UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 ☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2019March 31, 2020
OR
 ☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _____ to _____
Commission File Number 1-5823
 
CNA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-6169860
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
151 N. Franklin 60606
Chicago,Illinois (Zip Code)
(Address of principal executive offices)  
(312) 822-5000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, Par value $2.50 "CNA" New York Stock Exchange
    Chicago Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒

Non-acceleratedAccelerated filer
☐

AcceleratedNon-accelerated filer
☐

Smaller reporting company☐Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of October 24, 2019, 271,478,277April 30, 2020, 271,376,098 shares of common stock were outstanding.



Item Number 
Page
Number
 
Page
Number
PART I
 
PART I
 
1.
Condensed Consolidated Financial Statements:
 
Condensed Consolidated Financial Statements:
3
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (Unaudited)
3
Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 (Unaudited)
3
Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2019 and 2018 (Unaudited)
4
Condensed Consolidated Statements of Comprehensive (Loss) Income for the three months ended March 31, 2020 and 2019 (Unaudited)
4
Condensed Consolidated Balance Sheets as of September 30, 2019 (Unaudited) and December 31, 2018
5
Condensed Consolidated Balance Sheets as of March 31, 2020 (Unaudited) and December 31, 2019
5
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (Unaudited)
6
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019 (Unaudited)
6
Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2019 and 2018 (Unaudited)
7
Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2020 and 2019 (Unaudited)
7
Notes to Condensed Consolidated Financial Statements (Unaudited)
8
Notes to Condensed Consolidated Financial Statements (Unaudited)
8
2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
43
Management's Discussion and Analysis of Financial Condition and Results of Operations
39
3.
Quantitative and Qualitative Disclosures About Market Risk
66
Quantitative and Qualitative Disclosures About Market Risk
59
4.
Controls and Procedures
66
Controls and Procedures
59
PART II PART II 
1.
Legal Proceedings
67
Legal Proceedings
60
1A.
Risk Factors
60
2.
Unregistered Sales of Equity Securities and Use of Proceeds
67
Unregistered Sales of Equity Securities and Use of Proceeds
62
6.
Exhibits
67
Exhibits
62

PART I
Item 1. Condensed Consolidated Financial Statements
CNA Financial Corporation
Condensed Consolidated Statements of Operations (Unaudited)
Periods ended September 30Three Months Nine Months
Three months ended March 31   
(In millions, except per share data)2019 2018 2019 20182020 2019
Revenues          
Net earned premiums$1,890
 $1,853
 $5,517
 $5,453
$1,869
 $1,803
Net investment income487
 487
 1,573
 1,483
329
 571
Net investment gains:       
Other-than-temporary impairment losses(14) (3) (34) (9)
Other net investment gains21
 17
 54
 34
Net investment gains7
 14
 20
 25
Net investment (losses) gains(216) 31
Non-insurance warranty revenue292
 258
 858
 744
301
 281
Other revenues9
 10
 22
 26
8
 9
Total revenues2,685
 2,622
 7,990
 7,731
2,291
 2,695
Claims, Benefits and Expenses          
Insurance claims and policyholders’ benefits1,614
 1,312
 4,323
 3,978
1,425
 1,357
Amortization of deferred acquisition costs345
 337
 1,025
 992
344
 342
Non-insurance warranty expense278
 235
 801
 676
281
 260
Other operating expenses289
 302
 853
 903
299
 283
Interest32
 34
 100
 104
31
 34
Total claims, benefits and expenses2,558
 2,220
 7,102
 6,653
2,380
 2,276
Income before income tax127
 402
 888
 1,078
Income tax expense(20) (66) (161) (181)
Net income$107
 $336
 $727
 $897
(Loss) income before income tax(89) 419
Income tax benefit (expense)28
 (77)
Net (loss) income$(61) $342
          
Basic earnings per share$0.39
 $1.24
 $2.68
 $3.30
Basic (loss) earnings per share$(0.23) $1.26
          
Diluted earnings per share$0.39
 $1.23
 $2.67
 $3.29
Diluted (loss) earnings per share$(0.23) $1.25
          
Weighted Average Outstanding Common Stock and Common Stock Equivalents          
Basic271.6
 271.6
 271.6
 271.5
271.5
 271.6
Diluted272.6
 272.5
 272.5
 272.4
271.5
 272.6

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).


CNA Financial Corporation
Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited)
Periods ended September 30Three Months Nine Months
(In millions)2019 2018 2019 2018
Comprehensive Income       
Net income$107
 $336
 $727
 $897
Other Comprehensive Income (Loss), Net of Tax       
Changes in:       
Net unrealized gains on investments with other-than-temporary impairments—
 (1) 4
 (11)
Net unrealized gains on other investments41
 (158) 1,003
 (746)
Net unrealized gains on investments41
 (159) 1,007
 (757)
Foreign currency translation adjustment(29) —
 (12) (40)
Pension and postretirement benefits7
 7
 22
 24
Other comprehensive income (loss), net of tax19
 (152) 1,017
 (773)
Total comprehensive income$126
 $184
 $1,744
 $124
Three months ended March 31   
(In millions)2020 2019
Comprehensive (Loss) Income   
Net (loss) income$(61) $342
Other Comprehensive (Loss) Income, net of tax   
Changes in:   
Net unrealized gains and losses on investments with an allowance for credit losses(11) —
Net unrealized gains and losses on other investments(1,044) 530
Net unrealized gains and losses on investments(1,055) 530
Foreign currency translation adjustment(77) 17
Pension and postretirement benefits11
 7
Other comprehensive (loss) income, net of tax(1,121) 554
Total comprehensive (loss) income$(1,182) $896
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

CNA Financial Corporation
Condensed Consolidated Balance Sheets
(In millions, except share data)September 30, 2019 (Unaudited) December 31,
2018		March 31, 2020 (Unaudited) December 31,
2019
Assets      
Investments:      
Fixed maturity securities at fair value (amortized cost of $38,258 and $38,085)$42,459
 $39,546
Equity securities at fair value (cost of $812 and $844)841
 780
Fixed maturity securities at fair value (amortized cost of $38,034 and $38,126, less allowance for credit loss of $49 and $-)$40,098
 $42,207
Equity securities at fair value (cost of $936 and $820)799
 865
Limited partnership investments1,758
 1,982
1,509
 1,752
Other invested assets60
 53
63
 65
Mortgage loans923
 839
Mortgage loans (less allowance for uncollectible receivables of $20 and $-)1,021
 994
Short term investments1,494
 1,286
596
 1,861
Total investments47,535
 44,486
44,086
 47,744
Cash340
 310
857
 242
Reinsurance receivables (less allowance for uncollectible receivables of $29 and $29)4,063
 4,426
Insurance receivables (less allowance for uncollectible receivables of $40 and $42)2,464
 2,323
Reinsurance receivables (less allowance for uncollectible receivables of $23 and $25)4,328
 4,179
Insurance receivables (less allowance for uncollectible receivables of $30 and $32)2,502
 2,449
Accrued investment income409
 391
402
 395
Deferred acquisition costs668
 633
683
 662
Deferred income taxes190
 392
518
 199
Property and equipment at cost (less accumulated depreciation of $201 and $216)293
 324
Property and equipment at cost (less accumulated depreciation of $224 and $215)271
 282
Goodwill145
 146
145
 147
Deferred non-insurance warranty acquisition expense2,772
 2,513
2,905
 2,840
Other assets (includes $- and $8 due from Loews Corporation)1,571
 1,208
Other assets (includes $15 and $21 due from Loews Corporation)1,708
 1,473
Total assets$60,450
 $57,152
$58,405
 $60,612
Liabilities 
  
 
  
Insurance reserves:   
   
Claim and claim adjustment expenses$21,596
 $21,984
$21,872
 $21,720
Unearned premiums4,608
 4,183
4,745
 4,583
Future policy benefits12,305
 10,597
11,734
 12,311
Long term debt2,678
 2,680
2,680
 2,679
Deferred non-insurance warranty revenue3,707
 3,402
3,848
 3,779
Other liabilities (includes $47 and $23 due to Loews Corporation)3,433
 3,089
Other liabilities (includes $7 and $21 due to Loews Corporation)3,164
 3,325
Total liabilities48,327
 45,935
48,043
 48,397
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; 271,478,277 and 271,456,978 shares outstanding)683
 683
Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 271,370,988 and 271,412,591 shares outstanding)683
 683
Additional paid-in capital2,197
 2,192
2,187
 2,203
Retained earnings9,171
 9,277
8,634
 9,348
Accumulated other comprehensive income (loss)139
 (878)
Treasury stock (1,561,966 and 1,583,265 shares), at cost(67) (57)
Accumulated other comprehensive (loss) income(1,070) 51
Treasury stock (1,669,255 and 1,627,652 shares), at cost(72) (70)
Total stockholders’ equity12,123
 11,217
10,362
 12,215
Total liabilities and stockholders' equity$60,450
 $57,152
$58,405
 $60,612
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

CNA Financial Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
Nine months ended September 30   
Three months ended March 31   
(In millions)2019 20182020 2019
Cash Flows from Operating Activities      
Net income$727
 $897
Adjustments to reconcile net income to net cash flows provided by operating activities:   
Net (loss) income$(61) $342
Adjustments to reconcile net (loss) income to net cash flows provided by operating activities:   
Deferred income tax (benefit) expense(72) 37
(37) 32
Trading portfolio activity(1) 2
7
 (3)
Net investment gains(20) (25)
Net investment losses (gains)216
 (31)
Equity method investees48
 136
98
 14
Net amortization of investments(64) (48)(15) (25)
Depreciation and amortization52
 59
16
 19
Changes in:      
Receivables, net207
 (47)(229) 44
Accrued investment income(18) 5
(8) (15)
Deferred acquisition costs(37) (24)(27) (30)
Insurance reserves337
 108
510
 57
Other, net(179) (232)(258) (117)
Net cash flows provided by operating activities980
 868
212
 287
Cash Flows from Investing Activities 
  
 
  
Dispositions:      
Fixed maturity securities - sales4,872
 6,622
823
 2,259
Fixed maturity securities - maturities, calls and redemptions2,116
 1,838
799
 576
Equity securities171
 69
98
 64
Limited partnerships417
 304
204
 186
Mortgage loans109
 83
15
 35
Purchases:      
Fixed maturity securities(7,053) (8,244)(1,818) (2,447)
Equity securities(140) (177)(220) (36)
Limited partnerships(167) (380)(32) (114)
Mortgage loans(193) (112)(61) (59)
Change in other investments(8) (10)(6) (6)
Change in short term investments(180) 158
1,267
 (177)
Purchases of property and equipment(20) (87)(3) (8)
Other, net16
 16
21
 16
Net cash flows (used) provided by investing activities(60) 80
Net cash flows provided by investing activities1,087
 289
Cash Flows from Financing Activities      
Dividends paid to common stockholders(834) (801)(649) (643)
Proceeds from the issuance of debt496
 —
Repayment of debt(520) (180)
Purchase of treasury stock(18) —
(18) (14)
Other, net(11) (8)(8) (8)
Net cash flows used by financing activities(887) (989)(675) (665)
Effect of foreign exchange rate changes on cash(3) (4)(9) 2
Net change in cash30
 (45)615
 (87)
Cash, beginning of year310
 355
242
 310
Cash, end of period$340
 $310
$857
 $223
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

CNA Financial Corporation
Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
Periods ended September 30Three Months Nine Months
Three months ended March 31   
(In millions)2019 2018 2019 20182020 2019
Common Stock          
Balance, beginning of period$683
 $683
 $683
 $683
$683
 $683
Balance, end of period683
 683
 683
 683
683
 683
Additional Paid-in Capital          
Balance, beginning of period2,190
 2,179
 2,192
 2,175
2,203
 2,192
Stock-based compensation7
 7
 5
 11
(16) (8)
Balance, end of period2,197
 2,186
 2,197
 2,186
2,187
 2,184
Retained Earnings          
Balance, beginning of period, as previously reported9,348
 9,277
Cumulative effect adjustments from changes in accounting guidance, net of tax(5) —
Balance, beginning of period, as adjusted9,343
 9,277
Dividends to common stockholders ($2.37 and $2.35 per share)(648) (643)
Net (loss) income(61) 342
Balance, end of period8,634
 8,976
Accumulated Other Comprehensive (Loss) Income   
Balance, beginning of period9,159
 9,216
 9,277
 9,364
51
 (878)
Dividends to common stockholders ($0.35, $0.35, $3.05 and $2.95 per share)(95) (96) (833) (805)
Net income107
 336
 727
 897
Balance, end of period9,171
 9,456
 9,171
 9,456
Accumulated Other Comprehensive Income (Loss)
       
Balance, beginning of period120
 (605) (878) 16
Other comprehensive income (loss)19
 (152) 1,017
 (773)
Other comprehensive (loss) income(1,121) 554
Balance, end of period139
 (757) 139
 (757)(1,070) (324)
Treasury Stock          
Balance, beginning of period(65) (58) (57) (60)(70) (57)
Stock-based compensation—
 —
 8
 2
16
 7
Purchase of treasury stock(2) —
 (18) —
(18) (14)
Balance, end of period(67) (58) (67) (58)(72) (64)
Total stockholders' equity$12,123
 $11,510
 $12,123
 $11,510
$10,362
 $11,455
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).


CNA Financial Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note A. 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, 2019.March 31, 2020.
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, 2018,2019, 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, 2019March 31, 2020 and for the three and nine months ended September 30,March 31, 2020 and 2019 and 2018 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 2016-02: 2016-13:In FebruaryJune 2016 the Financial Accounting Standards Board (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. On January 1, 2019, the Company adopted the updated guidance using a modified retrospective method. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. The Company utilized the package of practical expedients allowing the Company to not reassess whether a contract is or contains a lease, lease classification and initial direct costs. The Company also utilized the practical expedient to not separate lease and non-lease components for all leases.
Adoption of the updated guidance resulted in the following changes to the Condensed Consolidated Balance Sheet on January 1, 2019:
(In millions)Balance as of December 31, 2018 Adjustments Due to Adoption of Topic 842 Balance as of January 1, 2019
Property and equipment at cost (less accumulated depreciation)$324
 $2
 $326
Other assets1,208
 237
 1,445
Other liabilities3,089
 239
 3,328

As of January 1, 2019, operating lease right-of-use (ROU) assets, included within Other assets, were reduced by accrued rent and lease incentives of $75 million previously classified as Other liabilities. The updated guidance did not impact the Condensed Consolidated Statements of Operations. See Note K to the Condensed Consolidated Financial Statements for additional information regarding leases.

Accounting Standards Pending Adoption
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 guidance will be applied using a modified retrospective approach with the cumulative effect recognized as an adjustment to retained earnings. A prospective transition approach is required for debt securities that have recognized an other-than-temporary impairment prior to the effective date. The Company is currently evaluating the effect the guidance will have on the Company'sCompany’s results of operations. For financial statements, but does not expect the impact to be material. The primary changes will be the use ofassets measured at cost, the expected credit loss model for mortgage loans, reinsurance and insurance receivables and other financing receivables andrequires immediate recognition of estimated credit losses over the uselife of the allowance method rather thanasset and presentation of 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. TheThis new guidance applies to mortgage loan investments, reinsurance and insurance receivables and other financing receivables. For available-for-sale fixed maturity securities carried at fair value, estimated credit losses will continue to be measured at the present value of expected cash flows, however, the other than temporary impairment (OTTI) concept has been eliminated. Under the previous guidance, estimated credit impairments resulted in a write-down of amortized cost. Under the new guidance, estimated credit losses are recognized through an allowance method for available-for-sale debt securities will allow the Company to recordand reversals of credit lossesthe allowance are permitted if the estimate of credit losses declines. For available-for-sale fixed maturity securities where the Company has an intent to sell, impairment will continue to result in a write-down of amortized cost.
On January 1, 2020, the Company adopted the updated guidance using a modified retrospective method with a cumulative effect adjustment recorded to beginning Retained earnings. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. A prospective transition approach is required for available-for-sale fixed maturity securities that were purchased with credit deterioration (PCD assets) or have recognized an OTTI write-down prior to the effective date. The cumulative effect of the accounting change resulted in a $5 million decrease in Retained earnings, with a corresponding $7 million allowance for credit losses recorded for Mortgage loans partially offset by a $2 million tax impact.

The allowance for uncollectible insurance and reinsurance receivables was unchanged as a result of adopting the new guidance. At adoption, an allowance for credit losses of $6 million was established for available-for-sale fixed maturity securities that were PCD assets, with a corresponding increase to amortized cost, resulting in no adjustment to the carrying value of the securities. Below is a summary of the significant accounting policies impacted by the adoption of ASU 2016-13.
The allowance for credit losses is a valuation account that is reported as a reduction of a financial asset’s cost basis and is measured on a pool basis when similar risk characteristics exist. Management estimates the allowance using relevant available information from both internal and external sources. Historical credit loss experience provides the basis for the estimation of expected credit losses and adjustments may be made to reflect current conditions and reasonable and supportable forecasts. Adjustments to historical loss information are made for any additional factors that come to the Company’s attention. This could include significant shifts in counterparty financial strength ratings, aging of past due receivables, amounts sent to collection agencies, or other underlying portfolio changes. Amounts are considered past due when payments have not been received according to contractual terms. The Company also considers current and forecast economic conditions, using a variety of economic metrics and forecast indices. The sensitivity of expected credit losses relative to changes to these forecast economic conditions can vary by financial asset class. The Company considers a reasonable and supportable forecast period to be up to 24 months from the balance sheet date. After the forecast period, the Company reverts to historical credit experience. The Company uses collateral arrangements such as letters of credit and amounts held in beneficiary trusts to mitigate credit risk, which are considered in the estimate of net amount expected to be collected.
The Company has made a policy election to present accrued interest balances separately from the amortized cost basis of assets and has elected the practical expedient to exclude the accrued interest from the tabular disclosures for mortgage loans and available-for-sale securities. The Company has elected not to estimate an allowance for credit losses on accrued interest receivable. The accrual of interest income is currentlydiscontinued and the asset is placed on nonaccrual status in the processquarter that payment becomes delinquent. Interest accrued but not received for assets on nonaccrual status is reversed through investment income. Interest received for assets that are on nonaccrual status is recognized as payment is received. The asset is returned to accrual status when the principal and interest amounts contractually due are brought current and future payments are expected. Interest receivable is presented as a component of evaluating existing impairment methodology, developing models to comply withaccrued investment income on the new guidanceCondensed Consolidated Balance Sheet.
See Note C and accumulating all of the necessary internal and external information required to measure credit losses under the expected credit loss model. The Company is implementing changesNote K to the Condensed Consolidated Financial Statements for additional information systems to assist with the accounting, including the recording of the allowance. The Company is also evaluating additional changes to processes to meet the reporting and disclosure requirements of the new guidance.regarding credit losses.
Accounting Standards Pending Adoption
In August 2018, the FASB issued ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-DurationLong Duration Contracts. The updated accounting guidance requires changes to the measurement and disclosure of long-duration contracts. The guidance 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 incomethe Company's results of operations 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; however2021, and the FASB has approved a one year deferral of the effective date.Company will adopt it on January 1, 2022. The guidance requires restatement of 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.statements, including the increased disclosure requirements. 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. While the requirements of the new guidance represent a material change from existing GAAP, the underlying economics of the business and related cash flows arewill be unchanged.

