Table of its long term care future policy benefit reserves by performing a gross premium valuation (GPV) to determine if there is a premium deficiency. Under the GPV, management estimates required reserves using best estimate assumptions as of the date of the assessment without provisions for adverse deviation. The GPV required reserves are then compared to the existing recorded reserves. If the GPV required reserves are greater than the existing recorded reserves, the existing assumptions are unlocked and future policy benefit reserves are increased to the greater amount. Any such increase is reflected in the Company’s results of operations in the period in which the need for such adjustment is determined. If the GPV required reserves are less than the existing recorded reserves, assumptions remain locked in and no adjustment is required. Periodically, management engages independent third parties to assess the appropriateness of its best estimate assumptions. The most recent third party assessment, performed in 2019, validated the assumption setting process and confirmed the best estimate assumptions appropriately reflected the experience data at that time.Contents

The GPV for the long term care future policy benefit reserves, performed in the third quarter of 2020 and 2019, indicated a premium deficiency primarily driven by lower discount rate assumptions. Recognition of the premium deficiency resulted in a $74 million and a $216 million pretax increase in policyholders' benefits reflected in the Company's results of operations for the three and nine months ended September 30, 2020 and 2019.

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 ~~September 30, 2020~~March 31, 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 ~~September 30, 2020,~~March 31, 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.

Table of Contents

Note G. Benefit Plans

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

Periods ended September 30 Three Months Nine Months
(In millions) 2020 2019 2020 2019
Net periodic pension cost (benefit)
Interest cost on projected benefit obligation $ 20
$ 25
$ 60
$ 75
Expected return on plan assets (38 ) (36 ) (116 ) (107 )
Amortization of net actuarial (gain) loss 11
10
33
30
Settlement loss 0
0
2
0
Total net periodic pension cost (benefit) $ (7 ) $ (1 ) $ (21 ) $ (2 )


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 ~~and nine~~ months ended ~~September 30,~~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 and $6~~ million of non-service benefit in Insurance claims and policyholders' benefits and $5 million ~~and $15 million~~ of non-service benefit in Other operating ~~expenses. For the three and nine months ended September 30, 2019, the Company recognized less than $1 million and $1 million~~expenses related to net periodic pension benefit.

Table of ~~non-service benefit in Insurance claims and policyholders' benefits and less than $1 million and $1 million of non-service benefit in Other operating expenses.~~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
Balance as of July 1, 2020 $ (9 ) $ 1,172
$ (815 ) $ (194 ) $ 154
Other comprehensive income (loss) before reclassifications 2
231
(2 ) 37
268
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $1, $(7), $2, $- and $(4) (4 ) 24
(9 ) 0
11
Other comprehensive income (loss) net of tax (expense) benefit of $(1), $(56), $(3), $- and $(60) 6
207
7
37
257
Balance as of September 30, 2020 $ (3 ) $ 1,379
$ (808 ) $ (157 ) $ 411


(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	$	0	$	1,025	$	(833)	$	(141)	$	51
Other comprehensive income (loss) before reclassifications	(48)		(1,066)		1		(77)		(1,190)
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $10, $6, $3, $0 and $19	(37)		(22)		(10)		0		(69)
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)

(In millions)
Net unrealized gains (losses) on investments with OTTI losses⁽¹⁾

Net unrealized gains (losses) on other investments⁽¹⁾
Pension and postretirement benefits Cumulative foreign currency translation adjustment Total
Balance as of July 1, 2019 $ 20
$ 1,023
$ (760 ) $ (163 ) $ 120
Other comprehensive income (loss) before reclassifications 0
44
0
(29 ) 15
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $-, $2, $- and $2 0
3
(7 ) 0
(4 )
Other comprehensive income (loss) net of tax (expense) benefit of $-, $(11), $(2), $- and $(13) 0
41
7
(29 ) 19
Balance as of September 30, 2019 $ 20
$ 1,064
$ (753 ) $ (192 ) $ 139

~~(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 balances previously reported in the Net unrealized gains (losses) on investments with OTTI losses column are now reported in the Net unrealized gains (losses) on other investments column.

(In millions)
Net unrealized gains (losses) on investments with an allowance for credit losses⁽¹⁾

Net unrealized gains (losses) on other investments⁽¹⁾
Pension and postretirement benefits Cumulative foreign currency translation adjustment Total
Balance as of January 1, 2020 $ 0
$ 1,025
$ (833 ) $ (141 ) $ 51
Other comprehensive income (loss) before reclassifications (48 ) 374
(3 ) (16 ) 307
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $12, $(5), $7, $- and $14 (45 ) 20
(28 ) 0
(53 )
Other comprehensive income (loss) net of tax (expense) benefit of $1, $(92), $(7), $- and $(98) (3 ) 354
25
(16 ) 360
Balance as of September 30, 2020 $ (3 ) $ 1,379
$ (808 ) $ (157 ) $ 411

(In millions)
Net unrealized gains (losses) on investments with OTTI losses⁽¹⁾

Net unrealized gains (losses) on other investments⁽¹⁾
Pension and postretirement benefits Cumulative foreign currency translation adjustment Total
Balance as of January 1, 2019 $ 16
$ 61
$ (775 ) $ (180 ) $ (878 )
Other comprehensive income (loss) before reclassifications 3
999
(1 ) (12 ) 989
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $1, $6, $- and $7 (1 ) (4 ) (23 ) 0
(28 )
Other comprehensive income (loss) net of tax (expense) benefit of $(2), $(266), $(6), $- and $(274) 4
1,003
22
(12 ) 1,017
Balance as of September 30, 2019 $ 20
$ 1,064
$ (753 ) $ (192 ) $ 139

~~(1)~~

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

Table of Contents

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.

Table of Contents

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


Three months ended March 31, 2021	Specialty		Commercial		International		Life & Group		Corporate & Other
(In millions)											Eliminations		Total
Operating revenues
Net earned premiums	$	735	$	855	$	252	$	120	$	0	$	0	$	1,962
Net investment income	117		148		14		219		6		0		504
Non-insurance warranty revenue	338		0		0		0		0		0		338
Other revenues	0		5		0		1		1		(2)		5
Total operating revenues	1,190		1,008		266		340		7		(2)		2,809
Claims, benefits and expenses
Net incurred claims and benefits	427		639		155		281		(2)		0		1,500
Policyholders’ dividends	1		5		0		0		0		0		6
Amortization of deferred acquisition costs	154		153		52		0		0		0		359
Non-insurance warranty expense	311		0		0		0		0		0		311
Other insurance related expenses	70		115		35		25		10		0		255
Other expenses	11		9		(5)		2		42		(2)		57
Total claims, benefits and expenses	974		921		237		308		50		(2)		2,488
Core income (loss) before income tax	216		87		29		32		(43)		0		321
Income tax (expense) benefit on core income (loss)	(46)		(18)		(5)		4		7		0		(58)
Core income (loss)	$	170	$	69	$	24	$	36	$	(36)	$	0	263
Net investment gains (losses)													57
Income tax (expense) benefit on net investment gains (losses)													(8)
Net investment gains (losses), after tax													49
Net income (loss)													$	312


March 31, 2021
(In millions)
Reinsurance receivables	$	957	$	859	$	300	$	389	$	2,628	$	0	$	5,133
Insurance receivables	1,004		1,322		357		2		0		0		2,685
Deferred acquisition costs	340		299		102		0		0		0		741
Goodwill	117		0		31		0		0		0		148
Deferred non-insurance warranty acquisition expense	3,149		0		0		0		0		0		3,149
Insurance reserves
Claim and claim adjustment expenses	5,916		8,449		2,142		3,726		2,823		0		23,056
Unearned premiums	2,666		1,930		588		135		0		0		5,319
Future policy benefits	0		0		0		12,772		0		0		12,772
Deferred non-insurance warranty revenue	4,119		0		0		0		0		0		4,119

Table of Contents


Three months ended September 30, 2020	Specialty			Commercial				International			Life & Group				Corporate & Other
Three months ended March 31, 2020														Three months ended March 31, 2020				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	$	734		$	857				$	236		$	127				$	0				$	(1	)		$	1,953		Net earned premiums	$	685				$	818			$	239			$	127		$	0			$	0		$	1,869
Net investment income	126			165				15			208				3				0			517			Net investment income		56					42			15			208				8			0				329
Non-insurance warranty revenue	317			0				0			0				0				0			317			Non-insurance warranty revenue		301					0			0			0				0			0				301
Other revenues	0			6				0			0				0				0			6			Other revenues		1					8			0			0				1			(2)				8
Total operating revenues	1,177			1,028				251			335				3				(1		)	2,793			Total operating revenues		1,043					868			254			335				9			(2)				2,507
Claims, benefits and expenses																									Claims, benefits and expenses
Net incurred claims and benefits	433			673				150			363				(8		)		0			1,611			Net incurred claims and benefits		405					555			154			316				(11)			0				1,419
Policyholders’ dividends	0			5				0			0				0				0			5			Policyholders’ dividends		1					5			0			0				0			0				6
Amortization of deferred acquisition costs	158			150				52			0				0				0			360			Amortization of deferred acquisition costs		151					144			49			0				0			0				344
Non-insurance warranty expense	293			0				0			0				0				0			293			Non-insurance warranty expense		281					0			0			0				0			0				281
Other insurance related expenses	66			127				31			28				0				(1		)	251			Other insurance related expenses		69					127			36			26				0			0				258
Other expenses	14			7				(8		)	3				34				0			50			Other expenses		13					6			13			3				39			(2)				72
Total claims, benefits and expenses	964			962				225			394				26				(1		)	2,570			Total claims, benefits and expenses		920					837			252			345				28			(2)				2,380
Core income (loss) before income tax	213			66				26			(59		)		(23		)		0			223			Core income (loss) before income tax		123					31			2			(10)				(19)			0				127
Income tax (expense) benefit on core income (loss)	(45		)	(14		)		1			24				4				0			(30		)	Income tax (expense) benefit on core income (loss)		(27)					(8)			0			14				2			0				(19)
Core income (loss)	$	168		$	52			$	27		$	(35	)		$	(19	)		$	0		193			Core income (loss)		$	96				$	23		$	2		$	4			$	(17)		$	0			108
Net investment gains (losses)																						27			Net investment gains (losses)																								(216)
Income tax (expense) benefit on net investment gains (losses)																						(7		)	Income tax (expense) benefit on net investment gains (losses)																								47
Net investment gains (losses), after tax																						20			Net investment gains (losses), after tax																								(169)
Net income (loss)																						$	213		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 September 30, 2019

