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 March 31, ~~2020~~2021



			☐			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.)~~



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~~) (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

☒

Accelerated filer

☐

Non-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 ~~April 30, 2020, 271,376,098~~May 5, 2021, 271,656,848 shares of common stock were outstanding.


Item Number		Page Number
	PART I
1.	Condensed Consolidated Financial Statements:	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2021 and 2020 (Unaudited)	4
	Condensed Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (Unaudited)	6
	Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2021 and 2020 (Unaudited)	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	35
3.	Quantitative and Qualitative Disclosures About Market Risk	53
4.	Controls and Procedures	53
	PART II
1.	Legal Proceedings	54
1A.	Risk Factors	54
2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
6.	Exhibits	57

Item Number
Page
Number

PART I

1.
Condensed Consolidated Financial Statements:
3

Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019 (Unaudited)
3

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 March 31, 2020 (Unaudited) and December 31, 2019
5

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 months ended March 31, 2020 and 2019 (Unaudited)
7

Notes to Condensed Consolidated Financial Statements (Unaudited)
8
2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
39
3.
Quantitative and Qualitative Disclosures About Market Risk
59
4.
Controls and Procedures
59
PART II
1.
Legal Proceedings
60
1A.
Risk Factors
60
2.
Unregistered Sales of Equity Securities and Use of Proceeds
62
6.
Exhibits
62

Table of Contents

PART I

Item 1. Condensed Consolidated Financial Statements

CNA Financial Corporation

Condensed Consolidated Statements of Operations (Unaudited)

Three months ended March 31
(In millions, except per share data) 2020 2019
Revenues
Net earned premiums $ 1,869
$ 1,803
Net investment income 329
571
Net investment (losses) gains (216 ) 31
Non-insurance warranty revenue 301
281
Other revenues 8
9
Total revenues 2,291
2,695
Claims, Benefits and Expenses
Insurance claims and policyholders’ benefits 1,425
1,357
Amortization of deferred acquisition costs 344
342
Non-insurance warranty expense 281
260
Other operating expenses 299
283
Interest 31
34
Total claims, benefits and expenses 2,380
2,276
(Loss) income before income tax (89 ) 419
Income tax benefit (expense) 28
(77 )
Net (loss) income $ (61 ) $ 342

Basic (loss) earnings per share $ (0.23 ) $ 1.26

Diluted (loss) earnings per share $ (0.23 ) $ 1.25

Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic 271.5
271.6
Diluted 271.5
272.6


Three months ended March 31
(In millions, except per share data)	2021		2020
Revenues
Net earned premiums	$	1,962	$	1,869
Net investment income	504		329
Net investment gains (losses)	57		(216)
Non-insurance warranty revenue	338		301
Other revenues	5		8
Total revenues	2,866		2,291
Claims, Benefits and Expenses
Insurance claims and policyholders’ benefits	1,506		1,425
Amortization of deferred acquisition costs	359		344
Non-insurance warranty expense	311		281
Other operating expenses	284		299
Interest	28		31
Total claims, benefits and expenses	2,488		2,380
Income (loss) before income tax	378		(89)
Income tax (expense) benefit	(66)		28
Net income (loss)	$	312	$	(61)

Basic earnings (loss) per share	$	1.15	$	(0.23)

Diluted earnings (loss) per share	$	1.14	$	(0.23)

Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	271.9		271.5
Diluted	272.9		271.5

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

Table of Contents

CNA Financial Corporation

Condensed Consolidated Statements of Comprehensive ~~(Loss) Income~~Loss (Unaudited)


Three months ended March 31						Three months ended March 31
(In millions)	2020			2019		(In millions)	2021		2020
Comprehensive (Loss) Income
Net (loss) income	$	(61	)	$	342
Other Comprehensive (Loss) Income, net of tax
Comprehensive Loss						Comprehensive Loss
Net income (loss)						Net income (loss)	$	312	$	(61)
Other Comprehensive Loss, net of tax						Other Comprehensive Loss, net of tax
Changes in:						Changes in:
Net unrealized gains and losses on investments with an allowance for credit losses	(11		)	—		Net unrealized gains and losses on investments with an allowance for credit losses	0		(11)
Net unrealized gains and losses on other investments	(1,044		)	530		Net unrealized gains and losses on other investments	(627)		(1,044)
Net unrealized gains and losses on investments	(1,055		)	530		Net unrealized gains and losses on investments	(627)		(1,055)
Foreign currency translation adjustment	(77		)	17		Foreign currency translation adjustment	2		(77)
Pension and postretirement benefits	11			7		Pension and postretirement benefits	9		11
Other comprehensive (loss) income, net of tax	(1,121		)	554
Total comprehensive (loss) income	$	(1,182	)	$	896
Other comprehensive loss, net of tax						Other comprehensive loss, net of tax	(616)		(1,121)
Total comprehensive loss						Total comprehensive loss	$	(304)	$	(1,182)

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

Table of Contents

CNA Financial Corporation

Condensed Consolidated Balance Sheets


(In millions, except share data)	March 31, 2020 (Unaudited)			December 31, 2019			(In millions, except share data)	March 31, 2021 (Unaudited)		December 31, 2020
Assets							Assets
Investments:							Investments:
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
Fixed maturity securities at fair value (amortized cost of $39,291 and $38,953, less allowance for credit loss of $43 and $40)							Fixed maturity securities at fair value (amortized cost of $39,291 and $38,953, less allowance for credit loss of $43 and $40)	$	43,579	$	44,631
Equity securities at fair value (cost of $927 and $941)							Equity securities at fair value (cost of $927 and $941)	984		992
Limited partnership investments	1,509			1,752			Limited partnership investments	1,654		1,619
Other invested assets	63			65			Other invested assets	77		76
Mortgage loans (less allowance for uncollectible receivables of $20 and $-)	1,021			994
Mortgage loans (less allowance for uncollectible receivables of $26 and $26)							Mortgage loans (less allowance for uncollectible receivables of $26 and $26)	1,043		1,068
Short term investments	596			1,861			Short term investments	1,334		1,907
Total investments	44,086			47,744			Total investments	48,671		50,293
Cash	857			242			Cash	588		419
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
Reinsurance receivables (less allowance for uncollectible receivables of $22 and $21)							Reinsurance receivables (less allowance for uncollectible receivables of $22 and $21)	5,111		4,457
Insurance receivables (less allowance for uncollectible receivables of $33 and $33)							Insurance receivables (less allowance for uncollectible receivables of $33 and $33)	2,652		2,607
Accrued investment income	402			395			Accrued investment income	399		380
Deferred acquisition costs	683			662			Deferred acquisition costs	741		708
Deferred income taxes	518			199			Deferred income taxes	197		66
Property and equipment at cost (less accumulated depreciation of $224 and $215)	271			282
Property and equipment at cost (less accumulated depreciation of $243 and $231)							Property and equipment at cost (less accumulated depreciation of $243 and $231)	244		252
Goodwill	145			147			Goodwill	148		148
Deferred non-insurance warranty acquisition expense	2,905			2,840			Deferred non-insurance warranty acquisition expense	3,149		3,068
Other assets (includes $15 and $21 due from Loews Corporation)	1,708			1,473
Other assets							Other assets	1,813		1,628
Total assets	$	58,405		$	60,612		Total assets	$	63,713	$	64,026
Liabilities							Liabilities
Insurance reserves:							Insurance reserves:
Claim and claim adjustment expenses	$	21,872		$	21,720		Claim and claim adjustment expenses	$	23,056	$	22,706
Unearned premiums	4,745			4,583			Unearned premiums	5,319		5,119
Future policy benefits	11,734			12,311			Future policy benefits	12,772		13,318
Long term debt	2,680			2,679			Long term debt	2,777		2,776
Deferred non-insurance warranty revenue	3,848			3,779			Deferred non-insurance warranty revenue	4,119		4,023
Other liabilities (includes $7 and $21 due to Loews Corporation)	3,164			3,325
Other liabilities (includes $130 and $89 due to Loews Corporation)							Other liabilities (includes $130 and $89 due to Loews Corporation)	3,581		3,377
Total liabilities	48,043			48,397			Total liabilities	51,624		51,319
Commitments and contingencies (Notes C and F)							Commitments and contingencies (Notes C and F)			0
Stockholders' Equity							Stockholders' Equity
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
Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 271,644,861 and 271,391,603 shares outstanding)							Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 271,644,861 and 271,391,603 shares outstanding)	683		683
Additional paid-in capital	2,187			2,203			Additional paid-in capital	2,194		2,211
Retained earnings	8,634			9,348			Retained earnings	9,084		9,081
Accumulated other comprehensive (loss) income	(1,070		)	51
Treasury stock (1,669,255 and 1,627,652 shares), at cost	(72		)	(70		)
Accumulated other comprehensive income							Accumulated other comprehensive income	187		803
Treasury stock (1,395,382 and 1,648,640 shares), at cost							Treasury stock (1,395,382 and 1,648,640 shares), at cost	(59)		(71)
Total stockholders’ equity	10,362			12,215			Total stockholders’ equity	12,089		12,707
Total liabilities and stockholders' equity	$	58,405		$	60,612		Total liabilities and stockholders' equity	$	63,713	$	64,026

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

Table of Contents

CNA Financial Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)


Three months ended March 31							Three months ended March 31
(In millions)	2020			2019			(In millions)	2021		2020
Cash Flows from Operating Activities							Cash Flows from 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	(37		)	32
Net income (loss)							Net income (loss)	$	312	$	(61)
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:							Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:
Deferred income tax expense (benefit)							Deferred income tax expense (benefit)	30		(37)
Trading portfolio activity	7			(3		)	Trading portfolio activity	(8)		7
Net investment losses (gains)	216			(31		)
Net investment (gains) losses							Net investment (gains) losses	(57)		216
Equity method investees	98			14			Equity method investees	14		98
Net amortization of investments	(15		)	(25		)	Net amortization of investments	(24)		(15)
Depreciation and amortization	16			19			Depreciation and amortization	14		16
Changes in:							Changes in:
Receivables, net	(229		)	44			Receivables, net	(700)		(229)
Accrued investment income	(8		)	(15		)	Accrued investment income	(19)		(8)
Deferred acquisition costs	(27		)	(30		)	Deferred acquisition costs	(32)		(27)
Insurance reserves	510			57			Insurance reserves	605		510
Other, net	(258		)	(117		)	Other, net	(53)		(258)
Net cash flows provided by operating activities	212			287			Net cash flows provided by operating activities	82		212
Cash Flows from Investing Activities							Cash Flows from Investing Activities
Dispositions:							Dispositions:
Fixed maturity securities - sales	823			2,259			Fixed maturity securities - sales	907		823
Fixed maturity securities - maturities, calls and redemptions	799			576			Fixed maturity securities - maturities, calls and redemptions	1,084		799
Equity securities	98			64			Equity securities	119		98
Limited partnerships	204			186			Limited partnerships	49		204
Mortgage loans	15			35			Mortgage loans	42		15
Purchases:							Purchases:
Fixed maturity securities	(1,818		)	(2,447		)	Fixed maturity securities	(2,203)		(1,818)
Equity securities	(220		)	(36		)	Equity securities	(81)		(220)
Limited partnerships	(32		)	(114		)	Limited partnerships	(61)		(32)
Mortgage loans	(61		)	(59		)	Mortgage loans	(16)		(61)
Change in other investments	(6		)	(6		)	Change in other investments	(2)		(6)
Change in short term investments	1,267			(177		)	Change in short term investments	573		1,267
Purchases of property and equipment	(3		)	(8		)	Purchases of property and equipment	(3)		(3)
Other, net	21			16			Other, net	0		21
Net cash flows provided by investing activities	1,087			289			Net cash flows provided by investing activities	408		1,087
Cash Flows from Financing Activities							Cash Flows from Financing Activities
Dividends paid to common stockholders	(649		)	(643		)	Dividends paid to common stockholders	(310)		(649)
Purchase of treasury stock	(18		)	(14		)	Purchase of treasury stock	(3)		(18)
Other, net	(8		)	(8		)	Other, net	(8)		(8)
Net cash flows used by financing activities	(675		)	(665		)	Net cash flows used by financing activities	(321)		(675)
Effect of foreign exchange rate changes on cash	(9		)	2			Effect of foreign exchange rate changes on cash	0		(9)
Net change in cash	615			(87		)	Net change in cash	169		615
Cash, beginning of year	242			310			Cash, beginning of year	419		242
Cash, end of period	$	857		$	223		Cash, end of period	$	588	$	857

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

Table of Contents

CNA Financial Corporation

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)


Three months ended March 31							Three months ended March 31
(In millions)	2020			2019			(In millions)	2021		2020
Common Stock							Common Stock
Balance, beginning of period	$	683		$	683		Balance, beginning of period	$	683	$	683
Balance, end of period	683			683			Balance, end of period	683		683
Additional Paid-in Capital							Additional Paid-in Capital
Balance, beginning of period	2,203			2,192			Balance, beginning of period	2,211		2,203
Stock-based compensation	(16		)	(8		)	Stock-based compensation	(17)		(16)
Balance, end of period	2,187			2,184			Balance, end of period	2,194		2,187
Retained Earnings							Retained Earnings
Balance, beginning of period, as previously reported	9,348			9,277			Balance, beginning of period, as previously reported	9,081		9,348
Cumulative effect adjustments from changes in accounting guidance, net of tax	(5		)	—			Cumulative effect adjustments from changes in accounting guidance, net of tax	0		(5)
Balance, beginning of period, as adjusted	9,343			9,277			Balance, beginning of period, as adjusted	9,081		9,343
Dividends to common stockholders ($2.37 and $2.35 per share)	(648		)	(643		)
Net (loss) income	(61		)	342
Dividends to common stockholders ($1.13 and $2.37 per share)							Dividends to common stockholders ($1.13 and $2.37 per share)	(309)		(648)
Net income (loss)							Net income (loss)	312		(61)
Balance, end of period	8,634			8,976			Balance, end of period	9,084		8,634
Accumulated Other Comprehensive (Loss) Income
Accumulated Other Comprehensive Income (Loss)							Accumulated Other Comprehensive Income (Loss)
Balance, beginning of period	51			(878		)	Balance, beginning of period	803		51
Other comprehensive (loss) income	(1,121		)	554
Other comprehensive loss							Other comprehensive loss	(616)		(1,121)
Balance, end of period	(1,070		)	(324		)	Balance, end of period	187		(1,070)
Treasury Stock							Treasury Stock
Balance, beginning of period	(70		)	(57		)	Balance, beginning of period	(71)		(70)
Stock-based compensation	16			7			Stock-based compensation	15		16
Purchase of treasury stock	(18		)	(14		)	Purchase of treasury stock	(3)		(18)
Balance, end of period	(72		)	(64		)	Balance, end of period	(59)		(72)
Total stockholders' equity	$	10,362		$	11,455		Total stockholders' equity	$	12,089	$	10,362

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

Table of Contents

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%~~89.5% of the outstanding common stock of CNAF as of March 31, ~~2020.~~2021.