Note B. 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,March 31, 2020, approximately 1,015 thousand potential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were excluded from the calculation of diluted loss per share because the effect would have been antidilutive due to the net loss position of the Company. For the three months ended March 31, 2019, approximately 1 million and 920971 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 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, 2018, approximately 900 thousand and 925 thousand potential shares attributable to exercises or conversions into common stock under stock-based employee compensation plansMarch 31, 2019 there 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.0 antidilutive shares.
The Company repurchased 415,695435,376 and 317,508 shares of CNAF common stock at an aggregate cost of $18 million and $14 million during the ninethree months ended September 30,March 31, 2020 and 2019. NaN repurchases were made during 2018.


Note C. Investments
The significant components of Net investment income are presented in the following table.
Periods ended September 30Three Months Nine Months
Three months ended March 31   
(In millions)2019 2018 2019 20182020 2019
Fixed maturity securities$452
 $449
 $1,362
 $1,339
$438
 $455
Equity securities16
 10
 62
 32
(44) 30
Limited partnership investments12
 23
 125
 93
(70) 76
Mortgage loans13
 11
 37
 36
14
 12
Short term investments8
 6
 27
 18
7
 10
Trading portfolio2
 1
 6
 6
1
 2
Other—
 1
 2
 4
—
 2
Gross investment income503
 501
 1,621
 1,528
346
 587
Investment expense(16) (14) (48) (45)(17) (16)
Net investment income$487
 $487
 $1,573
 $1,483
$329
 $571

During the three and nine months ended September 30,March 31, 2020 and 2019, $5$(45) million and $26$17 million of Net investment income was recognized due to the change in fair value of common stock still held as of September 30,March 31, 2020 and 2019. During the three and nine months ended September 30, 2018,March 31, 2020 and 2019, $(2) million and less than $1 million of Net investment income was reduced by $2 millionrecognized due to the change in fair value of common stocktrading securities still held as of September 30, 2018.March 31, 2020 and 2019. 
Net investment gains (losses) are presented in the following table.
Periods ended September 30Three Months Nine Months
Three months ended March 31   
(In millions)2019 2018 2019 20182020 2019
Net investment gains (losses):          
Fixed maturity securities:          
Gross gains$34
 $42
 $98
 $148
$29
 $36
Gross losses(31) (32) (104) (116)(104) (42)
Net investment gains (losses) on fixed maturity securities3
 10
 (6) 32
(75) (6)
Equity securities7
 2
 60
 (23)(133) 42
Derivatives(2) 1
 (13) 10
5
 (5)
Mortgage loans(13) —
Short term investments and other(1) 1
 (21) 6
—
 —
Net investment gains (losses)$7
 $14
 $20
 $25
$(216) $31

During the three and nine months ended September 30,March 31, 2020 and 2019, $7$(133) million of losses and $60$42 million of gains were recognized in Net investment gains were recognized(losses) due to the change in fair value of non-redeemable preferred stock still held as of September 30,March 31, 2020 and 2019. During
For available-for-sale fixed maturity securities, a credit loss exists if the threepresent value of cash flows expected to be collected is less than the amortized cost basis. The allowance for credit loss related to available-for-sale fixed maturity securities is the difference between present value of cash flows expected to be collected and nine months ended September 30, 2018, $2 millionthe amortized cost basis, limited by the amount that the fair value is less than the amortized cost basis. The Company considers all available evidence when determining whether an investment requires a credit loss write-down or allowance to be recorded. Examples of such evidence may include the financial condition and near term prospects of the issuer, whether the issuer is current with interest and principal payments, credit ratings on the security or changes in ratings over time, general market conditions and industry, sector or other specific factors and whether it is likely that the Company will recover its amortized cost through the collection of cash flows. Changes in the allowance are presented as a component of Net investment gains and $23 million(losses) on the Condensed Consolidated Statements of Net investment losses were recognized due toOperations.

The following table presents the change in fair value of non-redeemable preferred stock still held as of September 30, 2018. Net investment gains (losses) for the nine months ended September 30, 2019 included a $21 million lossactivity related to the second quarter 2019 redemptionallowance on available-for-sale securities with credit impairments and PCD assets for the three months ended March 31, 2020. Accrued interest receivable on available-for-sale fixed maturity securities totaled $390 million and is excluded from the estimate of expected credit losses and the Company's $500 million senior notes due August 2020.amortized cost basis in the tables included within this Note.
Three months ended March 31 
(in millions)Corporate and other bonds
Allowance for credit losses: 
Beginning balance$—
Additions to the allowance for credit losses: 
Impact of adopting ASC 3266
For securities for which credit losses were not previously recorded48
For available-for-sale securities accounted for as PCD assets1
  
Reductions to the allowance for credit losses: 
Securities sold during the period (realized)5
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis1
Write-offs charged against the allowance—
Recoveries of amounts previously written off—
  
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period—
Ending balance as of March 31, 2020$49

The components of Other-than-temporaryavailable-for-sale impairment (OTTI) losses recognized in earnings by asset type are presented in the following table. The table includes losses on securities with an intention to sell and changes in the allowance for credit losses on securities since acquisition date.
Periods ended September 30Three Months Nine Months
Three Months ended March 31   
(In millions)2019 2018 2019 20182020 2019
Fixed maturity securities available-for-sale:          
Corporate and other bonds$12
 $1
 $24
 $6
$91
 $6
Asset-backed2
 2
 10
 3
1
 8
OTTI losses recognized in earnings$14
 $3
 $34
 $9
Impairment losses recognized in earnings$92
 $14


The following tables present a summary of fixed maturity securities.
September 30, 2019
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
OTTI
Losses (Gains)
March 31, 2020Cost or
Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 
Allowance for Credit Losses(1)
 Estimated
Fair
Value
(In millions)
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
OTTI
Losses (Gains)
 
Fixed maturity securities available-for-sale:          
Corporate and other bonds$19,806
 $2,263
 $42
 $22,027
 $—
$20,181
 $1,419
 $817
 $49
 $20,734
States, municipalities and political subdivisions9,154
 1,641
 —
 10,795
 —
8,957
 1,536
 2
 —
 10,491
Asset-backed:                  
Residential mortgage-backed4,718
 157
 1
 4,874
 (23)4,198
 207
 8
 —
 4,397
Commercial mortgage-backed2,066
 117
 3
 2,180
 1
2,207
 36
 153
 —
 2,090
Other asset-backed1,884
 46
 4
 1,926
 (3)1,868
 9
 133
 —
 1,744
Total asset-backed8,668
 320
 8
 8,980
 (25)8,273
 252
 294
 —
 8,231
U.S. Treasury and obligations of government-sponsored enterprises124
 7
 —
 131
 —
147
 8
 —
 —
 155
Foreign government491
 20
 —
 511
 —
452
 15
 4
 —
 463
Redeemable preferred stock10
 —
 —
 10
 —
9
 —
 —
 —
 9
Total fixed maturity securities available-for-sale38,253
 4,251
 50
 42,454
 $(25)38,019
 3,230
 1,117
 49
 40,083
Total fixed maturity securities trading5
 —
 —
 5
  15
 —
 —
 —
 15
Total fixed maturity securities$38,258
 $4,251
 $50
 $42,459
  $38,034
 $3,230
 $1,117
 $49
 $40,098
(1) As of January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments. The Unrealized OTTI Losses (Gains) column that tracked subsequent valuation changes on securities for which a credit loss had previously been recorded has been replaced with the Allowance for Credit Losses column.
December 31, 2018
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
OTTI
Losses (Gains)
December 31, 2019Cost or
Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Estimated
Fair
Value		 Unrealized
OTTI
Losses (Gains)
(In millions)
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Estimated
Fair
Value
 
Unrealized
OTTI
Losses (Gains)
 
Fixed maturity securities available-for-sale:          
Corporate and other bonds$18,764
 $791
 $395
 $19,160
 $—
$19,789
 $2,292
 $32
 $22,049
 $—
States, municipalities and political subdivisions9,681
 1,076
 9
 10,748
 —
9,093
 1,559
 —
 10,652
 —
Asset-backed:                  
Residential mortgage-backed4,815
 68
 57
 4,826
 (20)4,387
 133
 1
 4,519
 (17)
Commercial mortgage-backed2,200
 28
 32
 2,196
 —
2,265
 86
 5
 2,346
 1
Other asset-backed1,975
 11
 24
 1,962
 —
1,925
 41
 4
 1,962
 (3)
Total asset-backed8,990
 107
 113
 8,984
 (20)8,577
 260
 10
 8,827
 (19)
U.S. Treasury and obligations of government-sponsored enterprises156
 3
 —
 159
 —
146
 1
 2
 145
 —
Foreign government480
 5
 4
 481
 —
491
 14
 1
 504
 —
Redeemable preferred stock10
 —
 —
 10
 —
10
 —
 —
 10
 —
Total fixed maturity securities available-for-sale38,081
 1,982
 521
 39,542
 $(20)38,106
 4,126
 45
 42,187
 $(19)
Total fixed maturity securities trading4
 —
 —
 4
  20
 —
 —
 20
  
Total fixed maturity securities$38,085
 $1,982
 $521
 $39,546
  $38,126
 $4,126
 $45
 $42,207
  

The net unrealized gains on investments included in the tables above are recorded as a component of Accumulated other comprehensive income (AOCI). When presented in AOCI, these amounts are net of tax and 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, 2019March 31, 2020 and December 31, 2018,2019, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $2,237$1,700 million and $1,078$2,198 million.


The following tables present the estimated fair value and gross unrealized losses of fixed maturity securities in a gross unrealized loss position for which an allowance for credit loss has not been recorded, by the length of time in which the securities have continuously been in that position.
Less than 12 Months 12 Months or Longer TotalLess than 12 Months 12 Months or Longer Total
September 30, 2019Estimated
Fair Value		 Gross
Unrealized
Losses		 Estimated
Fair Value		 Gross
Unrealized
Losses		 Estimated
Fair Value		 
Gross
Unrealized
Losses
March 31, 2020
Estimated
Fair Value
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
Gross
Unrealized
Losses
(In millions)Estimated
Fair Value		 Gross
Unrealized
Losses		 Estimated
Fair Value		 Gross
Unrealized
Losses		 Estimated
Fair Value		 
Gross
Unrealized
Losses
 
Fixed maturity securities available-for-sale:            
Corporate and other bonds$890
 $26
 $200
 $16
 $1,090
 $42
$7,036
 $804
 $44
 $13
 $7,080
 $817
States, municipalities and political subdivisions20
 —
 2
 —
 22
 —
82
 2
 —
 —
 82
 2
Asset-backed:                      
Residential mortgage-backed150
 —
 38
 1
 188
 1
166
 7
 22
 1
 188
 8
Commercial mortgage-backed83
 2
 26
 1
 109
 3
1,185
 151
 12
 2
 1,197
 153
Other asset-backed416
 3
 6
 1
 422
 4
1,510
 131

9

2
 1,519
 133
Total asset-backed649
 5
 70
 3
 719
 8
2,861
 289
 43
 5
 2,904
 294
U.S. Treasury and obligations of government-sponsored enterprises14
 —
 4
 —
 18
 —
2
 —
 —
 —
 2
 —
Foreign government17
 —
 2
 —
 19
 —
76
 4
 —
 —
 76
 4
Redeemable preferred stock9

—

—

—

9

—
Total$1,590
 $31
 $278
 $19
 $1,868
 $50
$10,066

$1,099

$87

$18

$10,153

$1,117
Less than 12 Months 12 Months or Longer TotalLess than 12 Months 12 Months or Longer Total
December 31, 2018Estimated
Fair Value		 Gross
Unrealized
Losses		 Estimated
Fair Value		 Gross
Unrealized
Losses		 Estimated
Fair Value		 Gross
Unrealized
Losses
December 31, 2019
Estimated
Fair Value
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
Gross
Unrealized
Losses
 
Estimated
Fair Value
 
Gross
Unrealized
Losses
(In millions)Estimated
Fair Value		 Gross
Unrealized
Losses		 Estimated
Fair Value		 Gross
Unrealized
Losses		 Estimated
Fair Value		 Gross
Unrealized
Losses		 
Fixed maturity securities available-for-sale:            
Corporate and other bonds$8,543
 $340
 $825
 $55
 $9,368
 $395
$914
 $21
 $186
 $11
 $1,100
 $32
States, municipalities and political subdivisions517
 8
 5
 1
 522
 9
34
 —
 —
 —
 34
 —
Asset-backed:                      
Residential mortgage-backed1,932
 23
 1,119
 34
 3,051
 57
249
 1
 30
 —
 279
 1
Commercial mortgage-backed728
 10
 397
 22
 1,125
 32
381
 3
 20
 2
 401
 5
Other asset-backed834
 21
 125
 3
 959
 24
449
 3
 33
 1
 482
 4
Total asset-backed3,494
 54
 1,641
 59
 5,135
 113
1,079
 7
 83
 3
 1,162
 10
U.S. Treasury and obligations of government-sponsored enterprises21
 —
 19
 —
 40
 —
62
 2
 2
 —
 64
 2
Foreign government114
 2
 124
 2
 238
 4
59
 1
 1
 —
 60
 1
Total$12,689
 $404
 $2,614
 $117
 $15,303
 $521
$2,148
 $31
 $272
 $14
 $2,420
 $45


The following tables present the estimated fair value and gross unrealized losses of available-for-sale Corporate and other bonds in a gross unrealized loss position at March 31, 2020 across industry sectors and by rating distributions.
March 31, 2020Estimated
Fair
Value		 Gross
Unrealized
Losses
(In millions)
Corporate and other bonds:   
Basic Materials$727
 $78
Communications349
 27
Consumer, cyclical - Other390
 56
Consumer, non-cyclical - Other401
 27
Energy - Oil & Gas575
 191
Energy - Pipelines523
 112
Entertainment148
 23
Financial - Other1,711
 89
Financial - Real Estate/REITS599
 45
Industrial468
 55
Retail150
 18
Technology290
 30
Transportation73
 5
Travel & Related269
 37
Utilities407
 24
Total Corporate and other bonds$7,080
 $817
March 31, 2020Estimated
Fair
Value		 Gross
Unrealized
Losses
(In millions) 
Corporate and other bonds:   
AAA$8
 $—
AA134
 4
A608
 17
BBB4,987
 516
Below investment grade1,343
 280
Total Corporate and other bonds$7,080
 $817


The following tables present the estimated fair value and gross unrealized losses of available-for-sale Commercial mortgage-backed securities in a gross unrealized loss position at March 31, 2020 by property type and by rating distributions.
March 31, 2020Estimated
Fair
Value		 Gross
Unrealized
Losses
(In millions) 
Commercial mortgage-backed:   
Conduits (multi property, multi borrower pools)$211
 $11
Single asset, single borrower986
 142
Total Commercial mortgage-backed$1,197
 $153
March 31, 2020Estimated
Fair
Value		 Gross
Unrealized
Losses
(In millions) 
Commercial mortgage-backed:   
US Government, Government agencies and Government sponsored enterprises$1
 $—
AAA60
 1
AA245
 17
A214
 22
BBB484
 78
Below investment grade193
 35
Total Commercial mortgage-backed$1,197
 $153
The following tables present the estimated fair value and gross unrealized losses of available-for-sale Other asset-backed securities in a gross unrealized loss position at March 31, 2020 by underlying collateral and by rating distributions.
March 31, 2020Estimated
Fair
Value		 Gross
Unrealized
Losses
(In millions) 
Other asset-backed:   
Auto$290
 $6
Collateralized loan obligations418
 60
Franchise414
 39
Other397
 28
Total Other asset-backed$1,519
 $133

March 31, 2020Estimated
Fair
Value		 Gross
Unrealized
Losses
(In millions) 
Other asset-backed:   
AAA$49
 $1
AA83
 2
A821
 74
BBB566
 56
Below investment grade—
 —
Total Other asset-backed$1,519
 $133


Based on current facts and circumstances, the Company believes the unrealized losses presented in the September 30, 2019 securities in aMarch 31, 2020 gross unrealized loss position tabletables above are not indicative of the ultimate collectibility of the current amortized cost of the securities, but rathersecurities. Rather, the Company believes the gross unrealized losses are attributable primarily to changes in interest rates,widening credit spreads and other factors.over risk free rates beyond historic norms, as a result of market uncertainties stemming from the COVID-19 pandemic, as well as supply shocks in the energy sector coupled with demand shocks in multiple sectors from the COVID-19 pandemic, that originated during the first quarter of 2020. 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 OTTIimpairment losses to be recorded as of September 30, 2019.
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, 2019 and 2018 for which a portion of an OTTI loss was recognized in Other comprehensive income (loss).
Periods ended September 30Three Months Nine Months
(In millions)2019 2018 2019 2018
Beginning balance of credit losses on fixed maturity securities$16
 $21
 $18
 $27
Reductions for securities sold during the period—
 (2) (2) (8)
Ending balance of credit losses on fixed maturity securities$16
 $19
 $16
 $19


March 31, 2020.
Contractual Maturity
The following table presents available-for-sale fixed maturity securities by contractual maturity.
September 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
(In millions)
Cost or
Amortized
Cost
 
Estimated
Fair
Value
 
Cost or
Amortized
Cost
 
Estimated
Fair
Value
Cost or
Amortized
Cost
 
Estimated
Fair
Value
 
Cost or
Amortized
Cost
 
Estimated
Fair
Value
Due in one year or less$1,071
 $1,091
 $1,350
 $1,359
$1,331
 $1,325
 $1,334
 $1,356
Due after one year through five years10,992
 11,470
 7,979
 8,139
11,554
 11,812
 9,746
 10,186
Due after five years through ten years13,694
 14,711
 16,859
 16,870
13,078
 13,069
 14,892
 15,931
Due after ten years12,496
 15,182
 11,893
 13,174
12,056
 13,877
 12,134
 14,714
Total$38,253
 $42,454
 $38,081
 $39,542
$38,019
 $40,083
 $38,106
 $42,187

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 $170$196 million and $172$182 million as of September 30, 2019March 31, 2020 and December 31, 20182019 and a fair value of $(9)$(1) million and $4$(7) million as of September 30, 2019March 31, 2020 and December 31, 2018.2019. 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 part of its overall investment strategy, the Company invests in various assets which require future purchase, sale or funding commitments. These investments are recorded once funded, and the related commitments may include future capital calls from various third-party limited partnerships, signed and accepted mortgage loan applications, and obligations related to privately placed debt securities. As of September 30, 2019,March 31, 2020, the Company had commitments to purchase or fund approximately $865$1,025 million and sell approximately $90$85 million under the terms of these investments.
Mortgage Loans
The allowance for expected credit losses is developed by assessing the credit quality of pools of mortgage loans in good standing using debt service coverage ratios (DSCR) and loan-to-value ratios (LTV). The DSCR compares a property’s net operating income to its debt service payments, including principal and interest. The LTV ratio compares the current unpaid principal balance of the loan to the estimated fair value of the underlying property collateralizing the loan. The pools developed to measure the credit loss allowance use increments of DSCR and LTV to draw distinctions between risk levels. Changes in the allowance for mortgage loans are presented as a component of Net investment gains (losses) on the Condensed Consolidated Statements of Operations. The Company has adjusted the historical loss rate applied to mortgage loans over the forecast period to reflect higher expected credit losses based on observable economic forecasts, which increased the allowance by $13 million for the period ended March 31, 2020.

