarily for professional liability products. Favorable development in surety coverages was primarily due to lower than expected frequency of large losses in accident years 2015 and prior. Nine Months 2018 Unfavorable development for medical professional liability was primarily due to higher than expected severity in accident years 2014 and 2017 in our hospitals business and higher than expected frequency and severity in aging services in accident years 2014 through 2017. Favorable development in other professional liability and management liability was primarily due to lower than expected claim frequency for accident years 2013 through 2017 related to financial institutions and professional liability errors and omissions (E&O), favorable severity for accident years 2012 and prior related to professional liability E&O, and favorable outcomes on individual claims in financial institutions in accident years 2013 and prior. Favorable development for surety was due to lower than expected loss emergence for accident years 2017 and prior. 2017 Unfavorable development in medical professional liability was primarily due to continued higher than expected frequency in aging services. Favorable development in other professional liability and management liability was primarily due to favorable settlements on closed claims and a lower frequency of large losses for accident years 2011 through 2016 for professional and management liability, lower than expected claim frequency in accident years 2012 through 2015 for professional liability and lower than expected severity in accident years 2014 through 2016 for professional liability. Favorable development in surety coverages was primarily due to lower than expected frequency of large losses in accident years 2015 and prior. Commercial The following table presents further detail of the development recorded for the Commercial segment.
Three Months 2017 Favorable development in commercial auto was primarily due to lower than expected severity in accident years 2015 and 2016, as well as a large favorable recovery on a claim in accident year 2012. Unfavorable development in workers' compensation reflects the recognition of loss estimates related to favorable premium development as well as an adverse arbitration ruling related to reinsurance recoverables from older accident years. Nine Months 2018 Unfavorable development in general liability was driven by higher than expected claim severity in umbrella in accident years 2013 through 2015. Favorable development in property and other was driven by lower than expected claim severity in catastrophes in accident year 2017. 2017 Favorable development for commercial auto was primarily due to lower than expected severity in accident years 2013 through 2016, as well as a large favorable recovery on a claim in accident year 2012. Favorable development for general liability was due to lower than expected severity in life sciences. Favorable development for workers’ compensation was primarily related to decreases in frequency and severity in recent accident years, partially attributable to California reforms related to decreases in medical costs. This was partially offset by unfavorable development related to an adverse arbitration ruling on reinsurance recoverables from older accident years as well as the recognition of loss estimates associated with favorable premium development. International The following table presents further detail of the development recorded for the International segment.
Nine Months 2018 Favorable development in casualty was primarily driven by better than expected frequency in the liability portion of the package business in Canada and general liability in Europe. Unfavorable development in property was primarily driven by higher than expected severity in Canada and higher than expected frequency in CNA Hardy, both in accident year 2017. Favorable development in energy and marine was primarily driven by better than expected large loss frequency in the energy book in recent accident years. Unfavorable development in specialty was driven by increased severity in accident year 2017 related to professional indemnity. Favorable development in healthcare and technology was primarily driven by lower than expected frequency in accident years 2015 and prior related to healthcare in Europe. 2017 Favorable development for property was due to better than expected frequency in accident years 2014 through 2016. Unfavorable development for specialty was primarily due to higher than expected severity in accident year 2015 arising from the management liability business, partially offset by favorable development in accident years 2014 and prior. Additional unfavorable development was related to adverse large claims experience in the CNA Hardy political risks portfolio, relating largely to accident year 2016. Asbestos and Environmental Pollution (A&EP) Reserves In 2010, Continental Casualty Company (CCC) together with several of the Company’s other insurance subsidiaries completed a transaction with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc., under which substantially all of the Company’s legacy A&EP liabilities were ceded to NICO through a Loss Portfolio Transfer (LPT). At the effective date of the transaction, the Company ceded approximately $1.6 billion of net A&EP claim and allocated claim adjustment expense reserves to NICO under a retroactive reinsurance agreement with an aggregate limit of $4 billion. The $1.6 billion of claim and allocated claim adjustment expense reserves ceded to NICO was net of $1.2 billion of ceded claim and allocated claim adjustment expense reserves under existing third-party reinsurance contracts. The NICO LPT aggregate reinsurance limit also covers credit risk on the existing third-party reinsurance related to these liabilities. The Company paid NICO a reinsurance premium of $2 billion and transferred to NICO billed third-party reinsurance receivables related to A&EP claims with a net book value of $215 million, resulting in total consideration of $2.2 billion. In years subsequent to the effective date of the LPT, the Company recognized adverse prior year development on its A&EP reserves resulting in additional amounts ceded under the LPT. As a result, the cumulative amounts ceded under the LPT have exceeded the $2.2 billion consideration paid, resulting in the NICO LPT moving into a gain position, requiring retroactive reinsurance accounting. Under retroactive reinsurance accounting, this gain is deferred and only recognized in earnings in proportion to actual paid recoveries under the LPT. Over the life of the contract, there is no economic impact as long as any additional losses incurred are within the limit of the LPT. In a period in which the Company recognizes a change in the estimate of A&EP reserves that increases or decreases the amounts ceded under the LPT, the proportion of actual paid recoveries to total ceded losses is affected and the change in the deferred gain is recognized in earnings as if the revised estimate of ceded losses was available at the effective date of the LPT. The effect of the deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders' benefits in the Condensed Consolidated Statement of Operations. The following table presents the impact of the Loss Portfolio Transfer on the Condensed Consolidated Statements of Operations.