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, ~~2019,~~2020, 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 March 31, ~~2020~~2021 and for the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 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 2016-13:~~ ~~In June 2016 the Financial Accounting Standards Board (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 the Company’s results of operations. For financial assets measured at cost, the expected credit loss model requires immediate recognition of estimated credit losses over the life of the asset and presentation of the asset at the net amount expected to be collected. This 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 and reversals of the 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 discontinued and the asset is placed on nonaccrual status in the quarter 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 accrued investment income on the Condensed Consolidated Balance Sheet.

~~See Note C and Note K to the Condensed Consolidated Financial Statements for additional information 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 Duration~~Long-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 the 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, ~~2021, and the Company will adopt it on January 1, 2022.~~2022, with early adoption permitted. The guidance may be applied using either a modified retrospective transition method or a full retrospective transition method. The guidance requires restatement of prior periods presented. The Company plans to adopt on the effective date, using the modified retrospective transition method and is currently evaluating ~~the method of adoption and~~ the effect the updated guidance will have on its financial statements, including the increased disclosure requirements. The annual updating of cash flow assumptions is expected to increase income statement volatility. While the requirements of the new guidance represent a material change from existing GAAP, the underlying economics of the business and related cash flows will be unchanged.

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Note B. Earnings (Loss) Per Share

Earnings (loss) per share is based on 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 months ended March 31, 2021, approximately 1,020 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 the same period, approximately 120 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 months ended 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 971 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 the three months ended March 31, 2019 there were 0 antidilutive shares.

The Company repurchased ~~435,376~~66,000 and ~~317,508~~435,376 shares of CNAF common stock at an aggregate cost of ~~$18~~$3 million and ~~$14~~$18 million during the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020.

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Note C. Investments

The significant components of Net investment income are presented in the following table.

Three months ended March 31
(In millions) 2020 2019
Fixed maturity securities $ 438
$ 455
Equity securities (44 ) 30
Limited partnership investments (70 ) 76
Mortgage loans 14
12
Short term investments 7
10
Trading portfolio 1
2
Other —
2
Gross investment income 346
587
Investment expense (17 ) (16 )
Net investment income $ 329
$ 571


Three months ended March 31
(In millions)	2021		2020
Fixed maturity securities	$	428	$	438
Equity securities	29		(44)
Limited partnership investments	43		(70)
Mortgage loans	14		14
Short term investments	0		7
Trading portfolio	5		1
Other	2		0
Gross investment income	521		346
Investment expense	(17)		(17)
Net investment income	$	504	$	329

During the three months ended March 31, 2021 and 2020, $13 million and ~~2019, $(45)~~$(45) million ~~and $17 million~~ of Net ~~investment~~investment income was recognized due to the change in fair value of common stock still held as of March 31, ~~2020~~2021 and 2019. During the three months ended March 31, 2020 and 2019, $(2) million and less than $1 million of Net investment income was recognized due to the change in fair value of trading securities still held as of March 31, 2020 and 2019. 2020.

Net investment gains (losses) are presented in the following table.

Three months ended March 31
(In millions) 2020 2019
Net investment gains (losses):
Fixed maturity securities:
Gross gains $ 29
$ 36
Gross losses (104 ) (42 )
Net investment gains (losses) on fixed maturity securities (75 ) (6 )
Equity securities (133 ) 42
Derivatives 5
(5 )
Mortgage loans (13 ) —
Short term investments and other —
—
Net investment gains (losses) $ (216 ) $ 31


Three months ended March 31
(In millions)	2021		2020
Net investment gains (losses):
Fixed maturity securities:
Gross gains	$	58	$	29
Gross losses	(20)		(104)
Net investment gains (losses) on fixed maturity securities	38		(75)
Equity securities	2		(133)
Derivatives	17		5
Mortgage loans	0		(13)
Net investment gains (losses)	$	57	$	(216)

During thethree months ended March 31, ~~2020~~2021 and ~~2019, $(133)~~2020, $2 million of ~~losses~~gains and ~~$42~~$(133) million of ~~gains~~losses were recognized in Net investment gains (losses) due to the change in fair value of non-redeemable preferred stock still held as of March 31, ~~2020~~2021 and ~~2019.~~2020.

~~For available-for-sale fixed maturity securities, a credit loss exists if the present value~~

Table 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 the 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 (losses) on the Condensed Consolidated Statements of Operations.Contents

The following ~~table presents~~tables present the activity related to the allowance on available-for-sale securities with credit impairments and ~~PCD assets for the three months ended March 31, 2020.~~purchased credit-deteriorated (PCD) assets. Accrued interest receivable on available-for-sale fixed maturity securities totaled ~~$390~~$389 million, $371 million and $390 million as of March 31, 2021, December 31, 2020 and March 31, 2020 and is excluded from the estimate of expected credit losses and the amortized cost basis in the tables included within this Note.



(In millions)	Corporate and other bonds		Asset-backed		Total
Allowance for credit losses:
Balance as of January 1, 2021	$	23	$	17	$	40
Additions to the allowance for credit losses:
Securities for which credit losses were not previously recorded	14		0		14
Available-for-sale securities accounted for as PCD assets	2		0		2

Reductions to the allowance for credit losses:
Securities sold during the period (realized)	6		0		6
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis	0		0		0
Write-offs charged against the allowance	0		0		0
Recoveries of amounts previously written off	0		0		0

Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	(6)		(1)		(7)
Balance as of March 31, 2021	$	27	$	16	$	43



(In millions)	Corporate and other bonds		Asset-backed		Total
Allowance for credit losses:
Balance as of January 1, 2020	$	0	$	0	$	0
Additions to the allowance for credit losses:
Impact of adopting ASC 326	6		0		6
Securities for which credit losses were not previously recorded	48		0		48
Available-for-sale securities accounted for as PCD assets	1		0		1

Reductions to the allowance for credit losses:
Securities sold during the period (realized)	5		0		5
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis	1		0		1
Write-offs charged against the allowance	0		0		0
Recoveries of amounts previously written off	0		0		0

Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	0		0		0
Balance as of March 31, 2020	$	49	$	0	$	49

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 326 6
For securities for which credit losses were not previously recorded 48
For available-for-sale securities accounted for as PCD assets 1

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 basis 1
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

Table of Contents

The components of available-for-sale impairment 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.


Three months ended March 31
(In millions)	2021		2020
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	7	$	91
Asset-backed	(1)		1
Impairment losses recognized in earnings	$	6	$	92

Three Months ended March 31
(In millions) 2020 2019
Fixed maturity securities available-for-sale:
Corporate and other bonds $ 91
$ 6
Asset-backed 1
8
Impairment losses recognized in earnings $ 92
$ 14
There were 0 losses recognized on mortgage loans during the three months ended March 31, 2021. During the three months ended March 31, 2020, the Company recognized $13 million of losses related to mortgage loans due to changes in expected credit losses.

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The following tables present a summary of fixed maturity securities.


March 31, 2021	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	21,110	$	2,644	$	71	$	27	$	23,656
States, municipalities and political subdivisions	10,041		1,590		31		0		11,600
Asset-backed:
Residential mortgage-backed	3,215		108		40		0		3,283
Commercial mortgage-backed	1,952		76		24		16		1,988
Other asset-backed	2,281		71		7		0		2,345
Total asset-backed	7,448		255		71		16		7,616
U.S. Treasury and obligations of government-sponsored enterprises	138		1		7		0		132
Foreign government	508		23		2		0		529
Redeemable preferred stock	12		0		0		0		12
Total fixed maturity securities available-for-sale	39,257		4,513		182		43		43,545
Total fixed maturity securities trading	34		—		—		—		34
Total fixed maturity securities	$	39,291	$	4,513	$	182	$	43	$	43,579

March 31, 2020 Cost or
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses
Allowance for Credit Losses⁽¹⁾
Estimated
Fair
Value
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds $ 20,181
$ 1,419
$ 817
$ 49
$ 20,734
States, municipalities and political subdivisions 8,957
1,536
2
—
10,491
Asset-backed:
Residential mortgage-backed 4,198
207
8
—
4,397
Commercial mortgage-backed 2,207
36
153
—
2,090
Other asset-backed 1,868
9
133
—
1,744
Total asset-backed 8,273
252
294
—
8,231
U.S. Treasury and obligations of government-sponsored enterprises 147
8
—
—
155
Foreign government 452
15
4
—
463
Redeemable preferred stock 9
—
—
—
9
Total fixed maturity securities available-for-sale 38,019
3,230
1,117
49
40,083
Total fixed maturity securities trading 15
—
—
—
15
Total fixed maturity securities $ 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, 2019 Cost or
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated
Fair
Value Unrealized
OTTI
Losses (Gains)
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds $ 19,789
$ 2,292
$ 32
$ 22,049
$ —
States, municipalities and political subdivisions 9,093
1,559
—
10,652
—
Asset-backed:
Residential mortgage-backed 4,387
133
1
4,519
(17 )
Commercial mortgage-backed 2,265
86
5
2,346
1
Other asset-backed 1,925
41
4
1,962
(3 )
Total asset-backed 8,577
260
10
8,827
(19 )
U.S. Treasury and obligations of government-sponsored enterprises 146
1
2
145
—
Foreign government 491
14
1
504
—
Redeemable preferred stock 10
—
—
10
—
Total fixed maturity securities available-for-sale 38,106
4,126
45
42,187
$ (19 )
Total fixed maturity securities trading 20
—
—
20

Total fixed maturity securities $ 38,126
$ 4,126
$ 45
$ 42,207


December 31, 2020	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	20,792	$	3,578	$	22	$	23	$	24,325
States, municipalities and political subdivisions	9,729		1,863		0		0		11,592
Asset-backed:
Residential mortgage-backed	3,442		146		1		0		3,587
Commercial mortgage-backed	1,933		93		42		17		1,967
Other asset-backed	2,179		81		9		0		2,251
Total asset-backed	7,554		320		52		17		7,805
U.S. Treasury and obligations of government-sponsored enterprises	339		2		3		0		338
Foreign government	512		32		0		0		544
Redeemable preferred stock	0		0		0		0		0
Total fixed maturity securities available-for-sale	38,926		5,795		77		40		44,604
Total fixed maturity securities trading	27		—		—		—		27
Total fixed maturity securities	$	38,953	$	5,795	$	77	$	40	$	44,631

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 March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of ~~$1,700~~$2,301 million and ~~$2,198~~$2,773 million.