The following table presents the amortized cost basis of mortgage loans for each credit quality indicator by year of origination as of March 31, 2020:
 
Mortgage Loans Amortized Cost Basis by Origination Year (1)
As of March 31, 20202020 2019 2018 2017 2016 Prior Total
DSCR ≥1.6x             
LTV less than 55%$60
 $32
 $19
 $92
 $41
 $130
 $374
LTV 55% to 65%—
 32
 29
 55
 4
 —
 120
LTV greater than 65%—
 5
 —
 —
 —
 —
 5
DSCR 1.2x - 1.6x             
LTV less than 55%—
 33
 10
 13
 16
 126
 198
LTV 55% to 65%—
 73
 32
 32
 —
 —
 137
LTV greater than 65%—
 85
 —
 —
 —
 —
 85
DSCR ≤1.2             
LTV less than 55%—
 1
 11
 27
 —
 9
 48
LTV 55% to 65%—
 14
 14
 —
 —
 —
 28
LTV greater than 65%—
 22
 —
 —
 24
 —
 46
Total$60
 $297
 $115
 $219
 $85
 $265
 $1,041

(1)The values in the table above reflect DSCR on a standardized amortization period and LTV based on the most recent appraised values trended forward using changes in a commercial real estate price index.
As of March 31, 2020, accrued interest receivable on mortgage loans totaled $4 million and is excluded from the amortized cost basis disclosed in the table above and the estimate of expected credit losses. There were no loans that were past due or placed in nonaccrual status as of March 31, 2020. NaN interest income was written off for the period ended March 31, 2020.


Note D. 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, and 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.securities.

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.
September 30, 2019      
Total
Assets/Liabilities
at Fair Value
March 31, 2020      
Total
Assets/Liabilities
at Fair Value
(In millions)Level 1 Level 2 Level 3 
Total
Assets/Liabilities
at Fair Value
Level 1 Level 2 Level 3 
Assets             
Fixed maturity securities:              
Corporate bonds and other$161
 $22,095
 $428
 $22,684
$175
 $20,705
 $496
 $21,376
States, municipalities and political subdivisions—
 10,795
 —
 10,795
—
 10,491
 —
 10,491
Asset-backed—
 8,784
 196
 8,980
—
 8,034
 197
 8,231
Total fixed maturity securities161
 41,674
 624
 42,459
175
 39,230
 693
 40,098
Equity securities:              
Common stock114
 —
 6
 120
187
 —
 4
 191
Non-redeemable preferred stock52
 653
 16
 721
59
 538
 11
 608
Total equity securities166
 653
 22
 841
246
 538
 15
 799
Short term and other288
 1,089
 —
 1,377
135
 365
 —
 500
Total assets$615
 $43,416
 $646
 $44,677
$556
 $40,133

$708

$41,397
Liabilities     
  
     
  
Other liabilities$—
 $9
 $—
 $9
$—
 $1
 $—
 $1
Total liabilities$—
 $9
 $—
 $9
$—
 $1
 $—
 $1
December 31, 2018      
Total
Assets/Liabilities
at Fair Value
December 31, 2019      
Total
Assets/Liabilities
at Fair Value
(In millions)Level 1 Level 2 Level 3 
Total
Assets/Liabilities
at Fair Value
Level 1 Level 2 Level 3 
Assets             
Fixed maturity securities:              
Corporate bonds and other$196
 $19,396
 $222
 $19,814
$175
 $22,085
 $468
 $22,728
States, municipalities and political subdivisions—
 10,748
 —
 10,748
—
 10,652
 —
 10,652
Asset-backed—
 8,787
 197
 8,984
—
 8,662
 165
 8,827
Total fixed maturity securities196
 38,931
 419
 39,546
175
 41,399
 633
 42,207
Equity securities:              
Common stock144
 —
 4
 148
135
 —
 7
 142
Non-redeemable preferred stock48
 570
 14
 632
54
 658
 11
 723
Total equity securities192
 570
 18
 780
189
 658
 18
 865
Short term and other216
 949
 —
 1,165
397
 1,344
 —
 1,741
Total assets$604
 $40,450
 $437
 $41,491
$761

$43,401

$651

$44,813
Liabilities     
  
     
  
Other liabilities$—
 $(4) $—
 $(4)$—
 $7
 $—
 $7
Total liabilities$—
 $(4) $—
 $(4)$—
 $7
 $—
 $7



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).
Level 3
(In millions)
Corporate bonds and other States, municipalities and political subdivisions Asset-backed Equity securities Total
Balance as of July 1, 2019$338
 $—
 $193
 $22
 $553
Total realized and unrealized investment gains (losses):         
Reported in Net investment gains (losses)—
 —
 —
 —
 —
Reported in Other comprehensive income (loss)14
 —
 1
 —
 15
Total realized and unrealized investment gains (losses)14

—

1

—
 15
Purchases79
 —
 22
 —
 101
Sales—
 —
 —
 —
 —
Settlements(3) —
 (4) —
 (7)
Transfers into Level 3—
 —
 —
 —
 —
Transfers out of Level 3—
 —
 (16) —
 (16)
Balance as of September 30, 2019$428
 $—
 $196
 $22
 $646
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2019 recognized in Net income (loss) in the period$—
 $—
 $—
 $—
 $—
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2019 recognized in Other comprehensive income (loss) in the period14
 —
 2
 —
 16
Level 3
(In millions)
Corporate bonds and other States, municipalities and political subdivisions Asset-backed Equity securities TotalCorporate bonds and other States, municipalities and political subdivisions Asset-backed Equity securities Total
Balance as of July 1, 2018$94
 $1
 $273
 $17
 $385
Balance as of January 1, 2020$468
 $—
 $165
 $18
 $651
Total realized and unrealized investment gains (losses):        

         
Reported in Net investment gains (losses)—
 —
 (2) 1
 (1)—
 —
 —
 —
 —
Reported in Net investment income—
 —
 —
 (3) (3)
Reported in Other comprehensive income (loss)—
 —
 —
 —
 —
(37) —
 (9) —
 (46)
Total realized and unrealized investment gains (losses)—

—

(2)
1

(1)(37)
—

(9)
(3) (49)
Purchases67
 —
 55
 —
 122
67
 —
 45
 —
 112
Sales—
 —
 —
 —
 —
—
 —
 —
 —
 —
Settlements(3) (1) (25) —
 (29)(2) —
 (3) —
 (5)
Transfers into Level 330
 —
 29
 —
 59
—
 —
 —
 —
 —
Transfers out of Level 3—
 —
 (32) —
 (32)—
 —
 (1) —
 (1)
Balance as of September 30, 2018$188
 $—
 $298
 $18
 $504
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2018 recognized in Net income (loss) in the period$—
 $—
 $(2) $1
 $(1)
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2018 recognized in Other comprehensive income (loss) in the period—
 —
 1
 —
 1
Balance as of March 31, 2020$496
 $—
 $197
 $15
 $708
Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2020 recognized in Net income (loss) in the period$—
 $—
 $—
 $(3) $(3)
Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2020 recognized in Other comprehensive income (loss) in the period(35) —
 (9) —
 (44)



Level 3
(In millions)
Corporate bonds and other States, municipalities and political subdivisions Asset-backed Equity securities Total
Balance as of January 1, 2019$222
 $—
 $197
 $18
 $437
Total realized and unrealized investment gains (losses):         
Reported in Net investment gains (losses)—
 —
 —
 2
 2
Reported in Other comprehensive income (loss)34
 —
 8
 —
 42
Total realized and unrealized investment gains (losses)34
 —
 8
 2
 44
Purchases211
 —
 42
 2
 255
Sales—
 —
 —
 —
 —
Settlements(7) —
 (12) —
 (19)
Transfers into Level 3—
 —
 45
 —
 45
Transfers out of Level 3(32) —
 (84) —
 (116)
Balance as of September 30, 2019$428
 $—
 $196
 $22
 $646
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2019 recognized in Net income (loss) in the period$—
 $—
 $—
 $2
 $2
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2019 recognized in Other comprehensive income (loss) in the period29
 —
 9
 —
 38
Level 3
(In millions)
Corporate bonds and other States, municipalities and political subdivisions Asset-backed Equity securities TotalCorporate bonds and other States, municipalities and political subdivisions Asset-backed Equity securities Total
Balance as of January 1, 2018$98
 $1
 $335
 $20
 $454
Balance as of January 1, 2019$222
 $—
 $197
 $18
 $437
Total realized and unrealized investment gains (losses):                 

Reported in Net investment gains (losses)(1) —
 5
 (2) 2
—
 —
 —
 2
 2
Reported in Net investment income—
 —
 —
 —
 —
Reported in Other comprehensive income (loss)(1) —
 (6) —
 (7)8
 —
 3
 —
 11
Total realized and unrealized investment gains (losses)(2) —
 (1) (2) (5)8

—

3

2
 13
Purchases69
 —
 126
 —
 195
56
 —
 20
 —
 76
Sales(5) —
 (72) —
 (77)—
 —
 —
 —
 —
Settlements(7) (1) (37) —
 (45)(2) —
 (4) —
 (6)
Transfers into Level 335
 —
 42
 —
 77
—
 —
 5
 —
 5
Transfers out of Level 3—
 —
 (95) —
 (95)(31) —
 (37) —
 (68)
Balance as of September 30, 2018$188
 $—
 $298
 $18
 $504
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2018 recognized in Net income (loss) in the period$—
 $—
 $(2) $(2) $(4)
Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2018 recognized in Other comprehensive income (loss) in the period(2) —
 (2) —
 (4)
Balance as of March 31, 2019$253
 $—
 $184
 $20
 $457
Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2019 recognized in Net income (loss) in the period$—
 $—
 $—
 $2
 $2
Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2019 recognized in Other comprehensive income (loss) in the period7
 —
 3
 —
 10

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 government securities and exchange traded bonds, 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 some inputs that are not market observable.
Equity Securities
Level 1 equity 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 some 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, 2019March 31, 2020 and December 31, 2018,2019, there were approximately $55$58 million and $48$60 million of overseas deposits within otherOther 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.
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 primarily 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.
September 30, 2019
Estimated Fair Value
(In millions)
 Valuation Technique(s) Unobservable Input(s) 
Range
 (Weighted Average)
March 31, 2020
Estimated Fair Value
(In millions)
 Valuation Technique(s) Unobservable Input(s) 
Range
 (Weighted Average)
Fixed maturity securities$496
 Discounted cash flow Credit spread 1% - 6% (2%)$583
 Discounted cash flow Credit spread 1% - 10% (4%)
December 31, 2018Estimated Fair Value
(In millions)		 Valuation Technique(s) Unobservable Input(s) 
Range
 (Weighted Average)
December 31, 2019Estimated Fair Value
(In millions)		 Valuation Technique(s) Unobservable Input(s) 
Range
 (Weighted Average)
Fixed maturity securities$228
 Discounted cash flow Credit spread 1% - 12% (3%)$525
 Discounted cash flow Credit spread 1% - 6% (2%)

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.
September 30, 2019
Carrying
Amount
 Estimated Fair Value
March 31, 2020
Carrying
Amount
 Estimated Fair Value
(In millions)
Carrying
Amount
 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets                 
Mortgage loans$923
 $—
 $—
 $950
 $950
$1,021
 $—
 $—
 $1,036
 $1,036
Note receivable21
 —
 —
 21
 21
Liabilities                  
Long term debt$2,678
 $—
 $2,905
 $—
 $2,905
$2,680
 $—
 $2,730
 $—
 $2,730
December 31, 2018Carrying
Amount		 Estimated Fair Value
December 31, 2019Carrying
Amount		 Estimated Fair Value
(In millions)Carrying
Amount		 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets                 
Mortgage loans$839
 $—
 $—
 $827
 $827
$994
 $—
 $—
 $1,025
 $1,025
Note receivable35
 —
 —
 35
 35
21
 —
 —
 21
 21
Liabilities                  
Long term debt$2,680
 $—
 $2,731
 $—
 $2,731
$2,679
 $—
 $2,906
 $—
 $2,906

The following methods and assumptions were used to estimate the fair value of these financial assets and liabilities.
The fair value of mortgage loans was 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. TheDuring the three months ended March 31, 2020, the note receivable iswas repaid in full. As of December 31, 2019, the note receivable was 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.

Note E. Claim and Claim Adjustment Expense and Future Policy Benefit Reserves
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 historical patterns such as claim reserving trends and settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions and 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 our results of operations and/or equity. The Company reported catastrophe losses, net of reinsurance, of $32$75 million and $128$58 million for the three and nine months ended September 30,March 31, 2020 and 2019. The Company reportedNet catastrophe losses net of reinsurance, of $46 million and $106 million for the three and nine months ended September 30, 2018.March 31, 2020 included $13 million related to the COVID-19 pandemic, with the remaining $62 million related primarily to U.S. weather related events. Net catastrophe losses infor the three months ended March 31, 2019 and 2018 related primarily to U.S. weather related events.

Liability for Unpaid Claim and Claim Adjustment Expenses
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.
For the nine months ended September 30   
For the three months ended March 31   
(In millions)2019 20182020 2019
Reserves, beginning of year:      
Gross$21,984
 $22,004
$21,720
 $21,984
Ceded4,019
 3,934
3,835
 4,019
Net reserves, beginning of year17,965
 18,070
17,885
 17,965
Net incurred claim and claim adjustment expenses:      
Provision for insured events of current year3,968
 3,866
1,355
 1,309
Increase (decrease) in provision for insured events of prior years(65) (173)(8) 8
Amortization of discount143
 136
51
 50
Total net incurred (1)
4,046
 3,829
1,398
 1,367
Net payments attributable to:      
Current year events(599) (658)(72) (100)
Prior year events(3,547) (3,415)(1,218) (1,309)
Total net payments(4,146) (4,073)(1,290) (1,409)
Foreign currency translation adjustment and other29
 (80)(88) 13
Net reserves, end of period17,894
 17,746
17,905
 17,936
Ceded reserves, end of period3,702
 3,858
3,967
 3,900
Gross reserves, end of period$21,596
 $21,604
$21,872
 $21,836

(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.
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.
Periods ended September 30Three Months Nine Months
Three months ended March 31   
(In millions)2019 2018 2019 20182020 2019
Pretax (favorable) unfavorable development:          
Specialty$(20) $(53) $(58) $(127)$(11) $(20)
Commercial35
 (5) 15
 (27)(4) (8)
International1
 (2) 14
 (4)—
 14
Corporate & Other—
 (2) —
 (2)—
 —
Total pretax (favorable) unfavorable development$16
 $(62) $(29) $(160)$(15) $(14)



Specialty
The following table presents further detail of the development recorded for the Specialty segment.
Periods ended September 30Three Months Nine Months
Three months ended March 31   
(In millions)2019 2018 2019 20182020 2019
Pretax (favorable) unfavorable development:          
Medical Professional Liability$29
 $15
 $59
 $38
$10
 $15
Other Professional Liability and Management Liability(18) (45) (37) (113)3
 (12)
Surety(43) (20) (83) (50)(30) (25)
Warranty—
 (1) (7) (7)—
 —
Other12
 (2) 10
 5
6
 2
Total pretax (favorable) unfavorable development$(20) $(53) $(58) $(127)$(11) $(20)

Three Months2020
Unfavorable development in medical professional liability was primarily due to unfavorable outcomes on specific claims in accident years 2015 and 2016 in our aging services business.
Favorable development in surety was primarily due to lower than expected frequency for accident years 2017 and prior.
2019
Unfavorable development in medical professional liability was primarily due to higher than expected indemnity severity in accident years 2016 through 2018 in our aging services business.
Favorable development in other professional liability and management liability was due to lower than expected large claim losses in recent accident years in our public company directors and officers liability (D&O) business.
Favorable development in surety was due to lower than expected frequency for accident years 2015 through 2018.
Unfavorable development in other was primarily due to higher than expected severity in aging services related to auto liability coverages.
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.

Nine Months
2019
Unfavorable development in medical professional liability was primarily due to higher than expected indemnity severity in accident years 2016 through 2018 in our aging services business, higher than expected severity in accident year 2013 in our allied healthcare business, unfavorable outcomes on individual claims and higher than expected severity in accident year 2017 in our dentists business.
Favorable development in other professional liability and management liability was primarily due to lower than expected claim frequency and favorable outcomes on individual claims in accident years 2017 and prior related to financial institutions and lower than expectedinstitutions. This was partially offset by unfavorable development in management liability in accident year 2014 due to large claim losses in recent accident years in our public company D&O business.activity.
Favorable development in surety was due to lower than expected frequency for accident years 2018 and prior.
Unfavorable development in other was primarily due to higher than expected severity in aging services related to auto liability coverages.
2018
Unfavorable development in 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 in surety was due to lower than expected loss emergence for accident years 20172016 and prior.

Commercial
The following table presents further detail of the development recorded for the Commercial segment.
Periods ended September 30Three Months Nine Months
Three months ended March 31   
(In millions)2019 2018 2019 20182020 2019
Pretax (favorable) unfavorable development:          
Commercial Auto$(16) $1
 $(24) $—
$9
 $(5)
General Liability43
 (5) 36
 13
—
 (20)
Workers' Compensation7
 (2) 2
 (14)(13) 2
Property and Other1
 1
 1
 (26)—
 15
Total pretax (favorable) unfavorable development$35
 $(5) $15
 $(27)$(4) $(8)

Three Months
20192020
Favorable development in commercial autoworkers’ compensation was primarily due to a decline in bodily injury frequency in accident year 2018 and continuedfavorable medical trends driving lower than expected severity acrossin accident years 20132016 through 2016.2018.
Unfavorable2019
Favorable development in general liability was primarily due to higher than expected emergence in mass tort related to accident years 2009 and prior, 2015 and 2016.
Nine Months
2019
Favorable development in commercial auto was primarily due to a decline in bodily injury frequency in accident year 2018 and continued lower than expected severity acrossfrequency on latent construction defect claims in multiple accident years 2016 and prior.years.
Unfavorable development in general liabilityproperty and other was primarily due to higher than expected emergence in mass tort as well as higher than expectedfrequency and large loss experience in our excess and umbrella businessactivity in accident year 2017.
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.our marine business.