Based upon the Company's annual A&EP reserve review, net unfavorable prior year development of $113 million and $60 million was recognized before consideration of cessions to the LPT for the nine months ended September 30, 2018 and 2017. Additionally, in 2018, the Company released a portion of its provision for uncollectible third party reinsurance. The 2018 unfavorable development was driven by higher than anticipated defense costs on direct asbestos environmental accounts and paid losses on assumed reinsurance exposures. The 2017 unfavorable development was driven by modestly higher anticipated payouts on claims from known sources of asbestos exposure. The Company expects to complete another A&EP reserve review in the fourth quarter of 2018 and intends to maintain that timing going forward annually. As of September 30, 2018 and December 31, 2017, the cumulative amounts ceded under the LPT were $3.0 billion and $2.9 billion. The unrecognized deferred retroactive reinsurance benefit was $339 million and $326 million as of September 30, 2018 and December 31, 2017. NICO established a collateral trust account as security for its obligations to the Company. The fair value of the collateral trust account was $3.2 billion and $3.1 billion as of September 30, 2018 and December 31, 2017. In addition, Berkshire Hathaway Inc. guaranteed the payment obligations of NICO up to the aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement. NICO is responsible for claims handling and billing and collection from third-party reinsurers related to the Company’s A&EP claims. |
Legal Proceedings, Contingencies and Guarantees |
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Legal Proceedings, Commitments and Contingencies, and Guarantees [Abstract] | |
Legal Proceedings, Contingencies and Guarantees | Legal Proceedings, Contingencies and Guarantees Small Business Premium Rate Adjustment In 2016 and 2017, the Company identified rating errors related to its multi-peril package product and workers' compensation policies within its Small Business unit and determined that it would voluntarily issue premium refunds along with interest on affected policies. After the rating errors were identified, written and earned premium were reported net of any impact from the premium rate adjustments. The policyholder refunds for the multi-peril package product were issued in the third quarter of 2017. The policyholder refunds for workers’ compensation policies were largely completed in the third quarter of 2018. For the nine months ended September 30, 2017, earned premium was reduced by $37 million. Earned premium increased by $6 million for the three and nine months ended September 30, 2018 as a result of a change in estimate of the refund payments to policyholders. Additionally, Interest expense increased for interest due to policyholders on the premium rate adjustments by $1 million and $7 million for the three and nine months ended September 30, 2017 and $1 million for the nine months ended September 30, 2018. Other Litigation The Company is a party to other routine litigation incidental to its business, which, based on the facts and circumstances currently known, is not material to the Company's results of operations or financial position. Guarantees As of September 30, 2018 and December 31, 2017, the Company had recorded liabilities of approximately $5 million related to guarantee and indemnification agreements and management does not believe that any future indemnity claims will be significantly greater than the amounts recorded. In the course of selling business entities and assets to third parties, the Company agreed to guarantee the performance of certain obligations of previously owned subsidiaries and to indemnify purchasers for losses arising out of breaches of representations and warranties with respect to the business entities or assets sold, including, in certain cases, losses arising from undisclosed liabilities or certain named litigation. Such guarantee and indemnification agreements in effect for sales of business entities, assets and third-party loans may include provisions that survive indefinitely. As of September 30, 2018, the aggregate amount related to quantifiable guarantees was $375 million and the aggregate amount related to quantifiable indemnification agreements was $252 million. In certain cases, should the Company be required to make payments under any such guarantee, it would have the right to seek reimbursement from an affiliate of a previously owned subsidiary. In addition, the Company has agreed to provide indemnification to third-party purchasers for certain losses associated with sold business entities or assets that are not limited by a contractual monetary amount. As of September 30, 2018, the Company had outstanding unlimited indemnifications in connection with the sales of certain of its business entities or assets that included tax liabilities arising prior to a purchaser's ownership of an entity or asset, defects in title at the time of sale, employee claims arising prior to closing and in some cases losses arising from certain litigation and undisclosed liabilities. Certain provisions of the indemnification agreements survive indefinitely, while others survive until the applicable statutes of limitation expire, or until the agreed-upon contract terms expire. The Company also provided guarantees, if the primary obligor fails to perform, to holders of structured settlement annuities provided by a previously owned subsidiary. As of September 30, 2018, the potential amount of future payments the Company could be required to pay under these guarantees was approximately $1.8 billion, which will be paid over the lifetime of the annuitants. The Company does not believe any payment is likely under these guarantees, as the Company is the beneficiary of a trust that must be maintained at a level that approximates the discounted reserves for these annuities. |
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Benefit Plans | Benefit Plans The components of net periodic pension cost (benefit) are presented in the following table.
