UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 20202021

OR

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

For the Transition Period From ____________ to _____________

Commission File Number 1-6541

LOEWS CORPORATION
(Exact name of registrant as specified in its charter)

Delaware 13-2646102
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)

667 Madison Avenue, New York, NY 10065-8087
(Address of principal executive offices) (Zip Code)

(212) 521-2000
(Registrant’s telephone number, including area code)

NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.01 per shareLNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒
 
No ☐
  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒
 
No ☐
  
Not Applicable ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☒
Accelerated filer  ☐
Non-accelerated filer  ☐
Smaller reporting company  ☐

 
Emerging growth company  ☐
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐
 
No  ☒
  

As of October 23, 2020,29, 2021, there were 274,872,872253,684,412 shares of the registrant’s common stock outstanding.




INDEX

Page
No.
Part I. Financial Information
 
  
Item 1. Financial Statements (unaudited)
 
  
Consolidated Condensed Balance Sheets
3
September 30, 20202021 and December 31, 20192020
 

 
Consolidated Condensed Statements of Operations
4
Three and nine months ended September 30, 20202021 and 20192020
 

 
Consolidated Condensed Statements of Comprehensive Income (Loss)
5
Three and nine months ended September 30, 20202021 and 20192020
 

 
Consolidated Condensed Statements of Equity
6
Three and nine months ended September 30, 20202021 and 20192020
 

 
Consolidated Condensed Statements of Cash Flows
8
Nine months ended September 30, 20202021 and 20192020
 

 
Notes to Consolidated Condensed Financial Statements
9
  
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
39
37
  
Item 3. Quantitative and Qualitative Disclosures about Market Risk
6257
  
Item 4. Controls and Procedures
62
57
  
Part II. Other Information
62
58
  
Item 1. Legal Proceedings
62
58
  
Item 1A. Risk Factors
62
58
  
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
67
61
  
Item 6. Exhibits
68
62

2
Index


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.

Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)

 September 30,  December 31, 
 September 30, 2020  December 31, 2019  2021  2020 
(Dollar amounts in millions, except per share data)            
            
Assets:            
            
Investments:            
Fixed maturities, amortized cost of $38,979 and $38,157, less allowance for credit loss of $47 and $0 $43,917  $42,240 
Equity securities, cost of $1,391 and $1,244  1,368   1,306 
Fixed maturities, amortized cost of $40,342 and $38,963, less allowance for credit loss of $31 and $40
 $45,069  $44,646 
Equity securities, cost of $1,552 and $1,456
  1,660   1,561 
Limited partnership investments  1,758   2,004   1,996   1,798 
Other invested assets, primarily mortgage loans, less allowance for credit loss of $21 and $0  1,176   1,072 
Other invested assets, primarily mortgage loans, less allowance for credit loss of $26 and $26
  1,140   1,165 
Short term investments  4,553   4,628   4,178   4,674 
Total investments  52,772   51,250   54,043   53,844 
Cash  886   336   811   478 
Receivables  7,850   7,675   9,187   7,833 
Property, plant and equipment  10,468   15,568   9,878   10,451 
Goodwill  765   767   349   785 
Deferred non-insurance warranty acquisition expenses  2,998   2,840   3,418   3,068 
Deferred acquisition costs of insurance subsidiaries  697   662   721   708 
Other assets  3,028   3,145   3,319   3,069 
Total assets $79,464  $82,243  $81,726  $80,236 
                
Liabilities and Equity:                
                
Insurance reserves:                
Claim and claim adjustment expense $22,534  $21,720  $23,832  $22,706 
Future policy benefits  12,978   12,311   13,198   13,318 
Unearned premiums  5,020   4,583   5,577   5,119 
Total insurance reserves  40,532   38,614   42,607   41,143 
Payable to brokers  466   108   665   92 
Short term debt  35   77   187   37 
Long term debt  10,373   11,456   8,925   10,072 
Deferred income taxes  913   1,168   1,089   1,065 
Deferred non-insurance warranty revenue  3,951   3,779   4,443   4,023 
Other liabilities  4,574   5,111   4,680   4,623 
Total liabilities  60,844   60,313   62,596   61,055 
                
Commitments and contingent liabilities          0   0
 
                
Preferred stock, $0.10 par value:        
Preferred stock, $0.10 par value:
        
Authorized – 100,000,000 shares        0   0
 
Common stock, $0.01 par value:      
Common stock, $0.01 par value:
        
Authorized – 1,800,000,000 shares                
Issued – 291,393,899 and 291,210,222 shares  3   3 
Issued – 269,574,153 and 269,360,973 shares
  3   3 
Additional paid-in capital  3,379   3,374   3,120   3,133 
Retained earnings  14,437   15,823   15,336   14,150 
Accumulated other comprehensive income (loss)  238   (68)
Accumulated other comprehensive income  191   581 
  18,057   19,132   18,650   17,867 
Less treasury stock, at cost (16,353,956 and 240,000 shares)  (685)  (13)
Less treasury stock, at cost (15,807,106 and 150,000 shares)
  (833)  (7)
Total shareholders’ equity  17,372   19,119   17,817   17,860 
Noncontrolling interests  1,248   2,811   1,313   1,321 
Total equity  18,620   21,930   19,130   19,181 
Total liabilities and equity $79,464  $82,243  $81,726  $80,236 

See accompanying Notes to Consolidated Condensed Financial Statements.

3
Index


Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

 Three Months Ended  Nine Months Ended 
 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
  September 30,  September 30, 
 2020  2019  2020  2019  2021  2020  2021  2020 
(In millions, except per share data)                        
                        
Revenues:                        
Insurance premiums $1,953  $1,890  $5,672  $5,517  $2,059  $1,953  $6,056  $5,672 
Net investment income  540   525   1,347   1,733   483   540   1,649   1,347 
Investment gains (losses) (Note 2)  46   8   (1,312)  41   22   46   657   (1,312)
Non-insurance warranty revenue  317   292   926   858   357   317   1,054   926 
Operating revenues and other  609   960   2,241   2,906   450   609   1,580   2,241 
Total  3,465   3,675   8,874   11,055   3,371   3,465   10,996   8,874 
                                
Expenses:                                
Insurance claims and policyholders’ benefits  1,616   1,614   4,683   4,323   1,632   1,616   4,684   4,683 
Amortization of deferred acquisition costs  360   345   1,046   1,025   368   360   1,084   1,046 
Non-insurance warranty expense  293   278   859   801   330   293   973   859 
Operating expenses and other  876   1,234   3,894   3,614   638   876   2,208   3,894 
Interest  137   144   404   449   99   137   324   404 
Total  3,282   3,615   10,886   10,212   3,067   3,282   9,273   10,886 
Income (loss) before income tax  183   60   (2,012)  843   304   183   1,723   (2,012)
Income tax (expense) benefit  (21)  (21)  284   (183)  (58)  (21)  (391)  284 
Net income (loss)  162   39   (1,728)  660   246   162   1,332   (1,728)
Amounts attributable to noncontrolling interests  (23)  33   400   55   (26)  (23)  (97)  400 
Net income (loss) attributable to Loews Corporation $139  $72  $(1,328) $715  $220  $139  $1,235  $(1,328)
                                
Basic and diluted net income (loss) per share $0.50  $0.24  $(4.70) $2.34 
Basic net income (loss) per share $0.86  $0.50  $4.71  $(4.70)
                
Diluted net income (loss) per share $0.85  $0.50  $4.70  $(4.70)
                                
Weighted average shares outstanding:                                
Shares of common stock  279.40   301.65   282.63   305.08   256.76   279.40   262.27   282.63 
Dilutive potential shares of common stock  0.09   0.70       0.65   0.54   0.09   0.50     
Total weighted average shares outstanding assuming dilution  279.49   302.35   282.63   305.73   257.30   279.49   262.77   282.63 

See accompanying Notes to Consolidated Condensed Financial Statements.

4
Index

Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

 Three Months Ended  Nine Months Ended 
 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
  September 30,  September 30, 
 2020  2019  2020  2019  2021  2020  2021  2020 
(In millions)                        
                        
Net income (loss) $162  $39  $(1,728) $660  $246  $162  $1,332  $(1,728)
                                
Other comprehensive income (loss), after tax                                
Changes in:                                
Net unrealized gains (losses) on investments with an allowance for credit losses  6       (3)          6       (3)
Net unrealized gains on other investments  207   41   354   1,007 
Total unrealized gains on investments  213   41   351   1,007 
Net unrealized gains (losses) on other investments  (138)  207   (465)  354 
Total unrealized gains (losses) on investments  (138)  213   (465)  351 
Unrealized gains (losses) on cash flow hedges  1   (4)  (18)  (16)  2   1   14   (18)
Pension and postretirement benefits  7   10   27   25   16   7   32   27 
Foreign currency translation  38   (31)  (17)  (11)  (33)  38   (19)  (17)
                                
Other comprehensive income  259   16   343   1,005 
Other comprehensive income (loss)  (153)  259   (438)  343 
                                
Comprehensive income (loss)  421   55   (1,385)  1,665   93   421   894   (1,385)
                                
Amounts attributable to noncontrolling interests  (49)  31   363   (53)  (9)  (49)  (49)  363 
                                
Total comprehensive income (loss) attributable to Loews Corporation $372  $86  $(1,022) $1,612  $84  $372  $845  $(1,022)

See accompanying Notes to Consolidated Condensed Financial Statements.

5
Index

Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF EQUITY
(Unaudited)

    Loews Corporation Shareholders    
             Accumulated  Common    
       Additional     Other  Stock    
    Loews Corporation Shareholders        Common  Paid-in  Retained  Comprehensive  Held in  Noncontrolling 
 Total  
Common
Stock
  
Additional
Paid-in
Capital
  
Retained
Earnings
  
Accumulated
Other
Comprehensive
Income (Loss)
  
Common
Stock
Held in
Treasury
  
Noncontrolling
Interests
  Total  Stock  Capital  Earnings  Income (Loss)  Treasury  Interests 
(In millions)                                          
                                          
Balance, July 1, 2019 $22,394  $3  $3,612  $16,374  $3  $(478) $2,880 
Net income  39           72           (33)
Other comprehensive income  16               14       2 
Dividends paid ($0.0625 per share)  (29)          (19)          (10)
Purchases of Loews Corporation treasury stock  (169)                  (169)    
Purchases of subsidiary stock from noncontrolling interests  (2)                      (2)
Stock-based compensation  9       8               1 
Balance, September 30, 2019 $22,258  $3  $3,620  $16,427  $17  $(647) $2,838 
                            
Balance, July 1, 2020 $18,413  $3  $3,371  $14,316  $5  $(491) $1,209  $18,413  $3  $3,371  $14,316  $5  $(491) $1,209 
Net income  162           139           23   162           139           23 
Other comprehensive income  259               233       26   259               233       26 
Dividends paid ($0.0625 per share)  (27)          (17)          (10)
Dividends paid ($0.0625 per share)
  (27)          (17)          (10)
Purchases of Loews Corporation treasury stock  (195)                  (195)      (195)                  (195)    
Stock-based compensation  8       8                   8       8                 
Other  0           (1)      1       0           (1)      1     
Balance, September 30, 2020 $18,620  $3  $3,379  $14,437  $238  $(685) $1,248  $18,620  $3  $3,379  $14,437  $238  $(685) $1,248 
                            
Balance, July 1, 2021 $19,398  $3  $3,121  $15,132  $327  $(500) $1,315 
Net income  246           220           26 
Other comprehensive loss
  (153)              (136)      (17)
Dividends paid ($0.0625 per share)
  (27)          (16)          (11)
Purchases of Loews Corporation treasury stock  (333)                  (333)    
Stock-based compensation  (2)      (2)                
Other  1       1                 
Balance, September 30, 2021
 $19,130  $3  $3,120  $15,336  $191  $(833) $1,313 

See accompanying Notes to Consolidated Condensed Financial Statements.

6
Index

Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF EQUITY
(Unaudited)

    Loews Corporation Shareholders    
             Accumulated  Common    
       Additional     Other  Stock    
    Loews Corporation Shareholders        Common  Paid-in  Retained  Comprehensive  Held in  Noncontrolling 
 Total  
Common
Stock
  
Additional
Paid-in
Capital
  
Retained
Earnings
  
Accumulated
Other
Comprehensive
Income (Loss)
  
Common
Stock
Held in
Treasury
  
Noncontrolling
Interests
  Total  Stock  Capital  Earnings  Income (Loss)  Treasury  Interests 
(In millions)                                          
                                          
Balance, January 1, 2019 $21,386  $3  $3,627  $15,773  $(880) $(5) $2,868 
Net income  660           715           (55)
Other comprehensive income  1,005               897       108 
Dividends paid ($0.1875 per share)  (145)          (57)          (88)
Purchases of Loews Corporation treasury stock  (642)                  (642)    
Purchases of subsidiary stock from noncontrolling interests  (18)                      (18)
Stock-based compensation  17       (5)              22 
Other  (5)      (2)  (4)          1 
Balance, September 30, 2019 $22,258  $3  $3,620  $16,427  $17  $(647) $2,838 
                            
Balance, December 31, 2019, as reported $21,930  $3  $3,374  $15,823  $(68) $(13) $2,811 
Cumulative effect adjustment from change in accounting standards (Note 1)  (5)          (5)            
Balance, January 1, 2020, as reported $21,930  $3  $3,374  $15,823  $(68) $(13) $2,811 
Cumulative effect adjustment from change in accounting standards  (5)          (5)            
Balance, January 1, 2020, as adjusted  21,925   3   3,374   15,818   (68)  (13)  2,811   21,925   3   3,374   15,818   (68)  (13)  2,811 
Net loss  (1,728)          (1,328)          (400)  (1,728)          (1,328)          (400)
Other comprehensive income  343               306       37   343               306       37 
Dividends paid ($0.1875 per share)  (141)          (53)          (88)
Dividends paid ($0.1875 per share)
  (141)          (53)          (88)
Deconsolidation of Diamond Offshore  (1,087)                      (1,087)  (1,087)                      (1,087)
Purchases of Loews Corporation treasury stock  (673)                  (673)      (673)                  (673)    
Purchases of subsidiary stock from noncontrolling interests  (37)      5               (42)  (37)      5               (42)
Stock-based compensation  17       (1)              18   17       (1)              18 
Other  1       1           1   (1)  1       1           1   (1)
Balance, September 30, 2020 $18,620  $3  $3,379  $14,437  $238  $(685) $1,248  $18,620  $3  $3,379  $14,437  $238  $(685) $1,248 
                            
Balance, January 1, 2021 $19,181  $3  $3,133  $14,150  $581  $(7) $1,321 
Net income  1,332           1,235           97 
Other comprehensive loss  (438)              (390)      (48)
Dividends paid ($0.1875 per share)
  (103)          (49)          (54)
Purchases of Loews Corporation treasury stock  (826)                  (826)    
Purchases of subsidiary stock from noncontrolling interests  (18)                      (18)
Stock-based compensation  5       (11)              16 
Other  (3)      (2)              (1)
Balance, September 30, 2021
 $19,130  $3  $3,120  $15,336  $191  $(833) $1,313 

See accompanying Notes to Consolidated Condensed Financial Statements.