Specialty

Commercial
International
Life &
Group

Corporate
& Other

(In millions) Eliminations Total
Operating revenues
Net earned premiums $ 712
$ 813
$ 236
$ 130
$ 0
$ (1 ) $ 1,890
Net investment income 121
136
17
207
6
0
487
Non-insurance warranty revenue 292
0
0
0
0
0
292
Other revenues 1
10
(1 ) (1 ) 1
(1 ) 9
Total operating revenues 1,126
959
252
336
7
(2 ) 2,678
Claims, benefits and expenses

Net incurred claims and benefits 411
564
163
476
(7 ) 0
1,607
Policyholders’ dividends 2
5
0
0
0
0
7
Amortization of deferred acquisition costs 155
134
56
0
0
0
345
Non-insurance warranty expense 278
0
0
0
0
0
278
Other insurance related expenses 71
123
35
29
0
(1 ) 257
Other expenses 13
9
7
1
35
(1 ) 64
Total claims, benefits and expenses 930
835
261
506
28
(2 ) 2,558
Core income (loss) before income tax 196
124
(9 ) (170 ) (21 ) 0
120
Income tax (expense) benefit on core income (loss) (43 ) (27 ) 0
48
4
0
(18 )
Core income (loss) $ 153
$ 97
$ (9 ) $ (122 ) $ (17 ) $ 0
102
Net investment gains (losses) 7
Income tax (expense) benefit on net investment gains (losses) (2 )
Net investment gains (losses), after tax 5
Net income (loss) $ 107

Nine months ended September 30, 2020

Specialty

Commercial
International
Life &
Group

Corporate
& Other

(In millions) Eliminations Total
Operating revenues
Net earned premiums $ 2,124
$ 2,470
$ 699
$ 380
$ 0
$ (1 ) $ 5,672
Net investment income 315
389
44
622
10
0
1,380
Non-insurance warranty revenue 926
0
0
0
0
0
926
Other revenues 1
18
0
0
3
(3 ) 19
Total operating revenues 3,366
2,877
743
1,002
13
(4 ) 7,997
Claims, benefits and expenses

Net incurred claims and benefits 1,346
1,897
480
983
(40 ) 0
4,666
Policyholders’ dividends 2
15
0
0
0
0
17
Amortization of deferred acquisition costs 462
441
143
0
0
0
1,046
Non-insurance warranty expense 859
0
0
0
0
0
859
Other insurance related expenses 208
378
106
79
(1 ) (1 ) 769
Other expenses 37
26
3
6
108
(3 ) 177
Total claims, benefits and expenses 2,914
2,757
732
1,068
67
(4 ) 7,534
Core income (loss) before income tax 452
120
11
(66 ) (54 ) 0
463
Income tax (expense) benefit on core income (loss) (98 ) (24 ) 4
49
6
0
(63 )
Core income (loss) $ 354
$ 96
$ 15
$ (17 ) $ (48 ) $ 0
400
Net investment gains (losses) (120 )
Income tax (expense) benefit on net investment gains (losses) 23
Net investment gains (losses), after tax (97 )
Net income (loss) $ 303

September 30, 2020
(In millions)
Reinsurance receivables $ 855
$ 948
$ 253
$ 401
$ 1,937
$ 0
$ 4,394
Insurance receivables 1,015
1,267
269
7
1
0
2,559
Deferred acquisition costs 324
285
88
0
0
0
697
Goodwill 117
0
29
0
0
0
146
Deferred non-insurance warranty acquisition expense 2,998
0
0
0
0
0
2,998
Insurance reserves
Claim and claim adjustment expenses 5,698
9,054
1,975
3,766
2,041
0
22,534
Unearned premiums 2,550
1,847
502
121
0
0
5,020
Future policy benefits 0
0
0
12,978
0
0
12,978
Deferred non-insurance warranty revenue 3,951
0
0
0
0
0
3,951

Nine months ended September 30, 2019

Specialty

Commercial
International
Life &
Group

Corporate
& Other

(In millions) Eliminations Total
Operating revenues
Net earned premiums $ 2,061
$ 2,339
$ 729
$ 390
$ 0
$ (2 ) $ 5,517
Net investment income 410
480
47
616
20
0
1,573
Non-insurance warranty revenue 858
0
0
0
0
0
858
Other revenues 1
20
0
0
5
(4 ) 22
Total operating revenues 3,330
2,839
776
1,006
25
(6 ) 7,970
Claims, benefits and expenses

Net incurred claims and benefits 1,198
1,581
472
1,093
(40 ) 0
4,304
Policyholders’ dividends 4
15
0
0
0
0
19
Amortization of deferred acquisition costs 454
391
180
0
0
0
1,025
Non-insurance warranty expense 801
0
0
0
0
0
801
Other insurance related expenses 217
372
94
87
(2 ) (2 ) 766
Other expenses 37
27
14
5
108
(4 ) 187
Total claims, benefits and expenses 2,711
2,386
760
1,185
66
(6 ) 7,102
Core income (loss) before income tax 619
453
16
(179 ) (41 ) 0
868
Income tax (expense) benefit on core income (loss) (136 ) (97 ) (2 ) 74
7
0
(154 )
Core income (loss) $ 483
$ 356
$ 14
$ (105 ) $ (34 ) $ 0
714
Net investment gains (losses) 20
Income tax (expense) benefit on net investment gains (losses) (7 )
Net investment gains (losses), after tax 13
Net income (loss) $ 727

December 31, 2019
(In millions)
Reinsurance receivables $ 575
$ 855
$ 247
$ 385
$ 2,142
$ 0
$ 4,204
Insurance receivables 971
1,210
284
16
0
0
2,481
Deferred acquisition costs 311
257
94
0
0
0
662
Goodwill 117
0
30
0
0
0
147
Deferred non-insurance warranty acquisition expense 2,840
0
0
0
0
0
2,840
Insurance reserves
Claim and claim adjustment expenses 5,238
8,656
1,876
3,716
2,234
0
21,720
Unearned premiums 2,337
1,626
495
125
0
0
4,583
Future policy benefits 0
0
0
12,311
0
0
12,311
Deferred non-insurance warranty revenue 3,779
0
0
0
0
0
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

Periods ended September 30 Three Months Nine Months
(In millions) 2020 2019 2020 2019
Specialty
Management & Professional Liability $ 668
$ 638
$ 1,881
$ 1,903
Surety 153
156
444
446
Warranty & Alternative Risks 356
332
1,041
981
Specialty revenues 1,177
1,126
3,366
3,330
Commercial

Middle Market 381
357
1,071
1,065
Construction ⁽¹⁾
298
265
823
754
Small Business 126
124
352
377
Other Commercial 223
213
631
643
Commercial revenues 1,028
959
2,877
2,839
International

Canada 73
70
214
204
Europe 96
91
282
270
Hardy 82
91
247
302
International revenues 251
252
743
776
Life & Group revenues 335
336
1,002
1,006
Corporate & Other revenues 3
7
13
25
Eliminations (1 ) (2 ) (4 ) (6 )
Total operating revenues 2,793
2,678
7,997
7,970
Net investment gains (losses) 27
7
(120 ) 20
Total revenues $ 2,820
$ 2,685
$ 7,877
$ 7,990


~~(1)~~	Effective January 1, 2020, the Construction line of business is presented separately in the Commercial segment to better align with the Company's 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 ~~reported~~had deferred non-insurance warranty revenue balances of $4.1 billion and $4.0 billion ofreported in Deferred non-insurance warranty revenue as of ~~September 30, 2020~~March 31, 2021 and ~~$3.8 billion as of~~ December 31, ~~2019.~~2020. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, the Company recognized ~~$262 million and $826 million~~$0.3 billion of revenues that were included in the deferred revenue balance as of January 1, 2021 and 2020. For the three ~~and nine~~ months ended ~~September 30, 2019, the Company recognized $236 million~~March 31, 2021 and ~~$747 million of revenues that were included in the deferred revenue balance as of January 1, 2019. For the three and nine months ended September 30,~~ 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 ~~$0.3~~$0.9 billion of the deferred revenue in the remainder of ~~2020, $1.1 billion in~~ 2021, ~~$0.9~~$1.0 billion in 2022, $0.8 billion in 2023 and ~~$1.7~~$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.~~

(In millions) September 30, 2020
A- to A++ $ 2,729
B- to B++ 874
Insolvent 4
Total voluntary reinsurance outstanding balance⁽¹⁾
$ 3,607


~~(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 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 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

~~In March 2020,~~The following table includes the World Health Organization declared COVID-19 to be a pandemic. The pandemic, together with global, national, regional and local efforts to mitigate the spread of the virus, have rapidly evolved and led to severely depressed economic conditions and financial market disruption. While these conditions have had a significant impact across our enterprise during 2020, COVID-19 impacts to ourconsolidated results ~~for the three months ended September 30, 2020 were more limited. During the first quarter of 2020 we experienced significant declines in the value~~ of our ~~investment portfolio, and during the second quarter of 2020 we recorded significant underwriting losses. While~~operations including our financial ~~markets have broadly recovered during the second and third quarters of 2020, our Net investment~~measure, core income ~~and Net investment gains (losses) are lower for the nine months ended September 30, 2020 as compared with the same period in 2019.~~

~~For a further discussion of COVID-19 impacts on our underwriting results see the~~ ~~Expected impact of COVID-19 on underwriting results~~ ~~within the Segment Results section of this MD&A. For a 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.~~

(loss). For more detailed components of our business operations and a discussion of the core income (loss) financial measure, see the 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.