For the three and nine months ended September 30, 2018, the Company recognized $3 million and $6 million of non-service benefit in Insurance claims and policyholders' benefits and $4 million and $11 million of non-service benefit in Other operating expenses. For the three and nine months ended September 30, 2017, the Company recognized $1 million of non-service cost and $1 million of non-service benefit in Insurance claims and policyholders' benefits and $1 million of non-service cost and $3 million of non-service benefit in Other operating expenses. |
Accumulated Other Comprehensive Income (Loss) by Component |
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss) by Component | Accumulated Other Comprehensive Income (Loss) by Component The tables below display the changes in Accumulated other comprehensive income (loss) by component.
Amounts reclassified from Accumulated other comprehensive income (loss) shown above are reported in Net income (loss) as follows:
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Business Segments |
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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, 2018, management changed the segment presentation of the life sciences business and technology and media related errors and omissions business within the Specialty and Commercial business segments. The life sciences business moved from the Specialty business segment to the Commercial business segment and the technology and media related errors and omissions business moved from the Commercial business segment to the Specialty business segment. The new management responsibility for these businesses better aligns with line of business underwriting expertise and the manner in which the products are sold. 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, 2017. 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. 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 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.
The following table presents operating revenue by line of business for each reportable segment.
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Non-Insurance Revenues from Contracts with Customers |
9 Months Ended |
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Sep. 30, 2017 | |
Revenue from Contract with Customer [Abstract] | |
Non-Insurance Revenues from Contracts with Customers | Non-Insurance Revenues from Contracts with Customers Non-Insurance revenue is recognized when obligations under the terms of a contract with a customer are satisfied; generally this occurs over time as obligations are fulfilled. Revenue is measured as the amount of consideration the Company expects to receive in exchange for providing services. Deferred Non-Insurance Warranty Revenue Non-insurance warranty revenue is primarily generated from separately-priced service contracts that provide mechanical breakdown and other coverages to vehicle or consumer goods owners. The warranty contracts generally provide coverage from 1 month to 10 years. For warranty products where the Company acts as the principal in the transaction, Non-insurance warranty revenues are reported on a gross basis, with amounts billed to customers reported as Non-insurance warranty revenue and commissions paid to agents reported as Non-insurance warranty expense. Non-insurance warranty revenue is reported net of any premiums related to contractual liability coverage issued by the Company's insurance operations. Additionally, the Company provides warranty administration services for dealer and manufacturer obligor warranty products, which include limited warranties and guaranteed automobile protection waivers. The Company recognizes Non-insurance warranty revenues over the service period in proportion to the actuarially determined expected claims emergence pattern. Customers pay in full at the inception of the warranty contract. A liability for deferred revenue is recorded when cash payments are received or due in advance of the Company's performance. The deferred revenue balance includes amounts which are refundable on a pro rata basis upon cancellation. The Company had deferred non-insurance warranty revenue balances of $2.9 billion and $3.3 billion reported in Other liabilities as of January 1, 2018 and September 30, 2018. The increase in the deferred revenue balance for the nine months ended September 30, 2018 was primarily driven by cash payments received or due in advance of satisfying the Company's performance obligations, offset by cancellations and revenues recognized during the period. For the three and nine months ended September 30, 2018, the Company recognized $200 million and $635 million of revenues that were included in the deferred revenue balance as of January 1, 2018. For the three and nine months ended September 30, 2018, Non-insurance warranty revenue recognized from performance obligations related to prior periods due to a change in estimate was not material. The Company expects to recognize approximately $316 million of the deferred revenue in the remainder of 2018, $891 million in 2019, $718 million in 2020, and $1.4 billion thereafter. Cost to Obtain and Fulfill Non-Insurance Warranty Contracts with Customers Dealers, retailers and agents earn commission for assisting the Company in obtaining non-insurance warranty contracts. Additionally, the Company utilizes a third-party to perform warranty administrator services for its consumer good warranties. These costs, which are deferred and recorded as Other assets, are amortized to Non-insurance warranty expense consistent with how the related revenue is recognized. Losses under warranty contracts shall be recognized when it is probable that estimated future costs exceed unrecognized revenue. The Company evaluates deferred costs for recoverability including consideration of anticipated investment income. Adjustments to deferred costs, if necessary, are recorded in the current period results of operations. No adjustments were recorded for the nine months ended September 30, 2018. As of September 30, 2018, capitalized commission costs were $2.4 billion and capitalized administrator service costs were $22 million. For the three and nine months ended September 30, 2018, the amount of amortization of capitalized costs was $173 million and $494 million and there was no impairment loss related to the costs capitalized. |
General (Policies) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Consolidation | The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Intercompany amounts have been eliminated. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, including certain financial statement notes, is not required for interim reporting purposes and has been condensed or omitted. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in CNAF's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2017, including the summary of significant accounting policies in Note A. |
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Use of Estimates | The preparation of Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. |