7
Index


Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

Nine Months Ended September 30, 2020  2019 
Nine Months Ended September 30 2021  2020 
(In millions)            
            
Operating Activities:            
            
Net income (loss) $(1,728) $660  $1,332  $(1,728)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities, net  2,503   747   (85)  2,503 
Changes in operating assets and liabilities, net:                
Receivables  (273)  179   (1,115)  (273)
Deferred acquisition costs  (36)  (37)  (15)  (36)
Insurance reserves  1,479   337   1,891   1,479 
Other assets  (411)  (386)  (853)  (411)
Other liabilities  238   315   701   238 
Trading securities  (481)  (544)  (180)  (481)
Net cash flow provided by operating activities  1,291   1,271   1,676   1,291 
                
Investing Activities:                
                
Purchases of fixed maturities  (8,466)  (7,053)  (7,127)  (8,466)
Proceeds from sales of fixed maturities  5,023   4,872   2,510   5,023 
Proceeds from maturities of fixed maturities  2,706   2,116   3,360   2,706 
Purchases of equity securities  (242)  (373)
Proceeds from sales of equity securities  237   275 
Purchases of limited partnership investments  (144)  (167)  (281)  (144)
Proceeds from sales of limited partnership investments  305   680   239   305 
Purchases of property, plant and equipment  (584)  (743)  (327)  (584)
Acquisitions  0   (257)
Dispositions  47   137   52   47 
Sale of interest in Altium Packaging  417     
Deconsolidation of Diamond Offshore  (483)  0       (483)
Change in short term investments  706   26   725   706 
Other, net  (218)  (95)  13   (120)
Net cash flow used by investing activities  (1,108)  (484)  (424)  (1,108)
                
Financing Activities:                
                
Dividends paid  (53)  (57)  (49)  (53)
Dividends paid to noncontrolling interests  (88)  (88)  (54)  (88)
Purchases of Loews Corporation treasury stock  (678)  (643)  (825)  (678)
Purchases of subsidiary stock from noncontrolling interests  (37)  (18)  (18)  (37)
Principal payments on debt  (1,157)  (1,796)  (1,154)  (1,157)
Issuance of debt  2,393   1,870   1,199   2,393 
Other, net  (13)  (15)  (12)  (13)
Net cash flow provided (used) by financing activities  367   (747)
Net cash flow (used) provided by financing activities  (913)  367 
                
Effect of foreign exchange rate on cash  0   (3)  (6)    
                
Net change in cash  550   37   333   550 
Cash, beginning of period  336   405   478   336 
Cash, end of period $886  $442  $811  $886 

See accompanying Notes to Consolidated Condensed Financial Statements.

8
Index



Loews Corporation and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation


Loews Corporation is a holding company. Its consolidated subsidiaries are engaged in the following lines of business: commercial property and casualty insurance (CNA Financial Corporation (“CNA”), aan 89.6%89.6% owned subsidiary); transportation and storage of natural gas and natural gas liquids (Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”), a wholly owned subsidiary); and the operation of a chain of hotels (Loews Hotels Holding Corporation (“Loews Hotels & Co”), a wholly owned subsidiary); and the manufacture of rigid plastic packaging solutions (Altium Packaging LLC (“Altium Packaging”), a 99% owned subsidiary). Unless the context otherwise requires, the term “Company” as used herein means Loews Corporation including its consolidated subsidiaries, and the term “Net income (loss) attributable to Loews Corporation” as used herein means Net income (loss) attributable to Loews Corporation shareholders.shareholders and the term “subsidiaries” means Loews Corporation’s consolidated subsidiaries.


In the second quarterOn April 1, 2021, Loews Corporation sold 47% of 2020, Diamond Offshore Drilling, Inc. (“Diamond Offshore”) was deconsolidated from the Company’s consolidated financial statements.its interest in Altium Packaging, previously a 99% owned subsidiary. See Note 2 for further discussion.


In the opinion of management, the accompanying unaudited Consolidated Condensed Financial Statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s financial position as of September 30, 20202021 and December 31, 2019 and2020, results of operations, comprehensive income (loss) and changes in shareholders’ equity for the three and nine months ended September 30, 20202021 and 20192020 and cash flows for the nine months ended September 30, 20202021 and 2019.2020. Net income (loss) for the third quarter and first nine months of each of the years is not necessarily indicative of net income (loss) for that entire year. These Consolidated Condensed Financial Statements should be read in conjunction with the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.2020.


The Company presents basic and diluted net income (loss) per share on the Consolidated Condensed Statements of Operations. Basic net income (loss) per share excludes dilution and is computed by dividing net income (loss) attributable to common stock by the weighted average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the three months ended September 30, 2020 there were 0.4 million shares attributable to employee stock-based compensation awards excluded from the diluted weighted average shares outstanding amounts because the effect would have been antidilutive. For the three months ended September 30, 2019 and the nine months ended September 30, 2020 and 20192021, there were 0 shares attributable to employee stock-based compensation awards excluded from the diluted weighted average shares outstanding amounts because the effect would have been antidilutive.


Accounting changesRecently issued ASUs – In JuneAugust of 20162018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The updated accounting guidance requires changes to the recognition of credit losses on financial instruments not accounted for at fair value through net income. For financial assets measured at cost, the expected credit loss model requires immediate recognition of estimated credit losses over the life of the asset and presentation of the asset at the net amount expected to be collected. This new guidance applies to mortgage loan investments, reinsurance and insurance receivables and other financing and trade receivables. For available-for-sale fixed maturity securities carried at fair value, estimated credit losses will continue to be measured at the present value of expected cash flows, however, the other than temporary impairment (“OTTI”) concept has been eliminated. Under the previous guidance, estimated credit impairments resulted in a write down of amortized cost. Under the new guidance, estimated credit losses are recognized through an allowance and reversals of the allowance are permitted if the estimate of credit losses declines. For available-for-sale fixed maturity securities where there is an intent to sell, impairment will continue to result in a write down of amortized cost.


On January 1, 2020, the Company adopted the updated guidance using a modified retrospective method with a cumulative effect adjustment recorded to beginning Retained earnings. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. A prospective transition approach is required for available-for-sale fixed maturity securities that were purchased with credit deterioration (“PCD assets”) or have recognized an OTTI write down prior to the effective date. The cumulative effect of the accounting change resulted in a $5 million decrease in Retained earnings, after tax and noncontrolling interests.

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The allowance for doubtful accounts for insurance, reinsurance and trade receivables was unchanged as a result of adopting the new guidance. At adoption, an allowance for credit losses of $6 million was established for available-for-sale fixed maturity securities that were PCD assets, with a corresponding increase to amortized cost, resulting in no adjustment to the carrying value of the securities. Below is a summary of the significant accounting policies impacted by the adoption of ASU 2016-13.


The allowance for credit losses is a valuation account that is reported as a reduction of a financial asset’s cost basis and is measured on a pool basis when similar risk characteristics exist. The allowance is estimated using relevant available information from both internal and external sources. Historical credit loss experience provides the basis for the estimation of expected credit losses and adjustments may be made to reflect current conditions and reasonable and supportable forecasts. Adjustments to historical loss information are made for additional factors that come to the Company’s attention. This could include significant shifts in counterparty financial strength ratings, aging of past due receivables, amounts sent to collection agencies, or other underlying portfolio changes. Current and forecast economic conditions are considered, using a variety of economic metrics and forecast indices. The sensitivity of expected credit losses relative to changes to the forecast of economic conditions can vary by financial asset class. A reasonable and supportable forecast period is up to 24 months from the balance sheet date. After the forecast period, the Company reverts to historical credit experience. Collateral arrangements such as letters of credit and amounts held in beneficiary trusts to mitigate credit risk are considered in the estimate of the net amount expected to be collected.


A policy election has been made to present accrued interest balances separately from the amortized cost basis of assets, and a practical expedient has been elected to exclude the accrued interest from the tabular disclosures for mortgage loans and available-for-sale securities. An election has been made not to estimate an allowance for credit losses on accrued interest receivables. The accrual of interest income is discontinued and the asset is placed on nonaccrual status within 90 days of the interest becoming delinquent. Interest accrued but not received for assets on nonaccrual status is reversed through Net investment income. Interest received for assets that are on nonaccrual status is recognized as payment is received. The asset is returned to accrual status when the principal and interest amounts contractually due are brought current, and future payments are expected. Interest receivables are presented in Receivables on the Consolidated Condensed Balance Sheet.


See Notes 3 and 10 for more information on credit losses.


Recently issued ASUs – In August of 2018, the FASB issued ASU 2018-12, “Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts.” The updated accounting guidance requires changes to the measurement and disclosure of long-duration contracts. The guidance requires entities to update annually cash flow assumptions, including morbidity and persistency, and update quarterly discount rate assumptions using an upper-medium grade fixed-income instrument yield. The effect of changes in cash flow assumptions will be recorded in Net income and the effect of changes in discount rate assumptions will be recorded in Other comprehensive income (“OCI”). This guidance is effective for interim and annual periods beginning after December 15, 2021, however the FASB has approved a one year deferral of the effective date. Early2022, with early adoption is permitted. The Companyguidance may elect to apply the guidancebe applied using either a modified retrospective transition method or a full retrospective transition method. The guidance requires restatement of prior periods presented. The Company plans to useadopt on the effective date, using the modified retrospective transition method at adoption and is currently evaluating the effect the updated guidance will have on its consolidated financial statements, including the increased disclosure requirements. The annual updating of cash flow assumptions is expected to increase income statement volatility. While the requirements of the new guidance represent a material change from existing accounting guidance, the underlying economics of the business and related cash flows will be unchanged.

2.  Significant Transactions

2.  Deconsolidation of Diamond OffshoreAltium Packaging


On April 26, 2020 (the “Filing Date”), Diamond Offshore and certain1, 2021, Loews Corporation sold 47% of its direct and indirect subsidiaries filed voluntary petitionsinterest in the United States Bankruptcy CourtAltium Packaging to GIC, Singapore’s sovereign wealth fund, for the Southern District of Texas seeking relief under Chapter 11 of the United States Bankruptcy Code (the “Chapter 11 Filing”). As a result of Diamond Offshore’s Chapter 11 Filing and applicable U.S. generally accepted accounting principles,$420 million in cash consideration. Loews Corporation no longer controls Diamond Offshore for accounting purposesshares certain participating rights with GIC related to capital allocation and therefore, Diamond Offshoreother decisions by Altium Packaging. Therefore, in accordance with Accounting Standards Codification (“ASC”) 810, “Consolidation,” Altium Packaging was deconsolidated from itsLoews Corporation’s consolidated financial statements effective as of April 1, 2021. Effective April 1, 2021, Loews Corporation’s investment in Altium Packaging is accounted for under the Filing Date. See Note 14 for Diamond Offshore’s revenuesequity method of accounting, with the investment reported in Other assets on the Consolidated Condensed Balance Sheets and equity income (loss) reported in Operating expenses throughand other on the Filing Date.Consolidated Condensed Statements of Operations.

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9

The transaction resulted in a gain of $555 million ($438 million after tax) for the nine months ended September 30, 2021, which is recorded in Investment gains (losses) on the Consolidated Condensed Statement of Operations. Loews Corporation’s retained investment in Altium Packaging was recorded at an estimated fair value of $473 million. The difference between the fair value of Loews Corporation’s investment in Altium Packaging and Loews Corporation’s 53% share of the carrying value of Altium Packaging’s net assets was attributed to definite lived intangible assets and goodwill. The amortization of the amounts attributed to definite lived intangible assets will be recognized as a component of equity income (loss) reported in Operating expenses and other on the Consolidated Condensed Statements of Operations. The assets and liabilities deconsolidated from the Consolidated Condensed Balance Sheets were property, plant and equipment of $490 million, goodwill of $436 million, intangible assets of $488 million, other assets of approximately $370 million, long term debt of $1.1 billion and other liabilities of approximately $380 million.

Diamond Offshore


As a result of the April 26, 2020 (“the Filing Date”) bankruptcy filing of Diamond Offshore Drilling, Inc. (“Diamond Offshore”) and certain of its subsidiaries and applicable accounting principles generally accepted in the United States of America (“GAAP”), Diamond Offshore was deconsolidated from Loews Corporation’s consolidated financial statements in the second quarter of 2020. Through the Filing Date, Diamond Offshore’s results were included in Loews Corporation’s consolidated financial statements and Loews Corporation recognized in its earnings its proportionate share of Diamond Offshore’s losses through such date. The deconsolidation resulted in the recognition of a loss of $1.2 billion ($957 million after tax) during the nine months ended September 30, 2020, which is reported within Investment gains (losses) on the Consolidated Condensed Statements of Operations. This loss representsDuring the difference betweennine months ended September 30, 2020, Diamond Offshore also recorded an aggregate asset impairment charge of $774 million ($408 million after tax and noncontrolling interests), which is reported within Operating expenses and other on the carrying value andConsolidated Condensed Statements of Operations. For additional information regarding the estimated fair value, which was immaterial, of Loews Corporation’s investment in equity securitiesdeconsolidation of Diamond Offshore asand the Diamond Offshore asset impairments, see Notes 2 and 6 of the Filing Date.
Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

3. Investments


Net investment income is as follows:

Three Months Ended Nine Months Ended 
 
Three Months Ended
September 30,
  
Nine Months Ended
September 30
 September 30, 
September 30,
 
 2020  2019  2020  2019 2021 2020 2021 2020 
(In millions)                    
                    
Fixed maturity securities $432  $452  $1,300  $1,362  $425  $432  $1,278  $1,300 
Limited partnership investments  71   16   26   140   89   71   285   26 
Short term investments  2   13   11   42   1   2   1   11 
Equity securities  18   16   24   62   4   18   53   24 
Income from trading portfolio (a)  22   34       144 
Income (loss) from trading portfolio (a)  (30)  22   46     
Other  14   13   44   39   12   14   42   44 
Total investment income  559   544   1,405   1,789   501   559   1,705   1,405 
Investment expenses  (19)  (19)  (58)  (56)  (18)  (19)  (56)  (58)
Net investment income $540  $525  $1,347  $1,733  $483  $540  $1,649  $1,347 

(a)
Net unrealized gains (losses) relatedinvestment income recognized due to changesthe change in fair value on securities still held wereas of September 30, 2021 and 2020 was $(55) and $11 and $17for the three months ended September 30, 20202021 and 20192020 and $13(9) and $55$13 for the nine months ended September 30, 20202021 and 2019.2020.