International
The following table presents further detail of the development recorded for the International segment.
Periods ended September 30Three Months Nine Months
Three months ended March 31   
(In millions)2019 2018 2019 20182020 2019
Pretax (favorable) unfavorable development:          
Casualty$(6) $(5) $(11) $(11)$—
 $—
Property3
 2
 14
 14
Energy and Marine1
 (5) 9
 (10)
Specialty (1)
3
 6
 2
 3
Property, Energy and Marine(1)
—
 14
Specialty—
 —
Total pretax (favorable) unfavorable development$1
 $(2) $14
 $(4)$—
 $14

(1) Effective January 1, 2019 the Healthcare and Technology line of business has been absorbed within the Specialty line of business in the International segment. Prior period information has been conformed to the new line of business presentation.
Nine Months
(1)
EffectiveJanuary 1, 2020 the Property and Energy and Marine lines of business have been combined in the International segment. Prior period information has been conformed to the new line of business presentation.
2019
Favorable development in casualty was driven by lower than expected large losses and claim severity in accident years 2014 and prior in Hardy and Europe.
Unfavorable development in property, energy and marine was driven by higher than expected claims in Hardy onfor 2018 accident year catastrophes.
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 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, partially offset by favorable development in healthcare in Europe primarily driven by lower than expected frequency in accident years 2015 and prior.

Asbestos and Environmental Pollution (A&EP) Reserves
In 2010, Continental Casualty Company (CCC) together with several of the Company’s 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 $2.2 billion consideration paid, resulting in the NICO LPT moving into a gain position, requiring retroactive reinsurance accounting. Under retroactive reinsurance accounting, this gain is deferred and only recognized in earnings in proportion to actual paid recoveries under the LPT. Over the life of the contract, there is no economic impact as long as any additional losses incurred are within the limit of the LPT. In a period in which the Company recognizes a change in the estimate of A&EP reserves that increases or decreases the amounts ceded under the LPT, the proportion of actual paid recoveries to total ceded losses is affected and the change in the deferred gain is recognized in earnings as if the revised estimate of ceded losses was available at the effective date of the LPT. The effect of the deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders' benefits onin the Condensed Consolidated Statements of Operations.
The following table presents the impact of the Loss Portfolio TransferLPT on the Condensed Consolidated Statements of Operations.
Periods ended September 30Three Months Nine Months
(In millions)2019 2018 2019 2018
Additional amounts ceded under LPT:       
Net A&EP adverse development before consideration of LPT$—
 $—
 $—
 $113
Provision for uncollectible third-party reinsurance on A&EP—
 —
 —
 (16)
Total additional amounts ceded under LPT—
 —
 —
 97
Retroactive reinsurance benefit recognized(7) (12) (43) (84)
Pretax impact of deferred retroactive reinsurance$(7) $(12) $(43) $13

The Company intends to complete its annual A&EP reserve review inOperations was the fourth quarterrecognition of 2019a retroactive reinsurance benefit of $14 million and maintain this timing for all future annual A&EP reserve reviews. The Company completed A&EP reserve reviews in both the first and fourth quarters of 2018. Based upon the Company's 2018 first quarter A&EP reserve review, net unfavorable prior year development of $113$22 million was recognized before consideration of cessions to the LPT for the ninethree months ended September 30, 2018. The 2018 unfavorable development was driven by higher than anticipated defense costs on direct asbestosMarch 31, 2020 and environmental accounts and paid losses on assumed reinsurance exposures. Additionally, in 2018, the Company released a portion of its provision for uncollectible third-party reinsurance.
2019. As of September 30, 2019March 31, 2020 and December 31, 2018,2019, the cumulative amounts ceded under the LPT were $3.1$3.2 billion. The unrecognized deferred retroactive reinsurance benefit was $331$378 million and $374$392 million as of September 30, 2019March 31, 2020 and December 31, 20182019 and is included within Other liabilities on the Condensed Consolidated Balance Sheets.
NICO established a collateral trust account as security for its obligations to the Company. The fair value of the collateral trust account was $3.3$2.7 billion and $2.7$3.7 billion as of September 30, 2019March 31, 2020 and December 31, 2018.2019. The decrease in the fair value of the trust was driven by overall declines in equity markets. As of March 31, 2020, the fair market value of the trust represented more than 150% of the gross LPT reserves. 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 majority of the Company’s A&EP claims.

Life & Group Policyholder Reserves
The Company’s Life & Group segment includes its run-off long term care business as well as structured settlement obligations not funded by annuities related to certain property and casualty claimants. Long term care policies provide benefits for nursing homes, assisted living facilities and home health care subject to various daily and lifetime caps. Generally, policyholders must continue to make periodic premium payments to keep the policy in force and the Company has the ability to increase policy premiums, subject to state regulatory approval.
The Company maintains both claim and claim adjustment expense reserves as well as future policy benefit reserves for policyholder benefits for the Life & Group segment. Claim and claim adjustment expense reserves consist of estimated reserves for long term care policyholders that are currently receiving benefits, including claims that have been incurred but are not yet reported. In developing the claim and claim adjustment expense reserve estimates for long term care policies, the Company’s actuaries perform a detailed claim experience study on an annual basis. The study reviews the sufficiency of existing reserves for policyholders currently on claim and includes an evaluation of expected benefit utilization and claim duration. The Company’s recorded claim and claim adjustment expense reserves reflect management's best estimate after incorporating the results of the most recent study. In addition, claim and claim adjustment expense reserves are also maintained for the structured settlement obligations.
The Company's most recent annual long term care claim experience study was completed in the third quarter of 2019 and resulted in a $56 million pretax reduction in claim and claim adjustment expense reserves primarily due to lower claim severity than anticipated in the reserve estimates. The Company's 2018 annual long term care claim experience study was completed in the third quarter of 2018 and resulted in a $31 million pretax reduction in claim and claim adjustment expense reserves.
Future policy benefit reserves represent the active life reserves related to the Company’s long term care policies which are the present value of expected future benefit payments and expenses less expected future premium. The determination of these reserves is fundamental to the Company’s financial results and requires management to make estimates and assumptions about expected investment and policyholder experience over the life of the contract. Since many of these contracts may be in force for several decades, these assumptions are subject to significant estimation risk.
The actuarial assumptions that management believes are subject to the most variability are morbidity, persistency, discount rate and anticipated future premium rate increases. Morbidity is the frequency and severity of injury, illness, sickness and diseases contracted. Persistency is the percentage of policies remaining in force and can be affected by policy lapses, benefit reductions and death. Discount rate is influenced by the investment yield on assets supporting long term care reserves which is subject to interest rate and market volatility and may also be affected by changes to the Internal Revenue Code. As future premium rate increases are generally subject to regulatory approval, the exact timing and size of the approved rate increases are unknown. As a result of this variability, the Company’s long term care reserves may be subject to material increases if actual experience develops adversely to the Company’s expectations.
Annually, management assesses the adequacy of its long term care future policy benefit reserves by performing a gross premium valuation (GPV) to determine if there is a premium deficiency. Management also uses the GPV process to evaluate the adequacy of its claim and claim adjustment expense reserves for structured settlement obligations. Under the GPV, management estimates required reserves using best estimate assumptions as of the date of the assessment without provisions for adverse deviation. The GPV required reserves are then compared to the existing recorded reserves. If the GPV required reserves are greater than the existing recorded reserves, the existing assumptions are unlocked and future policy benefit reserves are increased to the greater amount. Any such increase is reflected in the Company’s results of operations in the period in which the need for such adjustment is determined. Periodically, management engages independent third parties to assess the appropriateness of its best estimate assumptions. The most recent third party assessment, performed earlier this year, validated the assumption setting process and confirmed the best estimate assumptions appropriately reflected the experience data at that time.

In the third quarter of 2019 the Company performed the GPV for the long term care future policy benefit reserves. This GPV indicated a premium deficiency primarily driven by lower discount rate assumptions. Recognition of the premium deficiency resulted in a $216 million pretax increase in policyholders' benefits reflected in the Company's results of operations.

Note F. Legal Proceedings, Contingencies and Guarantees
The Company is a party to various claims and routine litigation incidental to its business, which, based on the facts and circumstances currently known, are not material to the Company's results of operations or financial position.
Guarantees
As of September 30, 2019March 31, 2020 and December 31, 2018,2019, the Company had recorded liabilities of approximately $5 million related to guarantee and indemnification agreements and managementagreements. 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 indemnified purchasers for certain losses, some of which are not limited by a contractual monetary amount. As of September 30, 2019, the Company had outstanding unlimited indemnifications 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 alsohas provided guarantees, if the primary obligor fails to perform, to holders of structured settlement annuities providedissued by a previously owned subsidiary. As of September 30, 2019,March 31, 2020, the potential amount of future payments the Company could be required to pay under these guarantees was approximately $1.7 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.

Note G. Benefit Plans
The components of net periodic pension cost (benefit) are presented in the following table.
Periods ended September 30Three Months Nine Months
Three months ended March 31   
(In millions)2019 2018 2019 20182020 2019
Net periodic pension cost (benefit)          
Service cost$—
 $—
 $—
 $—
Non-service cost (benefit):       
Interest cost on projected benefit obligation25
 23
 75
 70
$20
 $25
Expected return on plan assets(36) (40) (107) (120)(39) (36)
Amortization of net actuarial (gain) loss10
 10
 30
 28
11
 10
Settlement loss—
 —
 —
 5
1
 —
Total non-service cost (benefit)(1) (7) (2) (17)
Total net periodic pension cost (benefit)$(1) $(7) $(2) $(17)$(7) $(1)

For the three and nine months ended September 30,March 31, 2020, the Company recognized $2 million of non-service benefit in Insurance claims and policyholders' benefits and $5 million of non-service benefit in Other operating expenses. For the three months ended March 31, 2019, the Company recognized less than $1 million and $1 million of non-service benefit in Insurance claims and policyholders' benefits and less than $1 million and $1 million of non-service benefit in Other operating expenses.
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.

Note H. Accumulated Other Comprehensive Income (Loss) by Component
The tables below display the changes in Accumulated other comprehensive income (loss) by component.
(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, 2019$20
 $1,023
 $(760) $(163) $120
Other comprehensive income (loss) before reclassifications—
 44
 —
 (29) 15
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $-, $2, $- and $2—
 3
 (7) —
 (4)
Other comprehensive income (loss) net of tax (expense) benefit of $-, $(11), $(2), $- and $(13)—
 41

7
 (29) 19
Balance as of September 30, 2019$20
 $1,064
 $(753) $(192) $139
(In millions)
Net unrealized gains (losses) on investments with an allowance for credit losses(1)
 
Net unrealized gains (losses) on other investments(1)
 Pension and postretirement benefits Cumulative foreign currency translation adjustment Total
Balance as of January 1, 2020$—
 $1,025
 $(833) $(141) $51
Other comprehensive income (loss) before reclassifications(48) (1,066) 1
 (77) (1,190)
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $10, $6, $3, $- and $19(37) (22) (10) —
 (69)
Other comprehensive income (loss) net of tax (expense) benefit of $3, $281, $(3), $- and $281(11) (1,044) 11
 (77) (1,121)
Balance as of March 31, 2020$(11) $(19) $(822) $(218) $(1,070)
(1)
As of January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The Net unrealized gains (losses) on investments with OTTI losses column that tracked the change in unrealized gains (losses) on investments with OTTI losses has been replaced with the Net unrealized gains (losses) on investments with an allowance for credit losses column. The balance as of January 1, 2020 in the Net unrealized gains (losses) on investments with OTTI losses column is now reported in the Net unrealized gains (losses) on other investments column.
(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 January 1, 2019$16
 $61
 $(775) $(180) $(878)
Other comprehensive income (loss) before reclassifications3
 999
 (1) (12) 989
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $1, $6, $- and $7(1) (4) (23) —
 (28)
Other comprehensive income (loss) net of tax (expense) benefit of $(2), $(266), $(6), $- and $(274)4
 1,003
 22
 (12) 1,017
Balance as of September 30, 2019$20
 $1,064
 $(753) $(192) $139
(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$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)
(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, 2019$16
 $61
 $(775) $(180) $(878)
Other comprehensive income (loss) before reclassifications4
 521
 (1) 17
 541
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $1, $2, $- and $3—
 (5) (8) —
 (13)
Other comprehensive income (loss) net of tax (expense) benefit of $(1), $(141), $(2), $- and $(144)4
 526
 7
 17
 554
Balance as of March 31, 2019$20
 $587
 $(768) $(163) $(324)

Amounts reclassified from Accumulated other comprehensive income (loss) shown above are reported in Net income (loss) as follows:
Component of AOCI Condensed Consolidated Statements of Operations Line Item Affected by Reclassifications
Net unrealized gains (losses) on investments with an allowance for credit losses, Net unrealized gains (losses) on investments with OTTI lossesNet investment gains (losses)
and Net unrealized gains (losses) on other investments Net investment gains (losses)
Pension and postretirement benefits Other operating expenses and Insurance claims and policyholders' benefits


Note I. Business Segments
The Company's property and casualty commercial insurance operations are managed and reported in 3 business segments: Specialty, Commercial and International. These 3 segments are collectively referred to as Property & Casualty Operations. The Company's operations outside of Property & Casualty Operations are managed and reported in 2 segments: Life & Group and Corporate & Other.
The accounting policies of the segments are the same as those described in Note A to the Consolidated Financial Statements within CNAF's Annual Report on Form 10-K for the year ended December 31, 2018.2019. The Company manages most of its assets on a legal entity basis, while segment operations are generally conducted across legal entities. As such, only Insurance and Reinsurance receivables, Insurance reserves, Deferred acquisition costs, Goodwill and Deferred non-insurance warranty acquisition expense and revenue are readily identifiable for individual segments. Distinct investment portfolios are not maintained for every individual segment; accordingly, allocation of assets to each segment is not performed. Therefore, a significant portion of Net investment income and Net investment gains or losses are allocated primarily based on each segment's net carried insurance reserves, as adjusted. All significant intersegment income and expense have been eliminated. Income taxes have been allocated on the basis of the taxable income of the segments.
In the following tables, certain financial measures are presented to provide information used by management to monitor the Company's operating performance. Management utilizes these financial measures to monitor the Company's insurance operations and investment portfolio.
The performance of the Company's insurance operations is monitored by management through core income (loss), which is derived from certain income statement amounts. The Company's investment portfolio is monitored by management through analysis of various factors including unrealized gains and losses on securities, portfolio duration and exposure to market and credit risk.
Core income (loss) is calculated by excluding from net income (loss) the after-tax effects of i) net investment gains (losses), ii) income or loss from discontinued operations, iii)losses and 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.guidance. The calculation of core income (loss) excludes net investment gains or losses because net investment gains or losses are generally driven by economic factors that are not necessarily consistent with key driversreflective of underwriting performance, and are therefore not considered an indication of trends in insuranceour primary operations.


The Company's results of operations and selected balance sheet items by segment are presented in the following tables.
Three months ended March 31, 2020

Specialty
 

Commercial
 International 
Life &
Group
 
Corporate
& Other
    
(In millions)     Eliminations Total
Operating revenues             
Net earned premiums$685
 $818
 $239
 $127
 $—
 $—
 $1,869
Net investment income56
 47
 15
 208
 3
 —
 329
Non-insurance warranty revenue301
 —
 —
 —
 —
 —
 301
Other revenues1
 7
 —
 —
 2
 (2) 8
Total operating revenues1,043
 872
 254
 335
 5
 (2) 2,507
Claims, benefits and expenses 
  
    
  
  
  
Net incurred claims and benefits405
 558
 154
 316
 (14) —
 1,419
Policyholders’ dividends1
 5
 —
 —
 —
 —
 6
Amortization of deferred acquisition costs151
 144
 49
 —
 —
 —
 344
Non-insurance warranty expense281
 —
 —
 —
 —
 —
 281
Other insurance related expenses69
 127
 36
 26
 —
 —
 258
Other expenses13
 6
 13
 3
 39
 (2) 72
Total claims, benefits and expenses920
 840
 252
 345
 25
 (2) 2,380
Core income (loss) before income tax123
 32
 2
 (10) (20) —
 127
Income tax (expense) benefit on core income (loss)(27) (8) —
 14
 2
 —
 (19)
Core income (loss) $96
 $24
 $2
 $4
 $(18) $—
 108
Net investment gains (losses)            (216)
Income tax (expense) benefit on net investment gains (losses)            47
Net investment gains (losses), after tax            (169)
Net income (loss)            $(61)
Three months ended September 30, 2019
Specialty		 
Commercial		 International Life &
Group		 Corporate
& Other		 Eliminations Total
(In millions)      
Operating revenues             
Net earned premiums$712
 $813
 $236
 $130
 $—
 $(1) $1,890
Net investment income121
 136
 17
 207
 6
 —
 487
Non-insurance warranty revenue292
 —
 —
 —
 —
 —
 292
Other revenues1
 10
 (1) (1) 1
 (1) 9
Total operating revenues1,126
 959
 252
 336
 7
 (2) 2,678
Claims, benefits and expenses 
  
    
  
  
  
Net incurred claims and benefits411
 564
 163
 476
 (7) —
 1,607
Policyholders’ dividends2
 5
 —
 —
 —
 —
 7
Amortization of deferred acquisition costs155
 134
 56
 —
 —
 —
 345
Non-insurance warranty expense278
 —
 —
 —
 —
 —
 278
Other insurance related expenses71
 123
 35
 29
 —
 (1) 257
Other expenses13
 9
 7
 1
 35
 (1) 64
Total claims, benefits and expenses930
 835
 261
 506
 28
 (2) 2,558
Core income (loss) before income tax196
 124
 (9) (170) (21) —
 120
Income tax (expense) benefit on core income (loss)(43) (27) —
 48
 4
 —
 (18)
Core income (loss) $153
 $97
 $(9) $(122) $(17) $—
 102
Net investment gains (losses)            7
Income tax (expense) benefit on net investment gains (losses)            (2)
Net investment gains (losses), after tax            5
Net income            $107