~~The following table includes the consolidated results of our operations including our financial measure, core income (loss).~~

Periods ended September 30 Three Months Nine Months
(In millions) 2020 2019 2020 2019
Operating Revenues
Net earned premiums $ 1,953
$ 1,890
$ 5,672
$ 5,517
Net investment income 517
487
1,380
1,573
Non-insurance warranty revenue 317
292
926
858
Other revenues 6
9
19
22
Total operating revenues 2,793
2,678
7,997
7,970
Claims, Benefits and Expenses
Net incurred claims and benefits 1,611
1,607
4,666
4,304
Policyholders' dividends 5
7
17
19
Amortization of deferred acquisition costs 360
345
1,046
1,025
Non-insurance warranty expense 293
278
859
801
Other insurance related expenses 251
257
769
766
Other expenses 50
64
177
187
Total claims, benefits and expenses 2,570
2,558
7,534
7,102
Core income before income tax 223
120
463
868
Income tax expense on core income (30 ) (18 ) (63 ) (154 )
Core income 193
102
400

714
Net investment gains (losses) 27
7
(120 ) 20
Income tax (expense) benefit on net investment gains (losses) (7 ) (2 ) 23
(7 )
Net investment gains (losses), after tax 20
5
(97 ) 13
Net income $ 213
$ 107
$ 303
$ 727

~~Three Month Comparison~~


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

Core income increased ~~$91~~$155 million for the three months ended ~~September 30, 2020~~March 31, 2021 as compared with the same period in ~~2019.~~2020. Core income for our Property & Casualty Operations increased $6$142 million primarily due to ~~improved non-catastrophe current accident year underwriting results,~~ higher net investment income driven by limited partnership and common stock returns and ~~favorable net prior~~improved non-catastrophe current accident year ~~loss reserve development in the current year period.~~underwriting results. These results were ~~largely~~partially offset by higher net catastrophe losses. Core ~~loss~~income for our Life & Group segment ~~improved $87 million. Results for the three months ended September 30, 2020 include a $59~~increased $32 million charge related to recognition of a premium deficiency as a result of the third quarter 2020 gross premium valuation (GPV) compared to a $170 million charge related to recognition of a premium deficiency as a result of the third quarter 2019 GPV. Corewhile core loss for our Corporate & Other segment increased $2$19 million.

Net catastrophe losses were ~~$160~~$125 million and ~~$32~~$75 million for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019. Net catastrophe losses for the three months ended September 30, 2020 were driven by severe weather related events, primarily Hurricanes Laura, Isaias and Sally, and the Midwest derecho.~~

2020. Favorable net prior year loss reserve development of $15 million was recorded ~~for~~in the three months ended ~~September 30,~~March 31, 2021 and 2020 ~~as compared with unfavorable net prior year loss reserve development of $16 million for the three months ended September 30, 2019~~ related to our Specialty, Commercial, International and Corporate & Other segments. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

~~Nine Month Comparison~~

Core income decreased $314 million for the nine months ended September 30, 2020 as compared with the same period in 2019. Core income for our Property & Casualty Operations decreased $388 million primarily due to higher net catastrophe losses and lower net investment income driven by limited partnership and common stock returns. Core loss for our Life & Group segment improved $88 million. Results for the nine months ended September 30, 2020 include a $59 million charge related to recognition

Table of a premium deficiency as a result of the third quarter 2020 GPV compared to a $170 million charge related to recognition of a premium deficiency as a result of the third quarter 2019 GPV. Core loss for our Corporate & Other segment increased $14 million.Contents

Net catastrophe losses were $536 million and $128 million for the nine months ended September 30, 2020 and 2019. Catastrophe losses for the nine months ended September 30, 2020 include $273 million related primarily to severe weather related events, $195 million related to COVID-19 and $68 million related to civil unrest. The COVID-19 losses, which were recognized in the first half of 2020, followed a detailed review and analysis of existing and potential exposures in light of current information, and represent the Company's best estimate of its ultimate insurance losses and loss adjustment expenses, including defense costs resulting from the pandemic and the consequent economic crisis. The losses were substantially driven by healthcare professional liability with additional impacts from workers' compensation, management liability, commercial property, trade credit and surety. Due to the timing and fluidity of the events, emergence pattern of claims and long tail nature of certain exposures the losses are substantially classified as incurred but not reported (IBNR) reserves. The COVID-19 catastrophe losses do not include the benefits of lower current accident year losses associated with lower loss frequency in certain lines of business as a result of shelter in place restrictions. Those benefits are modest and are partially offset by the impact of a reduction in our estimated audit premiums and an increase in our credit allowance for premiums receivables resulting from the depressed economic conditions.

Favorable net prior year loss reserve development of $8 million and $29 million was recorded for the nine months ended September 30, 2020 and 2019 related to our Specialty, Commercial, International and Corporate & Other segments. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

SEGMENT RESULTS

~~Expected impact of COVID-19 on Property & Casualty underwriting results~~

Our underwriting results for the first nine months of 2020 were negatively impacted by COVID-19 and the related depressed economic conditions. In many geographic locations, the virus continues to spread. Accordingly, it remains the case that months past the initial identification of the threat, all of the direct and indirect consequences and implications of COVID-19 are not yet known and may not emerge for some time. Until the virus is brought under control, the timing of any economic recovery remains uncertain. As a result, the impact to our results in the first three quarters of 2020 may not be indicative of its impacts for the remainder of 2020 or thereafter. For further discussion of the risks to our business associated with COVID-19 and measures to mitigate the spread of the virus, see the Investments and Liquidity and Capital Resources sections of this MD&A and the Risk Factor included under Part II, Item 1A of this Form 10-Q.

We experienced year-over-year growth in gross and net written premiums, excluding third party captives, driven by rate increases across property and casualty lines of business. However, depressed economic conditions generally have had an unfavorable impact on premium exposures, resulting in a decrease in our estimated audit premiums during the second quarter of 2020 and causing an unfavorable impact on our net earned premiums. Additionally, in the second quarter of 2020 we renewed multiple property and casualty reinsurance treaties at higher costs as well as purchased additional coverage, which had an unfavorable impact on net written premiums and will have an unfavorable impact on our net earned premiums in future quarters. Lower net earned premiums have had and may continue to have an unfavorable impact on our expense ratio. Our expense ratio has also been unfavorably impacted by increases in our allowance for uncollectible insurance receivables, more than offset by lower travel-related expenses. If general economic conditions do not improve in the remainder of 2020 or thereafter, our net written premiums, net earned premiums and our expense ratio may continue to be unfavorably impacted as a result.

While our losses incurred during the first nine months of 2020 related to COVID-19 represent our best estimate of ultimate insurance losses resulting from events occurring in the first nine months of 2020 due to the pandemic and the consequent economic crisis, given the unprecedented nature of this event, a high level of uncertainty exists as to the potential impact on insurance losses from these events or other events that might occur for the remainder of the year and thereafter. The scope, duration and magnitude of the direct and indirect effects could continue to evolve through the remainder of 2020, and possibly thereafter, and could materially impact our ultimate loss estimate, including in lines of business where losses have already been incurred as well as the potential for impacts in other lines unknown at this time. Continued spread of the virus, as well as new or extended shelter in place restrictions and business closures, could cause us to experience additional COVID-19 related catastrophe losses in future quarters.

We have also experienced modest benefits in certain lines of business as a result of lower loss frequency from shelter in place restrictions. Those benefits only apply to a portion of our portfolio, as our larger portfolios, including healthcare, construction and property coverages, have seen limited benefit. In addition, the impact from lower frequency is mostly offset by higher severity in certain areas of the portfolio.

The following discusses the results of operations for our business 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.

Periods ended September 30 Three Months Nine Months
(In millions, except ratios, rate, renewal premium change and retention) 2020 2019 2020 2019
Gross written premiums $ 1,855
$ 1,766
$ 5,331
$ 5,191
Gross written premiums excluding third party captives 861
778
2,413
2,263
Net written premiums 795
732
2,231
2,143
Net earned premiums 734
712
2,124
2,061
Net investment income 126
121
315
410
Core income 168
153
354
483

Other performance metrics:
Loss ratio excluding catastrophes and development 60.0 % 60.1 % 59.8 % 60.2 %
Effect of catastrophe impacts 1.0
0.5
5.7
0.8
Effect of development-related items (2.0 ) (2.8 ) (2.1 ) (2.9 )
Loss ratio 59.0 % 57.8 % 63.4 % 58.1 %
Expense ratio 30.5
31.8
31.5
32.6
Dividend ratio —
0.2
0.1
0.2
Combined ratio 89.5 % 89.8 % 95.0 % 90.9 %
Combined ratio excluding catastrophes and development 90.5 % 92.1 % 91.4 % 93.0 %

Rate 13 % 6 % 11 % 4 %
Renewal premium change 12
9
11
7
Retention 86
87
85
88
New business $ 104
$ 91
$ 275
$ 274

~~Three Month Comparison~~


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

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

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

Gross written premiums, excluding third party captives, for Specialty increased ~~$83~~$75 million for the three months ended ~~September 30, 2020~~March 31, 2021 as compared with the same period in ~~2019~~2020 driven by ~~strong rate and~~ higher new ~~business.~~business and strong rate. Net written premiums for Specialty increased ~~$63~~$48 million for the three months ended ~~September 30, 2020~~March 31, 2021 as compared with the same period in ~~2019.~~2020. The increase in net earned premiums was consistent with the trend in net written ~~premiums in recent quarters.~~premiums.

Core income increased ~~$15~~$74 million for the three months ended ~~September 30, 2020~~March 31, 2021 as compared with the same period in ~~2019~~2020 primarily due to higher net investment income driven by limited partnership and common stock returns and improved ~~non-catastrophe current accident year~~ underwriting results.

The combined ratio of ~~89.5%~~88.8% improved ~~0.3~~2.5 points for the three months ended ~~September 30, 2020~~March 31, 2021 as compared with the same period in ~~2019 primarily~~2020 due to a ~~1.3~~1.4 point improvement in the expense ratio ~~largely offset by~~and a ~~1.2~~1.1 point ~~increase~~improvement in the loss ratio. The ~~expense ratio~~ improvement ~~was driven by lower underwriting expenses and higher net earned premiums. The increase~~ in the loss ratio was ~~driven by lower~~primarily due to higher favorable net prior year loss reserve development and ~~higher~~lower net catastrophe losses. Net catastrophe losses were $7$5 million, or ~~1.0 point of the loss ratio, for the three months ended September 30, 2020, as compared with $3 million, or 0.5~~0.7 points of the loss ratio, for the three months ended ~~September 30, 2019. Net catastrophe losses~~March 31, 2021, as compared with $8 million, or 1.1 points of the loss ratio, for the three months ended ~~September 30, 2020 related primarily to severe weather related events.~~March 31, 2020. The improvement in the expense ratio was driven by higher net earned premiums.

Favorable net prior year loss reserve development of ~~$16~~$15 million and ~~$20~~$11 million was recorded for the three months ended ~~September 30, 2020~~March 31, 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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~~Nine Month Comparison~~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

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Commercial

The following table details the results of operations for Commercial.