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Investment gains (losses) are as follows:

 Three Months Ended  Nine Months Ended 
 
Three Months Ended
September 30,
  
Nine Months Ended
September 30
  September 30,  
September 30,
 
 2020  2019  2020  2019  2021  2020  2021  2020 
(In millions)                        
                        
Fixed maturity securities $26  $3  $(32) $(6)
Fixed maturity securities:          
 
Gross gains $50  $44  $159  $175 
Gross losses  (28)  (18)  (68)  (207)
Investment gains (losses) on fixed maturity securities  22   26   91   (32)
Equity securities  25   7   (45)  60   (2)  25   17   (45)
Derivative instruments  (2)  (2)  (7)  (13)  2   (2)  7   (7)
Short term investments and other  (3)      (17)          (3)  2   (17)
Deconsolidation of Diamond Offshore (see Note 2)          (1,211)    
Altium Packaging (see Note 2)          555     
Diamond Offshore (see Note 2)          (15)  (1,211)
Investment gains (losses) (a) $46  $8  $(1,312) $41  $22  $46  $657  $(1,312)

(a)
Gross investment gains on available-for-sale securities were $44 and $34for the three months ended September 30, 2020 and 2019 and $175 and $98 for the nine months ended September 30, 2020 and 2019. Gross investment losses on available-for-sale securities were $18 and $31for the three months ended September 30, 2020 and 2019 and $207 and $104 for the nine months ended September 30, 2020 and 2019.During the three and nine months ended September 30, 2021, $2 of investment losses and $15 of investment gains were recognized due to the change in fair value of non-redeemable preferred stock still held as of September 30, 2021. During the three and nine months ended September 30, 2020,, $25 $25 of investment gains and $44 of investment losses were recognized due to the change in fair value of non-redeemable preferred stock still held as of September 30, 2020. During the three and nine months ended September 30, 2019, $7 and $60 of investment gains were recognized due to the change in fair value of non-redeemable preferred stock still held as of September 30, 20192020.



The allowance for credit loss related to available-for-sale fixed maturity securities is the difference between the present value of cash flows expected to be collected and the amortized cost basis. All available evidence is considered when determining whether an investment requires a credit loss write-down or allowance to be recorded. Examples of such evidence may include the financial condition and near term prospects of the issuer, whether the issuer is current with interest and principal payments, credit ratings on the security or changes in ratings over time, general market conditions and industry, sector or other specific factors and whether it is likely that the amortized cost will be recovered through the collection of cash flows. Changes in the allowance are presented as a component of Investment gains (losses) on the Consolidated Condensed Statements of Operations.
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The following tables present the activity related to the allowance on available-for-sale securities with credit impairments and PCDpurchased credit-deteriorated (“PCD”) assets. Accrued interest receivables on available-for-sale fixed maturity securities totaled $390$387 million, $371 million and is$390 million as of September 30, 2021, December 31, 2020 and September 30, 2020 and are excluded from the estimate of expected credit losses and the amortized cost basis in the tables within this Note.

Three months ended September 30, 2020 
Corporate and
Other Bonds
  
Asset-
backed
  Total 
 Corporate and  Asset-    
Three months ended September 30, 2021 Other Bonds  backed  Total 
(In millions)                  
                  
Allowance for credit losses:                  
Balance as of July 1, 2020 $39  $12  $51 
Balance as of July 1, 2021
 $24  $21  $45 
Additions to the allowance for credit losses:                        
For securities for which credit losses were not previously recorded  4       4 
For available-for-sale securities accounted for as PCD assets  1       1 
Securities for which credit losses were not previously recorded            
Available-for-sale securities accounted for as PCD assets  2   
   2 
                        
Reductions to the allowance for credit losses:                        
Securities sold during the period (realized)  9       9             
Write-offs charged against the allowance
  16       16 
                        
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period  (1)  1       
  
   
Total allowance for credit losses $34  $13  $47  $10  $21  $31 

Nine months ended September 30, 2020
         
          
Allowance for credit losses:         
Balance as of December 31, 2019 $0  $0  $0 
Additions to the allowance for credit losses:            
Impact of adopting ASC 326
  6       6 
For securities for which credit losses were not previously recorded  62   12   74 
For available-for-sale securities accounted for as PCD assets  3       3 
             
Reductions to the allowance for credit losses:            
Securities sold during the period (realized)  15       15 
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis  1       1 
             
Additional increases or (decrease) to the allowance for credit losses on securities that had an allowance recorded in a previous period  (21)  1   (20)
Total allowance for credit losses $34  $13  $47 
Three months ended September 30, 2020         
          
Allowance for credit losses:         
Balance as of July 1, 2020
 $39  $12  $51 
Additions to the allowance for credit losses:            
Securities for which credit losses were not previously recorded  4   
   4 
Available-for-sale securities accounted for as PCD assets  1       1 
             
Reductions to the allowance for credit losses:            
Securities sold during the period (realized)  9       9 
Write-offs charged against the allowance
            
             
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period  (1)  1   
Total allowance for credit losses $34  $13  $47 

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Index
  Corporate and
  Asset-
    
Nine months ended September 30, 2021 Other Bonds  backed  Total 
(In millions)         
          
Allowance for credit losses:         
Balance as of January 1, 2021
 $23  $17  $40 
Additions to the allowance for credit losses:            
Securities for which credit losses were not previously recorded  14       14 
Available-for-sale securities accounted for as PCD assets  4   4   8 
             
Reductions to the allowance for credit losses:            
Securities sold during the period (realized)  6       6 
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis            
Write-offs charged against the allowance
  16       16 
             
Additional increases or (decrease) to the allowance for credit losses on securities that had an allowance recorded in a previous period  (9)      (9)
Total allowance for credit losses $10  $21  $31 

Nine months ended September 30, 2020         
          
Allowance for credit losses:         
Balance as of January 1, 2020 $0  $0  $0 
Additions to the allowance for credit losses:            
Impact of adopting ASC 326  6       6 
Securities for which credit losses were not previously recorded  62   12   74 
Available-for-sale securities accounted for as PCD assets  3       3 
             
Reductions to the allowance for credit losses:            
Securities sold during the period (realized)  15       15 
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis  1       1 
Write-offs charged against the allowance
            
             
Additional increases or (decrease) to the allowance for credit losses on securities that had an allowance recorded in a previous period  (21)  1   (20)
Total allowance for credit losses $34  $13  $47 


The components of available-for-sale impairment losses recognized in earnings by asset type are presented in the following table. The table includes losses on securities with an intention to sell and changes in the allowance for credit losses on securities since acquisition date:

 Three Months Ended  Nine Months Ended 
 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
  September 30,  September 30, 
 2020  2019  2020  2019  2021  2020  2021  2020 
(In millions)                        
                        
Fixed maturity securities available-for-sale:                        
Corporate and other bonds $4  $12  $94  $24  

 $4 $5  $94 
Asset-backed  1   2   14   10  $11   1   11   14 
Impairment losses recognized in earnings $5  $14  $108  $34  $11 $5  $16  $108 


There were $3 million and $16 million of losses on mortgage loans recognized during the three and nine months ended September 30, 2020 primarily due to changes in expected credit losses. There were 0 losses recognized on mortgage loans during the three and nine months ended September 30, 2021.

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Index

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

September 30, 2020 
Cost or
Amortized
Cost
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Allowance
for Credit
Losses (a)
  
Estimated
Fair Value
 
 Cost or


Gross


Gross


Allowance



 
  Amortized   Unrealized   Unrealized   for Credit
   Estimated 
September 30, 2021
 Cost  Gains  Losses  Losses  Fair Value 
(In millions)                              
                              
Fixed maturity securities:                              
Corporate and other bonds $20,734  $3,047  $89  $34  $23,658  $21,608  $2,967  $42  $10  $24,523 
States, municipalities and political subdivisions  9,459   1,766   1       11,224   10,384   1,610   15       11,979 
Asset-backed:                                        
Residential mortgage-backed  3,796   153   1       3,948   3,176   89   6       3,259 
Commercial mortgage-backed  2,048   85   70   13   2,050   2,064   85   16   17   2,116 
Other asset-backed  2,097   76   19       2,154   2,429   76   4   4   2,497 
Total asset-backed  7,941   314   90   13   8,152   7,669   250   26   21   7,872 
U.S. Treasury and obligations of government-sponsored enterprises  347   4   1       350   139   1   4       136 
Foreign government  481   29           510   521   19   2       538 
Redeemable preferred stock
  12               12 
Fixed maturities available-for-sale  38,962   5,160   181   47   43,894   40,333   4,847   89   31   45,060 
Fixed maturities trading  17   6           23   9               9 
Total fixed maturity securities $38,979  $5,166  $181  $47  $43,917  $40,342  $4,847  $89  $31  $45,069 

December 31, 2019 
Cost or
Amortized
Cost
  
Gross
Unrealized
Gains
  
Gross
Unrealized
Losses
  
Estimated
Fair Value
  
Unrealized
OTTI Losses
(Gains) (a)
 
                
Fixed maturity securities:               
Corporate and other bonds $19,789  $2,292  $32  $22,049    
States, municipalities and political subdivisions  9,093   1,559       10,652    
Asset-backed:                   
Residential mortgage-backed  4,387   133   1   4,519  $(17)
Commercial mortgage-backed  2,265   86   5   2,346   1 
Other asset-backed  1,925   41   4   1,962   (3)
Total asset-backed  8,577   260   10   8,827   (19)
U.S. Treasury and obligations of government-sponsored enterprises  146   1   2   145     
Foreign government  491   14   1   504     
Redeemable preferred stock  10           10     
Fixed maturities available-for-sale  38,106   4,126   45   42,187   (19)
Fixed maturities trading  51   2       53     
Total fixed maturities $38,157  $4,128  $45  $42,240  $(19)

(a)On January 1, 2020, the Company adopted ASU 2016-13; see Note 1. The Unrealized OTTI Losses (Gains) column that tracked subsequent valuation changes on securities for which a credit loss had previously been recorded has been replaced with the Allowance for Credit Losses column. Prior period amounts were not adjusted for the adoption of this standard.
December 31, 2020
               
                
Fixed maturity securities:               
Corporate and other bonds $20,792  $3,578  $22  $23  $24,325 
States, municipalities and political subdivisions  9,729   1,863           11,592 
Asset-backed:                    
Residential mortgage-backed  3,442   146   1       3,587 
Commercial mortgage-backed  1,933   93   42   17   1,967 
Other asset-backed  2,179   81   9       2,251 
Total asset-backed  7,554   320   52   17   7,805 
U.S. Treasury and obligations of government-sponsored enterprises  339   2   3       338 
Foreign government  512   32           544 
Fixed maturities available-for-sale  38,926   5,795   77   40   44,604 
Fixed maturities trading  37   5           42 
Total fixed maturity securities $38,963  $5,800  $77  $40  $44,646 


The net unrealized gains on available-for-sale investments included in the tables above are recorded as a component of Accumulated other comprehensive income (loss) (“AOCI”). When presented in AOCI, these amounts are net of tax and noncontrolling interests and any required Shadow Adjustments. To the extent that unrealized gains on fixed income securities supporting long term care products and structured settlements not funded by annuities would result in a premium deficiency if those gains were realized, a related increase in Insurance reserves is recorded, net of tax and noncontrolling interests, as a reduction of net unrealized gains through Other comprehensive income (loss) (“Shadow Adjustments”). As of September 30, 20202021 and December 31, 2019,2020, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $2.3$2.2 billion and $2.0$2.5 billion (after tax and noncontrolling interests).

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Index


The available-for-sale securities in a gross unrealized loss position for which an allowance for credit losses has not been recorded are as follows:

 
Less than
12 Months
  
12 Months
or Longer
  Total   Less than
   12 Months
    
September 30, 2020 
Estimated
Fair Value
  
Gross
Unrealized
Losses
  
Estimated
Fair Value
  
Gross
Unrealized
Losses
  
Estimated
Fair Value
  
Gross
Unrealized
Losses
 
 12 Months  or Longer  Total 
     Gross     Gross
     Gross
 
  Estimated   Unrealized  Estimated
   Unrealized  Estimated
   Unrealized 
September 30, 2021
 Fair Value  Losses  Fair Value  Losses  Fair Value  Losses 
(In millions)                                    
                                    
Fixed maturity securities:                                    
Corporate and other bonds $1,579  $86  $56  $3  $1,635  $89  $1,853  $37  $88  $5  $1,941  $42 
States, municipalities and political subdivisions  154   1           154   1   885   15           885   15 
Asset-backed:                                                
Residential mortgage-backed  98   1   13       111   1   1,295   6   
       1,295   6 
Commercial mortgage-backed  693   69   19   1   712   70   317   4   194   12   511   16 
Other asset-backed  432   18   13   1   445   19   439   3   58   1   497   4 
Total asset-backed  1,223   88   45   2   1,268   90   2,051   13   252   13   2,303   26 
U.S. Treasury and obligations of government-sponsored enterprises  25   1           25   1   65   4   1       66   4 
Foreign government  20               20       73   2           73   2 
Total fixed maturity securities $3,001  $176  $101  $5  $3,102  $181  $4,927  $71  $341  $18  $5,268  $89 
                                                
December 31, 2019                        
December 31, 2020
                        
                                                
Fixed maturity securities:                                                
Corporate and other bonds $914  $21  $186  $11  $1,100  $32  $609  $21  $12  $1  $621  $22 
States, municipalities and political subdivisions  34               34       33               33     
Asset-backed:                                                
Residential mortgage-backed  249   1   30       279   1   71   1   11       82   1 
Commercial mortgage-backed  381   3   20   2   401   5   533   40   28   2   561   42 
Other asset-backed  449   3   33   1   482   4   344   9   13       357   9 
Total asset-backed  1,079   7   83   3   1,162   10   948   50   52   2   1,000   52 
U.S. Treasury and obligations of government-sponsored enterprises  62   2   2       64   2   63   3           63   3 
Foreign government  59   1   1       60   1   13               13     
Total fixed maturity securities $2,148  $31  $272  $14  $2,420  $45  $1,666  $74  $64  $3  $1,730  $77 


Based on current facts and circumstances, the Company believes the unrealized losses presented in the September 30, 20202021 securities in a gross unrealized loss position table above are not indicative of the ultimate collectability of the current amortized cost of the securities, but rather are attributable to changes in interest rates, credit spreads and other factors. The Company hasThere is no current intent to sell securities with unrealized losses, nor is it more likely than not that itsale will be required to sell prior to recovery of amortized cost; accordingly, the Company hasit was determined that there are 0 additional impairment losses to be recorded as ofat September 30,2020. 2021.