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Recently Adopted Accounting Standards Updates (ASU) | Recently Adopted Accounting Standards Updates (ASU) ASU 2014-09: In May 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-09, Revenue Recognition (Topic 606): Revenue from Contracts with Customers. The standard excludes from its scope the accounting for insurance contracts, financial instruments, and certain other agreements that are governed under other GAAP guidance. The updated guidance requires an entity to recognize revenue as performance obligations are met, in an amount that reflects the consideration the entity is entitled to receive for the transfer of the promised goods or services. On January 1, 2018, the Company adopted the updated guidance using the modified retrospective method applied to all contracts which were not completed as of the date of adoption, with the cumulative effect recognized as an adjustment to the opening balance of Retained earnings. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. Under the new guidance, revenue on warranty products and services was recognized more slowly compared to the historic revenue recognition pattern. In addition, for warranty products where the Company acts as the principal in the transaction, Non-insurance warranty revenue and Non-insurance warranty expense are increased to reflect the gross amount paid by consumers, including the retail seller’s markup which is considered a commission to the Company's agent. This gross-up of revenue and expense also resulted in an increase to Other assets and Other liabilities on the Company's Condensed Consolidated Balance Sheets as the revenue and expense are recognized over the actuarially determined expected claims emergence pattern. The cumulative effect changes to the Condensed Consolidated Balance Sheet for the adoption of the updated guidance on January 1, 2018 were as follows:
The impact of adoption on the Condensed Consolidated Statements of Operations and Balance Sheet was as follows:
See Note J to the Condensed Consolidated Financial Statements for additional information regarding non-insurance revenues from contracts with customers. ASU 2016-01: In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updated accounting guidance requires changes to the reporting model for financial instruments. The guidance primarily changes the model for equity securities by requiring changes in the fair value of equity securities (except those accounted for under the equity method of accounting, those without readily determinable fair values and those that result in consolidation of the investee) to be recognized through the income statement. The Company adopted the updated guidance on January 1, 2018 and recognized a cumulative effect adjustment that increased beginning Retained earnings by $28 million, net of tax. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. For the three and nine months ended September 30, 2018, the Company recognized $2 million in pretax gains and $23 million in pretax losses within Net realized investment gains (losses) for the change in fair value of non-redeemable preferred stock and $1 million in pretax losses and $1 million in pretax gains within Net investment income for the change in fair value of common stock as a result of this change. For the three and nine months ended September 30, 2017, there was a $1 million increase and less than a $1 million increase in the fair value of common stock and less than a $1 million increase and a $7 million increase in the fair value of non-redeemable preferred stock recognized in Other comprehensive income. The Company's non-redeemable preferred stock contain characteristics of debt securities, are priced similarly to bonds, and are held primarily for income generation through periodic dividends. While recognition of gains and losses on these securities are no longer discretionary, management does not consider the changes in fair value of non-redeemable preferred stock to be reflective of our primary operations. As such, the changes in the fair value of these securities are recorded through Net realized investments gains (losses). The Company owns certain common stock with the intention of holding the securities primarily for market appreciation and as such, the changes in the fair value of these securities are recorded through Net investment income. ASU 2017-07: In March 2017, the FASB issued ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The updated accounting guidance requires changes to the presentation of the components of net periodic benefit cost on the income statement by requiring service cost to be presented with other employee compensation costs and other components of net periodic pension cost to be presented outside of any subtotal of operating income. The ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. The Company adopted the updated guidance effective January 1, 2018. The guidance was applied on a prospective basis for capitalization of service costs and on a retrospective basis for the presentation of the service cost and other components of net periodic benefit costs in the Company's Condensed Consolidated Statements of Operations and in its disclosures. The Company expanded the related footnote disclosure, Note G to the Condensed Consolidated Financial Statements, to disclose the amount of service cost and non-service cost components of net periodic benefit cost and the line items in the Condensed Consolidated Statements of Operations in which such amounts are reported. The change limiting the costs eligible for capitalization is not material to the Company’s results of operations or financial position. ASU 2018-02: In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. GAAP requires the remeasurement of deferred tax assets and liabilities due to a change in the tax rate to be included in Net income, even if the related income tax effects were originally recognized in Accumulated other comprehensive income (AOCI). The ASU allows a reclassification from AOCI to Retained earnings for stranded tax effects resulting from the new U.S. Federal corporate income tax rate enacted on December 22, 2017. The Company early adopted the updated guidance effective January 1, 2018 and elected to reclassify the stranded income tax effects relating to the reduction in the Federal corporate income tax rate from AOCI to Retained earnings at the beginning of the period of adoption. The net impact of the accounting change resulted in a $12 million increase in AOCI and a corresponding decrease in Retained earnings. The $12 million increase in AOCI is comprised of a $142 million increase in net unrealized gains (losses) on investments partially offset by a $130 million decrease in unrecognized pension and postretirement benefits. The Company releases tax effects from AOCI utilizing the security-by-security approach for Net unrealized gains (losses) on investments with Other-than-temporary impairment (OTTI) losses and Net unrealized gains (losses) on other investments. For Pension and postretirement benefits, tax effects from AOCI are released at enacted tax rates based on the pre-tax adjustments to pension liabilities or assets recognized within OCI. ASU 2018-13: In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The updated accounting guidance requires changes to the disclosures for fair value measurement by adding, removing and modifying disclosures. This guidance is effective for fiscal years beginning after December 15, 2019, including interim periods therein and early adoption is permitted. As of September 30, 2018, the Company adopted the updated guidance and added disclosures on changes in unrealized gains (losses) on Level 3 assets recognized in Other comprehensive income as well as the weighted average rate used to develop significant inputs utilized in the fair