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

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

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

Gross written premiums ~~excluding third party captives,~~ for ~~Specialty~~Commercial increased ~~$150~~$51 million for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 as compared with the same period in ~~2019~~2020 driven by higher new business and strong rate. Net written premiums for ~~Specialty~~Commercial increased ~~$88~~$10 million for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 as compared with the same period in ~~2019.~~2020. The increase in net earned premiums was consistent with the trend in net written premiums in recent quarters.

Core income ~~decreased $129~~increased $46 million for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 as compared with the same period in ~~2019~~2020 primarily due to higher ~~net catastrophe losses and lower~~ net investment income driven by limited partnership and common stock ~~returns.~~returns partially offset by higher net catastrophe losses.

The combined ratio of ~~95.0%~~106.7% increased ~~4.1~~5.1 points for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 as compared with the same period in ~~2019 primarily~~2020 due to a ~~5.3~~6.9 point increase in the loss ratio partially offset by a ~~1.1~~1.8 point improvement in the expense ratio. The increase in the loss ratio was primarily due to higher net catastrophe losses. Net catastrophe losses were ~~$120~~$115 million, or ~~5.7~~13.4 points of the loss ratio, for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, as compared with ~~$16~~$57 million, or ~~0.8~~7.0 points of the loss ratio, for the ~~nine~~three months ended September 30, 2019. Net catastrophe losses for the nine months ended September 30, 2020 included $109 million related to the COVID-19 pandemic and $11 million related primarily to severe weather related events.March 31, 2020. The improvement in the expense ratio was driven by ~~lower underwriting~~favorable acquisition expenses and higher net earned premiums.

~~Favorable~~There was no net prior year loss reserve development recorded for the three months ended March 31, 2021 as compared with favorable net prior year loss reserve development of ~~$47~~$4 million ~~and $58 million was recorded~~ for the ~~nine~~three months ended ~~September 30, 2020 and 2019.~~March 31, 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.

Table of Contents

The following table summarizes the gross and net carried reserves for ~~Specialty.~~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) September 30, 2020 December 31, 2019
Gross case reserves $ 1,580
$ 1,481
Gross IBNR reserves 4,118
3,757
Total gross carried claim and claim adjustment expense reserves $ 5,698
$ 5,238
Net case reserves $ 1,412
$ 1,343
Net IBNR reserves 3,464
3,333
Total net carried claim and claim adjustment expense reserves $ 4,876
$ 4,676

Table of Contents

~~Commercial~~International

The following table details the results of operations for ~~Commercial.~~International.

Periods ended September 30 Three Months Nine Months
(In millions, except ratios, rate, renewal premium change and retention) 2020 2019 2020 2019
Gross written premiums $ 915
$ 860
$ 3,103
$ 2,825
Gross written premiums excluding third party captives 915
852
3,018
2,742
Net written premiums 804
775
2,703
2,536
Net earned premiums 857
813
2,470
2,339
Net investment income 165
136
389
480
Core income 52
97
96
356

Other performance metrics:
Loss ratio excluding catastrophes and development 61.0 % 61.5 % 60.4 % 61.8 %
Effect of catastrophe impacts 17.0
3.0
14.3
4.3
Effect of development-related items 0.6
4.8
2.1
1.5
Loss ratio 78.6 % 69.3 % 76.8 % 67.6 %
Expense ratio 32.3
31.7
33.2
32.7
Dividend ratio 0.6
0.6
0.6
0.6
Combined ratio 111.5 % 101.6 % 110.6 % 100.9 %
Combined ratio excluding catastrophes and development 93.9 % 93.8 % 94.2 % 95.1 %

Rate 11 % 4 % 9 % 3 %
Renewal premium change 8
5
8
5
Retention 81
86
84
86
New business $ 168
$ 173
$ 564
$ 522

~~Three Month Comparison~~


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

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

Rate	14		%	9		%
Renewal premium change	11			9
Retention	74			70
New business	$	80		$	68

Gross written premiums for ~~Commercial~~International increased ~~$55~~$36 million for the three months ended ~~September 30, 2020~~March 31, 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 ~~strong rate.~~growth in Europe and Canada. Net written premiums for ~~Commercial~~International increased ~~$29~~$16 million for the three months ended ~~September 30, 2020~~March 31, 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 increase in net earned premiums was consistent with the trend in net written ~~premiums in recent quarters.~~premiums.

Core income ~~decreased $45~~increased $22 million for the three months ended ~~September 30, 2020~~March 31, 2021 as compared with the same period in ~~2019~~2020 driven by ~~higher net catastrophe losses partially offset by less unfavorable net prior~~improved current accident year ~~loss reserve development in the current year period and higher net investment income driven by limited partnership and common stock returns.~~underwriting results.

The combined ratio of ~~111.5% increased 9.9~~95.9% improved 4.0 points for the three months ended ~~September 30, 2020~~March 31, 2021 as compared with the same period in ~~2019~~2020 due to a ~~9.3~~3.0 point ~~increase~~improvement in the loss ratio and a ~~0.6~~1.0 point ~~increase~~improvement in the expense ratio. The ~~increase~~improvement in the loss ratio was driven by ~~higher net catastrophe losses partially offset by less unfavorable net prior~~improved current accident year ~~loss reserve development in the current year period.~~underwriting results. Net catastrophe losses were ~~$146~~$5 million, or ~~17.0~~2.0 points of the loss ratio, for the three months ended ~~September 30, 2020,~~March 31, 2021, as compared with ~~$25~~$10 million, or ~~3.0~~4.3 points of the loss ratio, for the three months ended ~~September 30, 2019. Net catastrophe losses for the three months ended September 30, 2020 related primarily to severe weather related events.~~March 31, 2020. The ~~increase~~improvement in the expense ratio was driven by ~~higher acquisition expenses partially offset by~~favorable commission rates and higher net earned premiums.

~~Unfavorable~~There was no net prior year loss reserve development ~~of $1 million and $35 million was~~ recorded for the three months ended ~~September 30, 2020~~March 31, 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.

~~Nine Month Comparison~~

Gross written premiums for Commercial increased $278 million for the nine months ended September 30, 2020 as compared with the same period in 2019 driven by strong rate and higher new business. Net written premiums for Commercial increased $167 million for the nine months ended September 30, 2020 as compared with the same period in 2019. The increase in net earned premiums was consistent with the trend in net written premiums in recent quarters partially offset by a reduction in estimated audit premiums as a result of the economic slowdown arising from COVID-19.

Core income decreased $260 million for the nine months ended September 30, 2020 as compared with the same period in 2019 primarily due to higher net catastrophe losses, lower net investment income driven by limited partnership and common stock returns and unfavorable net prior year loss reserve development in the current year period, including a $50 million charge for mass tort exposures primarily due to New York reviver statute-related claims.

The combined ratio of 110.6% increased 9.7 points for the nine months ended September 30, 2020 as compared with the same period in 2019 due to a 9.2 point increase in the loss ratio and a 0.5 point increase in the expense ratio. The increase in the loss ratio was driven by higher net catastrophe losses. Net catastrophe losses were $354 million, or 14.3 points of the loss ratio, for the nine months ended September 30, 2020, as compared with $102 million, or 4.3 points of the loss ratio, for the nine months ended September 30, 2019. Net catastrophe losses for the nine months ended September 30, 2020 included $240 million related primarily to severe weather related events, $66 million related to civil unrest and $48 million related to the COVID-19 pandemic. The increase in the expense ratio was driven by higher acquisition expenses partially offset by higher net earned premiums.

Unfavorable net prior year loss reserve development of $42 million and $15 million was recorded for the nine months ended September 30, 2020 and 2019. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

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

(In millions) September 30, 2020 December 31, 2019
Gross case reserves $ 3,776
$ 3,937
Gross IBNR reserves 5,278
4,719
Total gross carried claim and claim adjustment expense reserves $ 9,054
$ 8,656
Net case reserves $ 3,378
$ 3,543
Net IBNR reserves 4,819
4,306
Total net carried claim and claim adjustment expense reserves $ 8,197
$ 7,849

~~International~~

~~The following table details the results~~Table of ~~operations for International.~~Contents

Periods ended September 30 Three Months Nine Months
(In millions, except ratios, rate, renewal premium change and retention) 2020 2019 2020 2019
Gross written premiums $ 238
$ 226
$ 822
$ 837
Net written premiums 222
201
680
709
Net earned premiums 236
236
699
729
Net investment income 15
17
44
47
Core income (loss) 27
(9 ) 15
14

Other performance metrics:
Loss ratio excluding catastrophes and development 60.1 % 67.3 % 60.1 % 61.4 %
Effect of catastrophe impacts 3.0
1.7
8.9
1.4
Effect of development-related items 0.1
0.4
(0.4 ) 1.9
Loss ratio 63.2 % 69.4 % 68.6 % 64.7 %
Expense ratio 34.9
38.0
35.6
37.5
Combined ratio 98.1 % 107.4 % 104.2 % 102.2 %
Combined ratio excluding catastrophes and development 95.0 % 105.3 % 95.7 % 98.9 %

Rate 16 % 10 % 12 % 7 %
Renewal premium change 14
6
11
5
Retention 70
74
71
70
New business $ 58
$ 52
$ 187
$ 207

~~Three Month Comparison~~

Gross written premiums for International increased $12 million for the three months ended September 30, 2020 as compared with the same period in 2019. Excluding the effect of foreign currency exchange rates, gross written premiums increased $9 million driven by growth in Europe and Canada partially offset by the continued impact of the strategic exit from certain Lloyd’s business classes. Net written premiums increased $21 million for the three months ended September 30, 2020 as compared with the same period in 2019. Excluding the effect of foreign currency exchange rates, net written premiums increased $18 million for the three months ended September 30, 2020 as compared with the same period in 2019. Net earned premiums were consistent with the same period in 2019.

Core results improved $36 million for the three months ended September 30, 2020 as compared with the same period in 2019 primarily due to improved non-catastrophe current accident year underwriting results.