Contractual Maturity


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

 September 30, 2021  December 31, 2020 
 Cost or


Estimated


Cost or


Estimated
 
 September 30, 2020  December 31, 2019  Amortized


Fair


Amortized


Fair
 
 
Cost or
Amortized
Cost
  
Estimated
Fair
Value
  
Cost or
Amortized
Cost
  
Estimated
Fair
Value
  Cost  Value  Cost  Value 
(In millions)                        
                        
Due in one year or less $1,372  $1,392  $1,334  $1,356  $1,648  $1,656  $1,456  $1,458 
Due after one year through five years  11,955   12,625   9,746   10,186   10,776   11,517   12,304   13,098 
Due after five years through ten years  13,026   14,359   14,892   15,931   13,628   14,794   12,319   13,878 
Due after ten years  12,609   15,518   12,134   14,714   14,281   17,093   12,847   16,170 
Total $38,962  $43,894  $38,106  $42,187  $40,333  $45,060  $38,926  $44,604 


Actual maturities may differ from contractual maturities because certain securities may be called or prepaid. Securities not due at a single date are allocated based on weighted average life.

14
Mortgage Loans


The allowance for expected credit losses on mortgage loans is developed by assessing the credit quality of pools of mortgage loans in good standing using debt service coverage ratios (“DSCR”) and loan-to-value (“LTV”) ratios. The DSCR compares a property’s net operating income to its debt service payments, including principal and interest. The LTV ratio compares the current unpaid principal balance of the loan to the estimated fair value of the underlying property collateralizing the loan. The pools developed to measure the credit loss allowance use increments of DSCR and LTV to draw distinctions between risk levels. Changes in the allowance for mortgage loans are presented as a component of Investment gains (losses) on the Consolidated Condensed Statements of Operations. Mortgage loans are included in Other invested assets on the Consolidated Condensed Balance Sheets.


The following table presents the amortized cost basis of mortgage loans for each credit quality indicator by year of origination:origination. The primary credit quality indicators utilized are debt service coverage ratios (“DSCR”) and loan-to-value (“LTV”) ratios.

 Mortgage Loans Amortized Cost Basis by Origination Year (a)  Mortgage Loans Amortized Cost Basis by Origination Year (a) 
As of September 30, 2020 2020  2019  2018  2017  2016  Prior  Total 
As of September 30, 2021
 2021  2020  2019  2018  2017  Prior  Total 
(In millions)                                          
                                          
DSCR ≥1.6x                                          
LTV less than 55% $75  $33  $19  $85  $33  $161  $406  $
 8  $
75  $
16  $
37  $
116  $
203  $
455 
LTV 55% to 65%      33   29   55   12       129     38   15   18   
   1   72 
LTV greater than 65%      5               12   17  
17       14   7       23   61 
DSCR 1.2x - 1.6x                                                        
LTV less than 55%      31   10   13   16   79   149   13   15   95       5   58   186 
LTV 55% to 65%  20   54   32   24           130   25   
   
   24   10   4   63 
LTV greater than 65%  48   103                   151       24   9       8   
   41 
DSCR ≤1.2x                                                        
LTV less than 55%                                      35       30   
   65 
LTV 55% to 65%      14   14               28           42               42 
LTV greater than 65%      23       45   24   7   99       9   56           7   72 
Total $143  $296  $104  $222  $85  $259  $1,109  $63  $161  $282  $86  $169  $296  $1,057 

(a)The values in the table above reflect DSCR on a standardized amortization period and LTV ratios based on the most recent appraised values trended forward using changes in a commercial real estate price index.

Derivative Financial Instruments


A summary of the aggregate contractual or notional amounts and gross estimated fair values related to derivative financial instruments follows. The contractual or notional amounts for derivatives are used to calculate the exchange of contractual payments under related agreements and may not be representative of the potential for gain or loss on these instruments. Gross estimated fair values of derivative positions are currently presented in Equity securities, Receivables and Payable to brokers on the Consolidated Condensed Balance Sheets.

 September 30, 2021  December 31, 2020 
 September 30, 2020  December 31, 2019  Contractual/        Contractual/       
 
Contractual/
Notional
 Estimated Fair Value  
Contractual/
Notional
  Estimated Fair Value  Notional  Estimated Fair Value  Notional  Estimated Fair Value 
 Amount Asset (Liability)  Amount  Asset  (Liability)  Amount  Asset  (Liability)  Amount  Asset  (Liability) 
(In millions)                                 
                                 
With hedge designation:                                 
                
Interest rate swaps $675   $(28) $715     $(8) 

  

  

  $
675  

  $(26)
                                            
Without hedge designation:                                            
                    
Equity Options – purchased           57  $1     
– written           100       (1)
Equity markets:                        
Options – purchased $1           135  $3     
Interest rate swaps  80    (3)              100      $(1)  100       (3)
Embedded derivative on funds withheld liability  193    (16)  182       (7)  272       (11)  190       (19)

15
Investment Commitments


As part of the overall investment strategy, investments are made in various assets which require future purchase, sale or funding commitments. These investments are recorded once funded, and the related commitments may include future capital calls from various third-party limited partnerships, signed and accepted mortgage loan applications and obligations related to private placement securities. As of September 30, 2020,2021, commitments to purchase or fund were approximately $1.2$1.3 billion and to sell were approximately $55 million under the terms of these investments.

15
4. Fair Value


Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable:

●Level 1 – Quoted prices for identical instruments in active markets.

●Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.

●Level 3 – Valuations derived from valuation techniques in which one or more significant inputs are not observable.


Prices may fall within Level 1, 2 or 3 depending upon the methodology and inputs used to estimate fair value for each specific security. In general, the Company seeks to price securities are priced using third party pricing services. Securities not priced by pricing services are submitted to independent brokers for valuation and, if those are not available, internally developed pricing models are used to value assets using a methodology and inputs the Company believesthat market participants presumably would use to value the assets. Prices obtained from third-party pricing services or brokers are not adjusted.


Control procedures are performed over information obtained from pricing services and brokers to ensure prices received represent a reasonable estimate of fair value and to confirm representations regarding whether inputs are observable or unobservable. Procedures may include:  (i) the review of pricing service methodologies or broker pricing qualifications, (ii) back-testing, where past fair value estimates are compared to actual transactions executed in the market on similar dates, (iii) exception reporting, where period-over-period changes in price are reviewed and challenged with the pricing service or broker based on exception criteria and (iv) detailed analysis, where the Company performs an independent analysis of the inputs and assumptions used to price individual securities.securities is performed.


Assets and liabilities measured at fair value on a recurring basis are summarized in the following tables. Corporate bonds and other includes obligations of the U.S. Treasury, government-sponsored enterprises, foreign governments and redeemable preferred stock.stock.

September 30, 2020 Level 1  Level 2  Level 3  Total 
September 30, 2021
 Level 1  Level 2  Level 3  Total 
(In millions)                        
                        
Fixed maturity securities:                        
Corporate bonds and other $372  $23,452  $694  $24,518  $146  $24,186  $877  $25,209 
States, municipalities and political subdivisions      11,179   45   11,224       11,922   57   11,979 
Asset-backed      7,917   235   8,152       7,394   478   7,872 
Fixed maturities available-for-sale  372   42,548   974   43,894   146   43,502   1,412   45,060 
Fixed maturities trading      15   8   23       9       9 
Total fixed maturities $372  $42,563  $982  $43,917  $146  $43,511  $1,412  $45,069 
                                
Equity securities $655  $674  $39  $1,368  $890  $745  $25  $1,660 
Short term and other  4,379   56       4,435   4,063           4,063 
Payable to brokers  (40)  (31)      (71)  (118)  (1)      (119)

December 31, 2020
            
             
Fixed maturity securities:            
Corporate bonds and other $355  $24,082  $770  $25,207 
States, municipalities and political subdivisions      11,546   46   11,592 
Asset-backed      7,497   308   7,805 
Fixed maturities available-for-sale  355   43,125   1,124   44,604 
Fixed maturities trading      34   8   42 
Total fixed maturities $355  $43,159  $1,132  $44,646 
                 
Equity securities $796  $722  $43  $1,561 
Short term and other  4,538   39       4,577 
Payable to brokers  (14)  (29)      (43)
16

December 31, 2019 Level 1  Level 2  Level 3  Total 
(In millions)            
             
Fixed maturity securities:            
Corporate bonds and other $175  $22,065  $468  $22,708 
States, municipalities and political subdivisions      10,652       10,652 
Asset-backed      8,662   165   8,827 
Fixed maturities available-for-sale  175   41,379   633   42,187 
Fixed maturities trading      49   4   53 
Total fixed maturities $175  $41,428  $637  $42,240 
                 
Equity securities $629  $658  $19  $1,306 
Short term and other  3,138   1,383       4,521 
Receivables      2       2 
Payable to brokers  (18)  (10)      (28)
17


The following tables present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 20202021 and 2019:2020:

    
Net Realized
Investment Gains
(Losses) and Net Change
in Unrealized Investment
Gains (Losses)
                    
Unrealized
Gains
(Losses)
Recognized in
Net Income
(Loss) on Level
3 Assets and
  
Unrealized
Gains
(Losses)
Recognized in
Other
Comprehensive
Income (Loss)
on Level 3
Assets and
                             Unrealized 
2020 
Balance,
July 1
  
Included in
Net Income
(Loss)
  
Included in
OCI
  Purchases  Sales  Settlements  
Transfers
into
Level 3
  
Transfers
out of
Level 3
  
Balance,
September 30
  
Liabilities
Held at
September 30
  
Liabilities
Held at
September 30
 
                            Gains 
                         Unrealized  (Losses) 
                         Gains  Recognized in 
    Net Realized                    (Losses)  Other 
    Investment Gains                    Recognized in  Comprehensive 
    (Losses) and Net Change                    Net Income  Income (Loss) 
    in Unrealized Investment                    (Loss) on Level  on Level 3 
    Gains (Losses)                    3 Assets and  Assets and 
    Included in              Transfers  Transfers     Liabilities  Liabilities 
 Balance,  Net Income  Included in           into  out of  Balance,  Held at  Held at 
2021 July 1  (Loss)  OCI  Purchases  Sales  Settlements  Level 3  Level 3  September 30  September 30  September 30 
(In millions)                                                                  
                                                                  
Fixed maturity securities:                                                                  
Corporate bonds and other $555     $5  $129     $(3) $8     $694     $5  $883  $1  $1  $55  
   $(11)    $
(52) $877     $2 
States, municipalities and political subdivisions  0          45                 45          57                              57        
Asset-backed  222      9   20      (14)     $(2)  235      8   410   1   1   83  $
(9)  (11) $41  
(38)  478        
Fixed maturities available-for-sale  777  $0   14   194  $0   (17)  8   (2)  974  $0   13   1,350   2   2   138   (9)  (22)  41   (90)  1,412  $0   2 
Fixed maturities trading  4   4                           8   4       0                               0         
Total fixed maturities $781  $4  $14  $194  $0  $(17) $8  $(2) $982  $4  $13  $1,350  $2  $2  $138  $(9) $(22) $41  $(90) $1,412  $0  $2 
                                                                                        
Equity securities $27          $12                  $39          $36  $(2)     $1  $(11)     $
11  $
(10) $25  $
(3)    

18
17

    
























Unrealized 
    
























Gains 
    





















Unrealized

(Losses) 
    





















Gains

Recognized in 
    
Net Realized



















(Losses)

Other 
    
Investment Gains



















Recognized in

Comprehensive 
    
(Losses) and Net Change



















Net Income

Income (Loss) 
    
in Unrealized Investment



















(Loss) on Level

on Level 3 
    
Gains (Losses)



















3 Assets and

Assets and 
     Included in              Transfers  Transfers     Liabilities  Liabilities 
  Balance,  Net Income  Included in           into  out of  Balance,  Held at  Held at 
2020 July 1  (Loss)  OCI  Purchases  Sales  Settlements  Level 3  Level 3  September 30  September 30  September 30 
(In millions)                                 
                                  
Fixed maturity securities:                                 
Corporate bonds and other $555      $5  $129     $(3)
$
8
      $694      $5 
States, municipalities and political subdivisions  0           45                  45         
Asset-backed  222       9   20  

  (14)     $(2)  235       8 
Fixed maturities available-for-sale  777  $0   14   194  $
0  (17) 
8   (2)  974  $0   13 
Fixed maturities  trading  4   4                           8   4     
Total fixed maturities $781  $4  $14  $194  $
0 $(17) $8  $(2) $982  $4  $13 
                                             
Equity securities $27  

  
   $12          

      $39  

    

    
Net Realized
Investment Gains
(Losses) and Net Change
in Unrealized Investment
Gains (Losses)
                    
Unrealized
Gains
(Losses)
Recognized in
Net Income
(Loss) on Level
3 Assets and
  
Unrealized
Gains
(Losses)
Recognized in
Other
Comprehensive
Income (Loss)
on Level 3
Assets and
 
2019 
Balance,
July 1
  
Included in
Net Income
(Loss)
  
Included in
OCI
  Purchases  Sales  Settlements  
Transfers
into
Level 3
  
Transfers
out of
Level 3
  
Balance,
September 30
  
Liabilities
Held at
September 30
  
Liabilities
Held at
September 30
 
(In millions)                                 
                                  
                                  
Fixed maturity securities:                                 
Corporate bonds and other $338     $14  $79     $(3)       $428     $14 
Asset-backed  193      1   22      (4)    $(16)  196      2 
Fixed maturities available-for-sale  531  $0   15   101  $0   (7) $0   (16)  624  $0   16 
Fixed maturities  trading  4                               4         
Total fixed maturities $535  $0  $15  $101  $0  $(7) $0  $(16) $628  $0  $16 
                                             