Three months ended September 30, 2018
Specialty		 
Commercial		 International Life &
Group		 Corporate
& Other		 Eliminations Total
(In millions)      
Operating revenues             
Net earned premiums$684
 $782
 $255
 $133
 $—
 $(1) $1,853
Net investment income124
 144
 14
 200
 5
 —
 487
Non-insurance warranty revenue258
 —
 —
 —
 —
 —
 258
Other revenues—
 8
 1
 (1) 2
 —
 10
Total operating revenues1,066
 934
 270
 332
 7
 (1) 2,608
Claims, benefits and expenses 
  
    
  
  
  
Net incurred claims and benefits373
 496
 172
 277
 (12) —
 1,306
Policyholders’ dividends1
 5
 —
 —
 —
 —
 6
Amortization of deferred acquisition costs153
 127
 57
 —
 —
 —
 337
Non-insurance warranty expense235
 —
 —
 —
 —
 —
 235
Other insurance related expenses68
 133
 36
 31
 (1) (1) 266
Other expenses11
 10
 3
 2
 44
 —
 70
Total claims, benefits and expenses841
 771
 268
 310
 31
 (1) 2,220
Core income (loss) before income tax225
 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 investment gains (losses)            14
Income tax (expense) benefit on net investment gains (losses)            (1)
Net investment gains (losses), after tax            13
Net deferred tax asset remeasurement            6
Net income            $336


Nine months ended September 30, 2019

Specialty
 

Commercial
 International 
Life &
Group
 
Corporate
& Other
 Eliminations Total
(In millions)      
Operating revenues             
Net earned premiums$2,061
 $2,339
 $729
 $390
 $—
 $(2) $5,517
Net investment income410
 480
 47
 616
 20
 —
 1,573
Non-insurance warranty revenue858
 —
 —
 —
 —
 —
 858
Other revenues1
 20
 —
 —
 5
 (4) 22
Total operating revenues3,330
 2,839
 776
 1,006
 25
 (6) 7,970
Claims, benefits and expenses 
  
    
  
  
  
Net incurred claims and benefits1,198
 1,581
 472
 1,093
 (40) —
 4,304
Policyholders’ dividends4
 15
 —
 —
 —
 —
 19
Amortization of deferred acquisition costs454
 391
 180
 —
 —
 —
 1,025
Non-insurance warranty expense801
 —
 —
 —
 —
 —
 801
Other insurance related expenses217
 372
 94
 87
 (2) (2) 766
Other expenses37
 27
 14
 5
 108
 (4) 187
Total claims, benefits and expenses2,711
 2,386
 760
 1,185
 66
 (6) 7,102
Core income (loss) before income tax619
 453
 16
 (179) (41) —
 868
Income tax (expense) benefit on core income (loss)(136) (97) (2) 74
 7
 —
 (154)
Core income (loss) $483
 $356
 $14
 $(105) $(34) $—
 714
Net investment gains (losses)            20
Income tax (expense) benefit on net investment gains (losses)            (7)
Net investment gains (losses), after tax            13
Net income            $727
September 30, 2019             
March 31, 2020             
(In millions)                          
Reinsurance receivables$599
 $759
 $242
 $394
 $2,098
 $—
 $4,092
$793
 $883
 $233
 $370
 $2,072
 $—
 $4,351
Insurance receivables992
 1,243
 260
 8
 1
 —
 2,504
953
 1,267
 302
 8
 2
 —
 2,532
Deferred acquisition costs314
 264
 90
 —
 —
 —
 668
316
 277
 90
 —
 —
 —
 683
Goodwill117
 —
 28
 —
 —
 —
 145
117
 —
 28
 —
 —
 —
 145
Deferred non-insurance warranty acquisition expense2,772
 —
 —
 —
 —
 —
 2,772
2,905
 —
 —
 —
 —
 —
 2,905
Insurance reserves             
             
Claim and claim adjustment expenses5,285
 8,610
 1,802
 3,707
 2,192
 —
 21,596
5,472
 8,704
 1,818
 3,712
 2,166
 —
 21,872
Unearned premiums2,329
 1,679
 475
 126
 —
 (1) 4,608
2,363
 1,751
 495
 137
 —
 (1) 4,745
Future policy benefits—
 —
 —
 12,305
 —
 —
 12,305
—
 —
 —
 11,734
 —
 —
 11,734
Deferred non-insurance warranty revenue3,707
 —
 —
 —
 —
 —
 3,707
3,848
 —
 —
 —
 —
 —
 3,848

Nine months ended September 30, 2018

Specialty
 

Commercial
 International 
Life &
Group
 
Corporate
& Other
 Eliminations Total
Three months ended March 31, 2019

Specialty
 

Commercial
 International 
Life &
Group
 
Corporate
& Other
    
(In millions)

Specialty
 

Commercial
 International 
Life &
Group
 
Corporate
& Other
 Eliminations Total Eliminations Total
Operating revenues              
Net earned premiums$2,039
 $2,278
 $739
 $398
 $—
 $(1) $5,453
$661
 $763
 $250
 $130
 $—
 $(1) $1,803
Net investment income376
 450
 43
 598
 16
 —
 1,483
155
 190
 15
 204
 7
 —
 571
Non-insurance warranty revenue744
 —
 —
 —
 —
 —
 744
281
 —
 —
 —
 —
 —
 281
Other revenues1
 24
 —
 —
 2
 (1) 26
1
 7
 —
 1
 2
 (2) 9
Total operating revenues3,160
 2,752
 782
 996
 18
 (2) 7,706
1,098
 960
 265
 335
 9
 (3) 2,664
Claims, benefits and expenses 
      
    
  
 
      
    
  
Net incurred claims and benefits1,124
 1,434
 480
 907
 15
 —
 3,960
392
 510
 162
 308
 (21) —
 1,351
Policyholders’ dividends3
 15
 —
 —
 —
 —
 18
1
 5
 —
 —
 —
 —
 6
Amortization of deferred acquisition costs447
 375
 170
 —
 —
 —
 992
147
 127
 68
 —
 —
 —
 342
Non-insurance warranty expense676
 —
 —
 —
 —
 —
 676
260
 —
 —
 —
 —
 —
 260
Other insurance related expenses202
 386
 102
 91
 (1) (1) 779
70
 130
 25
 28
 (1) (1) 251
Other expenses34
 31
 6
 5
 153
 (1) 228
12
 11
 4
 2
 39
 (2) 66
Total claims, benefits and expenses2,486
 2,241
 758
 1,003
 167
 (2) 6,653
882
 783
 259
 338
 17
 (3) 2,276
Core income (loss) before income tax674
 511
 24
 (7) (149) —
 1,053
216
 177
 6
 (3) (8) —
 388
Income tax (expense) benefit on core income (loss)(143) (108) (7) 43
 30
 —
 (185)(47) (38) —
 13
 2
 —
 (70)
Core income (loss)$531
 $403
 $17
 $36
 $(119) $—
 868
$169
 $139
 $6
 $10
 $(6) $—
 318
Net investment gains (losses)            25
            31
Income tax (expense) benefit on net investment gains (losses)            (2)            (7)
Net investment gains (losses), after tax            23
            24
Net deferred tax asset remeasurement            6
Net income            $897
Net income (loss)            $342

December 31, 2018             
December 31, 2019             
(In millions)                          
Reinsurance receivables$649
 $795
 $250
 $414
 $2,347
 $—
 $4,455
$575
 $855
 $247
 $385
 $2,142
 $—
 $4,204
Insurance receivables947
 1,277
 284
 9
 (152) —
 2,365
971
 1,210
 284
 16
 —
 —
 2,481
Deferred acquisition costs308
 230
 95
 —
 —
 —
 633
311
 257
 94
 —
 —
 —
 662
Goodwill117
 —
 29
 —
 —
 —
 146
117
 —
 30
 —
 —
 —
 147
Deferred non-insurance warranty acquisition expense2,513
 —
 —
 —
 —
 —
 2,513
2,840
 —
 —
 —
 —
 —
 2,840
Insurance reserves             
             
Claim and claim adjustment expenses5,465
 8,743
 1,750
 3,601
 2,425
 —
 21,984
5,238
 8,656
 1,876
 3,716
 2,234
 —
 21,720
Unearned premiums2,132
 1,454
 475
 122
 —
 —
 4,183
2,337
 1,626
 495
 125
 —
 —
 4,583
Future policy benefits—
 —
 —
 10,597
 —
 —
 10,597
—
 —
 —
 12,311
 —
 —
 12,311
Deferred non-insurance warranty revenue3,402
 —
 —
 —
 —
 —
 3,402
3,779
 —
 —
 —
 —
 —
 3,779



The following table presents operating revenue by line of business for each reportable segment.
Periods ended September 30Three Months Nine Months
Three months ended March 31   
(In millions)2019 2018 2019 20182020 2019
Specialty          
Management & Professional Liability$638
 $616
 $1,903
 $1,867
$568
 $636
Surety156
 153
 446
 427
138
 139
Warranty & Alternative Risks332
 297
 981
 866
337
 323
Specialty revenues1,126
 1,066
 3,330
 3,160
1,043
 1,098
Commercial  

      

Middle Market560
 530
 1,652
 1,555
335
 357
Construction (1)
250
 248
Small Business115
 125
 351
 364
112
 131
Other Commercial Insurance284
 279
 836
 833
Other Commercial175
 224
Commercial revenues959
 934
 2,839
 2,752
872
 960
International

 

    

 

Canada70
 66
 204
 187
73
 66
Europe91
 94
 270
 273
92
 91
Hardy91
 110
 302
 322
89
 108
International revenues252
 270
 776
 782
254
 265
Life & Group revenues336
 332
 1,006
 996
335
 335
Corporate & Other revenues7
 7
 25
 18
5
 9
Eliminations(2) (1) (6) (2)(2) (3)
Total operating revenues2,678
 2,608
 7,970
 7,706
2,507
 2,664
Net investment gains (losses)7
 14
 20
 25
(216) 31
Total revenues$2,685
 $2,622
 $7,990
 $7,731
$2,291
 $2,695


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

Note J. Non-Insurance Revenues from Contracts with Customers
The Company had deferred non-insurance warranty revenue balances of $3.7 billion and $3.4$3.8 billion reported in Deferred non-insurance warranty revenue as of September 30, 2019March 31, 2020 and December 31, 2018.2019. For the three and nine months ended September 30,March 31, 2020, the Company recognized $286 million of revenues that were included in the deferred revenue balance as of January 1, 2020. For the three months ended March 31, 2019, the Company recognized $236 million and $747$265 million of revenues that were included in the deferred revenue balance as of January 1, 2019. For the three and nine months ended September 30, 2018, the Company recognized $200 millionMarch 31, 2020 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, 2019, and 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 $278$831 million of the deferred revenue in the remainder of 2019, $1.0 billion in 2020, $0.8 billion$951 million in 2021, $735 million in 2022 and $1.6$1.3 billion thereafter.


Note K. LeasesExpected Credit Losses - Uncollectible Reinsurance and Insurance Receivables
A lease provides the lessee the right to control the use of an identified asset for a period of time in exchange for consideration. Operating lease ROU assets and lease liabilities are included in Other assets and Other liabilities on the Company's Condensed Consolidated Balance Sheets.
ROU assets represent the Company's right to use an underlying asset for the lease term and operating lease liabilities represent the Company's obligation to make lease payments arising from the lease. The Company determines ifhas established an arrangementallowance for uncollectible reinsurance receivables which relates to both amounts already billed on ceded paid losses as well as ceded reserves that will be billed when losses are paid in the future. For assessing expected credit losses, the Company separates reinsurance receivables into two pools; voluntary reinsurance receivables and involuntary reinsurance exposures to mandatory pools. The Company has not recorded an allowance for involuntary pools as there is a lease at inception. Operating lease ROU assets and liabilities are recognized atno perceived credit risk. The principal credit quality indicator used in the lease commencement datevaluation of the allowance on voluntary reinsurance receivables is the financial strength rating of the reinsurer sourced from major rating agencies. If the reinsurer is unrated, an internal financial strength rating is assigned based on the present valueCompany’s historical loss experience and the Company’s assessment of lease payments over the lease term. Most operating leases contain renewal options that provide for rent increases based on prevailing market conditions. Certain leases contain options to terminate before maturity. The lease term used to calculate the ROU asset includes any renewal options or lease termination that the Company expects to exercise. The discount rate used to determine the commencement date present value of lease payments is the interest rate implicitreinsurance counterparty risk profile, which generally corresponds with a B rating. Changes in the lease, or when that is not readily determinable, the Company utilizes its secured borrowing rate. ROU assets include any lease payments required to be made prior to commencement and exclude lease incentives. Both ROU assets and lease liabilities exclude variable payments not based on an index or rate, whichallowance are treated as period costs. The Company's lease agreements do not contain significant residual value guarantees, restrictions or covenants.
The Company occupies office facilities under lease agreements that expire at various dates. In addition, data processing, office and transportation equipment is leased under agreements that expire at various dates. The Company’s leases generally include lease and non-lease components, which the Company has elected to account forpresented as a single lease component. Variable lease costs not basedcomponent of Insurance claims and policyholders' benefits on an index or rate consistthe Condensed Consolidated Statements of non-lease components, which are being accounted for as lease components, and represent charges for services provided by the landlord and our reimbursement for the landlord’s costs, including real estate taxes and insurance. The Company does not have any significant finance leases.
Operating lease cost was $9 million and $28 million for the three and nine months ended September 30, 2019. Variable lease cost was $5 million and $13 million for the three and nine months ended September 30, 2019. Cash paid for amounts included in operating lease liabilities was $8 million and $25 million for the three and nine months ended September 30, 2019. Operating lease ROU assets obtained in exchange for lease obligations was $11 million for the nine months ended September 30, 2019.Operations.
The following table presents operating lease ROU assets and lease liabilities.
(In millions)September 30, 2019
Operating lease ROU assets$223
Operating lease liabilities304

The following table presentssummarizes the maturitiesoutstanding amount of operating lease liabilitiesvoluntary reinsurance receivables, gross of any collateral arrangements, by financial strength rating as of September 30, 2019.March 31, 2020:
(In millions)Operating Leases
2019 (Excluding the nine months ended September 30, 2019)$6
202039
202142
202239
202334
Thereafter213
Total lease payments373
Less: Discount(69)
Total operating lease liabilities$304


(In millions)March 31, 2020
A- to A++$2,662
B- to B++859
Insolvent4
Total voluntary reinsurance outstanding balance(1)
$3,525
The following table presents the weighted average remaining lease term for operating leases and weighted average discount rate used in calculating operating lease right-of-use assets.
(1)September 30, 2019
Weighted average remaining lease term10.9 years
Weighted average discount rate3.4%Expected credit losses for legacy A&EP receivables are ceded to NICO and the reinsurance limit on the LPT has not been exhausted, therefore no allowance is recorded for these receivables and they are excluded from the table above. Refer to Note E for information regarding the LPT. The Company has also excluded receivables from involuntary pools.

Voluntary reinsurance receivables within the B- to B++ rating distribution are primarily due from captive reinsurers and backed by collateral arrangements.
The following table presentsCompany has established an allowance for uncollectible insurance receivables. A loss rate methodology is used to determine expected credit losses for premium receivables. This methodology uses the Company’s historical annual credit losses relative to gross premium written to develop a range of credit loss rates for each dollar of gross written premium underwritten. The expected future minimum lease payments to be made under non-cancelablecredit loss for loss sensitive business in good standing is calculated on a pool basis, using historical default rate data obtained from major rating agencies. Changes in the allowance are presented as a component of Other operating leases asexpenses on the Condensed Consolidated Statements of December 31, 2018.
(In millions)Future Minimum Lease Payments
2019$35
202039
202141
202238
202332
Thereafter200
Total$385


Operations.

Item 2. Management's Discussion and Analysis (MD&A) of Financial Condition and Results of Operations
OVERVIEW
The following discussion highlights significant factors affecting the Company. References to “we,” “our,” “us” or like terms refer to the business of CNA.
The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements included under Part I, Item 1 of this Form 10-Q, andas well as the supplemental risk factor regarding the COVID-19 pandemic disclosed under Part II, Item 1A of this Form 10-Q. The following discussion should also be read in conjunction with Item 1A Risk Factors and Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2018.2019.
We utilize the core income (loss) financial measure to monitor our operations. Core income (loss) is calculated by excluding from net income (loss) the after-tax effects of i) net investment gains or losses ii) income or loss from discontinued operations, iii)and 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.guidance. The calculation of core income (loss) excludes net investment gains or losses because net investment gains or losses are generally driven by economic factors that are not necessarily consistent with key driversreflective of underwriting performance, and are therefore not considered an indication of trends in insuranceour primary operations. Management monitors core income (loss) for each business segment to assess segment performance. Presentation of consolidated core income (loss) is deemed to be a non-GAAP financial measure. See further discussion regarding how we manage our business in Note I to the Condensed Consolidated Financial Statements included under Part I, Item 1. For reconciliations of non-GAAP measures to the most comparable GAAP measures and other information, please refer herein and/or to CNA's most recent Annual Report on Form 10-K on file with the Securities and Exchange Commission.
In evaluating the results of our Specialty, Commercial and International segments, we utilize the loss ratio, the expense ratio, the dividend ratio and the combined ratio. These ratios are calculated using GAAP financial results. The loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums. The expense ratio is the percentage of insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of policyholders' dividends incurred to net earned premiums. The combined ratio is the sum of the loss, expense and dividend ratios. In addition we also utilize renewal premium change, rate, retention and new business in evaluating operating trends. Renewal premium change represents the estimated change in average premium on policies that renew, including rate and exposure changes. Rate represents the average change in price on policies that renew excluding exposure change. For certain products within Small Business, where quantifiable, rate includes the influence of new business as well. Exposure represents the measure of risk used in the pricing of the insurance product. Retention represents the percentage of premium dollars renewed in comparison to the expiring premium dollars from policies available to renew. Renewal premium change, rate and retention presented for the prior year are updated to reflect subsequent activity on policies written in the period. New business represents premiums from policies written with new customers and additional policies written with existing customers. Gross written premiums, excluding third party captives, excludes business which is mostly ceded to third party captives, including business related to large warranty programs.
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 within this MD&A. These changes can be favorable or unfavorable. Net prior year loss reserve development does not include the effect of any related acquisition expenses. Further information on our reserves is provided in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

CRITICAL ACCOUNTING ESTIMATES
The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires us 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 amount of revenues and expenses reported during the period. Actual results may differ from those estimates.
Our Condensed Consolidated Financial Statements and accompanying notes have been prepared in accordance with GAAP applied on a consistent basis. We continually evaluate the accounting policies and estimates used to prepare the Condensed Consolidated Financial Statements. In general, our estimates are based on historical experience, evaluation of current trends, information from third-party professionals and various other assumptions that are believed to be reasonable under the known facts and circumstances.
The accounting estimates discussed below are considered by us to be critical to an understanding of our Condensed Consolidated Financial Statements as their application places the most significant demands on our judgment:
Insurance Reserves
Long Term Care Reserves
Reinsurance and Insurance Receivables
Valuation of Investments and Impairment of Securities
Long Term Care Policies
Income Taxes
Due to the inherent uncertainties involved with these types of judgments, actual results could differ significantly from our estimates and may have a material adverse impact on our results of operations, equity, business, and insurer financial strength and corporate debt ratings. See the Critical Accounting Estimates section of our Management's Discussion and Analysis of Financial Condition and Results of Operations included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 20182019 for further information.