Table of Contents

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				Total
March 31, 2021	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	1,868	$	66	$	82	$	5	$	1,950	$	71
States, municipalities and political subdivisions	866		31		0		0		866		31
Asset-backed:
Residential mortgage-backed	1,584		40		12		0		1,596		40
Commercial mortgage-backed	320		9		285		15		605		24
Other asset-backed	337		3		97		4		434		7
Total asset-backed	2,241		52		394		19		2,635		71
U.S. Treasury and obligations of government-sponsored enterprises	65		7		0		0		65		7
Foreign government	45		2		0		0		45		2
Total	$	5,085	$	158	$	476	$	24	$	5,561	$	182

Less than 12 Months 12 Months or Longer Total
March 31, 2020
Estimated
Fair Value

Gross
Unrealized
Losses

Estimated
Fair Value

Gross
Unrealized
Losses

Estimated
Fair Value

Gross
Unrealized
Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds $ 7,036
$ 804
$ 44
$ 13
$ 7,080
$ 817
States, municipalities and political subdivisions 82
2
—
—
82
2
Asset-backed:
Residential mortgage-backed 166
7
22
1
188
8
Commercial mortgage-backed 1,185
151
12
2
1,197
153
Other asset-backed 1,510
131

9

2
1,519
133
Total asset-backed 2,861
289
43
5
2,904
294
U.S. Treasury and obligations of government-sponsored enterprises 2
—
—
—
2
—
Foreign government 76
4
—
—
76
4
Redeemable preferred stock 9

—

—

—

9

—
Total $ 10,066

$ 1,099

$ 87

$ 18

$ 10,153

$ 1,117

Less than 12 Months 12 Months or Longer Total
December 31, 2019
Estimated
Fair Value

Gross
Unrealized
Losses

Estimated
Fair Value

Gross
Unrealized
Losses

Estimated
Fair Value

Gross
Unrealized
Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds $ 914
$ 21
$ 186
$ 11
$ 1,100
$ 32
States, municipalities and political subdivisions 34
—
—
—
34
—
Asset-backed:
Residential mortgage-backed 249
1
30
—
279
1
Commercial mortgage-backed 381
3
20
2
401
5
Other asset-backed 449
3
33
1
482
4
Total asset-backed 1,079
7
83
3
1,162
10
U.S. Treasury and obligations of government-sponsored enterprises 62
2
2
—
64
2
Foreign government 59
1
1
—
60
1
Total $ 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, 2020 Estimated
Fair
Value Gross
Unrealized
Losses
(In millions)
Corporate and other bonds:
Basic Materials $ 727
$ 78
Communications 349
27
Consumer, cyclical - Other 390
56
Consumer, non-cyclical - Other 401
27
Energy - Oil & Gas 575
191
Energy - Pipelines 523
112
Entertainment 148
23
Financial - Other 1,711
89
Financial - Real Estate/REITS 599
45
Industrial 468
55
Retail 150
18
Technology 290
30
Transportation 73
5
Travel & Related 269
37
Utilities 407
24
Total Corporate and other bonds $ 7,080
$ 817

March 31, 2020 Estimated
Fair
Value Gross
Unrealized
Losses
(In millions)
Corporate and other bonds:
AAA $ 8
$ —
AA 134
4
A 608
17
BBB 4,987
516
Below investment grade 1,343
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, 2020 Estimated
Fair
Value Gross
Unrealized
Losses
(In millions)
Commercial mortgage-backed:
Conduits (multi property, multi borrower pools) $ 211
$ 11
Single asset, single borrower 986
142
Total Commercial mortgage-backed $ 1,197
$ 153

March 31, 2020 Estimated
Fair
Value Gross
Unrealized
Losses
(In millions)
Commercial mortgage-backed:
US Government, Government agencies and Government sponsored enterprises $ 1
$ —
AAA 60
1
AA 245
17
A 214
22
BBB 484
78
Below investment grade 193
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, 2020 Estimated
Fair
Value Gross
Unrealized
Losses
(In millions)
Other asset-backed:
Auto $ 290
$ 6
Collateralized loan obligations 418
60
Franchise 414
39
Other 397
28
Total Other asset-backed $ 1,519
$ 133

March 31, 2020 Estimated
Fair
Value Gross
Unrealized
Losses
(In millions)
Other asset-backed:
AAA $ 49
$ 1
AA 83
2
A 821
74
BBB 566
56
Below investment grade —
—
Total Other asset-backed $ 1,519
$ 133


	Less than 12 Months				12 Months or Longer				Total
December 31, 2020	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	609	$	21	$	12	$	1	$	621	$	22
States, municipalities and political subdivisions	33		0		0		0		33		—
Asset-backed:
Residential mortgage-backed	71		1		11		0		82		1
Commercial mortgage-backed	533		40		28		2		561		42
Other asset-backed	344		9		13		0		357		9
Total asset-backed	948		50		52		2		1,000		52
U.S. Treasury and obligations of government-sponsored enterprises	63		3		0		0		63		3
Foreign government	13		0		0		0		13		0
Total	$	1,666	$	74	$	64	$	3	$	1,730	$	77

Based on current facts and circumstances, the Company believes the unrealized losses presented in the March 31, ~~2020~~2021 securities in a gross unrealized loss position ~~tables~~table above are not indicative of the ultimate collectibility of the current amortized cost of the ~~securities. Rather, the Company believes the gross unrealized losses~~securities, but rather are attributable ~~primarily~~ to ~~widening~~changes in interest rates, credit spreads 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.and other factors. The Company has no current intent to sell securities with unrealized losses, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost; accordingly, the Company has determined that there are no additional impairment losses to be recorded as of March 31, ~~2020.~~2021.

Table of Contents

Contractual Maturity

The following table presents available-for-sale fixed maturity securities by contractual maturity.

March 31, 2020 December 31, 2019
(In millions)
Cost or
Amortized
Cost

Estimated
Fair
Value

Cost or
Amortized
Cost

Estimated
Fair
Value
Due in one year or less $ 1,331
$ 1,325
$ 1,334
$ 1,356
Due after one year through five years 11,554
11,812
9,746
10,186
Due after five years through ten years 13,078
13,069
14,892
15,931
Due after ten years 12,056
13,877
12,134
14,714
Total $ 38,019
$ 40,083
$ 38,106
$ 42,187


	March 31, 2021				December 31, 2020
(In millions)	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,468	$	1,473	$	1,456	$	1,458
Due after one year through five years	10,837		11,583		12,304		13,098
Due after five years through ten years	13,640		14,685		12,319		13,878
Due after ten years	13,312		15,804		12,847		16,170
Total	$	39,257	$	43,545	$	38,926	$	44,604

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 ~~$196~~$256 million and ~~$182~~$190 million and a fair value of $(2) million and $(19) million as of March 31, ~~2020~~2021 and December 31, ~~2019 and a fair value of $(1) million and $(7) million as of March 31, 2020 and December 31, 2019.~~2020. 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~~private placement securities. As of March 31, ~~2020,~~2021, the Company had commitments to purchase or fund approximately ~~$1,025~~$1,365 million and sell approximately ~~$85~~$100 million under the terms of these investments.

Table of Contents

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:~~origination. The primary credit quality indicators utilized are debt service coverage ratios (DSCR) and loan-to-value ratios (LTV).


March 31, 2021	Mortgage Loans Amortized Cost Basis by Origination Year (1)
(In millions)	2021		2020		2019		2018		2017		Prior		Total
DSCR ≥1.6x
LTV less than 55%	$	0	$	75	$	32	$	36	$	114	$	187	$	444
LTV 55% to 65%	0		14		20		14		15		11		74
LTV greater than 65%	5		0		5		0		0		24		34
DSCR 1.2x - 1.6x
LTV less than 55%	0		0		16		0		5		77		98
LTV 55% to 65%	0		20		40		53		27		0		140
LTV greater than 65%	10		52		44		0		9		12		127
DSCR ≤1.2
LTV less than 55%	0		0		50		0		8		10		68
LTV 55% to 65%	0		0		48		0		0		0		48
LTV greater than 65%	0		0		29		0		0		7		36
Total	$	15	$	161	$	284	$	103	$	178	$	328	$	1,069

Mortgage Loans Amortized Cost Basis by Origination Year ⁽¹⁾
As of March 31, 2020 2020 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.


~~(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,~~2021, 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~~

Table of ~~March 31, 2020. NaN interest income was written off for the period ended March 31, 2020.~~Contents

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.

Table of Contents

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.


March 31, 2021							Total Assets/Liabilities at Fair Value
(In millions)	Level 1		Level 2		Level 3
Assets
Fixed maturity securities:
Corporate bonds and other	$	152	$	23,444	$	767	$	24,363
States, municipalities and political subdivisions	0		11,556		44		11,600
Asset-backed	0		7,301		315		7,616
Total fixed maturity securities	152		42,301		1,126		43,579
Equity securities:
Common stock	177		0		21		198
Non-redeemable preferred stock	67		711		8		786
Total equity securities	244		711		29		984
Short term and other	1,178		25		0		1,203
Total assets	$	1,574	$	43,037	$	1,155	$	45,766
Liabilities
Other liabilities	$	0	$	2	$	0	$	2
Total liabilities	$	0	$	2	$	0	$	2

March 31, 2020
Total
Assets/Liabilities
at Fair Value
(In millions) Level 1 Level 2 Level 3
Assets
Fixed maturity securities:
Corporate bonds and other $ 175
$ 20,705
$ 496
$ 21,376
States, municipalities and political subdivisions —
10,491
—
10,491
Asset-backed —
8,034
197
8,231
Total fixed maturity securities 175
39,230
693
40,098
Equity securities:
Common stock 187
—
4
191
Non-redeemable preferred stock 59
538
11
608
Total equity securities 246
538
15
799
Short term and other 135
365
—
500
Total assets $ 556
$ 40,133

$ 708

$ 41,397
Liabilities

Other liabilities $ —
$ 1
$ —
$ 1
Total liabilities $ —
$ 1
$ —
$ 1

December 31, 2019
Total
Assets/Liabilities
at Fair Value
(In millions) Level 1 Level 2 Level 3
Assets
Fixed maturity securities:
Corporate bonds and other $ 175
$ 22,085
$ 468
$ 22,728
States, municipalities and political subdivisions —
10,652
—
10,652
Asset-backed —
8,662
165
8,827
Total fixed maturity securities 175
41,399
633
42,207
Equity securities:
Common stock 135
—
7
142
Non-redeemable preferred stock 54
658
11
723
Total equity securities 189
658
18
865
Short term and other 397
1,344
—
1,741
Total assets $ 761

$ 43,401

$ 651

$ 44,813
Liabilities

Other liabilities $ —
$ 7
$ —
$ 7
Total liabilities $ —
$ 7
$ —
$ 7


December 31, 2020							Total Assets/Liabilities at Fair Value
(In millions)	Level 1		Level 2		Level 3
Assets
Fixed maturity securities:
Corporate bonds and other	$	355	$	24,109	$	770	$	25,234
States, municipalities and political subdivisions	0		11,546		46		11,592
Asset-backed	0		7,497		308		7,805
Total fixed maturity securities	355		43,152		1,124		44,631
Equity securities:
Common stock	175		0		20		195
Non-redeemable preferred stock	68		722		7		797
Total equity securities	243		722		27		992
Short term and other	1,761		28		0		1,789
Total assets	$	2,359	$	43,902	$	1,151	$	47,412
Liabilities
Other liabilities	$	0	$	19	$	0	$	19
Total liabilities	$	0	$	19	$	0	$	19

Table of Contents

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 January 1, 2021	$	770	$	46	$	308	$	27	$	1,151
Total realized and unrealized investment gains (losses):
Reported in Net investment gains (losses)	(13)		0		0		1		(12)
Reported in Net investment income	0		0		2		1		3
Reported in Other comprehensive income (loss)	(40)		(2)		(9)		0		(51)
Total realized and unrealized investment gains (losses)	(53)		(2)		(7)		2		(60)
Purchases	42		0		30		0		72
Sales	0		0		0		0		0
Settlements	(2)		0		(17)		0		(19)
Transfers into Level 3	10		0		9		0		19
Transfers out of Level 3	0		0		(8)		0		(8)
Balance as of March 31, 2021	$	767	$	44	$	315	$	29	$	1,155
Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2021 recognized in Net income (loss) in the period	$	0	$	0	$	0	$	2	$	2
Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2021 recognized in Other comprehensive income (loss) in the period	(40)		(2)		(9)		0		(51)

Level 3
(In millions)
Corporate bonds and other States, municipalities and political subdivisions Asset-backed Equity securities Total
Balance as of January 1, 2020 $ 468
$ —
$ 165
$ 18
$ 651
Total realized and unrealized investment gains (losses):
Reported in Net investment gains (losses) —
—
—
—
—
Reported in Net investment income —
—
—
(3 ) (3 )
Reported in Other comprehensive income (loss) (37 ) —
(9 ) —
(46 )
Total realized and unrealized investment gains (losses) (37 )
—

(9 )
(3 ) (49 )
Purchases 67
—
45
—
112
Sales —
—
—
—
—
Settlements (2 ) —
(3 ) —
(5 )
Transfers into Level 3 —
—
—
—
—
Transfers out of Level 3 —
—
(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 Net investment income —
—
—
—
—
Reported in Other comprehensive income (loss) 8
—
3
—
11
Total realized and unrealized investment gains (losses) 8

—

3

2
13
Purchases 56
—
20
—
76
Sales —
—
—
—
—
Settlements (2 ) —
(4 ) —
(6 )
Transfers into Level 3 —
—
5
—
5
Transfers out of Level 3 (31 ) —
(37 ) —
(68 )
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 period 7
—
3
—
10


Level 3 (In millions)	Corporate bonds and other		States, municipalities and political subdivisions		Asset-backed		Equity securities		Total
Balance as of January 1, 2020	$	468	$	0	$	165	$	18	$	651
Total realized and unrealized investment gains (losses):
Reported in Net investment gains (losses)	0		0		0		0		0
Reported in Net investment income	0		0		0		(3)		(3)
Reported in Other comprehensive income (loss)	(37)		0		(9)		0		(46)
Total realized and unrealized investment gains (losses)	(37)		0		(9)		(3)		(49)
Purchases	67		0		45		0		112
Sales	0		0		0		0		0
Settlements	(2)		0		(3)		0		(5)
Transfers into Level 3	0		0		0		0		0
Transfers out of Level 3	0		0		(1)		0		(1)
Balance as of March 31, 2020	$	496	$	0	$	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	$	0	$	0	$	0	$	(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)		0		(9)		0		(44)

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.