Equity securities $23                              $23         
19
18
                             Unrealized 
                             Gains 
                          Unrealized  (Losses) 
                          Gains  Recognized in 
     Net Realized  
              
  (Losses)  Other 
     Investment Gains  
              
  Recognized in  Comprehensive 
     (Losses) and Net Change  
              
  Net Income  Income (Loss) 
     in Unrealized Investment  
              
  (Loss) on Level  on Level 3 
     Gains (Losses)  
              
  3 Assets and  Assets and 
     Included in              Transfers  Transfers     Liabilities  Liabilities 
  Balance,  Net Income  Included in           into  out of  Balance,  Held at  Held at 
2021 January 1  (Loss)  OCI  Purchases  Sales  Settlements  Level 3  Level 3  September 30  September 30  September 30 
(In millions)                                 
                                  
Fixed maturity securities:                                 
Corporate bonds and other $770  $(9) $(23) $219  $(3) $(35) $10  $(52) $877     $(22)
States, municipalities and political subdivisions  46           12       (1)          57        
Asset-backed  308   4   (4)  197   (9)  (38)  71   (51)  478      (5)
Fixed maturities available-for-sale  1,124   (5)  (27)  428   (12)  (74)  81   (103)  1,412  $0   (27)
Fixed maturities trading  8   (6)              (2)          0         
Total fixed maturities $1,132  $(11) $(27) $428  $(12) $(76) $81  $
(103) $1,412  $0  $(27)
                                             
Equity securities $43  $(15)     $11  $(15)     $11  $(10) $25  $(1)    

    
Net Realized
Investment Gains
(Losses) and Net Change
in Unrealized Investment
Gains (Losses)
                    
Unrealized
Gains
(Losses)
Recognized in
Net Income
(Loss) on Level
3 Assets and
  
Unrealized
Gains
(Losses)
Recognized in
Other
Comprehensive
Income (Loss)
on Level 3
Assets and
 
2020 
Balance,
January 1
  
Included in
Net Income
(Loss)
  
Included in
OCI
  Purchases  Sales  Settlements  
Transfers
into
Level 3
  
Transfers
out of
Level 3
  
Balance,
September 30
  
Liabilities
Held at
September 30
  
Liabilities
Held at
September 30
 
(In millions)                                 
                                  
Fixed maturity securities:                                 
Corporate bonds and other $468     $27  $200     $(9) $8     $694     $29 
States, municipalities and political subdivisions  0          45                 45        
Asset-backed  165      18   100  $(9)  (22)     $(17)  235      19 
Fixed maturities available-for-sale  633  $0   45   345   (9)  (31)  8   (17)  974  $0   48 
Fixed maturities trading  4   4                           8   4     
Total fixed maturities $637  $4  $45  $345  $(9) $(31) $8  $(17) $982  $4  $48 
                                             
Equity securities $19  $(7)     $12          $15      $39  $(7)    
20
19

    
Net Realized
Investment Gains
(Losses) and Net Change
in Unrealized Investment
Gains (Losses)
                    
Unrealized
Gains
(Losses)
Recognized in
Net Income
(Loss) on Level
3 Assets and
  
Unrealized
Gains
(Losses)
Recognized in
Other
Comprehensive
Income (Loss)
on Level 3
Assets and
                              Unrealized 
2019 
Balance,
January 1
  
Included in
Net Income
(Loss)
  
Included in
OCI
  Purchases  Sales  Settlements  
Transfers
into
Level 3
  
Transfers
out of
Level 3
  
Balance,
September 30
  
Liabilities
Held at
September 30
  
Liabilities
Held at
September 30
 
                             Gains 
                          Unrealized   (Losses) 
                          Gains  Recognized in
 
     Net Realized                     (Losses)   Other 
     Investment Gains                    Recognized in
  Comprehensive
 
     (Losses) and Net Change                     Net Income  Income (Loss)
 
     in Unrealized Investment                     (Loss) on Level   on Level 3 
     Gains (Losses)                     3 Assets and  Assets and
 
    Included in              Transfers  Transfers     Liabilities  Liabilities 
 Balance,  Net Income  Included in           into  out of  Balance,  Held at  Held at 
2020 January 1  (Loss)  OCI  Purchases  Sales  Settlements  Level 3  Level 3  
September 30
  
September 30
  
September 30
 
(In millions)                                                                  
                   ��                                              
Fixed maturity securities:                                                                  
Corporate bonds and other $222     $34  $211     $(7)    $(32) $428     $29  $468      $27  $200     $(9) $
8
      $694      $29 
States, municipalities and political subdivisions  
0
           45                 45         
Asset-backed  197      8   42      (12) $45   (84)  196      9   165      18   100  $(9)  (22)    $(17)  235      19 
Fixed maturities available-for-sale  419  $0   42   253  $0   (19)  45   (116)  624  $0   38   633  $0   45   345   (9)  (31) 
8   (17)  974  $0   48 
Fixed maturities trading  6   (2)                          4   (2)      4   4                           8   4     
Total fixed maturities $425  $(2) $42  $253  $0  $(19) $45  $(116) $628  $(2) $38  $637  $4  $45  $345  $(9) $(31) $8  $(17) $982  $4  $48 
                                                                                        
Equity securities $19  $2      $2                  $23  $2      $19  $(7)      $12          $15      $39  $(7)    


Net investment gains and losses are reported in Net income (loss) as follows:

Major Category of Assets and LiabilitiesConsolidated Condensed Statements of Operations Line Items
  
Fixed maturity securities available-for-saleInvestment gains (losses)
Fixed maturity securities tradingNet investment income
Equity securitiesInvestment gains (losses) and Net investment income
Other invested assetsInvestment gains (losses) and Net investment income
Derivative financial instruments held in a trading portfolioNet investment income
Derivative financial instruments, otherInvestment gains (losses) and Operating revenues and other

21
20


Securities may be transferred in or out of levels within the fair value hierarchy based on the availability of observable market information and quoted prices used to determine the fair value of the security. The availability of observable market information and quoted prices varies based on market conditions and trading volume.

Valuation Methodologies and Inputs


The following section describes the valuation methodologies and relevant inputs used to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which the instruments are generally classified.

Fixed Maturity Securities


Level 1 securities include highly liquid government securities and exchange traded bonds valued using quoted market prices. Level 2 securities include most other fixed maturity securities as the significant inputs are observable in the marketplace. All classes of Level 2 fixed maturity securities are valued using a methodology based on information generated by market transactions involving identical or comparable assets, a discounted cash flow methodology or a combination of both when necessary. Common inputs for all classes of fixed maturity securities include prices from recently executed transactions of similar securities, marketplace quotes, benchmark yields, spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. Specifically for asset-backed securities, key inputs include prepayment and default projections based on past performance of the underlying collateral and current market data. Fixed maturity securities are primarily assigned to Level 3 in cases where broker/dealer quotes are significant inputs to the valuation, and there is a lack of transparency as to whether these quotes are based on information that is observable in the marketplace. Level 3 securities also include private placement debt securities whose fair value is determined using internal models with some inputs that are not market observable.

Equity Securities


Level 1 securities include publicly traded securities valued using quoted market prices. Level 2 securities are primarily valued using pricing for similar securities, recently executed transactions and other pricing models utilizing market observable inputs. Level 3 securities are primarily priced using broker/dealer quotes and internal models with some inputs that are not market observable.

Derivative Financial Instruments


Equity options are valued using quoted market prices and are classified within Level 1 of the fair value hierarchy. Over-the-counter derivatives, principally interest rate swaps, currency forwards, total return swaps, commodity swaps, equity warrants and options, are valued using inputs including broker/dealer quotes and are classified within Level 2 or Level 3 of the valuation hierarchy, depending on the amount of transparency as to whether these quotes are based on information that is observable in the marketplace.

Short Term and Other Invested Assets


Securities that are actively traded or have quoted prices are classified as Level 1. These securities include money market funds, treasury bills and exchange traded open-end funds valued using quoted market prices. Level 2 primarily includes commercial paper, for which all inputs are market observable. Fixed maturity securities purchased within one year of maturity are classified consistent with fixed maturity securities discussed above. Short term investments as presented in the tables above differ from the amounts presented in the Consolidated Condensed Balance Sheets because certain short term investments, such as time deposits, are not measured at fair value.

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21

Significant Unobservable Inputs


The following tables present quantitative information about the significant unobservable inputs utilized in the fair value measurement of Level 3 assets. Valuations for assets and liabilities not presented in the tables below are primarily based on broker/dealer quotes for which there is a lack of transparency as to inputs used to develop the valuations. The quantitative detail of unobservable inputs from these broker quotes is neither provided nor reasonably available. The weighted average rate is calculated based on fair value.

September 30, 2020
Estimated
Fair Value
 
Valuation
Techniques
 
Unobservable
Inputs
 
Range
(Weighted
Average)
 (In millions)      
         
Fixed maturity securities$888 Discounted cash flow Credit spread 1% – 10% (3%)
         
December 31, 2019        
         
Fixed maturity securities$525 Discounted cash flow Credit spread 1% – 6% (2%)

 





Range
 Estimated

Valuation

Unobservable

(Weighted
September 30, 2021
Fair Value Techniques Inputs Average)
 (In millions)      
         
Fixed maturity securities$1,154 Discounted cash flow Credit spread 1% – 7% (2%)
         
December 31, 2020
        
         
Fixed maturity securities$966 Discounted cash flow Credit spread 1% – 8% (3%)


For fixed maturity securities, an increase to the credit spread assumptions would result in a lower fair value measurement.

Financial Assets and Liabilities Not Measured at Fair Value


The carrying amount, estimated fair value and the level of the fair value hierarchy of the financial assets and liabilities which are not measured at fair value on the Consolidated Condensed Balance Sheets are presented in the following tables. The carrying amounts and estimated fair values of short term debt and long term debt exclude finance lease obligations. The carrying amounts reported on the Consolidated Condensed Balance Sheets for cash and short term investments not carried at fair value and certain other assets and liabilities approximate fair value due to the short term nature of these items.

 Carrying Estimated Fair Value 
September 30, 2020 Amount Level 1 Level 2  Level 3  Total 
(In millions)             
              
Assets:             
Other invested assets, primarily mortgage loans $1,088      $1,159  $1,159 
                 
Liabilities:                
Short term debt  32   $8   25   33 
Long term debt  10,343    10,641   757   11,398 
                  
December 31, 2019                 
                  
Assets:                 
Other invested assets, primarily mortgage loans $994       $1,025  $1,025 
                  
Liabilities:                 
Short term debt  75   $9   66   75 
Long term debt  11,443    10,884   626   11,510 
 Carrying  Estimated Fair Value 
September 30, 2021
 Amount  Level 1  Level 2  Level 3  Total 
(In millions)               
                
Assets:               
Other invested assets, primarily mortgage loans $1,031  
   
   $1,106  $1,106 
                     
Liabilities:                    
Short term debt  186           190   190 
Long term debt  8,919      $9,319   554   9,873 
                     
December 31, 2020
                    
                     
Assets:                    
Other invested assets, primarily mortgage loans $1,068          $1,151  $1,151 
                     
Liabilities:                    
Short term debt  35      $19   17   36 
Long term debt  10,042       10,482   765   11,247 

5.  Property, Plant and Equipment

Asset Impairments


During the first quarter of 2020, the offshore drilling business climate experienced a significant adverse change, primarily as a result of the market impacts of the oil price war between Saudi Arabia and Russia and regulatory, market and commercial challenges arising as a result of the COVID-19 pandemic and efforts to mitigate the spread of the virus, both of which resulted in a dramatic decline in oil prices. During the first quarter of 2020,5 drilling rigs that
23
had indicators of impairment were evaluated. Based on the assumptions and analysis at that time, it was determined that the carrying values of 4 of these rigs were impaired. The fair values of these rigs were estimated using an income approach, whereby the fair value of each rig was estimated based on a calculation of the rig’s future net cash flows. These calculations utilized significant unobservable inputs, including management’s assumptions related to estimated dayrate revenue, rig utilization, estimated capital expenditures, repair and regulatory survey costs, as well as estimated proceeds that may be received on ultimate disposition of each rig. These fair value estimates were representative of Level 3 fair value measurements due to the significant level of estimation involved and the lack of transparency as to the inputs used. An aggregate asset impairment charge of $774 million ($408 million after tax and noncontrolling interests) was recorded for the nine months ended September 30,2020 and is reported within Operating expenses and other on the Consolidated Condensed Statements of Operations.

6.5. Claim and Claim Adjustment Expense Reserves


Property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including incurred but not reported (“IBNR”) claims as of the reporting date. Reserve projections are based primarily on detailed analysis of the facts in each case, experience with similar cases and various historical development patterns. Consideration is given to historical patterns such as claim reserving trends and settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions and economic conditions, including inflation and public attitudes. All of these factors can affect the estimation of claim and claim adjustment expense reserves.

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Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process. Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve. Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can affect ultimate claim costs. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as workers’ compensation, general liability and professional liability claims. Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined. There can be no assurance that the ultimate cost for insurance losses will not exceed current estimates.


Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in the Company’s results of operations and/or equity. The Company reported catastrophe losses, net of reinsurance, of $160$178 million and $32$160 million for the three months ended September 30, 2021 and 2020 and 2019$357 million and $536 million and $128 million for the nine months ended September 30, 20202021 and 2019.2020. Net catastrophe losses for the three months ended September 30, 2021 included $114 million for Hurricane Ida. Net catastrophe losses for the nine months ended September 30, 2021 were driven by severe weather-related events, primarily Hurricane Ida and Winter Storms Uri and Viola. 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. Net catastrophe losses for the nine months ended September 30, 2020 included $273 million primarily related to severe weather-related events, $195 million related to the COVID-19 pandemic and $68 million related to civil unrest. Net catastrophe losses in 2019 primarily related to U.S. weather-related events.

Liability for Unpaid Claim and Claim Adjustment Expenses


The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves of Other Insurance Operations.other insurance operations.