CONSOLIDATED OPERATIONS
Results of Operations
The following table includesCOVID-19 pandemic and global, national, regional and local efforts to mitigate the consolidatedspread of the virus have rapidly evolved and led to severely depressed economic conditions and financial market disruption, primarily beginning in the month of March. These conditions have had an impact across our enterprise during the first quarter of 2020. While the impact to our underwriting results was limited, we experienced significant declines in the value of our investment portfolio during the first quarter. Currently, we believe the future impact across our operations is likely to be reflected in continued volatility in our investment portfolio, and adverse effects on our underwriting results including our financial measure, core income (loss).decreased premiums, elevated expenses in the form of credit losses for uncollectible receivables, and increased claims reporting activity and related litigation, due to both the pandemic and depressed economic conditions. For more discussion of COVID-19 impacts on our underwriting results and detailed components of our business operations and a discussion of the core income (loss) financial measure, see the segment sections within this MD&A. For further discussion of Net investment income and Net investment results,gains or losses, see the Investments section of this MD&A. For further discussion of the risks to our business associated with COVID-19, see the Risk Factor included under Part II, Item 1A of this Form 10-Q.
The following table includes the consolidated results of our operations including our financial measure, core income (loss).
Periods ended September 30Three Months Nine Months
Three months ended March 31   
(In millions)2019 2018 2019 20182020 2019
Operating Revenues          
Net earned premiums$1,890
 $1,853
 $5,517
 $5,453
$1,869
 $1,803
Net investment income487
 487
 1,573
 1,483
329
 571
Non-insurance warranty revenue292
 258
 858
 744
301
 281
Other revenues9
 10
 22
 26
8
 9
Total operating revenues2,678
 2,608
 7,970
 7,706
2,507
 2,664
Claims, Benefits and Expenses          
Net incurred claims and benefits1,607
 1,306
 4,304
 3,960
1,419
 1,351
Policyholders' dividends7
 6
 19
 18
6
 6
Amortization of deferred acquisition costs345
 337
 1,025
 992
344
 342
Non-insurance warranty expense278
 235
 801
 676
281
 260
Other insurance related expenses257
 266
 766
 779
258
 251
Other expenses64
 70
 187
 228
72
 66
Total claims, benefits and expenses2,558
 2,220
 7,102
 6,653
2,380
 2,276
Core income before income tax120
 388
 868
 1,053
127
 388
Income tax expense on core income(18) (71) (154) (185)(19) (70)
Core income102
 317
 714

868
108

318
Net investment gains7
 14
 20
 25
Income tax expense on net investment gains(2) (1) (7) (2)
Net investment gains, after tax5
 13
 13
 23
Net deferred tax asset remeasurement—
 6
 —
 6
Net income$107
 $336
 $727
 $897
Net investment (losses) gains(216) 31
Income tax benefit (expense) on net investment (losses) gains47
 (7)
Net investment (losses) gains, after tax(169) 24
Net (loss) income$(61) $342
Three Month Comparison
Core income decreased $215$210 million for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 2018.2019. Core income for our Property & Casualty Operations decreased $64$192 million primarily due to unfavorable net prior year loss reserve development in the current year period. Core results for our Life & Group segment decreased $154 million driven by a $170 million charge related to recognition of a premium deficiency as a result of the third quarter 2019 GPV. Core loss for our Corporate & Other segment improved $3 million.
Net catastrophe losses were $32 million and $46 million for the three months ended September 30, 2019 and 2018. Unfavorable net prior year loss reserve development of $16 million and favorable net prior year loss reserve development of $62 million was recorded in the three months ended September 30, 2019 and 2018 related to our Specialty, Commercial, International and Corporate & Other segments. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

Nine Month Comparison
Core income decreased $154 million for the nine months ended September 30, 2019 as compared with the same period in 2018. Core income for our Property & Casualty Operations decreased $98 million primarily due to lower favorable net prior year loss reserve development partially offset by higher net investment income driven by limited partnership and common stock returns. Our underwriting results for the three months ended March 31, 2020 included a $15 million pretax ($12 million after-tax) loss related to COVID-19 comprised of claims activity included in catastrophe losses and an increase in our allowance for uncollectible insurance receivables. Core resultsincome for our Life & Group segment decreased $141$6 million driven by a $170 million charge related to recognition of a premium deficiency as a result ofwhile the third quarter 2019 GPV. Corecore loss for our Corporate & Other segment improved $85increased $12 million.
Net catastrophe losses were $128$75 million and $106$58 million for the ninethree months ended September 30, 2019March 31, 2020 and 2018.2019. Catastrophe losses for the three months ended March 31, 2020 include $13 million related to COVID-19, which is being tracked as a separate catastrophe event. Favorable net prior year loss reserve development of $29$15 million and $160$14 million was recorded in the ninethree months ended September 30,March 31, 2020 and 2019 and 2018 related to our Specialty, Commercial, International and Corporate & Other segments. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.


SEGMENT RESULTS
The impact COVID-19 had on our insurance underwriting results was more limited in the first quarter of 2020 than we anticipate occurring in the second and third quarters of 2020, and possibly thereafter, as the situation continues to evolve. Currently, we believe the future impact on our underwriting results is likely to include declines in premium volume, driven by slower growth, especially for lines of business that are sensitive to rates of economic growth, as well as policy cancellations, refunds or return of premiums, as a result of decreased insured exposures for our current policyholders. In addition, many of our customers, across a broad spectrum of industries, are likely to be impacted by lost business, which may affect our ability to collect amounts owed to us, increasing our expenses for credit losses for uncollectible premiums. Lower premiums and higher expenses will result in an increase to our expense ratio. Further, while loss frequency may decrease related to lower exposures in certain lines, we expect an overall increase in insurance claims reporting activity and related litigation due to both the pandemic and depressed economic conditions. This includes increased frequency in claim submissions in lines that are implicated by the virus and the mitigating activities taken by our customers and governmental authorities in response to its spread. These include workers’ compensation, healthcare, commercial property coverage, and directors’ and officers’ liability and employment practices liability lines. In addition, our surety lines may experience increased losses, particularly in construction surety, where there is risk that contractors will be adversely impacted by general economic conditions. The costs associated with claims handling and defense, as well as the payment of claims for covered exposures, will likely increase our loss ratio. For further discussion of the risks to our business associated with COVID-19, see the Risk Factor included under Part II, Item 1A of this Form 10-Q.
The following discusses the results of operations for our business segments.segments during the first quarter of 2020. Our property and casualty commercial insurance operations are managed and reported in three business segments: Specialty, Commercial and International, which we refer to collectively as Property & Casualty Operations. Our operations outside of Property & Casualty Operations are managed and reported in two segments: Life & Group and Corporate & Other.


Specialty
The following table details the results of operations for Specialty.
Periods ended September 30Three Months Nine Months
(In millions, except ratios, rate, renewal premium change and retention)2019 2018 2019 2018
Gross written premiums$1,766
 $1,715
 $5,191
 $5,222
Gross written premiums excluding third party captives778
 714
 2,263
 2,130
Net written premiums732
 688
 2,143
 2,062
Net earned premiums712
 684
 2,061
 2,039
Net investment income121
 124
 410
 376
Core income153
 177
 483
 531
        
Other performance metrics:       
Loss and loss adjustment expense ratio57.8% 54.5% 58.1% 55.1%
Expense ratio31.8
 32.3
 32.6
 31.8
Dividend ratio0.2
 0.2
 0.2
 0.2
Combined ratio89.8% 87.0% 90.9% 87.1%
        
Rate6% 2% 4% 2%
Renewal premium change8
 5
 6
 5
Retention87
 85
 88
 84
New business$91
 $93
 $274
 $266
Three Month Comparison
Three months ended March 31   
(In millions, except ratios, rate, renewal premium change and retention)2020 2019
Gross written premiums$1,714
 $1,701
Gross written premiums excluding third party captives741
 730
Net written premiums694
 698
Net earned premiums685
 661
Net investment income56
 155
Core income96
 169
    
Other performance metrics:   
Loss and loss adjustment expense ratio59.1% 59.3%
Expense ratio32.0
 32.8
Dividend ratio0.2
 0.2
Combined ratio91.3% 92.3%
    
Rate9% 3%
Renewal premium change9
 6
Retention84
 89
New business$74
 $86
Gross written premiums, excluding third party captives, for Specialty increased $64$11 million for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 20182019 driven by strong retention and rate. Net written premiums for Specialty increased $44decreased $4 million for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 2018.2019 driven by a higher level of ceded reinsurance. The increase in net earned premiums was consistent with the trend in net written premiums in recent quarters.
Core income decreased $24$73 million for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 2018,2019 primarily due to lower net investment income driven by limited partnership and common stock returns partially offset by improved current accident year underwriting results.
The combined ratio of 91.3% improved 1.0 point for the three months ended March 31, 2020 as compared with the same period in 2019. The loss ratio improved 0.2 points driven by improved current accident year underwriting results largely offset by lower favorable net prior year loss reserve development partially offset by lower net catastrophe losses.
The combined ratio of 89.8% increased 2.8 points forin the three months ended September 30, 2019 as compared with the same period in 2018. The loss ratio increased 3.3 points primarily due to lower favorable net prior year loss reserve development.current period. Net catastrophe losses were $3$8 million, or 0.51.1 points of the loss ratio, for the three months ended September 30, 2019,March 31, 2020, as compared to $16with $12 million, or 2.41.8 points of the loss ratio, for the three months ended September 30, 2018.March 31, 2019. Net catastrophe losses for the three months ended March 31, 2020 included $6 million related to the COVID-19 pandemic. The expense ratio improved 0.50.8 points for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 20182019 driven by a favorable acquisition ratio.higher net earned premiums.
Favorable net prior year loss reserve development of $20$11 million and $53$20 million was recorded for the three months ended September 30, 2019March 31, 2020 and 2018.2019. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

Nine Month Comparison
Gross written premiums, excluding third party captives, for Specialty increased $133 million for the nine months ended September 30, 2019 as compared with the same period in 2018 driven by higher new business, strong retention and rate. Net written premiums for Specialty increased $81 million for the nine months ended September 30, 2019 as compared with the same period in 2018. The increase in net earned premiums was consistent with the trend in net written premiums in recent quarters.
Core income decreased $48 million for the nine months ended September 30, 2019 as compared with the same period in 2018, driven by lower favorable net prior year loss reserve development partially offset by higher net investment income driven by limited partnership and common stock returns.
The combined ratio of 90.9% increased 3.8 points for the nine months ended September 30, 2019 as compared with the same period in 2018. The loss ratio increased 3.0 points primarily due to lower favorable net prior year loss reserve development. Net catastrophe losses were $16 million, or 0.8 points of the loss ratio, for the nine months ended September 30, 2019, as compared to $22 million, or 1.1 points of the loss ratio, for the nine months ended September 30, 2018. The expense ratio increased 0.8 points for the nine months ended September 30, 2019 as compared with the same period in 2018 driven by higher employee costs.
Favorable net prior year loss reserve development of $58 million and $127 million was recorded for the nine months ended September 30, 2019 and 2018. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.
The following table summarizes the gross and net carried reserves for Specialty.
(In millions)September 30, 2019 December 31, 2018
Gross case reserves$1,491
 $1,623
Gross IBNR reserves3,794
 3,842
Total gross carried claim and claim adjustment expense reserves$5,285
 $5,465
Net case reserves$1,338
 $1,483
Net IBNR reserves3,367
 3,348
Total net carried claim and claim adjustment expense reserves$4,705
 $4,831

(In millions)March 31, 2020 December 31, 2019
Gross case reserves$1,527
 $1,481
Gross IBNR reserves3,945
 3,757
Total gross carried claim and claim adjustment expense reserves$5,472
 $5,238
Net case reserves$1,385
 $1,343
Net IBNR reserves3,310
 3,333
Total net carried claim and claim adjustment expense reserves$4,695
 $4,676

Commercial
The following table details the results of operations for Commercial.
Periods ended September 30Three Months Nine Months
(In millions, except ratios, rate, renewal premium change and retention)2019 2018 2019 2018
Gross written premiums$860
 $758
 $2,825
 $2,563
Gross written premiums excluding third party captives852
 756
 2,742
 2,483
Net written premiums775
 697
 2,536
 2,339
Net earned premiums813
 782
 2,339
 2,278
Net investment income136
 144
 480
 450
Core income97
 127
 356
 403
        
Other performance metrics:       
Loss and loss adjustment expense ratio69.3% 63.5% 67.6% 63.0%
Expense ratio31.7
 33.2
 32.7
 33.3
Dividend ratio0.6
 0.7
 0.6
 0.7
Combined ratio101.6% 97.4% 100.9% 97.0%
        
Rate4% 2% 3% 1%
Renewal premium change5
 4
 4
 5
Retention84
 84
 86
 85
New business$173
 $122
 $522
 $462
Three Month Comparison
Three months ended March 31   
(In millions, except ratios, rate, renewal premium change and retention)2020 2019
Gross written premiums$1,062
 $941
Gross written premiums excluding third party captives1,059
 932
Net written premiums950
 849
Net earned premiums818
 763
Net investment income47
 190
Core income24
 139
    
Other performance metrics:   
Loss and loss adjustment expense ratio68.1% 66.9%
Expense ratio33.2
 33.8
Dividend ratio0.6
 0.6
Combined ratio101.9% 101.3%
    
Rate8% 2%
Renewal premium change9
 4
Retention85
 85
New business$198
 $163
Gross written premiums for Commercial increased $102$121 million for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 20182019 driven by higher new business and rate. Net written premiums for Commercial increased $78$101 million for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 2018.2019. The increase in net earned premiumspremium was consistent with the trend in net written premiums in recent quarters.premiums.
Core income decreased $30$115 million for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 2018,2019, primarily due to unfavorable net prior year loss reserve development in the current year period.
The combined ratio of 101.6% increased 4.2 points for the three months ended September 30, 2019 as compared with the same period in 2018. The loss ratio increased 5.8 points primarily due to unfavorable net prior year loss reserve development in the current year period. Net catastrophe losses were $25 million, or 3.0 points of the loss ratio, for the three months ended September 30, 2019, as compared with $25 million, or 3.1 points of the loss ratio, for the three months ended September 30, 2018. The expense ratio improved 1.5 points for the three months ended September 30, 2019 as compared with the same period in 2018 driven by a favorable acquisition ratio.
Unfavorable net prior year loss reserve development of $35 million was recorded for the three months ended September 30, 2019 as compared with favorable development of $5 million recorded for the three months ended September 30, 2018. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

Nine Month Comparison
Gross written premiums for Commercial increased $262 million for the nine months ended September 30, 2019 as compared with the same period in 2018 driven by higher new business and rate. Net written premiums for Commercial increased $197 million for the nine months ended September 30, 2019 as compared with the same period in 2018.  The increase in net earned premiums was consistent with the trend in net written premiums in recent quarters.
Core income decreased $47 million for the nine months ended September 30, 2019 as compared with the same period in 2018, due to unfavorable underwriting results partially offset by higherlower net investment income driven by limited partnership and common stock returns.
The combined ratio of 100.9%101.9% increased 3.90.6 points for the ninethree months ended September 30, 2019March 31, 2020 as compared with the same period in 2018.2019. The loss ratio increased 4.61.2 points driven by the current accident year and unfavorablehigher net prior year loss reserve development in the current year period.catastrophe losses partially offset by lower claim handling expenses. Net catastrophe losses were $102$57 million, or 4.37.0 points of the loss ratio, for the ninethree months ended September 30, 2019,March 31, 2020, as compared to $73with $40 million, or 3.15.2 points of the loss ratio, for the ninethree months ended September 30, 2018.March 31, 2019. Net catastrophe losses for three months ended March 31, 2020 included $5 million related to the COVID-19 pandemic. The expense ratio for the three months ended March 31, 2020 improved 0.6 points for the nine months ended September 30, 2019point as compared with the same period in 20182019 driven by a favorable acquisition ratio partially offset by higher employee costs.net earned premiums.
UnfavorableFavorable net prior year loss reserve development of $15$4 million and $8 million was recorded for the ninethree months ended September 30, 2019 as compared with favorable development of $27 million recorded for the nine months ended September 30, 2018.March 31, 2020 and 2019. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.
The following table summarizes the gross and net carried reserves for Commercial.
(In millions)September 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
Gross case reserves$3,928
 $4,181
$3,914
 $3,937
Gross IBNR reserves4,682
 4,562
4,790
 4,719
Total gross carried claim and claim adjustment expense reserves$8,610
 $8,743
$8,704
 $8,656
Net case reserves$3,565
 $3,831
$3,477
 $3,543
Net IBNR reserves4,340
 4,167
4,414
 4,306
Total net carried claim and claim adjustment expense reserves$7,905
 $7,998
$7,891
 $7,849

International
The following table details the results of operations for International.
Periods ended September 30Three Months Nine Months
(In millions, except ratios, rate, renewal premium change and retention)2019 2018 2019 2018
Gross written premiums$226
 $230
 $837
 $884
Net written premiums201
 196
 709
 762
Net earned premiums236
 255
 729
 739
Net investment income17
 14
 47
 43
Core (loss) income(9) 1
 14
 17
        
Other performance metrics:       
Loss and loss adjustment expense ratio69.4% 67.6% 64.7% 65.0%
Expense ratio38.0
 36.3
 37.5
 36.8
Combined ratio107.4% 103.9% 102.2% 101.8%
        
Rate10% 4% 7% 3%
Renewal premium change6
 8
 5
 6
Retention71
 72
 69
 79
New business$52
 $71
 $207
 $247
Three Month Comparison
Three months ended March 31   
(In millions, except ratios, rate, renewal premium change and retention)2020 2019
Gross written premiums$307
 $324
Net written premiums219
 259
Net earned premiums239
 250
Net investment income15
 15
Core income2
 6
    
Other performance metrics:   
Loss and loss adjustment expense ratio64.5% 64.8%
Expense ratio35.4
 37.1
Combined ratio99.9% 101.9%
    