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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 March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, there were ~~$58~~$72 million and ~~$60~~$71 million of overseas deposits within Other invested assets, which can be redeemed at net asset value in 90 days or less. Overseas deposits are excluded from the fair value hierarchy because their fair value is recorded using the net asset value per share (or equivalent) practical expedient.

Derivative Financial Investments

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.

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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.

March 31, 2021

Estimated Fair Value
(In millions)

Valuation Technique(s)

Unobservable Input(s)

Range
(Weighted Average)

Fixed maturity securities

936

Discounted cash flow

Credit spread

1% - 8% (2%)

March 31, 2020
Estimated Fair Value
(In millions)
Valuation Technique(s) Unobservable Input(s)
Range
(Weighted Average)
Fixed maturity securities $ 583
Discounted cash flow Credit spread 1% - 10% (4%)

December 31, 2019 Estimated Fair Value
(In millions) Valuation Technique(s) Unobservable Input(s)
Range
(Weighted Average)
Fixed maturity securities $ 525
Discounted cash flow Credit spread 1% - 6% (2%)

December 31, 2020

Estimated Fair Value
(In millions)

Valuation Technique(s)

Unobservable Input(s)

Range
(Weighted Average)

Fixed maturity securities

966

Discounted cash flow

Credit spread

1% - 8% (3%)

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.


March 31, 2021	Carrying Amount		Estimated Fair Value
(In millions)			Level 1		Level 2		Level 3		Total
Assets
Mortgage loans	$	1,043	$	0	$	0	$	1,107	$	1,107
Liabilities
Long term debt	$	2,777	$	0	$	3,016	$	0	$	3,016

March 31, 2020
Carrying
Amount
Estimated Fair Value
(In millions) Level 1 Level 2 Level 3 Total
Assets
Mortgage loans $ 1,021
$ —
$ —
$ 1,036
$ 1,036
Liabilities
Long term debt $ 2,680
$ —
$ 2,730
$ —
$ 2,730

December 31, 2019 Carrying
Amount Estimated Fair Value
(In millions) Level 1 Level 2 Level 3 Total
Assets
Mortgage loans $ 994
$ —
$ —
$ 1,025
$ 1,025
Note receivable 21
—
—
21
21
Liabilities
Long term debt $ 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. During the three months ended March 31, 2020, the note receivable was 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.


December 31, 2020	Carrying Amount		Estimated Fair Value
(In millions)			Level 1		Level 2		Level 3		Total
Assets
Mortgage loans	$	1,068	$	0	$	0	$	1,151	$	1,151
Liabilities
Long term debt	$	2,776	$	0	$	3,148	$	0	$	3,148

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.

Table of Contents

Note E. Claim and Claim Adjustment Expense 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 ~~$75~~$125 million and ~~$58~~$75 million for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. Net catastrophe losses for the three months ended March 31, 2021 were primarily driven by Winter Storms Uri and Viola. Net catastrophe losses for the three months ended 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 for the three months ended March 31, 2019 related primarily to U.S. weather related events.~~

Table of Contents

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 three months ended March 31, 2021
(In millions)	2021		2020
Reserves, beginning of year:
Gross	$	22,706	$	21,720
Ceded	4,005		3,835
Net reserves, beginning of year	18,701		17,885
Reduction of net reserves due to Excess Workers' Compensation Loss Portfolio Transfer	(632)		0
Net incurred claim and claim adjustment expenses:
Provision for insured events of current year	1,474		1,355
Increase (decrease) in provision for insured events of prior years	(54)		(8)
Amortization of discount	50		51
Total net incurred (1)	1,470		1,398
Net payments attributable to:
Current year events	(85)		(72)
Prior year events	(1,067)		(1,218)
Total net payments	(1,152)		(1,290)
Foreign currency translation adjustment and other	(32)		(88)
Net reserves, end of period	18,355		17,905
Ceded reserves, end of period	4,701		3,967
Gross reserves, end of period	$	23,056	$	21,872

For the three months ended March 31
(In millions) 2020 2019
Reserves, beginning of year:
Gross $ 21,720
$ 21,984
Ceded 3,835
4,019
Net reserves, beginning of year 17,885
17,965
Net incurred claim and claim adjustment expenses:
Provision for insured events of current year 1,355
1,309
Increase (decrease) in provision for insured events of prior years (8 ) 8
Amortization of discount 51
50
Total net incurred ⁽¹⁾
1,398
1,367
Net payments attributable to:
Current year events (72 ) (100 )
Prior year events (1,218 ) (1,309 )
Total net payments (1,290 ) (1,409 )
Foreign currency translation adjustment and other (88 ) 13
Net reserves, end of period 17,905
17,936
Ceded reserves, end of period 3,967
3,900
Gross reserves, end of period $ 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, the loss on the Excess Workers' Compensation Loss Portfolio Transfer, uncollectible reinsurance and benefit expenses related to future policy benefits, which are not reflected in the table above.


~~(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 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.


Three months ended March 31
(In millions)	2021		2020
Pretax (favorable) unfavorable development:
Specialty	$	(15)	$	(11)
Commercial	0		(4)
International	0		0
Corporate & Other	0		0
Total pretax (favorable) unfavorable development	$	(15)	$	(15)

Three months ended March 31
(In millions) 2020 2019
Pretax (favorable) unfavorable development:
Specialty $ (11 ) $ (20 )
Commercial (4 ) (8 )
International —
14
Corporate & Other —
—
Total pretax (favorable) unfavorable development $ (15 ) $ (14 )

Table of Contents

Specialty

The following table presents further detail of the development recorded for the Specialty segment.


Three months ended March 31							Three months ended March 31
(In millions)	2020			2019			(In millions)	2021		2020
Pretax (favorable) unfavorable development:							Pretax (favorable) unfavorable development:
Medical Professional Liability	$	10		$	15		Medical Professional Liability	$	8	$	10
Other Professional Liability and Management Liability	3			(12		)	Other Professional Liability and Management Liability	0		3
Surety	(30		)	(25		)	Surety	(15)		(30)
Warranty	—			—			Warranty	(8)		0
Other	6			2			Other	0		6
Total pretax (favorable) unfavorable development	$	(11	)	$	(20	)	Total pretax (favorable) unfavorable development	$	(15)	$	(11)

2021

Favorable development in surety was primarily due to lower than expected frequency and lack of systemic activity in recent accident years.

2020

Unfavorable development in medical professional liability was primarily due to unfavorable outcomes on specific claims in accident years 2015 and 2016 in ~~our~~the Company's 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 severity in accident year 2013 in our allied healthcare 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. This was partially offset by unfavorable development in management liability in accident year 2014 due to large claim activity.

~~Favorable development in surety was due to lower than expected frequency for accident years 2016 and prior.~~

Commercial

The following table presents further detail of the development recorded for the Commercial segment.

Three months ended March 31
(In millions) 2020 2019
Pretax (favorable) unfavorable development:
Commercial Auto $ 9
$ (5 )
General Liability —
(20 )
Workers' Compensation (13 ) 2
Property and Other —
15
Total pretax (favorable) unfavorable development $ (4 ) $ (8 )


Three months ended March 31
(In millions)	2021		2020
Pretax (favorable) unfavorable development:
Commercial Auto	$	0	$	9
General Liability	0		0
Workers' Compensation	0		(13)
Property and Other	0		0
Total pretax (favorable) unfavorable development	$	0	$	(4)

2020

Favorable development in workers’ compensation was due to favorable medical trends driving lower than expected severity in accident years 2016 through 2018.

~~2019~~

~~Favorable development in general liability was primarily due to lower than expected frequency on latent construction defect claims in multiple accident years.~~

~~Unfavorable development in property and other was primarily due to higher than expected frequency and large loss activity in accident year 2018 in our marine business.~~

International

~~The following table presents further detail of the~~There was no development recorded in the International segment for the ~~International segment.~~three months ended March 31, 2021 and 2020.

Three months ended March 31
(In millions) 2020 2019
Pretax (favorable) unfavorable development:
Casualty $ —
$ —
Property, Energy and Marine⁽¹⁾
—
14
Specialty —
—
Total pretax (favorable) unfavorable development $ —
$ 14


~~(1)~~	~~Effective~~January 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. 0 24 Table of Contents

~~2019~~

~~Unfavorable development in property, energy and marine was driven by higher than expected claims in Hardy for 2018 accident year catastrophes.~~

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 inon the Condensed Consolidated Statements of Operations.

The impact of the LPT on the Condensed Consolidated Statements of Operations was the recognition of a retroactive reinsurance benefit of ~~$14~~$10 million and ~~$22~~$14 million for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the cumulative amounts ceded under the LPT were ~~$3.2~~$3.3 billion. The unrecognized deferred retroactive reinsurance benefit was ~~$378~~$388 million and ~~$392~~$398 million as of March 31, ~~2020~~2021 and December 31, ~~2019~~2020 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 ~~$2.7~~$4.6 billion and ~~$3.7~~$4.2 billion as of March 31, ~~2020~~2021 and December 31, 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.2020. 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.

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Excess Workers' Compensation LPT

On February 5, 2021, CCC completed a transaction with Cavello Bay Reinsurance Limited (Cavello), a subsidiary of Enstar Group Limited, under which certain legacy excess workers’ compensation (EWC) liabilities were ceded to Cavello. Under the terms of the transaction, based on reserves in place as of January 1, 2020, the Company ceded approximately $690 million of net EWC claim and allocated claim adjustment expense reserves to Cavello under an LPT with an aggregate limit of $1 billion. The Company paid Cavello a reinsurance premium of $697 million, less claims paid between January 1, 2020 and the closing date of the agreement of $64 million. After transaction costs, the Company recognized an after-tax loss of approximately $12 million in the Corporate & Other segment for the three months ended March 31, 2021 related to the EWC LPT.

Cavello established a collateral trust account as security for its obligations to the Company, which will be maintained at 105% of outstanding reserves. As of March 31, 2021, the remaining amount available under the $1 billion aggregate limit of the EWC LPT was $310 million on an incurred basis.

Credit Risk for Ceded Reserves

The majority of the Company’s outstanding voluntary reinsurance receivables are due from reinsurers with financial strength ratings of A- or higher. Receivables due from reinsurers with lower financial strength ratings are primarily due from captive reinsurers and are backed by collateral arrangements.

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Note F. Legal Proceedings, Contingencies and Guarantees

The Company is a party to various claims and 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 March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, the Company had recorded liabilities of approximately $5 million related to guarantee and indemnification agreements. Management does not believe that any future indemnity claims will be significantly greater than the amounts recorded.

The Company has provided guarantees, if the primary obligor fails to perform, to holders of structured settlement annuities issued by a previously owned subsidiary. As of March 31, ~~2020,~~2021, the potential amount of future payments the Company could be required to pay under these guarantees was approximately ~~$1.7~~$1.6 billion, which will be paid over the lifetime of the annuitants. The Company does not believe any payment is likely under these guarantees, as the Company is the beneficiary of a trust that must be maintained at a level that approximates the discounted reserves for these annuities.

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Note G. Benefit Plans

The components of net periodic pension cost (benefit) are presented in the following table.

Three months ended March 31
(In millions) 2020 2019
Net periodic pension cost (benefit)
Interest cost on projected benefit obligation $ 20
$ 25
Expected return on plan assets (39 ) (36 )
Amortization of net actuarial (gain) loss 11
10
Settlement loss 1
—
Total net periodic pension cost (benefit) $ (7 ) $ (1 )


Three months ended March 31
(In millions)	2021		2020
Net periodic pension cost (benefit)
Interest cost on projected benefit obligation	$	15	$	20
Expected return on plan assets	(38)		(39)
Amortization of net actuarial (gain) loss	12		11
Settlement loss	0		1
Total net periodic pension cost (benefit)	$	(11)	$	(7)

For the three months ended March 31, 2021, the Company recognized $3 million of non-service benefit in Insurance claims and policyholders' benefits and $8 million of non-service benefit in Other operating expenses related to net periodic pension benefit. For the three months ended 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~~expenses related to net periodic pension benefit.

Table of ~~non-service benefit in Insurance claims and policyholders' benefits and $1 million of non-service benefit in Other operating expenses.~~Contents

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 an allowance for credit losses		Net unrealized gains (losses) on other investments		Pension and postretirement benefits		Cumulative foreign currency translation adjustment		Total
Balance as of January 1, 2021	$	0	$	1,745	$	(848)	$	(94)	$	803
Other comprehensive income (loss) before reclassifications	(3)		(593)		0		2		(594)
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $1, $(8), $2, $0 and $(5)	(3)		34		(9)		0		22
Other comprehensive income (loss) net of tax (expense) benefit of $0, $162, $(2), $0 and $160	0		(627)		9		2		(616)
Balance as of March 31, 2021	$	0	$	1,118	$	(839)	$	(92)	$	187


(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			(In millions)	Net unrealized gains (losses) on investments with an allowance for credit losses		Net unrealized gains (losses) on other investments		Pension and postretirement benefits		Cumulative foreign currency translation adjustment		Total
Balance as of January 1, 2020	$	—		$	1,025		$	(833	)	$	(141	)	$	51		Balance as of January 1, 2020	$	0	$	1,025	$	(833)	$	(141)	$	51
Other comprehensive income (loss) before reclassifications	(48		)	(1,066		)	1			(77		)	(1,190		)	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		)
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $10, $6, $3, $0 and $19																Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $10, $6, $3, $0 and $19	(37)		(22)		(10)		0		(69)
Other comprehensive income (loss) net of tax (expense) benefit of $3, $281, $(3), $0 and $281																Other comprehensive income (loss) net of tax (expense) benefit of $3, $281, $(3), $0 and $281	(11)		(1,044)		11		(77)		(1,121)
Balance as of March 31, 2020	$	(11	)	$	(19	)	$	(822	)	$	(218	)	$	(1,070	)	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 January 1, 2019 $ 16
$ 61
$ (775 ) $ (180 ) $ (878 )
Other comprehensive income (loss) before reclassifications 4
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 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

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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 2two segments: Life & Group and Corporate & Other.