value measurements of Level 3 assets. The Company also eliminated disclosures on the amount of transfers between Level 1 and Level 2 assets and the policy for timing of transfers between Levels. Accounting Standards Pending Adoption In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842): Accounting for Leases. The updated accounting guidance requires lessees to recognize on the balance sheet assets and liabilities for the rights and obligations created by the majority of leases, including those historically accounted for as operating leases. The guidance is effective for interim and annual periods beginning after December 15, 2018 and prescribes a modified retrospective transition method but allows entities to utilize a practical expedient and apply the guidance prospectively beginning with the adoption date. The Company has decided to utilize the practical expedient. The Company is currently evaluating the effect the updated guidance will have on the Company's financial statements. It is expected that assets and liabilities will increase based on the present value of remaining lease payments for leases in place at the adoption date; however, this is not expected to be material to the Company's results of operations or financial position. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The updated accounting guidance requires changes to the recognition of credit losses on financial instruments not accounted for at fair value through net income. The guidance is effective for interim and annual periods beginning after December 15, 2019. The Company is currently evaluating the effect the guidance will have on the Company's financial statements, but expects the primary changes to be the use of the expected credit loss model for its mortgage loan portfolio and reinsurance receivables and the use of the allowance method rather than the write-down method for credit losses within the available-for-sale fixed maturities portfolio. The expected credit loss model will require a financial asset to be presented at the net amount expected to be collected. The allowance method for available-for-sale debt securities will allow the Company to record reversals of credit losses if the estimate of credit losses declines. In August 2018, the FASB issued ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The updated accounting guidance requires changes to the measurement and disclosure of long-duration contracts. The standard requires entities to annually update cash flow assumptions, including morbidity and persistency, and update discount rate assumptions quarterly using an upper-medium grade fixed-income instrument yield. The effect of changes in cash flow assumptions will be recorded in Net income and the effect of changes in discount rate assumptions will be recorded in Other comprehensive income. This guidance is effective for interim and annual periods beginning after December 15, 2020, and requires restatement of the prior periods presented. Early adoption is permitted. The Company is currently evaluating the method and timing of adoption and the effect the updated guidance will have on its financial statements. The annual updating of cash flow assumptions is expected to increase income statement volatility. The quarterly change in discount rate is expected to increase volatility in the Company’s stockholders' equity, but that will be somewhat mitigated because Shadow Adjustments are eliminated under the new guidance. In August 2018, the FASB issued ASU No. 2018-14, Compensation -Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. The updated accounting guidance modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing, modifying and adding disclosures. The guidance is effective for annual periods ending after December 15, 2020, and early adoption is permitted. The Company anticipates early adopting this standard in the fourth quarter of 2018. Income Tax Reform Update On December 22, 2017, H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018,” was signed into law (Tax Reform Legislation). Shortly after enactment, the Securities and Exchange Commission Staff issued Staff Accounting Bulletin No. 118 (SAB 118) to provide guidance on accounting for the Tax Reform Legislation impacts when the measurements of the income tax effects are complete, incomplete, or incomplete but for which a provisional amount can be estimated. SAB 118 permits the recognition of provisional amounts, and adjustments to provisional amounts, in subsequent reporting periods within the one year measurement period. The Company has reflected the following incomplete but reasonably estimated provisional items in Deferred income taxes on the Condensed Consolidated Balance Sheet at September 30, 2018. Adjustments to the Company's provisional amounts for the three and nine months ended September 30, 2018 did not impact income tax expense.
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Earnings (Loss) Per Share | Earnings (loss) per share is based on the weighted average number of outstanding common shares. Basic earnings (loss) per share excludes the impact of dilutive securities and is computed by dividing Net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. |
General (Tables) |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impact of Adoption on the Condensed Consolidated Statement of Operations and Balance Sheet | The cumulative effect changes to the Condensed Consolidated Balance Sheet for the adoption of the updated guidance on January 1, 2018 were as follows:
The impact of adoption on the Condensed Consolidated Statements of Operations and Balance Sheet was as follows:
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Investments (Tables) |
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net investment income | The significant components of Net investment income are presented in the following table.
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Net realized investment gains (losses) | Net realized investment gains (losses) are presented in the following table.
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Components of net other than temporary impairment losses recognized in earnings by asset type | The components of OTTI losses recognized in earnings by asset type are presented in the following table.
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Summary of fixed maturity and equity securities | The following tables present a summary of fixed maturity and equity securities.
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Securities in a gross unrealized loss position | The following tables present the estimated fair value and gross unrealized losses of fixed maturity and equity securities in a gross unrealized loss position by the length of time in which the securities have continuously been in that position.
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Activity related to the pretax fixed maturity credit loss component reflected within retained earnings for securities still held for which a portion of an OTTI loss was recognized in OCI | The following table presents the activity related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held as of September 30, 2018 and 2017 and for which a portion of an OTTI loss was recognized in Other comprehensive income (loss).
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Contractual maturity | The following table presents available-for-sale fixed maturity securities by contractual maturity.