The combined ratio of 98.1% improved 9.3 points for the three months ended September 30, 2020 as compared with the same period in 2019 due to a 6.2 point improvement in the loss ratio and a 3.1 point improvement in the expense ratio. The improvement in the loss ratio was primarily due to improved non-catastrophe current accident year underwriting results driven by lower large losses partially offset by higher net catastrophe losses. Net catastrophe losses were $7 million, or 3.0 points of the loss ratio, for the three months ended September 30, 2020, as compared with $4 million, or 1.7 points of the loss ratio, for the three months ended September 30, 2019. Net catastrophe losses for the three months ended September 30, 2020 related primarily to severe weather related events. The improvement in the expense ratio was driven by lower acquisition and underwriting expenses.

There was no prior year loss reserve development recorded for the three months ended September 30, 2020 as compared with unfavorable development of $1 million for the three months ended September 30, 2019. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

~~Nine Month Comparison~~

Gross written premiums for International decreased $15 million for the nine months ended September 30, 2020 as compared with the same period in 2019. Excluding the effect of foreign currency exchange rates, gross written premiums decreased $10 million driven by the continued impact of the strategic exit from certain Lloyd’s business classes partially offset by growth in Canada and Europe. Net written premiums decreased $29 million for the nine months ended September 30, 2020 as compared with the same period in 2019. Excluding the effect of foreign currency exchange rates, net written premiums decreased $24 million for the nine months ended September 30, 2020 as compared with the same period in 2019. The decrease in net earned premiums was consistent with the trend in net written premiums in recent quarters.

~~Core income for the nine months ended September 30, 2020 was generally consistent with the same period in 2019.~~

The combined ratio of 104.2% increased 2.0 points for the nine months ended September 30, 2020 as compared with the same period in 2019 due to a 3.9 point increase in the loss ratio partially offset by a 1.9 point improvement in the expense ratio. The increase in the loss ratio was driven by higher net catastrophe losses partially offset by favorable net prior year loss reserve development in the current year period. Net catastrophe losses were $62 million, or 8.9 points of the loss ratio, for the nine months ended September 30, 2020, as compared with $10 million, or 1.4 points of the loss ratio, for the nine months ended September 30, 2019. Net catastrophe losses for the nine months ended September 30, 2020 included $38 million related to the COVID-19 pandemic and $24 million related primarily to severe weather related events. The improvement in the expense ratio was driven by lower acquisition and underwriting expenses.

Favorable net prior year loss reserve development of $3 million was recorded for the nine months ended September 30, 2020 as compared with unfavorable development of $14 million for the nine months ended September 30, 2019. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

The following table summarizes the gross and net carried reserves for 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) September 30, 2020 December 31, 2019
Gross case reserves $ 821
$ 858
Gross IBNR reserves 1,154
1,018
Total gross carried claim and claim adjustment expense reserves $ 1,975
$ 1,876
Net case reserves $ 718
$ 759
Net IBNR reserves 997
869
Total net carried claim and claim adjustment expense reserves $ 1,715
$ 1,628

Table of Contents

Life & Group

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

Periods ended September 30 Three Months Nine Months
(In millions) 2020 2019 2020 2019
Net earned premiums $ 127
$ 130
$ 380
$ 390
Net investment income 208
207
622
616
Core loss before income tax (59 ) (170 ) (66 ) (179 )
Income tax benefit on core loss 24
48
49
74
Core loss (35 ) (122 ) (17 ) (105 )

~~Three Month Comparison~~


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

Core ~~loss~~income improved ~~$87~~$32 million for the three months ended ~~September 30, 2020~~March 31, 2021 as compared with the same period in ~~2019. Core loss for the three months ended September 30,~~ 2020 included a $59 million charge related to the recognition of an active life reserve premium deficiency for long term care policies primarily driven by actions taken on discount rate assumptions. The normative risk free rate (the projection of the 10-year U.S. Treasury rate in the long term) was lowered by 100 basis points to 2.75% and the time period to grade up to the normative rate was extended from 6 years to 10 years. Core loss for the three months ended September 30, 2020 also included a $36 million increase in the structured settlement claim reserves and a $30 million reduction in long term care claim reserves, both resulting from the annual claim experience studies in the third quarter of 2020. Excluding the impacts of the GPV and claim reserve reviews, core results were favorable driven by better than expected morbidity in the long term care ~~business. During~~business and higher net investment income. The increase in net investment income was driven by returns in the ~~third~~limited partnership portfolio. Further, during the first quarter of ~~2020,~~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.

Core loss for the three months ended September 30, 2019 included a $170 million charge related to the recognition of an active life reserve premium deficiency partially offset by a $44 million reduction in long term care claim reserves resulting from the annual claim experience study in the third quarter of 2019.

~~Nine Month Comparison~~

Core loss improved $88 million for the nine months ended September 30, 2020 as compared with the same period in 2019. The drivers of core loss for the nine month period were generally consistent with the three month summary noted above.

~~Life & Group Policyholder Reserves~~

Annually, in the third quarter, management assesses the adequacy of its long term care future policy benefit reserves by performing a GPV to determine if there is a premium deficiency. See Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1 for further information on the reserving process.

The September 30, 2020 GPV indicated a premium deficiency of $74 million and future policy benefit reserves were increased accordingly. As a result, the long term care active life reserves carried as of September 30, 2020 represent management's best estimate assumptions at that date with no margin for adverse deviation. A summary of the changes in the GPV results is presented in the table below:

Long Term Care Active Life Reserve - Change in estimated reserve margin (In millions)
September 30, 2019 Estimated Margin $ —
Changes in underlying discount rate assumptions (609 )
Changes in underlying morbidity assumptions 51
Changes in underlying persistency assumptions 152
Changes in underlying premium rate action assumptions 318
Changes in underlying expense and other assumptions 14
September 30, 2020 Premium Deficiency $ (74 )

The premium deficiency was primarily driven by changes in discount rate assumptions due to lower expected reinvestment rates, contemplating both near-term market indications and long-term normative assumptions. This unfavorable driver was significantly offset by higher than previously estimated rate increases on active rate increase programs, new planned rate increase filings and favorable changes to the underlying persistency and morbidity assumptions.

Our projections do not indicate a pattern of expected profits in earlier future years followed by expected losses in later future years. As such, we will not establish additional future policy benefit reserves for profits followed by losses in periods where the long term care business generates core income. The need for these additional future policy benefit reserves will be re-evaluated in connection with the next GPV, which is expected to be completed in the third quarter of 2021.

The table below summarizes the estimated pretax impact on our results of operations from various hypothetical revisions to our active life reserve assumptions. The annual GPV process involves updating all assumptions to management's then current best estimate, and historically all significant assumptions have been revised each year. In the Hypothetical revisions table below, we have assumed that revisions to such assumptions would occur in each policy type, age and duration within each policy group and would occur absent any changes, mitigating or otherwise, in the other assumptions. Although such hypothetical revisions are not currently required or anticipated, we believe they could occur based on past variances in experience and our expectations of the ranges of future experience that could reasonably occur. Any actual adjustment would be dependent on the specific policies affected and, therefore, may differ from the estimates summarized below.

September 30, 2020
Estimated reduction to pretax income
Hypothetical revisions (In millions)
Morbidity:
2.5% increase in morbidity $ 339
5% increase in morbidity 677
Persistency:
5% decrease in active life mortality and lapse $ 254
10% decrease in active life mortality and lapse 469
Discount Rates:
25 basis point decline in new money interest rates $ 175
50 basis point decline in new money interest rates 356
Premium Rate Actions:
25% decrease in anticipated future premium rate increases $ 66
50% decrease in anticipated future premium rate increases 132

~~The following table summarizes policyholder reserves for Life & Group.~~

September 30, 2020
(In millions) Claim and claim adjustment expenses Future policy benefits Total
Long term care $ 2,866
$ 9,678
$ 12,544
Structured settlement annuities 547
—
547
Other 12
—
12
Total 3,425
9,678
13,103
Shadow adjustments ⁽¹⁾
204
3,035
3,239
Ceded reserves ⁽²⁾
137
265
402
Total gross reserves $ 3,766
$ 12,978
$ 16,744

December 31, 2019
(In millions) Claim and claim adjustment expenses Future policy benefits Total
Long term care $ 2,863
$ 9,470
$ 12,333
Structured settlement annuities 515
—
515
Other 12
—
12
Total 3,390
9,470
12,860
Shadow adjustments ⁽¹⁾
167
2,615
2,782
Ceded reserves ⁽²⁾
159
226
385
Total gross reserves $ 3,716
$ 12,311
$ 16,027


~~(1)~~	To the extent that unrealized gains on fixed income securities supporting long term care products and annuity contracts would result in a premium deficiency if those gains were realized, an increase in Insurance reserves is recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments).


~~(2)~~	~~Ceded reserves relate to claim or policy reserves fully reinsured in connection with a sale or exit from the underlying business.~~

Corporate & Other

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


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

Periods ended September 30 Three Months Nine Months
(In millions) 2020 2019 2020 2019
Net investment income $ 3
$ 6
$ 10
$ 20
Interest expense 32
31
94
99
Core loss (19 ) (17 ) (48 ) (34 )

~~Three Month Comparison~~

~~Results~~Core loss increased $19 million for the three months ended ~~September 30, 2020 were generally consistent~~March 31, 2021 as compared with the same period in ~~2019.~~

~~Nine Month Comparison~~

~~Core loss is~~2020 driven by ~~interest expense on corporate debt partially offset by 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) September 30, 2020 December 31, 2019
Gross case reserves $ 1,147
$ 1,137
Gross IBNR reserves 894
1,097
Total gross carried claim and claim adjustment expense reserves $ 2,041
$ 2,234
Net case reserves $ 90
$ 92
Net IBNR reserves 76
83
Total net carried claim and claim adjustment expense reserves $ 166
$ 175

Table of Contents

INVESTMENTS

The financial market disruption in the first quarter of 2020 significantly impacted our investment portfolio. Losses from our limited partnership and common and preferred equity portfolios, as well as the recognition of impairment losses on certain fixed maturity holdings, negatively impacted our Net income for the three months ended March 31, 2020. While financial markets have broadly recovered during the second and third quarters of 2020, there could be continued volatility in our investment portfolio.