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

The accounting policies of the segments are the same as those described in Note A to the Consolidated Financial Statements within CNAF's Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. The Company manages most of its assets on a legal entity basis, while segment operations are generally conducted across legal entities. As such, only Insurance and Reinsurance receivables, Insurance reserves, Deferred acquisition costs, Goodwill and Deferred non-insurance warranty acquisition expense and revenue are readily identifiable for individual segments. Distinct investment portfolios are not maintained for every individual segment; accordingly, allocation of assets to each segment is not performed. Therefore, a significant portion of Net investment income and Net investment gains or losses are allocated primarily based on each segment's net carried insurance reserves, as adjusted. All significant intersegment income and expense have been eliminated. Income taxes have been allocated on the basis of the taxable income of the segments.

In the following tables, certain financial measures are presented to provide information used by management to monitor the Company's operating performance. Management utilizes these financial measures to monitor the Company's insurance operations and investment portfolio.

The performance of the Company's insurance operations is monitored by management through core income (loss), which is derived from certain income statement amounts. The Company's investment portfolio is monitored by management through analysis of various factors including unrealized gains and losses on securities, portfolio duration and exposure to market and credit risk.

Core income (loss) is calculated by excluding from net income (loss) the after-tax effects of net investment gains or losses and any cumulative effects of changes in accounting guidance. The calculation of core income (loss) excludes net investment gains or losses because net investment gains or losses are generally driven by economic factors that are not necessarily reflective of our primary operations.

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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
Three months ended March 31, 2021														Three months ended March 31, 2021				Specialty					Commercial						International				Life & Group			Corporate & Other
(In millions)	Specialty						Commercial							International							Life & Group						Corporate & Other				Eliminations			Total				(In millions)													Eliminations					Total
Operating revenues																		Operating revenues
Net earned premiums	$	685		$	818				$	239		$	127				$	—				$	—			$			1,869	Net earned premiums	$	735			$		855				$	252			$	120			$	0				$	0		$	1,962
Net investment income	56			47				15			208				3				—			329			Net investment income		117				148			14					219				6				0					504
Non-insurance warranty revenue	301			—				—			—				—				—			301			Non-insurance warranty revenue		338				0			0					0				0				0					338
Other revenues	1			7				—			—				2				(2		)	8			Other revenues		0				5			0					1				1				(2)					5
Total operating revenues	1,043			872				254			335				5				(2		)	2,507			Total operating revenues		1,190				1,008			266					340				7				(2)					2,809
Claims, benefits and expenses																									Claims, benefits and expenses
Net incurred claims and benefits	405			558				154			316				(14		)		—			1,419			Net incurred claims and benefits		427				639			155					281				(2)				0					1,500
Policyholders’ dividends	1			5				—			—				—				—			6			Policyholders’ dividends		1				5			0					0				0				0					6
Amortization of deferred acquisition costs	151			144				49			—				—				—			344			Amortization of deferred acquisition costs		154				153			52					0				0				0					359
Non-insurance warranty expense	281			—				—			—				—				—			281			Non-insurance warranty expense		311				0			0					0				0				0					311
Other insurance related expenses	69			127				36			26				—				—			258			Other insurance related expenses		70				115			35					25				10				0					255
Other expenses	13			6				13			3				39				(2		)	72			Other expenses		11				9			(5)					2				42				(2)					57
Total claims, benefits and expenses	920			840				252			345				25				(2		)	2,380			Total claims, benefits and expenses		974				921			237					308				50				(2)					2,488
Core income (loss) before income tax	123			32				2			(10		)		(20		)		—			127			Core income (loss) before income tax		216				87			29					32				(43)				0					321
Income tax (expense) benefit on core income (loss)	(27		)	(8		)		—			14				2				—			(19		)	Income tax (expense) benefit on core income (loss)		(46)				(18)			(5)					4				7				0					(58)
Core income (loss)	$	96		$	24			$	2		$	4			$	(18	)		$	—		108			Core income (loss)		$	170			$	69		$	24				$	36			$	(36)			$	0				263
Net investment gains (losses)																						(216		)	Net investment gains (losses)																											57
Income tax (expense) benefit on net investment gains (losses)																						47			Income tax (expense) benefit on net investment gains (losses)																											(8)
Net investment gains (losses), after tax																						(169		)	Net investment gains (losses), after tax																											49
Net income (loss)																						$	(61	)	Net income (loss)																											$	312


March 31, 2020
March 31, 2021																March 31, 2021
(In millions)																(In millions)
Reinsurance receivables	$	793	$	883	$	233	$	370	$	2,072	$	—		$	4,351	Reinsurance receivables	$	957	$	859	$	300	$	389	$	2,628	$	0	$	5,133
Insurance receivables	953		1,267		302		8		2		—			2,532		Insurance receivables	1,004		1,322		357		2		0		0		2,685
Deferred acquisition costs	316		277		90		—		—		—			683		Deferred acquisition costs	340		299		102		0		0		0		741
Goodwill	117		—		28		—		—		—			145		Goodwill	117		0		31		0		0		0		148
Deferred non-insurance warranty acquisition expense	2,905		—		—		—		—		—			2,905		Deferred non-insurance warranty acquisition expense	3,149		0		0		0		0		0		3,149
Insurance reserves																Insurance reserves
Claim and claim adjustment expenses	5,472		8,704		1,818		3,712		2,166		—			21,872		Claim and claim adjustment expenses	5,916		8,449		2,142		3,726		2,823		0		23,056
Unearned premiums	2,363		1,751		495		137		—		(1		)	4,745		Unearned premiums	2,666		1,930		588		135		0		0		5,319
Future policy benefits	—		—		—		11,734		—		—			11,734		Future policy benefits	0		0		0		12,772		0		0		12,772
Deferred non-insurance warranty revenue	3,848		—		—		—		—		—			3,848		Deferred non-insurance warranty revenue	4,119		0		0		0		0		0		4,119

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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	$	0	$	0	$	1,869
Net investment income	56		42		15		208		8		0		329
Non-insurance warranty revenue	301		0		0		0		0		0		301
Other revenues	1		8		0		0		1		(2)		8
Total operating revenues	1,043		868		254		335		9		(2)		2,507
Claims, benefits and expenses
Net incurred claims and benefits	405		555		154		316		(11)		0		1,419
Policyholders’ dividends	1		5		0		0		0		0		6
Amortization of deferred acquisition costs	151		144		49		0		0		0		344
Non-insurance warranty expense	281		0		0		0		0		0		281
Other insurance related expenses	69		127		36		26		0		0		258
Other expenses	13		6		13		3		39		(2)		72
Total claims, benefits and expenses	920		837		252		345		28		(2)		2,380
Core income (loss) before income tax	123		31		2		(10)		(19)		0		127
Income tax (expense) benefit on core income (loss)	(27)		(8)		0		14		2		0		(19)
Core income (loss)	$	96	$	23	$	2	$	4	$	(17)	$	0	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)


December 31, 2020
(In millions)
Reinsurance receivables	$	886	$	848	$	302	$	390	$	2,052	$	0	$	4,478
Insurance receivables	1,052		1,254		328		4		2		0		2,640
Deferred acquisition costs	330		281		97		0		0		0		708
Goodwill	117		0		31		0		0		0		148
Deferred non-insurance warranty acquisition expense	3,068		0		0		0		0		0		3,068
Insurance reserves
Claim and claim adjustment expenses	5,748		8,250		2,091		3,743		2,874		0		22,706
Unearned premiums	2,635		1,824		546		114		0		0		5,119
Future policy benefits	0		0		0		13,318		0		0		13,318
Deferred non-insurance warranty revenue	4,023		0		0		0		0		0		4,023

Three months ended March 31, 2019

Specialty

Commercial
International
Life &
Group

Corporate
& Other

(In millions) Eliminations Total
Operating revenues
Net earned premiums $ 661
$ 763
$ 250
$ 130
$ —
$ (1 ) $ 1,803
Net investment income 155
190
15
204
7
—
571
Non-insurance warranty revenue 281
—
—
—
—
—
281
Other revenues 1
7
—
1
2
(2 ) 9
Total operating revenues 1,098
960
265
335
9
(3 ) 2,664
Claims, benefits and expenses

Net incurred claims and benefits 392
510
162
308
(21 ) —
1,351
Policyholders’ dividends 1
5
—
—
—
—
6
Amortization of deferred acquisition costs 147
127
68
—
—
—
342
Non-insurance warranty expense 260
—
—
—
—
—
260
Other insurance related expenses 70
130
25
28
(1 ) (1 ) 251
Other expenses 12
11
4
2
39
(2 ) 66
Total claims, benefits and expenses 882
783
259
338
17
(3 ) 2,276
Core income (loss) before income tax 216
177
6
(3 ) (8 ) —
388
Income tax (expense) benefit on core income (loss) (47 ) (38 ) —
13
2
—
(70 )
Core income (loss) $ 169
$ 139
$ 6
$ 10
$ (6 ) $ —
318
Net investment gains (losses) 31
Income tax (expense) benefit on net investment gains (losses) (7 )
Net investment gains (losses), after tax 24
Net income (loss) $ 342

December 31, 2019
(In millions)
Reinsurance receivables $ 575
$ 855
$ 247
$ 385
$ 2,142
$ —
$ 4,204
Insurance receivables 971
1,210
284
16
—
—
2,481
Deferred acquisition costs 311
257
94
—
—
—
662
Goodwill 117
—
30
—
—
—
147
Deferred non-insurance warranty acquisition expense 2,840
—
—
—
—
—
2,840
Insurance reserves
Claim and claim adjustment expenses 5,238
8,656
1,876
3,716
2,234
—
21,720
Unearned premiums 2,337
1,626
495
125
—
—
4,583
Future policy benefits —
—
—
12,311
—
—
12,311
Deferred non-insurance warranty revenue 3,779
—
—
—
—
—
3,779

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


Three months ended March 31
(In millions)	2021		2020
Specialty
Management & Professional Liability	$	667	$	568
Surety	142		138
Warranty & Alternative Risks	381		337
Specialty revenues	1,190		1,043
Commercial
Middle Market	375		335
Construction	309		250
Small Business	126		112
Other Commercial	198		171
Commercial revenues	1,008		868
International
Canada	79		73
Europe	111		92
Hardy	76		89
International revenues	266		254
Life & Group revenues	340		335
Corporate & Other revenues	7		9
Eliminations	(2)		(2)
Total operating revenues	2,809		2,507
Net investment gains (losses)	57		(216)
Total revenues	$	2,866	$	2,291

Three months ended March 31
(In millions) 2020 2019
Specialty
Management & Professional Liability $ 568
$ 636
Surety 138
139
Warranty & Alternative Risks 337
323
Specialty revenues 1,043
1,098
Commercial

Middle Market 335
357
Construction ⁽¹⁾
250
248
Small Business 112
131
Other Commercial 175
224
Commercial revenues 872
960
International

Canada 73
66
Europe 92
91
Hardy 89
108
International revenues 254
265
Life & Group revenues 335
335
Corporate & Other revenues 5
9
Eliminations (2 ) (3 )
Total operating revenues 2,507
2,664
Net investment gains (losses) (216 ) 31
Total revenues $ 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.

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Note J. Non-Insurance Revenues from Contracts with Customers

The Company had ~~$3.8~~deferred non-insurance warranty revenue balances of $4.1 billion and $4.0 billion reported in Deferred non-insurance warranty revenue as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020. For the three months ended March 31, 2021 and 2020, the Company recognized ~~$286 million~~$0.3 billion of revenues that were included in the deferred revenue balance as of January 1, 2021 and 2020. For the three months ended March 31, ~~2019, the Company recognized $265 million of revenues that were included in the deferred revenue balance as of January 1, 2019. For the three months ended March 31,~~2021 and 2020, ~~and 2019,~~ 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 ~~$831 million~~$0.9 billion of the deferred revenue in the remainder of ~~2020, $951 million~~2021, $1.0 billion in ~~2021, $735 million~~2022, $0.8 billion in ~~2022~~2023 and $1.3 billion thereafter.

~~Note K. Expected Credit Losses - Uncollectible Reinsurance and Insurance Receivables~~

The Company has established an allowance 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 no perceived credit risk. The principal credit quality indicator used in the valuation 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 Company’s historical loss experience and the Company’s assessment of reinsurance counterparty risk profile, which generally corresponds with a B rating. Changes in the allowance are presented as a component of Insurance claims and policyholders' benefits on the Condensed Consolidated Statements of Operations.