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Fair Value (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets and liabilities measured at fair value on a recurring basis | Assets and liabilities measured at fair value on a recurring basis are presented in the following tables. Corporate bonds and other includes obligations of the U.S. Treasury, government-sponsored enterprises, foreign governments and redeemable preferred stock.
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Table of reconciliation for assets and liablities measured at fair value on a recurring basis using significant unobservable inputs | The tables below present a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).
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Quantitative information about significant unobservable inputs in the fair value measurement of level 3 assets | The following tables present quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurements of Level 3 assets. Valuations for assets and liabilities not presented in the tables below are primarily based on broker/dealer quotes for which there is a lack of transparency as to inputs used to develop the valuations. The quantitative detail of these unobservable inputs is neither provided nor reasonably available to the Company. The weighted average rate is calculated based on fair value.
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Carrying amount and estimated fair value of financial instrument assets and liabilities not measured at fair value | The carrying amount and estimated fair value of the Company's financial assets and liabilities which are not measured at fair value on the Condensed Consolidated Balance Sheets are presented in the following tables.
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Claim and Claim Adjustment Expense Reserves (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Incurred Claim and Claim Adjustment Expense [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of liability for unpaid claims and claims adjustment expense | The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves of the Life & Group segment.
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Net prior year development | The following table presents development recorded for the Specialty, Commercial, International and Corporate & Other segments.
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Specialty | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Incurred Claim and Claim Adjustment Expense [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net prior year claim and allocated claim adjustment expense reserve development | The following table presents further detail of the development recorded for the Specialty segment.
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Commercial | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Incurred Claim and Claim Adjustment Expense [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net prior year claim and allocated claim adjustment expense reserve development | The following table presents further detail of the development recorded for the Commercial segment.
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International | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Incurred Claim and Claim Adjustment Expense [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net prior year claim and allocated claim adjustment expense reserve development | The following table presents further detail of the development recorded for the International segment.
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CNAF Consolidated | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Incurred Claim and Claim Adjustment Expense [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impact of loss portfolio transfer on the consolidated statement of operations | The following table presents the impact of the Loss Portfolio Transfer on the Condensed Consolidated Statements of Operations.
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Benefit Plans (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of net periodic cost (benefit) | The components of net periodic pension cost (benefit) are presented in the following table.
|
Accumulated Other Comprehensive Income (Loss) by Component (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income (Loss) by Component | The tables below display the changes in Accumulated other comprehensive income (loss) by component.
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Reclassification out of Accumulated Other Comprehensive Income | Amounts reclassified from Accumulated other comprehensive income (loss) shown above are reported in Net income (loss) as follows:
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Business Segments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant components of the Company's continuing operations and selected balance sheet items | The Company's results of operations and selected balance sheet items by segment are presented in the following tables.
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Revenues by line of business | The following table presents operating revenue by line of business for each reportable segment.
|
Earnings (Loss) Per Share (Details) - shares shares in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Earnings Per Share [Abstract] | ||||
Incremental common shares attributable to dilutive effect of share-based payment arrangements (in shares) | 900 | 907 | 925 | 916 |
Antidilutive securities excluded from computation of earnings per share (in shares) | 1 | 1 | 3 | 4 |