Nine Months Ended September 30 2020  2019 
(In millions)      
       
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 (a)  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 
Nine Months Ended September 30
 2021  2020 
(In millions)      
       
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 the excess workers’ compensation loss portfolio transfer  (632)    
         
Net incurred claim and claim adjustment expenses:        
Provision for insured events of current year  4,474   
4,425
 
Increase (decrease) in provision for insured events of prior years  (130)  
(68
)
Amortization of discount  137   
143
 
Total net incurred (a)  4,481   
4,500
 
         
Net payments attributable to:        
Current year events  (629)  
(556
)
Prior year events  (2,874)  
(3,285
)
Total net payments  (3,503)  
(3,841
)
         
Foreign currency translation adjustment and other  (51)  
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Net reserves, end of period  18,996   
18,583
 
Ceded reserves, end of period  4,836   
3,951
 
Gross reserves, end of period $23,832  
$
22,534
 

(a)Total net incurred above does not agree to Insurance claims and policyholders’ benefits as reflected on the Consolidated Condensed Statements of Operations due to amounts related to retroactive reinsurance deferred gain accounting, the loss on the excess workers’ compensation loss portfolio transfer, uncollectible reinsurance and benefit expenses related to future policy benefits, which are not reflected in the table above.

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Net Prior Year Development


Changes in estimates of claim and claim adjustment expense reserves net of reinsurance, for prior years are defined as net prior year loss reserve development. These changes can be favorable or unfavorable.


Favorable net prior year loss reserve development of $15$10 million and unfavorable net prior year development of $16$15 million was recorded for commercial property and casualty operations (“Property & Casualty Operations”) for the three months ended September 30, 20202021 and 20192020 and favorable net prior year loss reserve development of $8$36 million and $29$58 million was recorded for the nine months ended September 30, 20202021 and 2019.2020. Unfavorable net prior year loss reserve development of $40 million and $50 million was recorded in CNA’s operations outside of Property & Casualty Operations (“Other Insurance Operations”) for the nine months ended September 30, 2021 and 2020.


The following table and discussion present details of the net prior year claim and claim adjustment expenseloss reserve development in Property & Casualty Operations and Other Insurance Operations:

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  2020  2019  2020  2019 
(In millions)            
             
Medical professional liability $25  $29  $35  $59 
Other professional liability and management liability      (18)  (6)  (37)
Surety  (40)  (43)  (70)  (83)
Commercial auto  9   (16)  33   (24)
General liability  15   43   65   36 
Workers’ compensation  (23)  7   (97)  2 
Property and other  (1)  14   32   18 
Total pretax (favorable) unfavorable development $(15) $16  $(8) $(29)
  Three Months Ended  Nine Months Ended 
  September 30,
  September 30, 
  2021  2020  2021  2020 
(In millions)            
             
Medical professional liability $8  $25  $16  
$
35
 
Other professional liability and management liability          10   (6)
Surety  (15)  (40)  (53)  (70)
Commercial auto      
9
   30   
33
 
General liability      15       15 
Workers’ compensation  2   
(23
)  (40)  (97)
Property and other  (5)  
(1
)  1   
32
 
Other insurance operations          40   
50
 
Total pretax (favorable) unfavorable development $(10) 
$
(15
) $4  
$
(8
)
25


Three Months

2020


2021


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

2020

Unfavorable development in medical professional liability was primarily due to higher than expected frequency of large losses in recent accident years and unfavorable development on a latent claim for an older accident year.



Favorable development in surety was due to lower than expected frequency and lack of systemic activity for accident years 2019 and prior.


Unfavorable development in general liability was primarily due to increased bodily injury severities in accident years 2012 through 2016 and higher than expected frequency and severity in CNA’s umbrella business in accident years 2015 through 2019.


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

Nine Months

2021


Unfavorable development in medical professional liability was due to higher than expected frequency of large losses in recent accident years.



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

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Unfavorable development in commercial auto was due to higher than expected claim severity in CNA’s construction and middle market businesses in recent accident years.


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

2019


Unfavorable development in medical professional liability was primarily due to higher than expected indemnity severity in accident years 2016 through 2018 in CNA’s aging services business.


Favorable development in other professional liability and management liability was due to lower than expected large claim losses in recent accident years in CNA’s public company directors and officers liability (“D&O”) business.


Favorable development in surety was due to lower than expected frequency for accident years 2015 through 2018.


Favorable development in commercial auto was primarily due to a decline in bodily injury frequency in accident year 2018 and continued lower than expected severity across accident years 2013 through 2016.


Unfavorable development in general liabilityproperty and other was primarilydue to higher than expected claim severity in CNA’s medical treatment business mostly offset by favorable development due to lower than expected loss emergence across multiple accident years in property, energy and marine.


Unfavorable development in other insurance operations was due to higher than expected emergence in mass tort exposures in older accident years primarily related to accident years 2009 and prior, 2015 and 2016.abuse.

2020

Unfavorable development in other was primarily due to higher than expected severity in aging services related to auto liability coverages.

Nine Months

2020


Unfavorable development in medical professional liability was primarily due to higher than expected frequency of large losses in recent accident years, unfavorable development on a latent claim for an older accident year and unfavorable outcomes on specific claims in accident years 2015 and 2016 in CNA’s aging services business.


Favorable development in surety was due to lower than expected frequency and lack of systemic activity for accident years 2019 and prior.


Unfavorable development in commercial auto was due to unfavorable claim severity in CNA’s middle market and construction businessbusinesses in accident years 2017 through 2019.


Unfavorable development in general liability was driven by higher than expected emergence in mass tort exposures, primarily due to New York reviver statute-related claims from accident years prior to 2010, increased bodily injury severities in accident years 2012 through 2016 and higher than expected frequency and severity in CNA’s umbrella business in accident years 2015 through 2019.


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


Unfavorable development in property and other was primarily due to higher than expected large loss activity in accident year 2019 in CNA’s middle market, national accounts and marine business units.
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2019


Unfavorable development in medical professional liability was primarily due to higher than expected indemnity severity in accident years 2016 through 2018 in CNA’s aging services business, higher than expected severityunits in accident year 2013 in CNA’s allied healthcare business, unfavorable outcomes on individual claims and higher than expected severity in accident year 2017 in CNA’s dentistsbusiness.
2019.


Favorable development in other professional liability and management liability was primarily due to lower than expected claim frequency and favorable outcomes on individual claims in accident years 2017 and prior related to financial institutions and lower than expected large claim losses in recent accident years in CNA’s public company D&O business.


Favorable development in surety was due to lower than expected frequency for accident years 2018 and prior.


Favorable development in commercial auto was primarily due to a decline in bodily injury frequency in accident year 2018 and continued lower than expected severity across accident years 2016 and prior.


Unfavorable development in general liabilityother insurance operations was primarily due to higher than expected emergence in mass tort exposures as well as higher than expected large loss experience in CNA’s excess and umbrella business inolder accident year 2017.years primarily related to abuse.


Unfavorable development in other was primarily due to higher than expected severity in aging services related to auto liability coverages and higher than expected claims in Hardy on 2018 accident year catastrophes in property partially offset by favorable development in casualty, driven by lower than expected large losses and claim severity in accident years 2014 and prior in Hardy and Europe.

Asbestos and& Environmental Pollution (“A&EP”) Reserves


In 2010, Continental Casualty Company (“CCC”) together with several insurance subsidiaries completed a transaction with National Indemnity Company (“NICO”), a subsidiary of Berkshire Hathaway Inc., under which substantially all of thetheir legacy A&EP liabilities were ceded to NICO through a loss portfolio transfer (“loss portfolio transfer” or “LPT”LPT”). At the effective date of the transaction, approximately $1.6 billion of net A&EP claim and allocated claim adjustment expense reserves were ceded to NICO under a retroactive reinsurance agreement with an aggregate limit of $4.0 billion. The $1.6 billion of claim and allocated claim adjustment expense reserves ceded to NICO was net of $1.2 billion of ceded claim and allocated claim adjustment expense reserves under existing third party reinsurance contracts. The NICO LPT aggregate reinsurance limit also covers credit risk on the existing third party reinsurance related to these liabilities. NICO was paid a reinsurance premium of $2.0 billion and billed third party reinsurance receivables related to A&EP claims with a net book value of $215 million were transferred to NICO, resulting in total consideration of $2.2 billion.

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In years subsequent to the effective date of the LPT, adverse prior year development on A&EP reserves was recognized resulting in additional amounts ceded under the LPT. As a result, the cumulative amounts ceded under the LPT have exceeded the $2.2 billion consideration paid, resulting in the NICO LPT moving into a gain position, requiring retroactive reinsurance accounting. Under retroactive reinsurance accounting, this gain is deferred and only recognized in earnings in proportion to actual paid recoveries under the LPT. Over the life of the contract, there is no economic impact as long as any additional losses incurred are within the limit of the LPT. In a period in which a change in the estimate of A&EP reserves is recognized that increases or decreases the amounts ceded under the LPT, the proportion of actual paid recoveries to total ceded losses is affected and the change in the deferred gain is recognized in earnings as if the revised estimate of ceded losses was available at the effective date of the LPT. The effect of the deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders’ benefits on the Consolidated Condensed Statements of Operations.


The impact of the LPT on the Consolidated Condensed Statements of Operations was the recognition of a retroactive reinsurance benefit of $98 million and $7$9 million for the three months ended September 30, 2021 and 2020 and 2019$30 million and $43$43 million for the nine months ended September 30, 20202021 and 2019.2020. As of September 30, 20202021 and December 31, 2019,2020, the cumulative amounts ceded under the LPT were $3.2$3.3 billion. The unrecognized deferred retroactive reinsurance benefit was $349$368 million and $392$398 million as of September 30, 20202021 and December 31, 20192020 and is included within Other liabilities on the Consolidated Condensed Balance Sheets.

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NICO established a collateral trust account as security for its obligations under the LPT. The fair value of the collateral trust account was $3.5 billion and $3.7$2.9 billion as of September 30, 2020 and December 31, 2019.2021. In addition, Berkshire Hathaway Inc. guaranteed the payment obligations of NICO up to the aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement. NICO is responsible for claims handling and billing and collection from third-party reinsurers related to the majority of the Company’s A&EP claims.


Excess Workers’ Compensation LPT


On February 5, 2021, CNA completed a transaction with Cavello Bay Reinsurance Limited (“Cavello”), a subsidiary of Enstar Group Limited, under which certain legacy excess workers’ compensation (“EWC”) liabilities were ceded to Cavello. Under the terms of the transaction, based on reserves in place as of January 1, 2020, approximately $690 million of net EWC claim and allocated claim adjustment expense reserves were ceded to Cavello under a loss portfolio transfer (“EWC LPT”) with an aggregate limit of $1.0 billion. Cavello was paid a reinsurance premium of $697 million, less claims paid between January 1, 2020 and the closing date of the agreement of $64 million. After transaction costs, a loss of approximately $11 million (after tax and noncontrolling interest) was recognized in Other Insurance Operations in the first quarter of 2021 related to the EWC LPT.

As of September 30, 2021, the cumulative amount ceded under the EWC LPT was $690 million.

Cavello established a collateral trust account as security for its obligations, which will be maintained at 105% of outstanding reserves.
Credit Risk for Ceded Reserves
 

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

Life & Group Policyholder Reserves


CNA’s Life & Group business includes its run-off long term care business as well as structured settlement obligations not funded by annuities related to certain property and casualty claimants. Long term care policies provide benefits for nursing homes, assisted living facilities and home health care subject to various daily and lifetime caps. Generally, policyholders must continue to make periodic premium payments to keep the policy in force and CNA has the ability to increase policy premiums, subject to state regulatory approval.


CNA maintains both claim and claim adjustment expense reserves as well as future policy benefit reserves for policyholder benefits for its long term careLife & Group business. Claim and claim adjustment expense reserves consist of estimated reserves for long term care policyholders that are currently receiving benefits, including claims that have been incurred but are not yet reported. In developing the claim and claim adjustment expense reserve estimates for long term care policies, CNA’s actuaries perform a detailed claim experience studyreserve review on an annual basis. The study reviewsreview analyzes the sufficiency of existing reserves for policyholders currently on claim and includes an evaluation of expected benefit utilization and claim duration. In addition, claim and claim adjustment expense reserves are also maintained for the
26
structured settlement obligations. In developing the claim and claim adjustment expense reserve estimates for structured settlement obligations, CNA’s actuaries monitorreview mortality experience on an annual basis. CNA’s recorded claim and claim adjustment expense reserves reflect management’s best estimate after incorporating the results of the most recent studies.reviews.


CNA’s most recent
CNA completed its annual claim experience studies were completedreserve reviews in the third quarterquarters of 2021 and 2020 and resultedresulting in a $46$40 million pretax increase in claim and claim adjustment expense reserve estimates for structured settlement obligations primarily due to lower discount rate assumptions and mortality assumption changes and a $37 million pretax reductionreductions in claim and claim adjustment expense reserves for long term care policiesreserves primarily due to lower claim severity than anticipated in the reserve estimates. CNA’s 2019 annual claim experience studies were completedestimates and $2 million and $46 million pretax increases in the third quarter of 2019 and resulted in a $56 million pretax reduction instructured settlement claim and claim adjustment expense reserves for long term care policies primarily due to lower claim severity than anticipated in the reserve estimates.discount rate assumptions and mortality assumption changes.


Future policy benefit reserves represent theconsist of active life reserves related to CNA’s long term care policies for policyholders that are not currently receiving benefits whichand represent the present value of expected future benefit payments and expenses less expected future premium. The determination of these reserves requires management to make estimates and assumptions about expected investment and policyholder experience over the life of the contract. Since many of these contracts may be in force for several decades, these assumptions are subject to significant estimation risk.



The actuarial assumptions that managementCNA believes are subject to the most variability are morbidity, persistency, discount rates and anticipated future premium rate increases. Morbidity is the frequency and severity of injury, illness, sickness and diseases contracted. Persistency is the percentage of policies remaining in force and can be affected by policy lapses, benefit reductions and death. Discount rates are influenced by the investment yield on assets supporting long term care reserves which is subject to interest rate and market volatility and may also be affected by changes to the Internal Revenue Code. Future premium rate increases are generally subject to regulatory approval, and therefore the exact timing and size of the approved rate increases are unknown. As a result of this variability, CNA’s long term care future policy benefit reserves may be subject to material increases if actual experience develops adversely to CNA’s expectations.


Annually, in the third quarter, managementCNA assesses the adequacy of its long term care future policy benefit reserves by performing a gross premium valuation (“GPV”) to determine if there is a premium deficiency. 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 GPV for the appropriateness of its best estimate assumptions. The most recent third party assessment,long term care future policy benefit reserves, performed in 2019, validated the assumption setting process and confirmedthird quarter of 2021, indicated the best estimate assumptions appropriately reflected the experience data at that time.recorded reserves included a pretax margin of approximately $72 million as of September 30, 2021.

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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 2019.2020.

7. Debt


In May of 2020, Loews Corporation completed a public offering of $27500 million aggregate principal amount of 3.2% senior notes due May 15, 2030. The proceeds of this offering are available for general corporate purposes.