~~The following table summarizes the outstanding amount of voluntary reinsurance receivables, gross of any collateral arrangements, by financial strength rating as of March 31, 2020:~~

(In millions) March 31, 2020
A- to A++ $ 2,662
B- to B++ 859
Insolvent 4
Total voluntary reinsurance outstanding balance⁽¹⁾
$ 3,525


~~(1)~~	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 Company 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 rangeTable of credit loss rates for each dollar of gross written premium underwritten. The expected credit 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 expenses on the Condensed Consolidated Statements of Operations.Contents

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, as well as the ~~supplemental risk factor regarding the COVID-19 pandemic~~updates and additions to our Risk Factors 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, ~~2019.~~2020.

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 net investment gains or losses and any cumulative effects of changes in accounting guidance. The calculation of core income (loss) excludes net investment gains or losses because net investment gains or losses are generally driven by economic factors that are not necessarily reflective of our primary operations. 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 loss ratio excluding catastrophes and development, the expense ratio, the dividend ratio, the combined ratio and the combined ~~ratio.~~ratio excluding catastrophes and development. 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 loss ratio excluding catastrophes and development excludes net catastrophes losses and changes in estimates of claim and claim adjustment expense reserves, net of reinsurance, for prior years from the loss ratio. 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. The combined ratio excluding catastrophes and development is the sum of the loss ratio excluding catastrophes and development, the expense ratio and the dividend ratio. 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.

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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

•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, financial condition, 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, ~~2019~~2020 for further information.

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CONSOLIDATED OPERATIONS

Results of Operations

The ~~COVID-19 pandemic and global, national, regional and local efforts to mitigate~~following table includes the spread 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 underwritingconsolidated 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~~operations including our operations is likely to be reflected in continued volatility in our investment portfolio, and adverse effects on our underwriting results including 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.financial measure, core income (loss). 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~~Segment Results section within this MD&A. For further discussion of Net investment income and Net investment 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).~~


Three months ended March 31							Three months ended March 31
(In millions)	2020			2019			(In millions)	2021		2020
Operating Revenues							Operating Revenues
Net earned premiums	$	1,869		$	1,803		Net earned premiums	$	1,962	$	1,869
Net investment income	329			571			Net investment income	504		329
Non-insurance warranty revenue	301			281			Non-insurance warranty revenue	338		301
Other revenues	8			9			Other revenues	5		8
Total operating revenues	2,507			2,664			Total operating revenues	2,809		2,507
Claims, Benefits and Expenses							Claims, Benefits and Expenses
Net incurred claims and benefits	1,419			1,351			Net incurred claims and benefits	1,500		1,419
Policyholders' dividends	6			6			Policyholders' dividends	6		6
Amortization of deferred acquisition costs	344			342			Amortization of deferred acquisition costs	359		344
Non-insurance warranty expense	281			260			Non-insurance warranty expense	311		281
Other insurance related expenses	258			251			Other insurance related expenses	255		258
Other expenses	72			66			Other expenses	57		72
Total claims, benefits and expenses	2,380			2,276			Total claims, benefits and expenses	2,488		2,380
Core income before income tax	127			388			Core income before income tax	321		127
Income tax expense on core income	(19		)	(70		)	Income tax expense on core income	(58)		(19)
Core income	108			318			Core income	263		108
Net investment (losses) gains	(216		)	31
Income tax benefit (expense) on net investment (losses) gains	47			(7		)
Net investment (losses) gains, after tax	(169		)	24
Net (loss) income	$	(61	)	$	342
Net investment gains (losses)							Net investment gains (losses)	57		(216)
Income tax (expense) benefit on net investment gains (losses)							Income tax (expense) benefit on net investment gains (losses)	(8)		47
Net investment gains (losses), after tax							Net investment gains (losses), after tax	49		(169)
Net income (loss)							Net income (loss)	$	312	$	(61)

Core income ~~decreased $210~~increased $155 million for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019.~~2020. Core income for our Property & Casualty Operations ~~decreased $192~~increased $142 million primarily due to ~~lower~~higher net investment income driven by limited partnership and common stock ~~returns. Our~~returns and improved non-catastrophe current accident year underwriting results. These 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~~were partially offset by higher net catastrophe ~~losses and an increase in our allowance for uncollectible insurance receivables.~~losses. Core income for our Life & Group segment ~~decreased $6~~increased $32 million while ~~the~~ core loss for our Corporate & Other segment increased ~~$12~~$19 million.

Net catastrophe losses were ~~$75~~$125 million and ~~$58~~$75 million for the three months ended March 31, ~~2020~~2021 and ~~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.~~2020. Favorable net prior year loss reserve development of $15 million ~~and $14 million~~ was recorded in the three months ended March 31, ~~2020~~2021 and ~~2019~~2020 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.

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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 during the first quarter of 2020.~~segments. 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.

Effective January 1, 2021, we changed the segment presentation of a legacy portfolio of excess workers’ compensation policies and certain legacy mass tort reserves. These businesses were previously reported in the Commercial business segment and are now reported as part of the Corporate & Other business segment. Prior period information has been conformed to the new segment presentation. See Note I to the Condensed Consolidated Financial Statements included under Part I, Item 1 for more information on the changes to our business segments.

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Specialty

The following table details the results of operations for Specialty.


Three months ended March 31							Three months ended March 31
(In millions, except ratios, rate, renewal premium change and retention)	2020			2019			(In millions, except ratios, rate, renewal premium change and retention)	2021			2020
Gross written premiums	$	1,714		$	1,701		Gross written premiums	$	1,794		$	1,714
Gross written premiums excluding third party captives	741			730			Gross written premiums excluding third party captives	816			741
Net written premiums	694			698			Net written premiums	742			694
Net earned premiums	685			661			Net earned premiums	735			685
Net investment income	56			155			Net investment income	117			56
Core income	96			169			Core income	170			96

Other performance metrics:							Other performance metrics:
Loss and loss adjustment expense ratio	59.1		%	59.3		%
Loss ratio excluding catastrophes and development							Loss ratio excluding catastrophes and development	59.4		%	59.5		%
Effect of catastrophe impacts							Effect of catastrophe impacts	0.7			1.1
Effect of development-related items							Effect of development-related items	(2.1)			(1.5)
Loss ratio							Loss ratio	58.0			59.1
Expense ratio	32.0			32.8			Expense ratio	30.6			32.0
Dividend ratio	0.2			0.2			Dividend ratio	0.2			0.2
Combined ratio	91.3		%	92.3		%	Combined ratio	88.8		%	91.3		%
Combined ratio excluding catastrophes and development							Combined ratio excluding catastrophes and development	90.2		%	91.7		%

Rate	9		%	3		%	Rate	10		%	10		%
Renewal premium change	9			6			Renewal premium change	9			11
Retention	84			89			Retention	86			83
New business	$	74		$	86		New business	$	103		$	74

Gross written premiums, excluding third party captives, for Specialty increased ~~$11~~$75 million for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019~~2020 driven by higher new business and strong rate. Net written premiums for Specialty ~~decreased $4~~increased $48 million for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019 driven by a higher level of ceded reinsurance.~~2020. The increase in net earned premiums was consistent with the trend in net written ~~premiums in recent quarters.~~premiums.

Core income ~~decreased $73~~increased $74 million for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019~~2020 primarily due to ~~lower~~higher net investment income driven by limited partnership and common stock returns ~~partially offset by~~and improved ~~current accident year~~ underwriting results.

The combined ratio of ~~91.3%~~88.8% improved ~~1.0 point~~2.5 points for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019.~~2020 due to a 1.4 point improvement in the expense ratio and a 1.1 point improvement in the loss ratio. The improvement in the loss ratio ~~improved 0.2 points driven by improved current accident year underwriting results largely offset by lower~~was primarily due to higher favorable net prior year loss reserve development ~~in the current period.~~and lower net catastrophe losses. Net catastrophe losses were $5 million, or 0.7 points of the loss ratio, for the three months ended March 31, 2021, as compared with $8 million, or 1.1 points of the loss ratio, for the three months ended March 31, ~~2020, as compared with $12 million, or 1.8 points of~~2020. The improvement in the ~~loss ratio, for the three months ended 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 0.8 points for the three months ended March 31, 2020 as compared with the same period in 2019~~was driven by higher net earned premiums.

Favorable net prior year loss reserve development of ~~$11~~$15 million and ~~$20~~$11 million was recorded for the three months ended March 31, ~~2020~~2021 and ~~2019.~~2020. 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.

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The following table summarizes the gross and net carried reserves for Specialty.


(In millions)	March 31, 2021		December 31, 2020
Gross case reserves	$	1,575	$	1,567
Gross IBNR reserves	4,341		4,181
Total gross carried claim and claim adjustment expense reserves	$	5,916	$	5,748
Net case reserves	$	1,418	$	1,410
Net IBNR reserves	3,577		3,488
Total net carried claim and claim adjustment expense reserves	$	4,995	$	4,898

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

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Commercial

The following table details the results of operations for Commercial.


Three months ended March 31							Three months ended March 31
(In millions, except ratios, rate, renewal premium change and retention)	2020			2019			(In millions, except ratios, rate, renewal premium change and retention)	2021			2020
Gross written premiums	$	1,062		$	941		Gross written premiums	$	1,113		$	1,062
Gross written premiums excluding third party captives	1,059			932			Gross written premiums excluding third party captives	1,111			1,059
Net written premiums	950			849			Net written premiums	960			950
Net earned premiums	818			763			Net earned premiums	855			818
Net investment income	47			190			Net investment income	148			42
Core income	24			139			Core income	69			23

Other performance metrics:							Other performance metrics:
Loss and loss adjustment expense ratio	68.1		%	66.9		%
Loss ratio excluding catastrophes and development							Loss ratio excluding catastrophes and development	60.8		%	60.8		%
Effect of catastrophe impacts							Effect of catastrophe impacts	13.4			7.0
Effect of development-related items							Effect of development-related items	0.5			—
Loss ratio							Loss ratio	74.7			67.8
Expense ratio	33.2			33.8			Expense ratio	31.4			33.2
Dividend ratio	0.6			0.6			Dividend ratio	0.6			0.6
Combined ratio	101.9		%	101.3		%	Combined ratio	106.7		%	101.6		%
Combined ratio excluding catastrophes and development							Combined ratio excluding catastrophes and development	92.8		%	94.6		%

Rate	8		%	2		%	Rate	10		%	8		%
Renewal premium change	9			4			Renewal premium change	8			9
Retention	85			85			Retention	84			86
New business	$	198		$	163		New business	$	211		$	198

Gross written premiums for Commercial increased ~~$121~~$51 million for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019~~2020 driven by higher new business and strong rate. Net written premiums for Commercial increased ~~$101~~$10 million for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019.~~2020. The increase in net earned ~~premium~~premiums was consistent with the trend in net written ~~premiums.~~premiums in recent quarters.

Core income ~~decreased $115~~increased $46 million for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019,~~2020 primarily due to ~~lower~~higher net investment income driven by limited partnership and common stock ~~returns.~~returns partially offset by higher net catastrophe losses.

The combined ratio of ~~101.9%~~106.7% increased ~~0.6~~5.1 points for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019. The~~2020 due to a 6.9 point increase in the loss ratio ~~increased 1.2 points driven~~partially offset by a 1.8 point improvement in the expense ratio. The increase in the loss ratio was primarily due to higher net catastrophe ~~losses partially offset by lower claim handling expenses.~~losses. Net catastrophe losses were $115 million, or 13.4 points of the loss ratio, for the three months ended March 31, 2021, as compared with $57 million, or 7.0 points of the loss ratio, for the three months ended March 31, ~~2020, as compared with $40 million, or 5.2 points of~~2020. The improvement in the expense ratio was driven by favorable acquisition expenses and higher net earned premiums.

There was no net prior year loss ~~ratio,~~reserve development recorded for the three months ended 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 point~~2021 as compared with ~~the same period in 2019 driven by higher net earned premiums.~~

~~Favorable~~favorable net prior year loss reserve development of $4 million ~~and $8 million was recorded~~ for the three months ended March 31, ~~2020 and 2019.~~2020. 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.

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The following table summarizes the gross and net carried reserves for Commercial.


(In millions)	March 31, 2021		December 31, 2020
Gross case reserves	$	3,238	$	3,215
Gross IBNR reserves	5,211		5,035
Total gross carried claim and claim adjustment expense reserves	$	8,449	$	8,250
Net case reserves	$	2,925	$	2,885
Net IBNR reserves	4,732		4,590
Total net carried claim and claim adjustment expense reserves	$	7,657	$	7,475

(In millions) March 31, 2020 December 31, 2019
Gross case reserves $ 3,914
$ 3,937
Gross IBNR reserves 4,790
4,719
Total gross carried claim and claim adjustment expense reserves $ 8,704
$ 8,656
Net case reserves $ 3,477
$ 3,543
Net IBNR reserves 4,414
4,306
Total net carried claim and claim adjustment expense reserves $ 7,891
$ 7,849

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International

The following table details the results of operations for International.