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
(In millions)	2021			2020
Fixed income securities:
Taxable fixed income securities	$	359		$	371
Tax-exempt fixed income securities	80			78
Total fixed income securities	439			449
Limited partnership investments	43			(70)
Common stock	18			(55)
Other, net of investment expense	4			5
Net investment income	$	504		$	329

Effective income yield for the fixed income securities portfolio	4.4		%	4.6		%
Limited partnership and common stock return	3.4		%	(7.0)		%

Periods ended September 30 Three Months Nine Months
(In millions) 2020 2019 2020 2019
Fixed income securities:
Taxable fixed income securities $ 363
$ 383
$ 1,094
$ 1,151
Tax-exempt fixed income securities 80
79
238
241
Total fixed income securities 443
462
1,332
1,392
Limited partnership investments 64
12
38
125
Common stock 7
6
(8 ) 32
Other, net of investment expense 3
7
18
24
Pretax net investment income $ 517
$ 487
$ 1,380
$ 1,573
Fixed income securities, after tax $ 364
$ 378
$ 1,092
$ 1,140
Net investment income, after tax 421
399
1,130
1,284

Effective income yield for the fixed income securities portfolio, pretax 4.5 % 4.8 % 4.6 % 4.8 %
Effective income yield for the fixed income securities portfolio, after tax 3.7 % 3.9 % 3.7 % 3.9 %
Limited partnership and common stock return 4.1 % 0.9 % 1.7 % 7.7 %

~~Pretax net~~Net investment income increased ~~$30~~$175 million for the three months ended ~~September 30, 2020~~March 31, 2021 as compared with the same period in ~~2019~~2020 driven by limited partnership and common stock ~~returns partially offset by lower yields in our fixed income portfolio.~~returns.

Pretax net investment income decreased $193 million for the nine months ended September 30, 2020 as compared with the same period in 2019 driven by limited partnership and common stock returns and lower yields in our fixed income portfolio.

Net Investment Gains (Losses)

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


Periods ended September 30	Three Months						Nine Months
Three months ended March 31													Three months ended March 31
(In millions)	2020			2019			2020			2019			(In millions)	2021		2020
Fixed maturity securities:													Fixed maturity securities:
Corporate and other bonds	$	14		$	7		$	(105	)	$	—		Corporate and other bonds	$	36	$	(79)
States, municipalities and political subdivisions	6			1			39			13			States, municipalities and political subdivisions	(1)		—
Asset-backed	6			(5		)	34			(19		)	Asset-backed	3		4
Total fixed maturity securities	26			3			(32		)	(6		)	Total fixed maturity securities	38		(75)
Non-redeemable preferred stock	25			7			(45		)	60			Non-redeemable preferred stock	2		(133)
Short term and other	(21		)	(3		)	(27		)	(34		)	Short term and other	17		5
Mortgage loans	(3		)	—			(16		)	—			Mortgage loans	—		(13)
Net investment gains (losses)	27			7			(120		)	20			Net investment gains (losses)	57		(216)
Income tax (expense) benefit on net investment gains (losses)	(7		)	(2		)	23			(7		)	Income tax (expense) benefit on net investment gains (losses)	(8)		47
Net investment gains (losses), after tax	$	20		$	5		$	(97	)	$	13		Net investment gains (losses), after tax	$	49	$	(169)

Net investment gains (losses) increased ~~$20~~$273 million for the three months ended ~~September 30, 2020~~March 31, 2021 as compared with the same period in ~~2019. The increase was~~2020 driven by the favorable relative change in fair value of non-redeemable preferred stock and ~~higher net realized investment gains on sales of fixed maturity securities partially offset by a loss on the third quarter 2020 redemption of our $400 million senior notes due August 2021. Pretax~~lower impairment ~~losses of $5 million on available-for-sale securities and $3 million of credit losses on mortgage loans were recognized in the currentquarter.~~losses.

Net investment gains (losses) decreased $140 million for the nine months ended September 30, 2020 as compared with the same period in 2019. The decrease was driven by higher impairment losses and the unfavorable change in fair value of non-redeemable preferred stock partially offset by higher net realized investment gains on sales of fixed maturity securities. Pretax impairment losses of $108 million on available-for-sale securities and $16 million of credit losses on mortgage loans were recognized for the nine months ended September 30, 2020.

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.


	September 30, 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	$	4,026	$	127	$	4,136	$	95	U.S. Government, Government agencies and Government-sponsored enterprises	$	3,149	$	36	$	3,672	$	117
AAA	3,623		452		3,254		349		AAA	3,589		385		3,627		454
AA	6,773		961		6,663		801		AA	7,221		802		7,159		1,012
A	9,470		1,296		9,062		1,051		A	9,380		1,057		9,543		1,390
BBB	17,488		2,105		16,839		1,684		BBB	17,692		1,920		18,007		2,596
Non-investment grade	2,521		38		2,253		101		Non-investment grade	2,548		131		2,623		149
Total	$	43,901	$	4,979	$	42,207	$	4,081	Total	$	43,579	$	4,331	$	44,631	$	5,718

As of ~~September 30, 2020~~March 31, 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 ~~September 30, 2020~~March 31, 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

September 30, 2020
(In millions) Estimated Fair Value Gross Unrealized Losses
U.S. Government, Government agencies and Government-sponsored enterprises $ 99
$ 1
AAA 37
1
AA 244
9
A 642
21
BBB 1,264
71
Non-investment grade 816
78
Total $ 3,102
$ 181

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

September 30, 2020
(In millions) Estimated Fair Value Gross Unrealized Losses
Due in one year or less $ 142
$ 8
Due after one year through five years 819
54
Due after five years through ten years 1,479
83
Due after ten years 662
36
Total $ 3,102
$ 181

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Duration

A primary objective in the management of the investment portfolio is to optimize return relative to the corresponding liabilities and respective liquidity needs. Our views on the current interest rate environment, tax regulations, asset class valuations, specific security issuer and broader industry segment conditions as well as domestic and global economic conditions, are some of the factors that enter into an investment decision. We also continually monitor exposure to issuers of securities held and broader industry sector exposures and may from time to time adjust such exposures based on our views of a specific issuer or industry sector.

A further consideration in the management of the investment portfolio is the characteristics of the corresponding liabilities and the ability to align the duration of the portfolio to those liabilities and to meet future liquidity needs, minimize interest rate risk and maintain a level of income sufficient to support the underlying insurance liabilities. For portfolios where future liability cash flows are determinable and typically long term in nature, we segregate investments for asset/liability management purposes. The segregated investments support the long term care and structured settlement liabilities in the Life & Group segment.

The effective durations of fixed income securities and short term investments are presented in the following table. Amounts presented are net of payable and receivable amounts for securities purchased and sold, but not yet settled.


	September 30, 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	$	18,700	9.0	$	18,015	8.9	Investments supporting Life & Group	$	17,952	9.1	$	18,518	9.2
Other investments	27,408		4.5	26,813		4.1	Other investments	27,666		4.9	28,839		4.5
Total	$	46,108	6.3	$	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) September 30, 2020 December 31, 2019
Short term investments:
Commercial paper $ —
$ 1,181
U.S. Treasury securities 1,247
364
Other 215
316
Total short term investments $ 1,462
$ 1,861

~~During 2020, we shifted our commercial paper holdings to U.S. Treasury securities.~~

~~In addition to Short term investments, the Company held $442 million and $242 million~~Table of ~~Cash as of September 30, 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, as the situation continues to evolve through the remainder of 2020, and possibly thereafter, uncertainty exists as to the potential impacts on our operating cash flows. 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 ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, net cash provided by operating activities was ~~$1,408~~$82 million as compared with ~~$980~~$212 million for the same period in ~~2019.~~2020. The ~~increase~~decrease in cash provided by operating activities was driven by ~~an increase in premiums collected,~~the payment of the EWC LPT premium partially offset by lower net claim payments and ~~lower income taxes paid, partially offset by a lower level of distributions from limited partnerships.~~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 ~~used~~provided by investing activities was ~~$407~~$408 million for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, as compared with ~~$60~~$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 ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, net cash used by financing activities was ~~$801~~$321 million as compared with ~~$887~~$675 million for the same period ~~2019. Financing activities for~~in 2020. In the ~~periods presented include:~~

~~During~~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 ~~nine months ended September 30,~~first quarter of 2020, we paid dividends of ~~$850~~$649 million and repurchased 435,376 shares of our common stock at an aggregate cost of $18 million.

In the third quarter of 2020, we issued $500 million of 2.05% senior notes due August 15, 2030 and redeemed the $400 million outstanding aggregate principal balances of our 5.750% senior notes due August 15, 2021.

~~During the nine months ended September 30, 2019, we paid dividends of $834 million and repurchased 415,695 shares of our common stock at an aggregate cost of $18 million.~~

In the second quarter of 2019, we issued $500 million of 3.90% senior notes due May 1, 2029 and redeemed the $500 million outstanding aggregate principal balances of our 5.875% senior notes due August 15, 2020.

Common Stock Dividends

~~Dividends~~A quarterly cash dividend of ~~$3.11~~$0.38 per share and a special cash dividend of $0.75 per share on our common stock ~~including a special dividend of $2.00 per share,~~ were declared and paid ~~during~~in the ~~nine months ended September~~first quarter of 2021. On April 30, ~~2020. On October 30, 2020,~~2021, our Board of Directors declared a quarterly cash dividend of ~~$0.37~~$0.38 per share, payable ~~December~~June 3, ~~2020~~2021 to stockholders of record on ~~November 16, 2020.~~May 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 $5.5 billion of cash, short term investments and highly liquid securities issued by the U.S. government and its agencies as of September 30, 2020, of which $517 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 ~~September 30, 2020,~~March 31, 2021, CCC was in a positive earned surplus position. CCC paid dividends of ~~$855~~$330 million and ~~$940~~$670 million during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019~~.2020. 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 are more uncertain, and therefore more difficult to estimate than loss reserves respecting traditional property and casualty exposures); the impact of routine ongoing insurance reserve reviews we are conducting; our expectations concerning our revenues, earnings, expenses and investment activities; volatility in investment returns; 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 ~~drive significant decreases in our premium volume~~operations and ~~result 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 ~~nine~~three months ended ~~September 30, 2020.~~March 31, 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 ~~September 30, 2020,~~March 31, 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 ~~September 30, 2020.~~March 31, 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 ~~September 30, 2020~~March 31, 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 and our Quarterly Reports on Form 10-Q for each of the first two quarters of~~ 2020, ~~include~~includes a detailed ~~discussions~~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~~10-K.

Any significant interruption in the operation of our business functions, facilities and ~~restates~~systems or our vendors' facilities and systems could result in ~~their entirety~~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 ~~factors contained~~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 shut-down or unavailability of one or more of our or our vendors' systems or facilities for these and 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 a deterioration of our ~~Quarterly Report on Form 10-Q for~~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 ~~quarter ended June 30, 2020.~~ability to issue financial statements in a timely manner.