In August of 2020, CNA completed a public offering of $500 million aggregate principal amount of its 2.1% senior notes due August 15, 2030 and used the net proceeds to redeem the entire $400 million outstanding aggregate principal balance of its 5.8% senior notes due August 15, 2021 and for general corporate purposes.


In August of 2020, Boardwalk Pipelines completed a public offering of $500 million aggregate principal amount of its 3.4% senior notes due February 15, 2031. Boardwalk Pipelines intends to use the proceeds to retire the outstanding $440 million aggregate principal amount of its 4.5% senior notes due 2021 in November of 2020, to fund growth capital expenditures and for general corporate purposes. Initially, the proceeds were used to reduce outstanding borrowings under its revolving credit facility. As of September 30, 2020, Boardwalk Pipelines had 0 outstanding borrowings under its revolving credit facility and had available the full borrowing capacity of $1.5 billion. As of October 30, 2020, Boardwalk Pipelines had $80 million of outstanding borrowings under its revolving credit facility and had $1.4 billion of available borrowing capacity.

29

8.6. Shareholders’ Equity

Accumulated other comprehensive income (loss)


The tables below present the changes in AOCI by component for the three and nine months ended September 30, 20192020 and 2020:2021:

 
Net Unrealized
Gains (Losses)
on Investments
with OTTI
Losses
  
Net Unrealized
Gains (Losses)
on Other
Investments
  
Unrealized
Gains (Losses)
on Cash Flow
Hedges
  
Pension and
Postretirement
Benefits
  
Foreign
Currency
Translation
  
Total
Accumulated
Other
Comprehensive
Income (Loss)
 
(In millions)                  
                   
Balance, July 1, 2019 $18  $917  $(7) $(780) $(145) $3 
Other comprehensive income (loss) before reclassifications, after tax of $0, $(11), $1, $0 and $0      44   (4)      (31)  9 
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $0, $0, $0, $(2) and $0      (3)      10       7 
Other comprehensive income (loss)  0   41   (4)  10   (31)  16 
Amounts attributable to noncontrolling interests      (5)          3   (2)
Balance, September 30, 2019 $18  $953  $(11) $(770) $(173) $17 
 Net Unrealized                
  Gains (Losses)              Total 
  on Investments  Net Unrealized  Unrealized        Accumulated 
  with an  Gains (Losses)  Gains (Losses)  Pension and  Foreign  Other 
  Allowance for  on Other  on Cash Flow  Postretirement  Currency  Comprehensive 
  Credit Losses  Investments  Hedges  Benefits  Translation  Income (Loss) 
(In millions)                  
                   
Balance, July 1, 2020 $(8) $1,050  $(25) $(837) $(175) $5 
Other comprehensive income (loss) before reclassifications, after tax of $0, $(63), $0, $0 and $0
  2   231   (2)  (2)  38   267 
Reclassification of (income) losses from accumulated other comprehensive income, after tax of $(1), $7, $0, $(3) and $0
  4   (24)  3   9       (8)
Other comprehensive income  6   207   1   7   38   259 
Amounts attributable to noncontrolling interests  (1)  (22)      
   (3)  (26)
Balance, September 30, 2020
 $(3) $1,235  $(24) $(830) $(140) $238 

 
Net Unrealized
Gains (Losses)
on Investments
with an
Allowance for
Credit Losses
  
Net Unrealized
Gains (Losses)
on Other
Investments
  
Unrealized
Gains (Losses)
on Cash Flow
Hedges
  
Pension and
Postretirement
Benefits
  
Foreign
Currency
Translation
  
Total
Accumulated
Other
Comprehensive
Income (Loss)
 
(In millions)
                  
                   
Balance, July 1, 2020 $(8) $1,050  $(25) $(837) $(175) $5 
Other comprehensive income (loss) before reclassifications, after tax of $0, $(63), $0, $0 and $0  2   231   (2)  (2)  38   267 
Reclassification of (income) losses from accumulated other comprehensive income, after tax of $(1), $7, $0, $(3) and $0
  4   (24)  3   9       (8)
Other comprehensive income  6   207   1   7   38   259 
Amounts attributable to noncontrolling interests  (1)  (22)          (3)  (26)
Balance, September 30, 2020 $(3) $1,235  $(24) $(830) $(140) $238 
Balance, July 1, 2021 $0  $1,271  $(11) $(863) $(70) $327 
Other comprehensive income (loss) before reclassifications, after tax of $0, $32, $0, $0 and $0
      (121)  1   3   (33)  (150)
Reclassification of (income) losses from accumulated other comprehensive income, after tax of $0, $5, $0, $(2) and $0
      (17)  1   13       (3)
Other comprehensive income (loss)
      (138)  2
   16   (33)  (153)
Amounts attributable to noncontrolling interests      14       (1)  4   17 
Balance, September 30, 2021
 $0  $1,147  $(9) $(848) $(99) $191 

30
28
 Net Unrealized                
  Gains (Losses)              Total 
  on Investments  Net Unrealized  Unrealized        Accumulated 
  with an  Gains (Losses)  Gains (Losses)  Pension and  Foreign  Other 
  Allowance for  on Other  on Cash Flow  Postretirement  Currency  Comprehensive 
  Credit Losses  Investments  Hedges  Benefits  Translation  Income (Loss) 
(In millions)                  
                   
Balance, January 1, 2020 $0  $918  $(6) $(855) $(125) $(68)
Other comprehensive income (loss) before reclassifications, after tax of $13, $(97), $8, $0 and $0
  (48)  374   (22)  (3)  (17)  284 
Reclassification of losses from accumulated other comprehensive income, after tax of $(12), $5, $(1), $(8) and $0
  45   (20)  4   30       59 
Other comprehensive income (loss)  (3)  354   (18)  27   (17)  343 
Amounts attributable to noncontrolling interests      (37)      (2)  2   (37)
Balance, September 30, 2020
 $(3) $1,235  $(24) $(830) $(140) $238 

 
Net Unrealized
Gains (Losses)
on Investments
with OTTI
Losses
  
Net Unrealized
Gains (Losses)
on Other
Investments
  
Unrealized
Gains (Losses)
on Cash Flow
Hedges
  
Pension and
Postretirement
Benefits
  
Foreign
Currency
Translation
  
Total
Accumulated
Other
Comprehensive
Income (Loss)
 
(In millions)                  
                   
Balance, January 1, 2019 $14  $57  $5  $(793) $(163) $(880)
Other comprehensive income (loss) before reclassifications, after tax of $(2), $(265), $5, $0 and $0  3   999   (16)  (1)  (11)  974 
Reclassification of losses from accumulated other comprehensive income, after tax of $0, $(1), $0, $(7) and $0
  1   4       26       31 
Other comprehensive income (loss)  4   1,003   (16)  25   (11)  1,005 
Amounts attributable to noncontrolling interests      (107)      (2)  1   (108)
Balance, September 30, 2019 $18  $953  $(11) $(770) $(173) $17 

 
Net Unrealized
Gains (Losses)
on Investments
with an
Allowance for
Credit Losses
  
Net Unrealized
Gains (Losses)
on Other
Investments
  
Unrealized
Gains (Losses)
on Cash Flow
Hedges
  
Pension and
Postretirement
Benefits
  
Foreign
Currency
Translation
  
Total
Accumulated
Other
Comprehensive
Income (Loss)
 
(In millions)                  
                   
Balance, January 1, 2020 (a) $0  $918  $(6) $(855) $(125) $(68)
Other comprehensive income (loss) before reclassifications, after tax of $13, $(97), $8, $0 and $0  (48)  374   (22)  (3)  (17)  284 
Reclassification of (income) losses from accumulated other comprehensive income, after tax of $(12), $5, $(1), $(8) and $0  45   (20)  4   30       59 
Other comprehensive income (loss)  (3)  354   (18)  27   (17)  343 
Amounts attributable to noncontrolling interests      (37)      (2)  2   (37)
Balance, September 30, 2020 $(3) $1,235  $(24) $(830) $(140) $238 

(a)On January 1, 2020, the Company adopted ASU 2016-13; see Note 1. The Net Unrealized Gains (Losses) on Investments with OTTI Losses column that tracked the change in unrealized gains (losses) on investments with OTTI losses has been replaced with the Net Unrealized Gains (Losses) on Investments with an Allowance for Credit Losses column. The balance as of January 1, 2020 in the Net Unrealized Gains (Losses) on Investments with OTTI Losses column is now reported in the Net Unrealized Gains (Losses) on Other Investments column. Prior period amounts were not adjusted for the adoption of this standard.
Balance, January 1, 2021 $0  $1,563  $(23) $(877) $(82) $581 
Other comprehensive income (loss) before reclassifications, after tax of $1, $104, $(3), $0 and $0
  (2)  (391)  12   1   (19)  (399)
Reclassification of (income) losses from accumulated other comprehensive income, after tax of $(1), $20, $(2), $(7) and $0
  2   (74)  2   31       (39)
Other comprehensive income (loss)  0   (465)  14   32   (19)  (438)
Amounts attributable to noncontrolling interests      49       (3)  2   48 
Balance, September 30, 2021
 $0  $1,147  $(9) $(848) $(99) $191 


Amounts reclassified from AOCI shown above are reported in Net income (loss) as follows:

Major Category of AOCIAffected Line Item
  
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 investmentsInvestment gains (losses)
Unrealized gains (losses) on cash flow hedgesOperating revenues and other, Interest expense and Operating expenses and other
Pension and postretirement benefitsOperating expenses and other

31
29

Treasury Stock


Loews Corporation repurchased 16.115.7 million and 13.216.1 million shares of its common stock at an aggregate cost of $673826 million and $642673 million during the nine months ended September 30, 20202021 and 20192020.

9.
7. Revenue from Contracts with Customers


Disaggregation of revenues – Revenue from contracts with customers, other than insurance premiums, is reported as Non-insurance warranty revenue and within Operating revenues and other on the Consolidated Condensed Statements of Operations. The following table presents revenues from contracts with customers disaggregated by revenue type along with the reportable segment and a reconciliation to Operating revenues and other as reported in Note 14:11:

 Three Months Ended

Nine Months Ended 
 
Three Months Ended
September 30,
  
Nine Months Ended
September 30
  September 30,
  September 30, 
 2020  2019  2020  2019  2021  2020  2021  2020 
(In millions)                        
                        
Non-insurance warranty – CNA Financial $317  $292  $926  $858  $357  $317  $1,054  $926 
                                
Transportation and storage of natural gas and NGLs and other services – Boardwalk Pipelines  280   287   898   947   296   280   959   898 
Lodging and related services – Loews Hotels & Co  36   147   194   512   129   36   279   194 
Rigid plastic packaging and recycled resin – Corporate  253   252   753   689 
Contract drilling – Diamond Offshore (a)
      254   300   704 
Rigid plastic packaging and recycled resin – Corporate (a)      253   280   753 
Contract drilling – Diamond Offshore (b)
      
       300 
Total revenues from contracts with customers  569   940   2,145   2,852   425   569   1,518   2,145 
Other revenues  40   20   96   54   25   40   62   96 
Operating revenues and other $609  $960  $2,241  $2,906  $450  $609  $1,580  $2,241 

(a)
Revenues presented for Corporate reflect the periods prior to the deconsolidation of Altium Packaging in the second quarter of 2021. See Note 2 for further discussion.
(b)Revenues presented for Diamond Offshore reflect the periodsperiod prior to its deconsolidation in the deconsolidation.second quarter of 2020. See NotesNote 2 and 14 for further discussion.


Receivables from contracts with customers – As of September 30, 20202021 and December 31, 2019,2020, receivables from contracts with customers were approximately $223$118 million and $458$246 million and are included within Receivables on the Consolidated Condensed Balance Sheets.


Deferred revenue – As of September 30, 20202021 and December 31, 2019,2020, deferred revenue resulting from contracts with customers was approximately $4.0$4.5 billion and $3.9$4.1 billion and is reported as Deferred non-insurance warranty revenue and within Other liabilities on the Consolidated Condensed Balance Sheets. Approximately $839$916 million and $778$839 million of revenues recognized during the nine months ended September 30, 20202021 and 20192020 were included in deferred revenue as of December 31, 20192020 and 2018.2019.


Performance obligations – As of September 30, 2020,2021, approximately $13.013.3 billion of estimated operating revenues is expected to be recognized in the future related to outstanding performance obligations. The balance relates primarily to transportation and storage of natural gas and natural gas liquids and hydrocarbons (“NGLs”) services and non-insurance warranty revenue. Approximately $0.60.7 billion will be recognized during the remaining three months of 2020,2021, $2.22.3 billion in 20212022 and the remainder in following years. The actual timing of recognition may vary due to factors outside of the Company’s control.

10.  Expected Credit Losses – Reinsurance and Insurance Receivables


As of September 30, 2020, an allowance for doubtful accounts of $24 million for reinsurance receivables has been established 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, reinsurance receivables are separated into two pools; voluntary reinsurance receivables and involuntary reinsurance exposures to mandatory pools. An allowance for involuntary pools has not been recorded 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 historical loss experience and assessment of the 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 Consolidated Condensed Statements of Operations.
32
30


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

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

(a)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. See Note 6 for more information on the LPT. Also excluded are 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.


As of September 30, 2020, an allowance for doubtful accounts of $32 million for insurance receivables has been established using a loss rate methodology to determine expected credit losses for premium receivables. This methodology uses historical annual credit losses relative to gross premium written to develop a range of credit loss rates for each dollar of gross written premium underwritten. The expected 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 Operating expenses and other on the Consolidated Condensed Statements of Operations.

11.8. Benefit Plans


The Company has several non-contributory defined benefit plans and postretirement benefit plans covering eligible employees and retirees.