Three months ended March 31							Three months ended March 31
(In millions, except ratios, rate, renewal premium change and retention)	2020			2019			(In millions, except ratios, rate, renewal premium change and retention)	2021			2020
Gross written premiums	$	307		$	324		Gross written premiums	$	343		$	307
Net written premiums	219			259			Net written premiums	235			219
Net earned premiums	239			250			Net earned premiums	252			239
Net investment income	15			15			Net investment income	14			15
Core income	2			6			Core income	24			2

Other performance metrics:							Other performance metrics:
Loss and loss adjustment expense ratio	64.5		%	64.8		%
Loss ratio excluding catastrophes and development							Loss ratio excluding catastrophes and development	59.6		%	60.3		%
Effect of catastrophe impacts							Effect of catastrophe impacts	2.0			4.3
Effect of development-related items							Effect of development-related items	(0.1)			(0.1)
Loss ratio							Loss ratio	61.5			64.5
Expense ratio	35.4			37.1			Expense ratio	34.4			35.4
Combined ratio	99.9		%	101.9		%	Combined ratio	95.9		%	99.9		%
Combined ratio excluding catastrophes and development							Combined ratio excluding catastrophes and development	94.0		%	95.7		%

Rate	8		%	5		%	Rate	14		%	9		%
Renewal premium change	8			2			Renewal premium change	11			9
Retention	72			69			Retention	74			70
New business	$	68		$	80		New business	$	80		$	68

Gross written premiums for International ~~decreased $17~~increased $36 million for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019~~2020. Excluding the effect of foreign currency exchange rates, gross written premiums increased $19 million driven by ~~the continued impact of the strategic exit from certain Lloyd’s business classes, offset by~~ growth in Europe and Canada. Net written premiums ~~decreased $40~~for International increased $16 million for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019.~~2020. Excluding the effects of foreign currency exchange rates, net written premiums increased $3 million for the three months ended March 31, 2021 as compared with the same period in 2020. The ~~decrease~~increase in net earned premiums was consistent with the trend in net written premiums.

Core income ~~decreased $4~~increased $22 million for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019~~2020 driven by improved current accident year underwriting results.

The combined ratio of ~~99.9%~~95.9% improved ~~2.0~~4.0 points for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019. The~~2020 due to a 3.0 point improvement in the loss ratio ~~improved 0.3 points~~and a 1.0 point improvement in the expense ratio. The improvement in the loss ratio was driven by ~~the absence of unfavorable net prior year loss reserve development in the current period partially offset by lower~~improved current accident year underwriting results. Net catastrophe losses were $5 million, or 2.0 points of the loss ratio, for the three months ended March 31, 2021, as compared with $10 million, or 4.3 points of the loss ratio, for the three months ended March 31, ~~2020, as compared with $6 million, or 2.3 points of~~2020. The improvement in the ~~loss ratio, for the three months ended 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 ~~improved 1.7 points for the three months ended March 31, 2020 as compared with the same period in 2019~~was driven by ~~lower acquisition expenses~~favorable commission rates and ~~employee costs.~~higher net earned premiums.

There was no net prior year loss reserve development recorded for the three months ended March 31, ~~2020 as compared with unfavorable development of $14 million for the three months ended March 31, 2019.~~2021 and 2020. 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.

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The following table summarizes the gross and net carried reserves for International.


(In millions)	March 31, 2021		December 31, 2020
Gross case reserves	$	861	$	892
Gross IBNR reserves	1,281		1,199
Total gross carried claim and claim adjustment expense reserves	$	2,142	$	2,091
Net case reserves	$	740	$	777
Net IBNR reserves	1,112		1,045
Total net carried claim and claim adjustment expense reserves	$	1,852	$	1,822

(In millions) March 31, 2020 December 31, 2019
Gross case reserves $ 807
$ 858
Gross IBNR reserves 1,011
1,018
Total gross carried claim and claim adjustment expense reserves $ 1,818
$ 1,876
Net case reserves $ 719
$ 759
Net IBNR reserves 864
869
Total net carried claim and claim adjustment expense reserves $ 1,583
$ 1,628

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Life & Group

The following table summarizes the results of operations for Life & Group.


Three months ended March 31
(In millions)	2021		2020
Net earned premiums	$	120	$	127
Net investment income	219		208
Core income (loss) before income tax	32		(10)
Income tax benefit on core loss	4		14
Core income	36		4

Three months ended March 31
(In millions) 2020 2019
Net earned premiums $ 127
$ 130
Net investment income 208
204
Core loss before income tax (10 ) (3 )
Income tax benefit on core loss 14
13
Core income 4
10

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 income ~~of $4~~improved $32 million for the three months ended March 31, 2021 as compared with the same period in 2020 isdriven by better than expected morbidity in ~~line with expectations.~~the long term care business and higher net investment income. The increase in net investment income was driven by returns in the limited partnership portfolio. Further, during the first quarter of 2021, relative to expectations, we experienced lower new claim frequency, higher claim terminations and more favorable claim severity in the long term care business amid the effects of COVID-19. Given the uncertainty of these trends, we increased our IBNR reserves in anticipation of increased claim activity as the COVID-19 pandemic abates.

Corporate & Other

The following table summarizes the results of operations for the Corporate & Other segment, including intersegment eliminations.


Three months ended March 31							Three months ended March 31
(In millions)	2020			2019			(In millions)	2021		2020
Net investment income	$	3		$	7		Net investment income	$	6	$	8
Interest expense	31			34			Interest expense	28		31
Core loss	(18		)	(6		)	Core loss	(36)		(17)

Core loss increased ~~$12~~$19 million for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019~~2020 driven by ~~lower amortization~~the recognition of a $12 million after-tax loss resulting from the ~~deferred gain related to the A&EP~~legacy excess workers' compensation (EWC) Loss Portfolio Transfer (LPT). The ~~A&EP~~EWC 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)	March 31, 2021		December 31, 2020
Gross case reserves	$	1,626	$	1,614
Gross IBNR reserves	1,197		1,260
Total gross carried claim and claim adjustment expense reserves	$	2,823	$	2,874
Net case reserves	$	123	$	560
Net IBNR reserves	130		331
Total net carried claim and claim adjustment expense reserves	$	253	$	891

(In millions) March 31, 2020 December 31, 2019
Gross case reserves $ 1,185
$ 1,137
Gross IBNR reserves 981
1,097
Total gross carried claim and claim adjustment expense reserves $ 2,166
$ 2,234
Net case reserves $ 92
$ 92
Net IBNR reserves 78
83
Total net carried claim and claim adjustment expense reserves $ 170
$ 175

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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.


Three months ended March 31							Three months ended March 31
(In millions)	2020			2019			(In millions)	2021			2020
Fixed income securities:							Fixed income securities:
Taxable fixed income securities	$	371		$	383		Taxable fixed income securities	$	359		$	371
Tax-exempt fixed income securities	78			82			Tax-exempt fixed income securities	80			78
Total fixed income securities	449			465			Total fixed income securities	439			449
Limited partnership investments	(70		)	76			Limited partnership investments	43			(70)
Common stock	(55		)	20			Common stock	18			(55)
Other, net of investment expense	5			10			Other, net of investment expense	4			5
Pretax net investment income	$	329		$	571
Fixed income securities, after tax	$	367		$	380
Net investment income, after tax	279			465
Net investment income							Net investment income	$	504		$	329

Effective income yield for the fixed income securities portfolio, pretax	4.6		%	4.8		%
Effective income yield for the fixed income securities portfolio, after tax	3.8		%	3.9		%
Effective income yield for the fixed income securities portfolio							Effective income yield for the fixed income securities portfolio	4.4		%	4.6		%
Limited partnership and common stock return	(7.0		)%	4.5		%	Limited partnership and common stock return	3.4		%	(7.0)		%

Net investment income ~~after tax, decreased $186~~increased $175 million for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019~~2020 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.


Three months ended March 31							Three months ended March 31
(In millions)	2020			2019			(In millions)	2021		2020
Fixed maturity securities:							Fixed maturity securities:
Corporate and other bonds	$	(79	)	$	—		Corporate and other bonds	$	36	$	(79)
States, municipalities and political subdivisions	—			8			States, municipalities and political subdivisions	(1)		—
Asset-backed	4			(14		)	Asset-backed	3		4
Total fixed maturity securities	(75		)	(6		)	Total fixed maturity securities	38		(75)
Non-redeemable preferred stock	(133		)	42			Non-redeemable preferred stock	2		(133)
Short term and other	5			(5		)	Short term and other	17		5
Mortgage loans	(13		)	—			Mortgage loans	—		(13)
Net investment (losses) gains	(216		)	31
Income tax benefit (expense) on net investment (losses) gains	47			(7		)
Net investment (losses) gains, after tax	$	(169	)	$	24
Net investment gains (losses)							Net investment gains (losses)	57		(216)
Income tax (expense) benefit on net investment gains (losses)							Income tax (expense) benefit on net investment gains (losses)	(8)		47
Net investment gains (losses), after tax							Net investment gains (losses), after tax	$	49	$	(169)

Net investment ~~results, after tax, decreased $193~~gains (losses) increased $273 million for the three months ended March 31, ~~2020~~2021 as compared with the same period in ~~2019. The decrease was~~2020 driven by the ~~unfavorable~~favorable relative change in fair value of non-redeemable preferred stock and ~~higher~~lower 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.~~losses.

Further information on ~~our~~our investment gains and losses is set forth in Note C to the Condensed Consolidated Financial Statements included under Part 1, Item 1.

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Portfolio Quality

The following table presents the estimated fair value and net unrealized gains (losses) of our fixed maturity securities by rating distribution.


	March 31, 2020					December 31, 2019					March 31, 2021				December 31, 2020
(In millions)	Estimated Fair Value		Net Unrealized Gains (Losses)			Estimated Fair Value		Net Unrealized Gains (Losses)		(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	U.S. Government, Government agencies and Government-sponsored enterprises	$	3,149	$	36	$	3,672	$	117
AAA	3,529		381			3,254		349		AAA	3,589		385		3,627		454
AA	6,328		747			6,663		801		AA	7,221		802		7,159		1,012
A	8,751		819			9,062		1,051		A	9,380		1,057		9,543		1,390
BBB	15,284		255			16,839		1,684		BBB	17,692		1,920		18,007		2,596
Non-investment grade	2,133		(287		)	2,253		101		Non-investment grade	2,548		131		2,623		149
Total	$	40,098	$	2,113		$	42,207	$	4,081	Total	$	43,579	$	4,331	$	44,631	$	5,718

As of March 31, ~~2020~~2021 and December 31, ~~2019,~~2020, 1% of our fixed maturity portfolio was rated internally. AAA rated securities included $1.9 billion and ~~$1.5~~$1.8 billion of ~~pre-funded~~pre-refunded municipal bonds as of March 31, ~~2020~~2021 and December 31, ~~2019.~~2020.

The following table presents available-for-sale fixed maturity securities in a gross unrealized loss position by ratings distribution.


	March 31, 2021
(In millions)	Estimated Fair Value		Gross Unrealized Losses
U.S. Government, Government agencies and Government-sponsored enterprises	$	1,631	$	47
AAA	202		9
AA	896		29
A	1,096		33
BBB	1,372		47
Non-investment grade	364		17
Total	$	5,561	$	182

March 31, 2020
(In millions) Estimated Fair Value Gross Unrealized Losses
U.S. Government, Government agencies and Government-sponsored enterprises $ 6
$ —
AAA 196
4
AA 481
25
A 1,762
117
BBB 6,102
652
Non-investment grade 1,606
319
Total $ 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, 2021
(In millions)	Estimated Fair Value		Gross Unrealized Losses
Due in one year or less	$	135	$	5
Due after one year through five years	672		21
Due after five years through ten years	3,090		82
Due after ten years	1,664		74
Total	$	5,561	$	182

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 years 2,780
199
Due after five years through ten years 5,418
632
Due after ten years 1,634
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.~~

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March 31, 2020 Cost 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
Communications 1,429
193
27
—
1,595
Consumer, cyclical - Other 605
16
56
—
565
Consumer, non-cyclical - Other 1,641
195
27
—
1,809
Energy - Oil & Gas 1,170
40
191
37
982
Energy - Other 23
7
—
—
30
Energy - Pipelines 1,056
43
112
11
976
Entertainment 177
—
23
—
154
Financial - Other 5,748
308
89
—
5,967
Financial - Real Estate/REITS 1,455
30
45
—
1,440
Industrial 1,481
135
55
—
1,561
Retail 527
67
18
—
576
Technology 853
38
30
1
860
Transportation 331
35
5
—
361
Travel & Related 490
26
37
—
479
Utilities 1,580
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.


	March 31, 2020			December 31, 2019				March 31, 2021			December 31, 2020
(In millions)	Estimated Fair Value		Effective Duration (In years)	Estimated Fair Value		Effective Duration (In years)	(In millions)	Estimated Fair Value		Effective Duration (In years)	Estimated Fair Value		Effective Duration (In years)
Investments supporting Life & Group	$	17,201	8.7	$	18,015	8.9	Investments supporting Life & Group	$	17,952	9.1	$	18,518	9.2
Other investments	24,237		4.1	26,813		4.1	Other investments	27,666		4.9	28,839		4.5
Total	$	41,438	6.0	$	44,828	6.0	Total	$	45,618	6.5	$	47,357	6.3

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, ~~2019.~~2020.

Short Term Investments

The carrying value of the components of the Short term investments are presented in the following table.