The ~~COVID-19 pandemic~~foregoing risks could also expose us to monetary and ~~measures to mitigate~~reputational damages. Potential exposures resulting from the ~~spread of~~March 2021 cybersecurity attack, described in the ~~virus~~following risk factor, as well as any future incidents may include substantially increased compliance costs and required computer system upgrades and security-related investments. If our business continuity plans or system security do not sufficiently address these risks, they could have ~~resulted in significant risk across our enterprise, which have had, and may continue to have,~~a material adverse ~~impacts~~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 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. Both the extensiveness of the pandemic itself, as well as the measures taken to mitigate the virus' spread globally, are unprecedented and their effects continue to be pervasive. In many geographic locations, the virus continues to spread. Accordingly, it remains the case that months past the initial identification of the threat, all of the direct and indirect consequences and implications of COVID-19 and measures to mitigate its spread are not yetinformation currently 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 have led to and may continue to 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 and those that are impacted by audit premium adjustments. Significant decreases in premium volume directly and adversely impacts our underwriting expense ratio. In addition, certain customers, across a broad spectrum of industries and markets, have been and continue to be impacted by lost business, which may affect our ability to collect amounts owed to us by policyholders. We recorded a decrease in our estimated audit premiums during the second quarter of 2020 impacting our net earned premium and if general economic conditionswe do not ~~improve in~~believe that the ~~remainder of 2020 or thereafter, our net written premiums and net earned premiums may be depressed, which may~~March 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.~~

~~While our~~ losses incurred during the first nine months of 2020 related to COVID-19 and measures to mitigate its spread represent our best estimate of our ultimate insurance losses resulting from events occurring in the first nine months of 2020 due to the pandemic and the consequent economic crisis, given the unprecedented nature of this event, a high level of uncertainty exists as to the potential impact on insurance losses from these events or other events that might occur for the remainder of the year and thereafter. The scope, duration and magnitude of the direct and indirect effects could continue to evolve through the remainder of 2020, and possibly thereafter, and could materially impact our ultimate loss estimate, including in lines of business where losses have already been incurred, as well as 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 unknown third parties or through cyber attacks. The risk of a breach can exist whether software services are 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 ~~potential for impacts~~personal information of our customers, claimants or employees, or sensitive and confidential information regarding our business and may

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result in ~~other lines unknown at this time. Continued spread of the virus,~~operational impairments and financial losses, as well as ~~new or extended shelter~~significant harm to our reputation. The breach of confidential information also could give rise to legal liability and regulatory action under data protection and privacy laws, as well as evolving regulation in ~~place restrictions~~this regard. Any such breach of our data security infrastructure could have a material adverse effect on our business, results of operations and ~~business closures, could cause us~~financial 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 ~~experience additional COVID-19 related catastrophe losses in future quarters, which could be material.~~

~~Financial Markets~~address the incident, including engaging a team of third-party forensic experts and ~~Investments~~

~~The COVID-19 pandemic has also significantly impacted financial markets.~~notifying law enforcement and key regulators. As investors have embarked on a flight to quality, risk free rates have decreased. In addition, liquidity concerns and overall economic uncertainties drove increased volatility in credit spreads and equity markets. While government actions to date have provided some stability to financial markets, economic prospects in the short term continue to be depressed and we remain in a historically low interest rate environment. The unabated spread of the ~~virus~~date of this report, we have restored network systems and resumed normal operations. We are continuing to assess the extension of efforts to mitigate the spread in numerous geographic areas will continue to cause substantial uncertainty on the timing and strength of any economic recovery and could continue to impact our investment portfolio results and valuations, and may result in additional volatility or losses in our investment portfolio, which could be material.

~~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~~full extent of the ~~investments~~impact from the incident, as well as determining any additional actions we ~~hold~~ 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 ~~in the underlying collateral of the security~~regulators may be required based on applicable law. As a result 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 strainotherwise related to the ~~pandemic.~~incident, we may be subject to subsequent investigations, claims or actions in addition to other costs, fines, penalties, or other obligations.

~~These significant financial market disruptions~~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 operations or financial condition. However, no assurances can be given, and ~~financial condition, the extent of which cannot be determined with any certainty at this time.~~

~~Claims and related litigation~~

Claim activity and related litigation has increased, and may continue to increase significantly, in certain lines of business as a result of the pandemic and mitigating actions. We have experienced, and are likely to continue to experience, increased frequency in claim submissions in product lines that are implicated by the virus and the mitigating activities taken by our customers and governmental authorities in response to its spread, as well as increased litigation related to denial of claims based on policy coverage. These lines include primarily healthcare professional liability and workers' compensation, as well as commercial property-related business interruption coverage, management liability (directors and officers, employment practices, and professional liability lines) and trade credit. In addition, our surety lines may continue to experience increased losses, particularly in construction surety, where there is significant risk that contractors will be adversely and materially impacted by general economic conditions. We have recorded significant losses in these areas in the first nine months of 2020 and may experience continued losses, which could be material.

Increased frequency or severity in any or all of the foregoing lines, or others where the exposure has yet to emerge, may have a material impact on our business, results of operations and financial condition, the extent of which cannot be determined with any certainty at this time.

We have also begun to incur substantial expenses related to litigation activity in connection with COVID-related legal claims. These actions primarily relate to denial of claims submitted as a result of the pandemic and the mitigating actions under commercial property policies for business interruption coverage, including lockdowns and closing of certain businesses. The significance of such litigation, both in substance and volume, and the resultant activities we have initiated, including external counsel engagement, and the costs related thereto, may have a material impact on our business, results of operation and financial condition, the extent of which cannot be determined with any certainty at this time.

~~Regulatory impact~~

The regulatory environment is rapidly evolving in direct response to the pandemic and the mitigating actions being taken. Numerous regulatory authorities to which our business is subject have implemented or are contemplating broad and significant regulations restricting and governing insurance company operations during the pandemic crisis. Such actions include, but are not limited to, premium moratoriums, premium refunds and reductions, restrictions on policy cancellations and potential legislation-driven expansion of policy terms. To date, certain state authorities have ordered premium refunds and certain regulatory and legislative bodies have proposed requiring insurers to cover business interruption under policies that were not written to provide for such coverage under the current circumstances. In addition, certain states have directed expansion of workers’ compensation coverage through presumption of compensability of claims for a broad category of workers. This highly fluid and challenging regulatory environment, and the new regulations we are now, and may be subject to future incidents that could have such a material adverse effect or may ~~have a~~

~~material impact on our business, results of operation~~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 the majority of 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~~reputation.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Items 2 (a) and (b) are not applicable

(c) The table below details the repurchases of our ~~business operations,~~common stock made during the ~~extent of which cannot be determined with any certainty at this time.~~three months ended March 31, 2021.

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.

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

Item 6. Exhibits

See Exhibit Index.

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


				CNA Financial Corporation

Dated: May 7, 2021			By	~~CNA Financial Corporation~~

~~Dated: November 2, 2020~~	By	/s/ Albert J. Miralles
				Albert J. Miralles Executive Vice President and Chief Financial Officer (Duly authorized officer and principal financial and accounting officer)

Table of Contents

EXHIBIT INDEX



Description of Exhibit			Exhibit Number
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

7457



~~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)


(In millions, except share data)	September 30, 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 $38,969 and $38,126, less allowance for credit loss of $47 and $-)	$	43,901		$	42,207
Equity securities at fair value (cost of $927 and $820)	919			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	1,567			1,752			Limited partnership investments	1,654		1,619
Other invested assets	69			65			Other invested assets	77		76
Mortgage loans (less allowance for uncollectible receivables of $21 and $-)	1,088			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	1,462			1,861			Short term investments	1,334		1,907
Total investments	49,006			47,744			Total investments	48,671		50,293
Cash	442			242			Cash	588		419
Reinsurance receivables (less allowance for uncollectible receivables of $24 and $25)	4,370			4,179
Insurance receivables (less allowance for uncollectible receivables of $32 and $32)	2,527			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	401			395			Accrued investment income	399		380
Deferred acquisition costs	697			662			Deferred acquisition costs	741		708
Deferred income taxes	144			199			Deferred income taxes	197		66
Property and equipment at cost (less accumulated depreciation of $224 and $215)	256			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	146			147			Goodwill	148		148
Deferred non-insurance warranty acquisition expense	2,998			2,840			Deferred non-insurance warranty acquisition expense	3,149		3,068
Other assets (includes $- and $21 due from Loews Corporation)	1,788			1,473
Other assets							Other assets	1,813		1,628
Total assets	$	62,775		$	60,612		Total assets	$	63,713	$	64,026
Liabilities							Liabilities
Insurance reserves:							Insurance reserves:
Claim and claim adjustment expenses	$	22,534		$	21,720		Claim and claim adjustment expenses	$	23,056	$	22,706
Unearned premiums	5,020			4,583			Unearned premiums	5,319		5,119
Future policy benefits	12,978			12,311			Future policy benefits	12,772		13,318
Long term debt	2,776			2,679			Long term debt	2,777		2,776
Deferred non-insurance warranty revenue	3,951			3,779			Deferred non-insurance warranty revenue	4,119		4,023
Other liabilities (includes $47 and $21 due to Loews Corporation)	3,495			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	50,754			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; 271,387,058 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	2,202			2,203			Additional paid-in capital	2,194		2,211
Retained earnings	8,796			9,348			Retained earnings	9,084		9,081
Accumulated other comprehensive income	411			51			Accumulated other comprehensive income	187		803
Treasury stock (1,653,185 and 1,627,652 shares), at cost	(71		)	(70		)
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	12,021			12,215			Total stockholders’ equity	12,089		12,707
Total liabilities and stockholders' equity	$	62,775		$	60,612		Total liabilities and stockholders' equity	$	63,713	$	64,026