Rate8% 5%
Renewal premium change8
 2
Retention72
 69
New business$68
 $80
Gross written premiums for International decreased $4$17 million for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 2018. Excluding the effect of foreign currency exchange rates, gross written premiums increased $1 million or 1%2019 driven by growth in Canada largely offset by the premium reduction from Hardy'scontinued impact of the strategic exit from certain Lloyd’s business classes, announcedoffset by growth in the fourth quarter of 2018.Canada. Net written premiums for International increased $5decreased $40 million for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 2018. Excluding the effect of foreign currency exchange rates, net written premiums increased $10 million or 5% for the three months ended September 30, 2019 as compared with the same period in 2018 driven by a change in the timing of ceded reinsurance contract renewals.2019. The decrease in net earned premiums was consistent with the trend in net written premiums in recent quarters.premiums.
Core resultsincome decreased $10$4 million for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 2018 primarily due to unfavorable2019 driven by current accident year underwriting results.
The combined ratio of 107.4% increased 3.599.9% improved 2.0 points for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 2018.2019. The loss ratio increased 1.8improved 0.3 points driven by the absence of unfavorable net prior year loss reserve development in the current period partially offset by lower current accident year period as compared with favorable development in the prior year period and an increase in large property losses in Hardy and Europe.underwriting results. Net catastrophe losses were $4$10 million, or 1.74.3 points of the loss ratio, for the three months ended September 30, 2019,March 31, 2020, as compared with $5$6 million, or 2.12.3 points of the loss ratio, for the three months ended September 30, 2018.March 31, 2019. Net catastrophe losses for the three months ended March 31, 2020 included $2 million related to the COVID-19 pandemic. The expense ratio increasedimproved 1.7 points for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 20182019 driven by lower net earned premiums.acquisition expenses and employee costs.
Unfavorable netThere was no prior year loss reserve development of $1 million was recorded for the three months ended September 30, 2019March 31, 2020 as compared with favorableunfavorable development of $2$14 million for the three months ended September 30, 2018.March 31, 2019. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

Nine Month Comparison
Gross written premiums for International decreased $47 million for the nine months ended September 30, 2019 as compared with the same period in 2018. Excluding the effect of foreign currency exchange rates, gross written premiums decreased $17 million or 2% for the nine months ended September 30, 2019 as compared with the same period in 2018 driven by the premium reduction from Hardy's strategic exit from certain business classes announced in the fourth quarter of 2018. Net written premiums for International decreased $53 million for the nine months ended September 30, 2019 as compared with the same period in 2018. Excluding the effect of foreign currency exchange rates, net written premiums decreased $25 million or 3% for the nine months ended September 30, 2019 as compared with the same period in 2018. The decrease in net earned premiums was consistent with the trend in net written premiums in recent quarters.
Core income decreased $3 million for the nine months ended September 30, 2019 as compared with the same period in 2018 driven by unfavorable net prior year loss reserve development in the current year partially offset by improved current accident year underwriting results.
The combined ratio of 102.2% increased 0.4 points for the nine months ended September 30, 2019 as compared with the same period in 2018. The loss ratio improved 0.3 points, driven by improved current accident year underwriting results largely offset by unfavorable net prior year loss reserve development in the current year period. Net catastrophe losses were $10 million, or 1.4 points of the loss ratio, for the nine months ended September 30, 2019, as compared to $11 million, or 1.5 points of the loss ratio, for the nine months ended September 30, 2018. The expense ratio increased 0.7 points for the nine months ended September 30, 2019 as compared with the same period in 2018 driven by lower net earned premiums.
Unfavorable net prior year loss reserve development of $14 million was recorded for the nine months ended September 30, 2019 as compared with favorable development of $4 million for the nine months ended September 30, 2018. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.
The following table summarizes the gross and net carried reserves for International.
(In millions)September 30, 2019 December 31, 2018
Gross case reserves$822
 $867
Gross IBNR reserves980
 883
Total gross carried claim and claim adjustment expense reserves$1,802
 $1,750
Net case reserves$728
 $749
Net IBNR reserves834
 775
Total net carried claim and claim adjustment expense reserves$1,562
 $1,524

(In millions)March 31, 2020 December 31, 2019
Gross case reserves$807
 $858
Gross IBNR reserves1,011
 1,018
Total gross carried claim and claim adjustment expense reserves$1,818
 $1,876
Net case reserves$719
 $759
Net IBNR reserves864
 869
Total net carried claim and claim adjustment expense reserves$1,583
 $1,628

Life & Group
The following table detailssummarizes the results of operations for Life & Group.
Periods ended September 30Three Months Nine Months
Three months ended March 31   
(In millions)2019 2018 2019 20182020 2019
Net earned premiums$130
 $133
 $390
 $398
$127
 $130
Net investment income207
 200
 616
 598
208
 204
Core (loss) income before income tax(170) 22
 (179) (7)
Core loss before income tax(10) (3)
Income tax benefit on core loss48
 10
 74
 43
14
 13
Core (loss) income(122) 32
 (105) 36
Core income4
 10
Three Month Comparison
Due to the recognition of the active life reserve premium deficiency and resetting of actuarial assumptions in the third quarter of 2019, the operating results for our long term care business in 2020 now reflect the variance between actual experience and the expected results contemplated in our best estimate reserves. Core results decreased $154income of $4 million for the three months ended September 30, 2019 as comparedMarch 31, 2020 is in line with the same period in 2018. The decrease was driven by a $170 million charge related to recognition of an active life reserve premium deficiency partially offset by a $44 million reduction in long term care claim reserves resulting from the annual claim experience study. The favorable claim reserve development was primarily due to lower claim severity than anticipated in the reserve estimates. Core income for the three months ended September 30, 2018 included a $24 million reduction in long term care claim reserves resulting from the 2018 annual claim experience study.expectations.
Nine Month Comparison
Core results decreased $141 million for the nine months ended September 30, 2019 as compared with the same period in 2018. The drivers of core results for the nine month period were generally consistent with the three month summary noted above.
Life & Group Policyholder Reserves
Annually, management assesses the adequacy of its long term care future policy benefit reserves by performing a GPV to determine if there is a premium deficiency. See Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1 for further information on the reserving process.

Prior to September 30, 2019, the active life reserves for long term care were based on the actuarial best estimate assumptions established at December 31, 2015 as a result of a reserve unlocking. The September 30, 2018 GPV indicated the carried reserves included a margin of approximately $182 million. The September 30, 2019 GPV indicated a premium deficiency of $216 million and future policy benefit reserves were increased accordingly. As a result, the long term care active life reserves carried as of September 30, 2019 represent management's best estimate assumptions at that date with no margin for adverse deviation. A summary of the changes in the GPV results is presented in the table below:
Long Term Care Active Life Reserve - Change in estimated reserve margin (In millions) 
September 30, 2018 Estimated Margin$182
Changes in underlying discount rate assumptions(280)
Changes in underlying morbidity assumptions32
Changes in underlying persistency assumptions and inforce policy inventory(234)
Changes in underlying premium rate action assumptions58
Changes in underlying expense and other assumptions26
September 30, 2019 Premium Deficiency$(216)
The premium deficiency was primarily driven by changes in discount rate assumptions driven by lower expected reinvestment rates, contemplating both near-term market indications and long-term normative assumptions. The premium deficiency was also adversely affected by the recognition of margin in earnings in recent quarters and changes in persistency assumptions, primarily from lower projected active life mortality rates. These unfavorable drivers were partially offset by higher than expected rate increases on active rate increase programs, new planned rate increase filings and favorable changes to the underlying morbidity and expense assumptions.
As a result of the premium deficiency, our projections no longer indicate a pattern of expected profits in earlier future years followed by expected losses in later future years. As such, we will no longer establish additional future policy benefit reserves for profits followed by losses in periods where the long term care business generates core income. The need for these additional future policy benefit reserves will be re-evaluated in connection with the next GPV, which is expected to be completed in the third quarter of 2020.
The table below summarizes the estimated pretax impact on our results of operations from various hypothetical revisions to our active life reserve assumptions. The annual GPV process involves updating all assumptions to the then current best estimate, and historically all significant assumptions have been revised each year. In the Hypothetical revisions table below, we have assumed that revisions to such assumptions would occur in each policy type, age and duration within each policy group and would occur absent any changes, mitigating or otherwise, in the other assumptions. Although such hypothetical revisions are not currently required or anticipated, we believe they could occur based on past variances in experience and our expectations of the ranges of future experience that could reasonably occur. Any actual adjustment would be dependent on the specific policies affected and, therefore, may differ from the estimates summarized below.
September 30, 2019 
 Estimated reduction to pretax income
Hypothetical revisions (In millions)
Morbidity: 
5% increase in morbidity$664
10% increase in morbidity1,329
Persistency: 
5% decrease in active life mortality and lapse$208
10% decrease in active life mortality and lapse427
Discount Rates: 
50 basis point decline in new money interest rates$309
100 basis point decline in new money interest rates675
Premium Rate Actions: 
25% decrease in anticipated future premium rate increases$58
50% decrease in anticipated future premium rate increases115

The following table summarizes policyholder reserves for Life & Group.
September 30, 2019     
(In millions)Claim and claim adjustment expenses Future policy benefits Total
Long term care$2,840
 $9,415
 $12,255
Structured settlement annuities519
 —
 519
Other13
 —
 13
Total3,372
 9,415
 12,787
Shadow adjustments (1)
168
 2,664
 2,832
Ceded reserves (2)
167
 226
 393
Total gross reserves$3,707
 $12,305
 $16,012
December 31, 2018     
(In millions)Claim and claim adjustment expenses Future policy benefits Total
Long term care$2,761
 $9,113
 $11,874
Structured settlement annuities530
 —
 530
Other14
 —
 14
Total3,305
 9,113
 12,418
Shadow adjustments (1)
115
 1,250
 1,365
Ceded reserves (2)
181
 234
 415
Total gross reserves$3,601
 $10,597
 $14,198
(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.


Corporate & Other
The following table detailssummarizes the results of operations for the Corporate & Other segment, including intersegment eliminations.
Periods ended September 30Three Months Nine Months
(In millions)2019 2018 2019 2018
Net investment income$6
 $5
 $20
 $16
Interest expense31
 33
 99
 101
Core loss(17) (20) (34) (119)
Three Month Comparison
Three months ended March 31   
(In millions)2020 2019
Net investment income$3
 $7
Interest expense31
 34
Core loss(18) (6)
Core loss improved $3increased $12 million for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 2018.2019 driven by lower amortization of the deferred gain related to the A&EP Loss Portfolio Transfer (LPT). The prior period included $4 million of non-recurring costs associated with the transition to a new IT infrastructure service provider.
Nine Month Comparison
Core loss improved $85 million for the nine months ended September 30, 2019 as compared with the same period in 2018. The prior period included adverse net prior year reserve development for A&EP under the LPT and $27 million of non-recurring costs associated with the transition to a new IT infrastructure service provider. The LPT is further discussed in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.
The following table summarizes the gross and net carried reserves for Corporate & Other.
(In millions)September 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
Gross case reserves$1,153
 $1,208
$1,185
 $1,137
Gross IBNR reserves1,039
 1,217
981
 1,097
Total gross carried claim and claim adjustment expense reserves$2,192
 $2,425
$2,166
 $2,234
Net case reserves$96
 $96
$92
 $92
Net IBNR reserves86
 96
78
 83
Total net carried claim and claim adjustment expense reserves$182
 $192
$170
 $175


INVESTMENTS
The financial market disruption in the first quarter of 2020 significantly impacted our investment portfolio during the period. Losses from our limited partnership and common and preferred equity portfolios, as well as the recognition of impairment losses on certain fixed maturity holdings, have negatively impacted our net income. Additionally, the overall fair value of our available for sale fixed maturity portfolio has declined, primarily as a result of credit spread widening. We currently expect some level of continued volatility in our investment portfolio as the situation continues to evolve.
Net Investment Income
The significant components of Net investment income are presented in the following table. Fixed income securities, as presented, include both fixed maturity securities and non-redeemable preferred stock.
Periods ended September 30Three Months Nine Months
Three months ended March 31   
(In millions)2019 2018 2019 20182020 2019
Fixed income securities:          
Taxable fixed income securities$383
 $366
 $1,151
 $1,070
$371
 $383
Tax-exempt fixed income securities79
 93
 241
 298
78
 82
Total fixed income securities462
 459
 1,392
 1,368
449
 465
Limited partnership and common stock investments18
 23
 157
 96
Limited partnership investments(70) 76
Common stock(55) 20
Other, net of investment expense7
 5
 24
 19
5
 10
Pretax net investment income$487
 $487
 $1,573
 $1,483
$329
 $571
Fixed income securities, after tax$378
 $378
 $1,140
 $1,130
$367
 $380
Net investment income, after tax399
 400
 1,284
 1,221
279
 465
          
Effective income yield for the fixed income securities portfolio, pretax4.8% 4.7% 4.8% 4.7%4.6 % 4.8%
Effective income yield for the fixed income securities portfolio, after tax3.9% 3.9% 3.9% 3.9%3.8 % 3.9%
Limited partnership and common stock return0.9% 0.9% 7.7% 4.0%(7.0)% 4.5%
Net investment income, after tax, decreased $1$186 million for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 2018.
Net investment income, after tax, increased $63 million for the nine months ended September 30, 2019 as compared with the same period in 2018 driven by limited partnership and common stock returns.

 The limited partnership returns for the three months ended March 31, 2020 include limited partnerships representing 51% reporting on a current basis with no reporting lag and 49% reporting on a lag, primarily three months or less. Limited partnerships reporting on a current basis include substantially all of the Company's hedge funds.

Net Investment Gains (Losses)
The components of Net investment gains (losses) are presented in the following table.
Periods ended September 30Three Months Nine Months
Three months ended March 31   
(In millions)2019 2018 2019 20182020 2019
Fixed maturity securities:       
  
Corporate and other bonds$7
 $8
 $—
 $36
$(79) $—
States, municipalities and political subdivisions1
 9
 13
 35
—
 8
Asset-backed(5) (7) (19) (39)4
 (14)
Total fixed maturity securities3
 10
 (6) 32
(75) (6)
Non-redeemable preferred stock7
 2
 60
 (23)(133) 42
Short term and other(3) 2
 (34) 16
5
 (5)
Net investment gains7
 14
 20
 25
Income tax expense on net investment gains(2) (1) (7) (2)
Net investment gains, after tax$5
 $13
 $13
 $23
Mortgage loans(13) —
Net investment (losses) gains(216) 31
Income tax benefit (expense) on net investment (losses) gains47
 (7)
Net investment (losses) gains, after tax$(169) $24
Net investment gains,results, after tax, decreased $8$193 million for the three months ended September 30, 2019March 31, 2020 as compared with the same period in 2018.2019. The decrease was driven by higher OTTI losses recognized in earnings.
Net investment gains, after tax, decreased $10 million for the nine months ended September 30, 2019 as compared with the same period in 2018. The decrease was driven by higher OTTI losses recognized in earnings and a $16 million after tax loss related to the redemption of our $500 million senior notes due August 2020. This was offset by the favorableunfavorable change in fair value of non-redeemable preferred stock.stock and higher impairment losses for the quarter. Pretax impairment losses of $92 million were recognized in the currentquarter, which includes $77 million related to the energy sector.
Further information on our investment gains and losses, including our OTTI losses is set forth in Note C to the Condensed Consolidated Financial Statements included under Part I,1, Item 1.


Portfolio Quality
The following table presents the estimated fair value and net unrealized gains (losses) of our fixed maturity securities by rating distribution.
 September 30, 2019 December 31, 2018

(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$4,432
 $114
 $4,334
 $(24)
AAA3,057
 360
 3,027
 245
AA6,731
 860
 6,510
 512
A9,040
 1,112
 8,768
 527
BBB16,718
 1,670
 14,205
 274
Non-investment grade2,481
 85
 2,702
 (73)
Total$42,459
 $4,201
 $39,546
 $1,461
 March 31, 2020 December 31, 2019

(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$4,073
 $198
 $4,136
 $95
AAA3,529
 381
 3,254
 349
AA6,328
 747
 6,663
 801
A8,751
 819
 9,062
 1,051
BBB15,284
 255
 16,839
 1,684
Non-investment grade2,133
 (287) 2,253
 101
Total$40,098
 $2,113
 $42,207
 $4,081
As of September 30, 2019March 31, 2020 and December 31, 2018,2019, 1% of our fixed maturity portfolio was rated internally. AAA rated securities included $1.3$1.9 billion and $1.5 billion of pre-refundedpre-funded municipal bonds as of September 30, 2019March 31, 2020 and December 31, 2018.
2019.
The following table presents available-for-sale fixed maturity securities in a gross unrealized loss position by ratings distribution.
September 30, 2019March 31, 2020
(In millions)Estimated Fair Value Gross Unrealized LossesEstimated Fair Value Gross Unrealized Losses
U.S. Government, Government agencies and Government-sponsored enterprises$171
 $1
$6
 $—
AAA35
 1
196
 4
AA29
 —
481
 25
A456
 4
1,762
 117
BBB568
 12
6,102
 652
Non-investment grade609
 32
1,606
 319
Total$1,868
 $50
$10,153
 $1,117

The following table presents the maturity profile for these available-for-sale fixed maturity securities. Securities not due to mature on a single date are allocated based on weighted average life.
 March 31, 2020
(In millions)Estimated Fair Value Gross Unrealized Losses
Due in one year or less$321
 $26
Due after one year through five years2,780
 199
Due after five years through ten years5,418
 632
Due after ten years1,634
 260
Total$10,153
 $1,117


The following table summarizes the available-for-sale Corporate and other bonds at March 31, 2020 across industry sectors.
 September 30, 2019
(In millions)Estimated Fair Value Gross Unrealized Losses
Due in one year or less$27
 $—
Due after one year through five years377
 12
Due after five years through ten years1,127
 22
Due after ten years337
 16
Total$1,868
 $50
March 31, 2020Cost or
Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Allowance for Credit Losses Estimated
Fair
Value
(In millions)    
Corporate and other bonds:         
Basic Materials$1,615
 $95
 $78
 $—
 $1,632
Communications1,429
 193
 27
 —
 1,595
Consumer, cyclical - Other605
 16
 56
 —
 565
Consumer, non-cyclical - Other1,641
 195
 27
 —
 1,809
Energy - Oil & Gas1,170
 40
 191
 37
 982
Energy - Other23
 7
 —
 —
 30
Energy - Pipelines1,056
 43
 112
 11
 976
Entertainment177
 —
 23
 —
 154
Financial - Other5,748
 308
 89
 —
 5,967
Financial - Real Estate/REITS1,455
 30
 45
 —
 1,440
Industrial1,481
 135
 55
 —
 1,561
Retail527
 67
 18
 —
 576
Technology853
 38
 30
 1
 860
Transportation331
 35
 5
 —
 361
Travel & Related490
 26
 37
 —
 479
Utilities1,580
 191
 24
 —
 1,747
Total Corporate and other bonds$20,181
 $1,419
 $817
 $49
 $20,734


Duration
A primary objective in the management of the investment portfolio is to optimize return relative to the corresponding liabilities and respective liquidity needs. Our views on the current interest rate environment, tax regulations, asset class valuations, specific security issuer and broader industry segment conditions as well as domestic and global economic conditions, are some of the factors that enter into an investment decision. We also continually monitor exposure to issuers of securities held and broader industry sector exposures and may from time to time adjust such exposures based on our views of a specific issuer or industry sector.
A further consideration in the management of the investment portfolio is the characteristics of the corresponding liabilities and the ability to align the duration of the portfolio to those liabilities and to meet future liquidity needs, minimize interest rate risk and maintain a level of income sufficient to support the underlying insurance liabilities. For portfolios where future liability cash flows are determinable and typically long term in nature, we segregate investments for asset/liability management purposes. The segregated investments support the long term care and structured settlement liabilities in the Life & Group segment.
The effective durations of fixed income securities and short term investments are presented in the following table. Amounts presented are net of payable and receivable amounts for securities purchased and sold, but not yet settled.
September 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
(In millions)Estimated Fair Value 
Effective
Duration
(In years)
 Estimated Fair Value 
Effective
Duration
(In years)
Estimated Fair Value 
Effective
Duration
(In years)
 Estimated Fair Value 
Effective
Duration
(In years)
Investments supporting Life & Group$18,003
 9.0
 $16,212
 8.4
$17,201
 8.7
 $18,015
 8.9
Other investments26,655
 4.1
 25,428
 4.4
24,237
 4.1
 26,813
 4.1
Total$44,658
 6.0
 $41,640
 6.0
$41,438
 6.0
 $44,828
 6.0
The investment portfolio is periodically analyzed for changes in duration and related price risk. Certain securities have duration characteristics that are variable based on market interest rates, credit spreads and other factors that may drive variability in the amount and timing of cash flows. Additionally, we periodically review the sensitivity of the portfolio to the level of foreign exchange rates and other factors that contribute to market price changes. A summary of these risks and specific analysis on changes is included in the Quantitative and Qualitative Disclosures About Market Risk included under Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2018.2019.
Short Term Investments
The carrying value of the components of the Short term investments are presented in the following table.
(In millions)September 30, 2019 December 31, 2018March 31, 2020 December 31, 2019
Short term investments:      
Commercial paper$1,004
 $705
$326
 $1,181
U.S. Treasury securities256
 185
103
 364
Other234
 396
167
 316
Total short term investments$1,494
 $1,286
$596
 $1,861

In addition to Short term investments, the Company held $857 million and $242 million of Cash as of March 31, 2020 and December 31, 2019.

LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Our primary operating cash flow sources are premiums and investment income from our insurance subsidiaries. Our primary operating cash flow uses are payments for claims, policy benefits and operating expenses, including interest expense on corporate debt. Additionally, cash may be paid or received for income taxes.
Related to the COVID-19 pandemic and efforts to mitigate the spread of the virus, cash flows may be adversely impacted by lower premium volumes, suspensions and cancellations of policies, return of premiums or premium refunds, and increased claim and defense cost payments in future quarters. At this time, we do not believe these impacts would give rise to a material liquidity concern given our overall liquid assets and anticipated future cash flows.
For the ninethree months ended September 30, 2019,March 31, 2020, net cash provided by operating activities was $980$212 million as compared with $868$287 million for the same period in 2018.2019. The increasedecrease in cash provided by operating activities was driven by higher net claim payments and a lower level of distributions from limited partnerships partially offset by an increase in premiums collected and lower income taxes paid.collected.
Cash flows from investing activities include the purchase and disposition of financial instruments, excluding those held as trading, and may include the purchase and sale of businesses, land, buildings, equipment and other assets not generally held for resale.
Net cash usedprovided by investing activities was $60$1,087 million for the ninethree months ended September 30, 2019,March 31, 2020, as compared with net cash provided of $80$289 million for the same period in 2018.2019. The cash flow from investing activities is affected by various factors such as the anticipated payment of claims, financing activity, asset/liability management and individual security buy and sell decisions made in the normal course of portfolio management.
Cash flows from financing activities may include proceeds from the issuance of debt and equity securities, and outflows for stockholder dividends, repayment of debt and purchases of treasury stock.
For the ninethree months ended September 30, 2019,March 31, 2020, net cash used by financing activities was $887$675 million as compared with $989$665 million for the same period in 2018. Financing activities for2019. In the periods presented include:
During the nine months ended September 30, 2019,first quarter of 2020, we paid dividends of $649 million and repurchased 415,695435,376 shares of our common stock at an aggregate cost of $18 million.
In the second quarter of 2019, we issued $500 million of 3.90% senior notes due May 1, 2029 and redeemed the $500 million outstanding aggregate principal balances of our 5.875% senior notes due August 15, 2020.
In the first quarter of 2018,2019, we redeemed the $150paid dividends of $643 million outstanding aggregate principal balanceand repurchased 317,508 shares of our 6.950% senior notes due January 15, 2018.
In the third quartercommon stock at an aggregate cost of 2018, we redeemed the $30 million of subordinated variable rate debt of CNA Hardy due September 15, 2036.$14 million.
Common Stock Dividends
DividendsA quarterly dividend of $3.05$0.37 per share on our common stock, includingand a special dividend of $2.00 per share of our common stock were declared and paid duringin the nine months ended September 30, 2019.first quarter of 2020. On October 25, 2019,May 1, 2020, our Board of Directors declared a quarterly dividend of $0.35$0.37 per share, payable December 2, 2019June 4, 2020 to stockholders of record on November 11, 2019.May 18, 2020. The declaration and payment of future dividends to holders of our common stock will be at the discretion of our Board of Directors and will depend on many factors, including our earnings, financial condition, business needs and regulatory constraints.

Liquidity
We believe that our present cash flows from operating, investing and financing activities are sufficient to fund our current and expected working capital and debt obligation needs and we do not expect this to change in the near term. In addition, we held $5 billion of cash, short term investments and highly liquid securities issued by US government agencies as of March 31, 2020, of which $506 million was held at the CNAF holding company. There are currently no amounts outstanding under our $250 million senior unsecured revolving credit facility and no borrowings outstanding through our membership in the Federal Home Loan Bank of Chicago (FHLBC).
We have an effective shelf registration statement under which we may publicly issue debt, equity or hybrid securities from time to time.
Dividends from CCC are subject to the insurance holding company laws of the State of Illinois, the domiciliary state of CCC. Under these laws, ordinary dividends, or dividends that do not require prior approval by the Illinois Department of Insurance (the Department), are determined based on the greater of the prior year's statutory net income or 10% of statutory surplus as of the end of the prior year, as well as timing and amount of dividends paid in the preceding twelve months. Additionally, ordinary dividends may only be paid from earned surplus, which is calculated by removing unrealized gains from unassigned surplus. As of September 30, 2019,March 31, 2020, CCC was in a positive earned surplus position. The maximum allowable dividend CCC could pay during 20192020 that would not be subject to the Department's prior approval is $1,383$1,078 million, less dividends paid during the preceding twelve months measured at that point in time. CCC paid dividends of $116$125 million during the three months ended June 30, 2019, $135 million during the three months ended September 30, 2019, $125 million during the three months ended December 31, 20182019 and $940$670 million during the ninethree months ended September 30, 2019.March 31, 2020. As of September 30, 2019,March 31, 2020, CCC is able to pay approximately $327$23 million of dividends that would not be subject to prior approval of the Department. The actual level of dividends paid in any year is determined after an assessment of available dividend capacity, holding company liquidity and cash needs as well as the impact the dividends will have on the statutory surplus of the applicable insurance company.
We have an effective automatic shelf registration statement under which we may publicly issue debt, equity or hybrid securities from time to time.

ACCOUNTING STANDARDS UPDATE
For a discussion of Accounting Standards Updates adopted in the current period and that will be adopted in the future, see Note A to the Condensed Consolidated Financial Statements included under Part I, Item 1.
FORWARD-LOOKING STATEMENTS
This report contains a number of forward-looking statements which relate to anticipated future events rather than actual present conditions or historical events. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as “believes,” “expects,” “intends,” “anticipates,” “estimates” and similar expressions. Forward-looking statements in this report include any and all statements regarding expected developments in our insurance business, including losses and loss reserves for long term care, A&EP and other mass tort claims which are more uncertain, and therefore more difficult to estimate than loss reserves respecting traditional property and casualty exposures; the impact of routine ongoing insurance reserve reviews we are conducting; our expectations concerning our revenues, earnings, expenses and investment activities; volatility in investment returns; expected cost savings and other results from our expense reduction activities; and our proposed actions in response to trends in our business. Forward-looking statements, by their nature, are subject to a variety of inherent risks and uncertainties that could cause actual results to differ materially from the results projected in the forward-looking statement. We cannot control many of these risks and uncertainties. These risks and uncertainties include, but are not limited to, the following:
Company-Specific Factors
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 2019 Annual Report on Form 10-K and this report, 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.
Industry and General Market Factors
the COVID-19 pandemic, and actions seeking to mitigate the spread of the virus, have resulted in significant risk across our enterprise, as economic uncertainty and depressed business conditions brought on by the crisis may materially and adversely impact our business, driving significant decreases in our premium volume and resulting in significant losses in our investment portfolio, increased claim and litigation activity, and unfavorable regulatory outcomes.
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 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 Factors
regulatory and legal initiatives and compliance with governmental regulations and other legal requirements, including with respect to cyber security protocols, legal inquiries by state authorities, judicial interpretations within the regulatory framework, including interpretation of policy provisions, decisions regarding coverage and theories of liability, legislative actions that increase claimant activity, including those revising applicability of statutes of limitations, 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.
Impact of Catastrophic EventsNatural and Related DevelopmentsMan-Made Disasters and Mass Tort Claims
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.epidemics and pandemics; and
mass tort claims, including those related to exposure to potentially harmful products or substances such as glyphosate, lead paint and opioids; and claims arising from changes that repeal or weaken tort reforms, such as those related to abuse reviver statutes.
Referendum on the United Kingdom's Membership in the European Union
in 2016, the U.K. approved an exit from the E.U., commonly referred to as "Brexit.” BrexitWhile the withdrawal of the U.K. from the E.U. was official as of January 31, 2020, until the transition period ends, there remains scheduled toa lack of specificity and detail regarding the long term relationship between the two sides and how businesses operating in both jurisdictions may be completed in 2019, although the formal exit has been delayed twice. Effectiveaffected. In any event, effective January 1, 2019, we writeour E.U. business in the E.U.is no longer handled out of our U.K.-domiciled subsidiary, but through our recently established European subsidiary in Luxembourg, which was established specifically to address the departure of the U.K. from the E.U. and not through our U.K.-domiciled subsidiary.to seek to ensure the Company’s ability to operate effectively throughout the E.U. As a result, the complexity and cost of regulatory compliance of our European business has increased and will likely continue to result in elevated expenses.
Our forward-looking statements speak only as of the date of the filing of this Quarterly Report on Form 10-Q and we do not undertake any obligation to update or revise any forward-looking statement to reflect events or circumstances after the date of the statement, even if our expectations or any related events or circumstances change.

Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes in our market risk components for the ninethree months ended September 30, 2019.March 31, 2020. See the Quantitative and Qualitative Disclosures About Market Risk included in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 20182019 for further information. Additional information related to portfolio duration is discussed in the Investments section of our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part I, Item 2.
Item 4. Controls and Procedures
The Company maintains a system of disclosure controls and procedures which are designed to ensure that information required to be disclosed by the Company in reports that it files or submits to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including this report, is recorded, processed, summarized and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to the Company's management on a timely basis to allow decisions regarding required disclosure.
As of September 30, 2019,March 31, 2020, the Company's management, including the Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO), conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on this evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective as of September 30, 2019.March 31, 2020.
There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15 (f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2019March 31, 2020 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


PART II. Other Information
Item 1. Legal Proceedings
Information on our legal proceedings is set forth in Note F to the Condensed Consolidated Financial Statements included under Part I, Item 1.
Item 1A. Risk Factors
Our Annual Report on Form 10-K for the year ended December 31, 2019, includes a detailed discussion of certain material risk factors facing us. The information presented below describes updates and additions to such risk factors and should be read in conjunction with the risk factors and information disclosed in our Form 10-K.
The COVID-19 pandemic and mitigating actions have resulted in significant risk across our enterprise, which may have a material adverse impact on our business, results of operations and financial condition, the extent of which cannot be determined with any certainty at this time.
The COVID-19 outbreak, and actions seeking to mitigate the spread of the virus, accelerated in both breadth and scope through the month of February, with the World Health Organization declaring it a pandemic on March 11, 2020. The situation has continued to evolve exponentially with implicated exposures increasing given sustained uncertainties across the global marketplace. Because of the extensiveness of the pandemic, all of the direct and indirect consequences and implications of COVID-19 are not yet known and may not emerge for some time.
Risks presented by the ongoing effects of COVID-19 that are known at this time include the following:
Broad economic impact
The economic effect of the pandemic has been broad in nature and has significantly impacted business operations across all industries, including ours. Depressed economic conditions may lead to decreased insured exposures causing us to experience declines in premium volume, especially for lines of business that are sensitive to rates of economic growth. Significant decreases in premium volume would also directly and adversely impact our underwriting expense ratio. In addition, many of our customers, representing a broad spectrum of industries and markets, may potentially be impacted by lost business, which may affect our ability to collect amounts owed to us by policyholders.
The COVID-19 pandemic has also significantly impacted the financial markets. As investors embark on a flight to quality, risk free rates have decreased. In addition, extreme market volatility due to liquidity concerns and overall uncertainties have driven widening credit spreads and declining equity markets. These conditions have impacted our investment portfolio results and valuations and may continue to do so, resulting in additional losses in our investment portfolio. The value of our fixed maturity investments is subject to risk that certain investments may default or become impaired due to deterioration in the financial condition of issuers of the investments we hold or in the underlying collateral of the security or loan, particularly in industries heavily impacted by COVID-19 and mitigating actions, including energy, retail, travel, entertainment, and real estate. Our municipal bond portfolio is also subject to risks of default by state and local governments and agencies that are under increased strain related to the pandemic.
These significant economic and financial market disruptions may have a material impact on our business, results of operations and financial condition, the extent of which cannot be determined with any certainty at this time.

Claims activity
Another aspect is claim activity and related litigation, which may increase significantly in certain of our lines of business as a result of the pandemic and mitigating actions. We may experience increased frequency in claim submissions in lines that are implicated by the virus and the mitigating activities taken by our customers and governmental authorities in response to its spread, as well as potential regulatory or legislative actions that are further described below under Regulatory impact. These include workers’ compensation, healthcare, commercial property coverage, and directors’ and officers’ liability and employment practices liability lines. In addition, our surety lines may experience increased losses, particularly in construction surety, where there is significant risk that contractors will be adversely and materially impacted by general economic conditions. Increased frequency or severity in any or all of the foregoing lines, or others where the exposure has yet to emerge, may have a material effect on our business, results of operations and financial condition, the extent of which cannot be determined with any certainty at this time.
Regulatory impact
The regulatory environment is rapidly evolving in direct response to the pandemic and the mitigating actions being taken. Numerous regulatory authorities to which our business is subject have implemented or are contemplating broad and significant regulations restricting and governing insurance company operations during the pandemic crisis. Such actions include, but are not limited to, premium moratoriums, premium refunds and reductions, restrictions on policy cancellations and potential legislation-driven expansion of policy terms. To date, certain state authorities have ordered premium refunds and certain regulatory and legislative bodies have proposed requiring insurers to cover business interruption under policies that were not written to provide for such coverage under the current circumstances. In addition, certain states have directed expansion of workers’ compensation coverage through presumption of compensability of claims for a broad category of workers. This highly fluid and challenging regulatory environment, and the new regulations we are now, and may be, subject to may have a material impact on our business, results of operation and financial condition, the extent of which cannot be determined with any certainty at this time.
Business operational impact
Beginning on March 17, 2020, we instituted mandatory work from home for all of our employees, across the United States and globally, including Canada, the United Kingdom and Europe, and moved to teleconference meetings only across the enterprise. As of the date of this report, the work from home mandate remains in place across our global workforce. Mandatory work from home may impact the productivity of our workforce, and increases the risk of information security exposure. Disruptions to our employees’ productivity, as well as their health and welfare, especially in the context of accelerated contagion of the virus (which has not occurred across our employee population at this time), along with the heightened security risks presented by widespread remote access to our computer systems, may have a material impact on our business operations, the extent of which cannot be determined with any certainty at this time.
In addition, in virtually all cases, our critical vendors have also had to impose workplace restrictions or work from home mandates on their employees, which may result in interruption in service delivery or failure by vendors to properly perform required services, including delivery in a manner more susceptible to significant information security risk. Such vendor issues may result in a material impact on our business operations, the extent of which cannot be determined with any certainty at this time.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Items 2 (a) and (b) are not applicable.
(c) The table below details repurchases of our common stock made during the three months ended September 30, 2019.March 31, 2020.
Period (a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares purchased as part of publicly announced plans or programs (d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (in millions) (a) Total number of shares purchased (b) Average price paid per share (c) Total number of shares purchased as part of publicly announced plans or programs (d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (in millions)
August 1, 2019 - August 31, 2019 50,000
 $46.47
 N/A N/A
February 1, 2020 - February 29, 2020 88,848
 $45.24
 N/A N/A
March 1, 2020 - March 31, 2020 346,528
 40.74
 N/A N/A
Total 50,000
 46.47
 N/A N/A 435,376
 

 N/A N/A
Item 6. Exhibits
See Exhibit Index.

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
  CNA Financial Corporation
   
Dated: October 28, 2019May 4, 2020By/s/ James M. AndersonAlbert J. Miralles
  
James M. AndersonAlbert J. Miralles
Executive Vice President and
Chief Financial Officer
(Duly authorized officer and principal financial and accounting officer)

EXHIBIT INDEX
Description of ExhibitExhibit Number
Amended and Restated Incentive Compensation Plan, effective January 1, 2020 (Incorporated herein by reference to Proxy Statement filed March 20, 2020)
10.1
General Release and Separation Agreement, dated March 6, 2020, between CNA Financial Corporation and James Anderson
10.2
Certification of Chief Executive Officer
31.1
  
Certification of Chief Financial Officer
31.2
  
Written Statement of the Chief Executive Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)
32.1
  
Written Statement of the Chief Financial Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)
32.2
  
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document101.INS
  
Inline XBRL Taxonomy Extension Schema101.SCH
  
Inline XBRL Taxonomy Extension Calculation Linkbase101.CAL
  
Inline XBRL Taxonomy Extension Definition Linkbase101.DEF
  
Inline XBRL Taxonomy Label Linkbase101.LAB
  
Inline XBRL Taxonomy Extension Presentation Linkbase101.PRE
  
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)104104.1

6964