(In millions)	March 31, 2021		December 31, 2020
Short term investments:
U.S. Treasury securities	$	1,109	$	1,702
Other	225		205
Total short term investments	$	1,334	$	1,907

(In millions) March 31, 2020 December 31, 2019
Short term investments:
Commercial paper $ 326
$ 1,181
U.S. Treasury securities 103
364
Other 167
316
Total short term investments $ 596
$ 1,861

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

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Our primary operating cash flow sources are premiums and investment ~~income from our insurance subsidiaries.~~income. 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 three months ended March 31, ~~2020,~~2021, net cash provided by operating activities was ~~$212~~$82 million as compared with ~~$287~~$212 million for the same period in ~~2019.~~2020. The decrease in cash provided by operating activities was driven by ~~higher~~the payment of the EWC LPT premium partially offset by lower net claim payments and ~~a lower level of distributions from limited partnerships partially offset by~~ an increase in premiums collected. The EWC LPT is further discussed in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

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, equipment and other assets not generally held for resale.

Net cash provided by investing activities was ~~$1,087~~$408 million for the three months ended March 31, ~~2020,~~2021, as compared with ~~$289~~$1,087 million for the same period in ~~2019. The~~2020. Net cash ~~flow from~~used or provided by investing activities is ~~affected~~primarily driven by ~~various~~cash available from operations and other 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.~~activities.

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 three months ended March 31, ~~2020,~~2021, net cash used by financing activities was ~~$675~~$321 million as compared with ~~$665~~$675 million for the same period ~~2019.~~in 2020. In the first quarter of 2021, we paid dividends of $310 million and repurchased 66,000 shares of common stock at an aggregate cost of $3 million. In the first quarter of 2020, we paid dividends of $649 million and repurchased 435,376 shares of our common stock at an aggregate cost of $18 million. ~~In the first quarter of 2019, we paid dividends of $643 million and repurchased 317,508 shares of our common stock at an aggregate cost of $14 million.~~

Common Stock Dividends

A quarterly cash dividend of ~~$0.37~~$0.38 per share and a special cash dividend of ~~$2.00~~$0.75 per share ofon our common stock were declared and paid in the first quarter of ~~2020.~~2021. On ~~May 1, 2020,~~April 30, 2021, our Board of Directors declared a quarterly cash dividend of ~~$0.37~~$0.38 per share, payable June ~~4, 2020~~3, 2021 to stockholders of record on May ~~18, 2020.~~17, 2021. 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.

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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).

Dividends from ~~CCC~~Continental Casualty Company (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 March 31, ~~2020,~~2021, CCC was in a positive earned surplus position. The maximum allowable dividend CCC could pay during 2020 that would not be subject to the Department's prior approval is $1,078 million, less dividends paid during the preceding twelve months measured at that point in time. CCC paid dividends of ~~$125~~$330 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, 2019~~ and $670 million during the three months ended March 31, 2021 and 2020. ~~As of March 31, 2020, CCC is able to pay approximately $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 on file with the Securities and Exchange Commission under which we may publicly issue debt, equity or hybrid securities from time to time.

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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,1, 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 (note that 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;~~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; 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:~~following as well as those risks contained in the Risk Factors section of our 2020 Annual Report on Form 10-K and this report:

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~~2020 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~~enterprise; 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~~operations and ~~resulting in significant losses in our investment portfolio,~~may lead to 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

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•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 and Legal Factors

•regulatory and legal initiatives and compliance with governmental regulations and other legal requirements, including with respect to cyber security protocols (which may be enhanced following completion of work relating to the sophisticated cyber incident sustained by the Company in March 2021 as discussed in Risk Factors, Part II, Item 1A of this report), 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.~~standards; and

•regulatory and legal implications relating to the sophisticated cyber incident sustained by the Company in March 2021 that may arise.

Impact of Natural and Man-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, wildfires, 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;

•the occurrence of 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.” While the withdrawal of the U.K. from the E.U. was official as of January 31, 2020, until the transition period ends, there remains a lack of specificity and detail regarding the long term relationship between the two sides and how businesses operating in both jurisdictions may be affected. In any event, effective January 1, 2019, our E.U. business is no longer handled out of our U.K.-domiciled subsidiary, but through our European subsidiary in Luxembourg, which was established specifically to address the departure of the U.K. from the E.U. and 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.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes in our market risk components for the three months ended March 31, ~~2020.~~2021. 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, ~~2019~~2020 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 March 31, ~~2020,~~2021, 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 March 31, ~~2020.~~2021.

There has been no change in the Company’s internal control over financial reporting (as defined in Rules ~~13a-15(f)~~13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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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,~~2020, 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.

Any significant interruption in the operation of our business functions, facilities and systems or our vendors' facilities and systems could result in a materially adverse effect on our operations.

Our business is highly dependent upon our ability to perform, in an efficient and uninterrupted manner, through our employees or vendor relationships, necessary business functions, such as internet support and 24-hour call centers, processing new and renewal business and processing and paying claims and other obligations.

Our or our vendors' facilities and systems could become unavailable, inoperable, or otherwise impaired from a variety of causes, including natural events, such as hurricanes, tornadoes, windstorms, earthquakes, severe winter weather and fires, or other events, such as explosions, terrorist attacks, computer security breaches or cyber attacks, riots, hazardous material releases, medical epidemics or pandemics, utility outages, interruptions of our data processing and storage systems or the systems of third-party vendors, or unavailability of communications facilities. An interruption of our system availability occurred in March 2021 as a result of a cybersecurity attack sustained by the Company. Please refer to following risk factor for further information regarding this incident. Likewise, we could experience a significant failure, interruption or corruption of one or more of our or our vendors’ information technology, telecommunications, or other systems for various reasons, including significant failures or interruptions that might occur as existing systems are replaced or upgraded. The ~~COVID-19 pandemic~~shut-down or unavailability of one or more of our or our vendors' systems or facilities for these and ~~mitigating actions have resulted~~other reasons could significantly impair our ability to perform critical business functions on a timely basis.

In addition, because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such service exceeds capacity or a third-party system fails or experiences an interruption. If sustained or repeated, such events could result in ~~significant~~a deterioration of our ability to write and process new and renewal business, provide customer service, pay claims in a timely manner, or perform other necessary business functions, including the ability to issue financial statements in a timely manner.

The foregoing risks could also expose us to monetary and reputational damages. Potential exposures resulting from the March 2021 cybersecurity attack, described in the following risk ~~across~~factor, as well as any future incidents may include substantially increased compliance costs and required computer system upgrades and security-related investments. If our ~~enterprise, which may~~business continuity plans or system security do not sufficiently address these risks, they could have a material adverse ~~impact~~effect on our business, results of operations and financial ~~condition,~~condition.

Based on the ~~extent of which cannot be determined with any certainty at this time.~~

~~The COVID-19 outbreak, and actions seeking to mitigate~~information currently known, we do not believe that 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~~2021 cybersecurity attack will have a material impact on our business, results of operations or financial condition. However, no assurances can be given, and we may be subject to future incidents that could have a material adverse effect or result in operational impairments 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,losses as well as ~~potential regulatory~~significant harm to our reputation.

Any significant breach in our data security infrastructure could disrupt business, cause financial losses and damage our reputation, and insurance coverage may not be available for claims related to a breach.

A significant breach of our data security infrastructure may result from actions by our employees, vendors, third-party administrators, or ~~legislative actions that~~unknown third parties or through cyber attacks. The risk of a breach can exist whether software services are ~~further described below under~~ ~~Regulatory impact. These include workers’ compensation, healthcare, commercial property coverage,~~in our data centers or we use cloud-based software services.

Such a breach could affect our data framework or cause a failure to protect the personal information of our customers, claimants or employees, or sensitive and ~~directors’~~confidential information regarding our business and ~~officers’~~may

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result in operational impairments and financial losses, as well as significant harm to our reputation. The breach of confidential information also could give rise to legal liability and ~~employment practices liability lines. In addition,~~regulatory action under data protection and privacy laws, as well as evolving regulation in this regard. Any such breach of 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, maydata security infrastructure could have a material adverse effect on our business, results of operations and financial ~~condition,~~condition.

We sustained a sophisticated cybersecurity attack in March 2021 involving ransomware that caused a network disruption and impacted certain of our systems. Promptly upon detection, we undertook steps to address the incident, including engaging a team of third-party forensic experts and notifying law enforcement and key regulators. As of the date of this report, we have restored network systems and resumed normal operations. We are continuing to assess the full extent of ~~which cannot~~the impact from the incident, as well as determining any additional actions we may take to improve our existing systems. Although the investigation is ongoing, should we determine that personal information was impacted, it is possible that notification to individuals, other parties and/or regulators may be ~~determined with any certainty at this time.~~

~~Regulatory impact~~

~~The regulatory environment is rapidly evolving in direct response~~required based on applicable law. As a result or otherwise related 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 regulationsincident, we ~~are now, and~~ may be subject to subsequent investigations, claims or actions in addition to other costs, fines, penalties, or other obligations.

Although we maintain cybersecurity insurance coverage insuring against costs resulting from cyber attacks (including the attack described above), it is possible losses may exceed the amount available under our coverage and our coverage policy may not cover all losses. Further, future cybersecurity insurance coverage may be difficult to obtain or may only be available at significantly higher costs to us.

Based on the information currently known, we do not believe that the March 2021 cybersecurity attack will have a material impact on our business, results of ~~operation~~operations or financial condition. However, no assurances can be given, and we may be subject to future incidents that could have such a material adverse effect or may result in operational impairments 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,losses, 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 accesssignificant harm 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.~~reputation.

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.~~applicable

(c) The table below details the repurchases of our common stock made during the three months ended March 31, ~~2020.~~2021.

Period

(a) Total number of shares purchased

(b) Average price paid per share

(d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (in millions)

March 1, 2021 - March 31, 2021

66,000

46.32

N/A

Total

66,000

N/A

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)
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 435,376

N/A N/A

Item 6. Exhibits

See Exhibit Index.

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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

		~~CNA Financial Corporation~~

Dated: May ~~4, 2020~~7, 2021	By	/s/ Albert J. Miralles
			Albert J. Miralles Executive Vice President and Chief Financial Officer (Duly authorized officer and principal financial and accounting officer)

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EXHIBIT INDEX



Description of Exhibit		Exhibit 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 document		101.INS

Inline XBRL Taxonomy Extension Schema		101.SCH

Inline XBRL Taxonomy Extension Calculation Linkbase		101.CAL

Inline XBRL Taxonomy Extension Definition Linkbase		101.DEF

Inline XBRL Taxonomy Label Linkbase		101.LAB

Inline XBRL Taxonomy Extension Presentation Linkbase		101.PRE

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)		104.1

6457



	Mortgage Loans Amortized Cost Basis by Origination Year ⁽¹⁾
As of March 31, 2020	2020		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



For the three months ended March 31
(In millions)	2020			2019
Reserves, beginning of year:
Gross	$	21,720		$	21,984
Ceded	3,835			4,019
Net reserves, beginning of year	17,885			17,965
Net incurred claim and claim adjustment expenses:
Provision for insured events of current year	1,355			1,309
Increase (decrease) in provision for insured events of prior years	(8		)	8
Amortization of discount	51			50
Total net incurred ⁽¹⁾	1,398			1,367
Net payments attributable to:
Current year events	(72		)	(100		)
Prior year events	(1,218		)	(1,309		)
Total net payments	(1,290		)	(1,409		)
Foreign currency translation adjustment and other	(88		)	13
Net reserves, end of period	17,905			17,936
Ceded reserves, end of period	3,967			3,900
Gross reserves, end of period	$	21,872		$	21,836



Three months ended March 31, 2019	Specialty			Commercial			International		Life & Group			Corporate & Other
(In millions)															Eliminations			Total
Operating revenues
Net earned premiums	$	661		$	763		$	250	$	130		$	—		$	(1	)	$	1,803
Net investment income	155			190			15		204			7			—			571
Non-insurance warranty revenue	281			—			—		—			—			—			281
Other revenues	1			7			—		1			2			(2		)	9
Total operating revenues	1,098			960			265		335			9			(3		)	2,664
Claims, benefits and expenses
Net incurred claims and benefits	392			510			162		308			(21		)	—			1,351
Policyholders’ dividends	1			5			—		—			—			—			6
Amortization of deferred acquisition costs	147			127			68		—			—			—			342
Non-insurance warranty expense	260			—			—		—			—			—			260
Other insurance related expenses	70			130			25		28			(1		)	(1		)	251
Other expenses	12			11			4		2			39			(2		)	66
Total claims, benefits and expenses	882			783			259		338			17			(3		)	2,276
Core income (loss) before income tax	216			177			6		(3		)	(8		)	—			388
Income tax (expense) benefit on core income (loss)	(47		)	(38		)	—		13			2			—			(70		)
Core income (loss)	$	169		$	139		$	6	$	10		$	(6	)	$	—		318
Net investment gains (losses)																		31
Income tax (expense) benefit on net investment gains (losses)																		(7		)
Net investment gains (losses), after tax																		24
Net income (loss)																		$	342



(In millions)	March 31, 2020
A- to A++	$	2,662
B- to B++	859
Insolvent	4
Total voluntary reinsurance outstanding balance⁽¹⁾	$	3,525