Investments (Net investment income) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Net Investment Income [Line Items] | ||||
Gross investment income | $ 501 | $ 524 | $ 1,528 | $ 1,573 |
Investment expense | (14) | (15) | (45) | (44) |
Net investment income | 487 | 509 | 1,483 | 1,529 |
Fixed maturity securities | ||||
Net Investment Income [Line Items] | ||||
Gross investment income | 449 | 455 | 1,339 | 1,367 |
Equity securities | ||||
Net Investment Income [Line Items] | ||||
Gross investment income | 10 | 1 | 32 | 4 |
Limited partnership investments | ||||
Net Investment Income [Line Items] | ||||
Gross investment income | 23 | 51 | 93 | 157 |
Mortgage loans | ||||
Net Investment Income [Line Items] | ||||
Gross investment income | 11 | 9 | 36 | 24 |
Short term investments | ||||
Net Investment Income [Line Items] | ||||
Gross investment income | 6 | 4 | 18 | 10 |
Trading portfolio | ||||
Net Investment Income [Line Items] | ||||
Gross investment income | 1 | 3 | 6 | 9 |
Other | ||||
Net Investment Income [Line Items] | ||||
Gross investment income | $ 1 | $ 1 | $ 4 | $ 2 |
Investments (Net realized investment gains (losses)) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Debt Securities, Available-for-sale [Line Items] | ||||
Net realized investment gains (losses) | $ 14 | $ (24) | $ 25 | $ 62 |
Fixed maturity securities | ||||
Debt Securities, Available-for-sale [Line Items] | ||||
Gross realized gains | 42 | 148 | ||
Gross realized gains | 34 | 139 | ||
Gross realized losses | (32) | (116) | ||
Gross realized losses | (18) | (47) | ||
Net realized investment gains (losses) on fixed maturity securities | 10 | 32 | ||
Net realized investment (losses) gains | 16 | 92 | ||
Equity securities | ||||
Debt Securities, Available-for-sale [Line Items] | ||||
Net realized investment (losses) gains | 0 | 0 | ||
Equity securities | 2 | (23) | ||
Derivatives | ||||
Debt Securities, Available-for-sale [Line Items] | ||||
Derivatives | 1 | (1) | 10 | (3) |
Short term investments and other | ||||
Debt Securities, Available-for-sale [Line Items] | ||||
Short term investments and other | $ 1 | $ (39) | $ 6 | $ (27) |
Investments (Components of other-than-temporary impairment losses recognized in earnings) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Debt Securities, Available-for-sale [Line Items] | ||||
OTTI losses recognized in earnings | $ 3 | $ 5 | $ 9 | $ 9 |
Corporate and other bonds | ||||
Debt Securities, Available-for-sale [Line Items] | ||||
OTTI losses recognized in earnings | 1 | 4 | 6 | 8 |
Asset-backed | ||||
Debt Securities, Available-for-sale [Line Items] | ||||
OTTI losses recognized in earnings | $ 2 | $ 1 | $ 3 | $ 1 |
Investments (Activity related to the pretax fixed maturity credit loss component reflected within retained earnings for securities still held for which a portion of an OTTI loss was recognized in OCI) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Other than Temporary Impairment, Credit Losses Recognized in Earnings [Roll Forward] | ||||
Balance beginning of period | $ 21 | $ 30 | $ 27 | $ 36 |
Reductions for securities sold during the period | (2) | (2) | (8) | (8) |
Balance end of period | $ 19 | $ 28 | $ 19 | $ 28 |
Investments (Contractual maturity) (Details) - USD ($) $ in Millions |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Investments [Abstract] | ||
Due in one year or less, cost or amortized cost | $ 1,457 | $ 1,135 |
Due after one year through five years, cost or amortized cost | 8,017 | 8,165 |
Due after five years through ten years, cost or amortized cost | 16,453 | 16,060 |
Due after ten years, cost or amortized cost | 12,124 | 12,852 |
Cost or Amortized Cost | 38,051 | 38,212 |
Due in one year or less, estimated fair value | 1,473 | 1,157 |
Due after one year through five years, estimated fair value | 8,197 | 8,501 |
Due after five years through ten years, estimated fair value | 16,475 | 16,718 |
Due after ten years, estimated fair value | 13,482 | 15,108 |
Total Estimated Fair Value | $ 39,627 | $ 41,484 |
Fair Value (Narrative) (Details) - USD ($) $ in Millions |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Fair Value Disclosures [Abstract] | ||
Other invested assets overseas deposit | $ 45 | $ 39 |
Fair Value (Financal assets and liabilities not measure at fair value) (Details) - USD ($) $ in Millions |
Sep. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Assets | ||
Mortgage loans | $ 868 | $ 839 |
Liabilities | ||
Short term debt | 0 | 150 |
Long term debt | 2,680 | 2,708 |
Carrying Amount | ||
Assets | ||
Mortgage loans | 868 | 839 |
Note receivable | 35 | 46 |
Liabilities | ||
Short term debt | 150 | |
Long term debt | 2,680 | 2,708 |
Estimated Fair Value | ||
Assets | ||
Mortgage loans | 847 | 844 |
Note receivable | 35 | 46 |
Liabilities | ||
Short term debt | 150 | |
Long term debt | 2,734 | 2,896 |
Level 1 | Estimated Fair Value | ||
Assets | ||
Mortgage loans | 0 | 0 |
Note receivable | 0 | 0 |
Liabilities | ||
Short term debt | 0 | |
Long term debt | 0 | 0 |
Level 2 | Estimated Fair Value | ||
Assets | ||
Mortgage loans | 0 | 0 |
Note receivable | 0 | 0 |
Liabilities | ||
Short term debt | 150 | |
Long term debt | 2,734 | 2,896 |
Level 3 | Estimated Fair Value | ||
Assets | ||
Mortgage loans | 847 | 844 |
Note receivable | 35 | 46 |
Liabilities | ||
Short term debt | 0 | |
Long term debt | $ 0 | $ 0 |
Claim and Claim Adjustment Expense Reserves (Liability for Unpaid Claim and Claim Adjustment Expense Rollforward) (Details) - USD ($) $ in Millions |
9 Months Ended | |
---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Liability for Claims and Claims Adjustment Expense [Abstract] | ||