Nine months ended September 30
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 income	$	303		$	727
Adjustments to reconcile net income to net cash flows provided by operating activities:
Deferred income tax benefit	(41		)	(72		)
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	2			(1		)	Trading portfolio activity	(8)		7
Net investment losses (gains)	120			(20		)
Net investment (gains) losses							Net investment (gains) losses	(57)		216
Equity method investees	12			48			Equity method investees	14		98
Net amortization of investments	(51		)	(64		)	Net amortization of investments	(24)		(15)
Depreciation and amortization	46			52			Depreciation and amortization	14		16
Changes in:							Changes in:
Receivables, net	(271		)	207			Receivables, net	(700)		(229)
Accrued investment income	(6		)	(18		)	Accrued investment income	(19)		(8)
Deferred acquisition costs	(36		)	(37		)	Deferred acquisition costs	(32)		(27)
Insurance reserves	1,479			337			Insurance reserves	605		510
Other, net	(149		)	(179		)	Other, net	(53)		(258)
Net cash flows provided by operating activities	1,408			980			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	5,023			4,872			Fixed maturity securities - sales	907		823
Fixed maturity securities - maturities, calls and redemptions	2,706			2,116			Fixed maturity securities - maturities, calls and redemptions	1,084		799
Equity securities	275			171			Equity securities	119		98
Limited partnerships	281			417			Limited partnerships	49		204
Mortgage loans	41			109			Mortgage loans	42		15
Purchases:							Purchases:
Fixed maturity securities	(8,466		)	(7,053		)	Fixed maturity securities	(2,203)		(1,818)
Equity securities	(373		)	(140		)	Equity securities	(81)		(220)
Limited partnerships	(144		)	(167		)	Limited partnerships	(61)		(32)
Mortgage loans	(154		)	(193		)	Mortgage loans	(16)		(61)
Change in other investments	(4		)	(8		)	Change in other investments	(2)		(6)
Change in short term investments	403			(180		)	Change in short term investments	573		1,267
Purchases of property and equipment	(16		)	(20		)	Purchases of property and equipment	(3)		(3)
Other, net	21			16			Other, net	0		21
Net cash flows used by investing activities	(407		)	(60		)
Net cash flows provided by investing activities							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	(850		)	(834		)	Dividends paid to common stockholders	(310)		(649)
Proceeds from the issuance of debt	495			496
Repayment of debt	(419		)	(520		)
Purchase of treasury stock	(18		)	(18		)	Purchase of treasury stock	(3)		(18)
Other, net	(9		)	(11		)	Other, net	(8)		(8)
Net cash flows used by financing activities	(801		)	(887		)	Net cash flows used by financing activities	(321)		(675)
Effect of foreign exchange rate changes on cash	0			(3		)	Effect of foreign exchange rate changes on cash	0		(9)
Net change in cash	200			30			Net change in cash	169		615
Cash, beginning of year	242			310			Cash, beginning of year	419		242
Cash, end of period	$	442		$	340		Cash, end of period	$	588	$	857



			☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



			☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


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


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


Three months ended September 30
(In millions)	Corporate and other bonds			Asset-backed		Total		(In millions)	Corporate and other bonds		Asset-backed		Total
Allowance for credit losses:								Allowance for credit losses:
Beginning balance	$	39		$	12	$	51
Balance as of January 1, 2020								Balance as of January 1, 2020	$	0	$	0	$	0
Additions to the allowance for credit losses:								Additions to the allowance for credit losses:
For securities for which credit losses were not previously recorded	4			0		4
For available-for-sale securities accounted for as PCD assets	1			0		1
Impact of adopting ASC 326								Impact of adopting ASC 326	6		0		6
Securities for which credit losses were not previously recorded								Securities for which credit losses were not previously recorded	48		0		48
Available-for-sale securities accounted for as PCD assets								Available-for-sale securities accounted for as PCD assets	1		0		1

Reductions to the allowance for credit losses:								Reductions to the allowance for credit losses:
Securities sold during the period (realized)	9			0		9		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	0			0		0		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		Write-offs charged against the allowance	0		0		0
Recoveries of amounts previously written off	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	(1		)	1		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
Ending balance as of September 30, 2020	$	34		$	13	$	47
Balance as of March 31, 2020								Balance as of March 31, 2020	$	49	$	0	$	49


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


	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


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


~~(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.


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


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)



September 30, 2020	Estimated Fair Value (In millions)		Valuation Technique(s)	Unobservable Input(s)	Range (Weighted Average)
Fixed maturity securities	$	888	Discounted cash flow	Credit spread	1% - 10% (3%)


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


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 nine months ended September 30
(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	4,425			3,968
Increase (decrease) in provision for insured events of prior years	(68		)	(65		)
Amortization of discount	143			143
Total net incurred ⁽¹⁾	4,500			4,046
Net payments attributable to:
Current year events	(556		)	(599		)
Prior year events	(3,285		)	(3,547		)
Total net payments	(3,841		)	(4,146		)
Foreign currency translation adjustment and other	39			29
Net reserves, end of period	18,583			17,894
Ceded reserves, end of period	3,951			3,702
Gross reserves, end of period	$	22,534		$	21,596


~~(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.


~~(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



Three months ended September 30, 2019	Specialty			Commercial			International			Life & Group			Corporate & Other
(In millions)																Eliminations			Total
Operating revenues
Net earned premiums	$	712		$	813		$	236		$	130		$	0		$	(1	)	$	1,890
Net investment income	121			136			17			207			6			0			487
Non-insurance warranty revenue	292			0			0			0			0			0			292
Other revenues	1			10			(1		)	(1		)	1			(1		)	9
Total operating revenues	1,126			959			252			336			7			(2		)	2,678
Claims, benefits and expenses
Net incurred claims and benefits	411			564			163			476			(7		)	0			1,607
Policyholders’ dividends	2			5			0			0			0			0			7
Amortization of deferred acquisition costs	155			134			56			0			0			0			345
Non-insurance warranty expense	278			0			0			0			0			0			278
Other insurance related expenses	71			123			35			29			0			(1		)	257
Other expenses	13			9			7			1			35			(1		)	64
Total claims, benefits and expenses	930			835			261			506			28			(2		)	2,558
Core income (loss) before income tax	196			124			(9		)	(170		)	(21		)	0			120
Income tax (expense) benefit on core income (loss)	(43		)	(27		)	0			48			4			0			(18		)
Core income (loss)	$	153		$	97		$	(9	)	$	(122	)	$	(17	)	$	0		102
Net investment gains (losses)																			7
Income tax (expense) benefit on net investment gains (losses)																			(2		)
Net investment gains (losses), after tax																			5
Net income (loss)																			$	107



Nine months ended September 30, 2020	Specialty			Commercial			International		Life & Group			Corporate & Other
(In millions)															Eliminations			Total
Operating revenues
Net earned premiums	$	2,124		$	2,470		$	699	$	380		$	0		$	(1	)	$	5,672
Net investment income	315			389			44		622			10			0			1,380
Non-insurance warranty revenue	926			0			0		0			0			0			926
Other revenues	1			18			0		0			3			(3		)	19
Total operating revenues	3,366			2,877			743		1,002			13			(4		)	7,997
Claims, benefits and expenses
Net incurred claims and benefits	1,346			1,897			480		983			(40		)	0			4,666
Policyholders’ dividends	2			15			0		0			0			0			17
Amortization of deferred acquisition costs	462			441			143		0			0			0			1,046
Non-insurance warranty expense	859			0			0		0			0			0			859
Other insurance related expenses	208			378			106		79			(1		)	(1		)	769
Other expenses	37			26			3		6			108			(3		)	177
Total claims, benefits and expenses	2,914			2,757			732		1,068			67			(4		)	7,534
Core income (loss) before income tax	452			120			11		(66		)	(54		)	0			463
Income tax (expense) benefit on core income (loss)	(98		)	(24		)	4		49			6			0			(63		)
Core income (loss)	$	354		$	96		$	15	$	(17	)	$	(48	)	$	0		400
Net investment gains (losses)																		(120		)
Income tax (expense) benefit on net investment gains (losses)																		23
Net investment gains (losses), after tax																		(97		)
Net income (loss)																		$	303



Nine months ended September 30, 2019	Specialty			Commercial			International			Life & Group			Corporate & Other
(In millions)																Eliminations			Total
Operating revenues
Net earned premiums	$	2,061		$	2,339		$	729		$	390		$	0		$	(2	)	$	5,517
Net investment income	410			480			47			616			20			0			1,573
Non-insurance warranty revenue	858			0			0			0			0			0			858
Other revenues	1			20			0			0			5			(4		)	22
Total operating revenues	3,330			2,839			776			1,006			25			(6		)	7,970
Claims, benefits and expenses
Net incurred claims and benefits	1,198			1,581			472			1,093			(40		)	0			4,304
Policyholders’ dividends	4			15			0			0			0			0			19
Amortization of deferred acquisition costs	454			391			180			0			0			0			1,025
Non-insurance warranty expense	801			0			0			0			0			0			801
Other insurance related expenses	217			372			94			87			(2		)	(2		)	766
Other expenses	37			27			14			5			108			(4		)	187
Total claims, benefits and expenses	2,711			2,386			760			1,185			66			(6		)	7,102
Core income (loss) before income tax	619			453			16			(179		)	(41		)	0			868
Income tax (expense) benefit on core income (loss)	(136		)	(97		)	(2		)	74			7			0			(154		)
Core income (loss)	$	483		$	356		$	14		$	(105	)	$	(34	)	$	0		714
Net investment gains (losses)																			20
Income tax (expense) benefit on net investment gains (losses)																			(7		)
Net investment gains (losses), after tax																			13
Net income (loss)																			$	727



(In millions)	September 30, 2020
A- to A++	$	2,729
B- to B++	874
Insolvent	4
Total voluntary reinsurance outstanding balance⁽¹⁾	$	3,607



Long Term Care Active Life Reserve - Change in estimated reserve margin (In millions)
September 30, 2019 Estimated Margin	$	—
Changes in underlying discount rate assumptions	(609		)
Changes in underlying morbidity assumptions	51
Changes in underlying persistency assumptions	152
Changes in underlying premium rate action assumptions	318
Changes in underlying expense and other assumptions	14
September 30, 2020 Premium Deficiency	$	(74	)



September 30, 2020
	Estimated reduction to pretax income
Hypothetical revisions (In millions)	Estimated reduction to pretax income
Morbidity:
2.5% increase in morbidity	$	339
5% increase in morbidity	677
Persistency:
5% decrease in active life mortality and lapse	$	254
10% decrease in active life mortality and lapse	469
Discount Rates:
25 basis point decline in new money interest rates	$	175
50 basis point decline in new money interest rates	356
Premium Rate Actions:
25% decrease in anticipated future premium rate increases	$	66
50% decrease in anticipated future premium rate increases	132