Gross, beginning of year | $ 22,004 | $ 22,343 |
Ceded, beginning of year | 3,934 | 4,094 |
Net reserves, beginning of year | 18,070 | 18,249 |
Net incurred claim and claim adjustment expenses: | ||
Provision for insured events of current year | 3,866 | 3,949 |
Decrease in provision for insured events of prior years | (173) | (284) |
Amortization of discount | 136 | 138 |
Total net incurred | 3,829 | 3,803 |
Net payments attributable to: | ||
Current year events | (658) | (560) |
Prior year events | (3,415) | (3,401) |
Total net payments | (4,073) | (3,961) |
Foreign currency translation adjustment and other | (80) | 110 |
Net reserves, end of period | 17,746 | 18,201 |
Ceded reserves, end of period | 3,858 | 4,008 |
Gross reserves, end of period | $ 21,604 | $ 22,209 |
Claim and Claim Adjustment Expense Reserves (Net prior year development) (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Segment Reporting Information [Line Items] | ||||
Total pretax (favorable) unfavorable development | $ (62) | $ (115) | $ (160) | $ (227) |
Specialty | ||||
Segment Reporting Information [Line Items] | ||||
Total pretax (favorable) unfavorable development | (53) | (99) | (127) | (134) |
Commercial | ||||
Segment Reporting Information [Line Items] | ||||
Total pretax (favorable) unfavorable development | (5) | (17) | (27) | (94) |
International | ||||
Segment Reporting Information [Line Items] | ||||
Total pretax (favorable) unfavorable development | (2) | 1 | (4) | 1 |
Corporate & Other | ||||
Segment Reporting Information [Line Items] | ||||
Total pretax (favorable) unfavorable development | $ (2) | $ 0 | $ (2) | $ 0 |
Claim and Claim Adjustment Expense Reserves (Commercial - Detail of Develpment Recorded) (Details) - Commercial - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Liability for Claims and Claims Adjustment Expense [Line Items] | ||||
Total pretax (favorable) unfavorable development | $ (5) | $ (17) | $ (27) | $ (94) |
Commercial Auto | ||||
Liability for Claims and Claims Adjustment Expense [Line Items] | ||||
Total pretax (favorable) unfavorable development | 1 | (12) | 0 | (37) |
General Liability | ||||
Liability for Claims and Claims Adjustment Expense [Line Items] | ||||
Total pretax (favorable) unfavorable development | (5) | (2) | 13 | (19) |
Workers' Compensation | ||||
Liability for Claims and Claims Adjustment Expense [Line Items] | ||||
Total pretax (favorable) unfavorable development | (2) | 9 | (14) | (38) |
Property and Other | ||||
Liability for Claims and Claims Adjustment Expense [Line Items] | ||||
Total pretax (favorable) unfavorable development | $ 1 | $ (12) | $ (26) | $ 0 |
Claim and Claim Adjustment Expense Reserves (Impact of Loss Portfolio Transfer on the Consolidated Statement of Operations) (Details) - Asbestos and Environmental Reserves - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Additional amounts ceded under LPT: | ||||
Net A&EP adverse development before consideration of LPT | $ 0 | $ 0 | $ 113 | $ 60 |
Provision for uncollectible third-party reinsurance on A&EP | 0 | 0 | (16) | 0 |
Total additional amounts ceded under LPT | 0 | 0 | 97 | 60 |
Retroactive reinsurance benefit recognized | (12) | (17) | (84) | (60) |
Pretax impact of deferred retroactive reinsurance | $ (12) | $ (17) | $ 13 | $ 0 |
Benefit Plans (Components of net periodic cost (benefit)) (Details) - Pension Plans - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2017 |
Sep. 30, 2018 |
Sep. 30, 2017 |
|
Net periodic pension cost (benefit) | ||||
Service cost | $ 0 | $ 0 | $ 0 | $ 0 |
Non-service cost (benefit): | ||||
Interest cost on projected benefit obligation | 23 | 25 | 70 | 77 |
Expected return on plan assets | (40) | (38) | (120) | (116) |
Amortization of net actuarial loss | 10 | 9 | 28 | 27 |
Settlement loss | 0 | 6 | 5 | 8 |
Total non-service cost (benefit) | (7) | 2 | (17) | (4) |
Total net periodic pension cost (benefit) | (7) | 2 | (17) | (4) |
Insurance Claims and Policyholder's Benefits | ||||
Non-service cost (benefit): | ||||
Total non-service cost (benefit) | (3) | 1 | (6) | (1) |
Other Operating Expenses | ||||
Non-service cost (benefit): | ||||
Total non-service cost (benefit) | $ (4) | $ 1 | $ (11) | $ (3) |
Business Segments (Narrative) (Details) |
9 Months Ended |
---|---|
Sep. 30, 2018
segments
| |
Core Segments - Specialty, Commercial and International | |
Segment Reporting Information [Line Items] | |
Number of operating segments | 3 |
Non-Core Segments, Life & Group Non-Core and Corporate and Other Non-Core | |
Segment Reporting Information [Line Items] | |
Number of operating segments | 2 |
Non-Insurance Revenues from Contracts with Customers (Details) - USD ($) $ in Millions |
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2018 |
Sep. 30, 2018 |
Dec. 31, 2017 |
|
Disaggregation of Revenue [Line Items] | |||
Unearned revenue associated with outstanding non-insurance warrany product and service contracts | $ 3,300 | $ 3,300 | $ 2,900 |
Contract with customer, liability, revenue recognized | 200 | 635 | |
Amortization of deferred sales commissions | 173 | $ 494 | |
Minimum | |||
Disaggregation of Revenue [Line Items] | |||
Warranty contract duration | 1 month | ||
Maximum | |||
Disaggregation of Revenue [Line Items] | |||
Warranty contract duration | 10 years | ||
Capitalized Commission Costs | |||
Disaggregation of Revenue [Line Items] | |||
Capitalized commission costs | 2,400 | $ 2,400 | |
Capitalized Administrator Service Costs | |||
Disaggregation of Revenue [Line Items] | |||
Capitalized commission costs | $ 22 | $ 22 |
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