The following table presents the components of net periodic (benefit) cost for the defined benefit plans:

 Pension Benefits 
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  2020  2019  2020  2019 
(In millions)            
             
Service cost    $2  $2  $5 
Interest cost $24   29   70   88 
Expected return on plan assets  (43)  (39)  (130)  (119)
Amortization of unrecognized net loss  12   10   35   33 
Amortization of unrecognized prior service cost          1     
Settlement charge  1   1   8   3 
Curtailment gain      (1)      (1)
Net periodic (benefit) cost $(6) $2  $(14) $9 

 Other Postretirement Benefits 
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  2020  2019  2020  2019 
(In millions)            
             
Interest cost  -  $1  $1  $2 
Expected return on plan assets          (2)  (2)
Amortization of unrecognized net gain      (1)      (1)
Net periodic benefit $0  $0  $(1) $(1)
 Pension Benefits 
  Three Months Ended  Nine Months Ended 
  September 30,  September 30, 
  2021  2020  2021  2020 
(In millions)            
             
Service cost $1  
   $2  $2 
Interest cost  17  $24   53   70 
Expected return on plan assets  (41)  (43)  (127)  (130)
Amortization of unrecognized net loss  12   12   37   35 
Amortization of unrecognized prior service cost              1 
Settlement charge      1   2   8 
Regulatory asset decrease
  1       1     
Net periodic benefit $(10) $(6) $(32) $(14)

33

The net periodic benefit for other postretirement benefits was $1 million for the three months ended September 30, 2021 and the nine months ended September 30, 2021 and 2020. There was 0 net periodic benefit for the three months ended September 30, 2020.

12.9. Legal Proceedings


On May 25, 2018, plaintiffs Tsemach Mishal and Paul Berger (on behalf of themselves and the purported class, “Plaintiffs”) initiated a purported class action in the Court of Chancery of the State of Delaware (the “Court”) against the following defendants:  Boardwalk Pipelines, Boardwalk GP, LP (“General Partner”), Boardwalk GP, LLC and Boardwalk Pipelines Holding Corp. (“BPHC”) (together, “Defendants”), regarding the potential exercise by the General Partner of its right to purchase all of the issued and outstanding common units representing limited partnership interests in Boardwalk Pipelines not already owned by the General Partner or its affiliates.


On June 25, 2018, Plaintiffs and Defendants entered into a Stipulation and Agreement of Compromise and Settlement, subject to the approval of the Court (the “Proposed Settlement”). Under the terms of the Proposed Settlement, the lawsuit would be dismissed, and related claims against the Defendants would be released by the Plaintiffs, if BPHC, the sole member of the General Partner, elected to cause the General Partner to exercise its right to purchase the issued and outstanding common units of Boardwalk Pipelines pursuant to Boardwalk Pipelines’ Third Amended and Restated Agreement of Limited Partnership, as amended (“Limited Partnership Agreement”), within a period specified by the Proposed Settlement. On June 29, 2018, the General Partner elected to exercise its right to purchase all of the issued and outstanding common units representing limited partnership interests in Boardwalk Pipelines not already owned by the General Partner or its affiliates pursuant to the Limited Partnership Agreement within the period specified by the Proposed Settlement. The transaction was completed on July 18, 2018.


On September 28, 2018, the Court denied approval of the Proposed Settlement. On February 11, 2019, a substitute verified class action complaint was filed in this proceeding. The Defendants filed a motion to dismiss, which was heard by the Court in July of 2019. In October of 2019, the Court ruled on the motion and granted a partial dismissal, with certain aspects of the case proceeding to trial. In OctoberA trial was held the week of 2020, after completion of fact discovery, Plaintiffs filed an amended complaint. In light of the amended complaint, Defendants have moved to vacate the trial date scheduled in January ofFebruary 22, 2021 and have also filed a motion to dismiss Plaintiffs’ new claims.post-trial oral arguments were held on July 14, 2021.


The Company is from time to time party to other litigation arising in the ordinary course of business. While it is difficult to predict the outcome or effect of any such litigation, management does not believe that the outcome of any such pending litigation, including the Boardwalk Pipelines matter described above, will materially affect the Company’s results of operations or equity.

13.
31
10. Commitments and Contingencies

CNA Data Breach-related Contingency


As previously disclosed, CNA sustained a sophisticated cybersecurity attack in March of 2021 involving ransomware. CNA’s investigation revealed that an unauthorized third party copied some personal information relating to certain current and former employees, contractor workers and their dependents and certain other persons, including some policyholders. In July of 2021, CNA provided notifications to the impacted individuals and to regulators, in accordance with applicable law. CNA may be subject to subsequent investigations, fines or penalties, as well as other legal claims and actions, related to the foregoing. The likelihood is reasonably possible, but the amount of such fines, penalties or costs, if any, cannot be estimated at this time.


Based on the information currently known, CNA does not believe that the March 2021 cybersecurity attack will have a material impact on its business, results of operations or financial condition, but no assurances can be given as it continues to assess the full impact from the incident, including costs, expenses and insurance coverage.

CNA Guarantees


CNA 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, 2020,2021, the potential amount of future payments CNA 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. CNA does not believe any payment is likely under these guarantees, as CNA is the beneficiary of a trust that must be maintained at a level that approximates the discounted reserves for these annuities.

14.
11. Segments


Loews Corporation has 54 reportable segments comprised of 3 individual consolidated operating subsidiaries, CNA, Boardwalk Pipelines and Loews Hotels & Co; and the Corporate segment andsegment. In the first quarter of 2020, Diamond Offshore.Offshore was a reportable segment; it was deconsolidated during the second quarter of 2020. The Corporate segment is primarily comprised of Loews Corporation, excluding its subsidiaries, and the operations of Altium Packaging.Packaging through March 31, 2021. On April 1, 2021, Loews Corporation sold 47% of its interest in Altium Packaging and as a result, Altium Packaging was deconsolidated from Loews Corporation’s consolidated financial results. Subsequent to deconsolidation, Loews Corporation’s investment in Altium Packaging is accounted for under the equity method of accounting, with Equity income (loss) reported in Operating expenses and other on the Consolidated Condensed Statements of Operations in the Corporate segment. For further discussion on the deconsolidations of Diamond Offshore was deconsolidated during the second quarter of 2020. Seeand Altium Packaging see Note 2 for further information on the deconsolidation of Diamond Offshore. 2.


Each of the operating subsidiaries and Diamond Offshore areis headed by a chief executive officer who is responsible for the operation of its business and has the duties and authority commensurate with that position. For additional disclosures regarding the composition of Loews Corporation’s segments, see Note 20 of the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.2020.


The following tables present the reportable segments and their contribution to the Consolidated Condensed Financial Statements.Statements of Operations. Amounts presented will not necessarily be the same as those in the individual financial statements of the subsidiaries due to adjustments for purchase accounting, income taxes and noncontrolling interests.

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32

Total assets by segment are presented in the following tables.

 September 30, 2020 
CNA
Financial
  
Boardwalk
Pipelines
  
Loews
Hotels & Co
  Corporate  
Diamond
Offshore (a)
  Total 
(In millions)                  
                   
Total assets $62,728  $9,666  $1,685  $5,385  $0  $79,464 
                         
December 31, 2019                        
                         
Total assets $60,583  $9,248  $1,728  $4,850  $5,834  $82,243 

Statements of Operations by segment are presented in the following tables.

Three Months Ended September 30, 2020 
CNA
Financial
  
Boardwalk
Pipelines
  
Loews
Hotels & Co
  Corporate  Total 
 CNA
  Boardwalk
  Loews
  
  
 
Three Months Ended September 30, 2021
 Financial  Pipelines  Hotels & Co  Corporate  Total 
(In millions)                              
                              
Revenues:                              
                              
Insurance premiums $1,953           $1,953  $2,059           $2,059 
Net investment income  517        $23   540 
Net investment income (loss)
  513     
   $(30)  483 
Investment gains  46             46   22              22 
Non-insurance warranty revenue  317             317   357              357 
Operating revenues and other  7  $289  $60   253   609   8  $307  $
134   1   450 
Total  2,840   289   60   276   3,465   2,959   307   134   (29)  3,371 
                                        
Expenses:                                        
                                        
Insurance claims and policyholders’ benefits  1,616               1,616   1,632               1,632 
Amortization of deferred acquisition costs  360               360   368               368 
Non-insurance warranty expense  293               293   330               330 
Operating expenses and other  268   219   114   275   876   287   215   109   27   638 
Interest  52   44   8   33   137   28   40   8   23   99 
Total  2,589   263   122   308   3,282   2,645   255   117   50   3,067 
Income (loss) before income tax  251   26   (62)  (32)  183   314   52   17   (79)  304 
Income tax (expense) benefit  (36)  (6)  15   6   (21)  (59)  (14)  (4)  19   (58)
Net income (loss)  215   20   (47)  (26)  162   255   38   13   (60)  246 
Amounts attributable to noncontrolling interests  (23)              (23)  (26)              (26)
Net income (loss) attributable to Loews Corporation $192  $20  $(47) $(26) $139  $229  $38  $13  $(60) $220 

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33

Three Months Ended September 30, 2019 
CNA
Financial
  
Boardwalk
Pipelines
  
Loews
Hotels & Co
  Corporate  
Diamond
Offshore (a)
  Total 
(In millions)                  
                   
Revenues:                  
                   
Insurance premiums $1,890              $1,890 
Net investment income  487        $36  $2   525 
Investment gains  8                 8 
Non-insurance warranty revenue  292                 292 
Operating revenues and other  9  $296  $156   250   249   960 
Total  2,686   296   156   286   251   3,675 
                         
Expenses:                        
                         
Insurance claims and policyholders’ benefits  1,614                   1,614 
Amortization of deferred acquisition costs  345                   345 
Non-insurance warranty expense  278                   278 
Operating expenses and other  291   212   145   264   322   1,234 
Interest  31   45   6   31   31   144 
Total  2,559   257   151   295   353   3,615 
Income (loss) before income tax  127   39   5   (9)  (102)  60 
Income tax (expense) benefit  (20)  (10)  (2)  1   10   (21)
Net income (loss)  107   29   3   (8)  (92)  39 
Amounts attributable to noncontrolling interests  (11)              44   33 
Net income (loss) attributable to Loews Corporation $96  $29  $3  $(8) $(48) $72 
36

Nine Months Ended September 30, 2020 
CNA
Financial
  
Boardwalk
Pipelines
  
Loews
Hotels & Co
  Corporate  
Diamond
Offshore (a)
  Total 
(In millions)                  
                   
Revenues:                  
                   
Insurance premiums $5,672              $5,672 
Net investment income (loss)  1,380        $(33)     1,347 
Investment losses  (101)        (1,211)     (1,312)
Non-insurance warranty revenue  926                926 
Operating revenues and other  20  $926  $236   754  $305   2,241 
Total  7,897   926   236   (490)  305   8,874 
                         
Expenses:                        
                         
Insurance claims and policyholders’ benefits  4,683                   4,683 
Amortization of deferred acquisition costs  1,046                   1,046 
Non-insurance warranty expense  859                   859 
Operating expenses and other  851   633   404   810   1,196   3,894 
Interest  114   127   24   96   43   404 
Total  7,553   760   428   906   1,239   10,886 
Income (loss) before income tax  344   166   (192)  (1,396)  (934)  (2,012)
Income tax (expense) benefit  (40)  (43)  48   293   26   284 
Net income (loss)  304   123   (144)  (1,103)  (908)  (1,728)
Amounts attributable to noncontrolling interests  (32)              432   400 
Net income (loss) attributable to Loews Corporation $272  $123  $(144) $(1,103) $(476) $(1,328)
37

Nine Months Ended September 30, 2019 
CNA
Financial
  
Boardwalk
Pipelines
  
Loews
Hotels & Co
  Corporate  
Diamond
Offshore (a)
  Total 
 CNA
  Boardwalk
  Loews
  
  
 
Three Months Ended September 30, 2020
 Financial  Pipelines  Hotels & Co  Corporate (a)  Total 
(In millions)                                 
                                 
Revenues:                                 
                                 
Insurance premiums $5,517              $5,517  $1,953           $1,953 
Net investment income  1,573     $1  $153  $6   1,733   517        $23   540 
Investment gains  41                  41   46             46 
Non-insurance warranty revenue  858                  858   317             317 
Operating revenues and other  22  $969   521   689   705   2,906   7  $289  $60   253   609 
Total  8,011   969   522   842   711   11,055   2,840   289   60   276   3,465 
                                            
Expenses:                                            
                                            
Insurance claims and policyholders’ benefits  4,323                   4,323   1,616               1,616 
Amortization of deferred acquisition costs  1,025                   1,025   360               360 
Non-insurance warranty expense  801                   801   293               293 
Operating expenses and other  854   616   464   740   940   3,614   268   219   114   275   876 
Interest  120   136   16   85   92   449   52   44   8   33   137 
Total  7,123   752   480   825   1,032   10,212   2,589   263   122   308   3,282 
Income (loss) before income tax  888   217   42   17   (321)  843   251   26   (62)  (32)  183 
Income tax (expense) benefit  (161)  (56)  (14)  (4)  52   (183)  (36)  (6)  15   6   (21)
Net income (loss)  727   161   28   13   (269)  660   215   20   (47)  (26)  162 
Amounts attributable to noncontrolling interests  (77)              132   55   (23)              (23)
Net income (loss) attributable to Loews Corporation $650  $161  $28  $13  $(137) $715  $192  $20  $(47) $(26) $139 

(a)Amounts presented for Corporate include the operating results of Altium Packaging prior to the deconsolidation.

34
  CNA


Boardwalk


Loews






 
Nine Months Ended September 30, 2021 Financial  Pipelines  Hotels & Co  Corporate (b)  Total 
(In millions)               
                
Revenues:               
                
Insurance premiums $6,056              $6,056 
Net investment income  1,608      $1  $40   1,649 
Investment gains  117           540   657 
Non-insurance warranty revenue  1,054               1,054 
Operating revenues and other  19  $991   288   282   1,580 
Total  8,854   991   289   862   10,996 
                     
Expenses:                    
                     
Insurance claims and policyholders’ benefits  4,684               4,684 
Amortization of deferred acquisition costs  1,084               1,084 
Non-insurance warranty expense  973               973 
Operating expenses and other  874   641   328   365   2,208 
Interest  85   121   25   93   324 
Total  7,700   762   353   458   9,273 
Income (loss) before income tax  1,154   229   (64)  404   1,723 
Income tax (expense) benefit  (219)  (59)  13   (126)  (391)
Net income (loss)  935   170   (51)  278   1,332 
Amounts attributable to noncontrolling interests  (97)              (97)
Net income (loss) attributable to Loews Corporation $838  $170  $(51) $278  $1,235 

(b)Amounts presented for Corporate include the operating results of Altium Packaging through March 31, 2021. Beginning April 1, 2021, Altium Packaging is recorded as an equity method investment.

35
  CNA
  Boardwalk
  Loews
  
  Diamond
  
 
Nine Months Ended September 30, 2020
 Financial  Pipelines  Hotels & Co  Corporate (a)  Offshore (c)  Total 
(In millions)                  
                   
Revenues:                  
                   
Insurance premiums $5,672              $5,672 
Net investment income (loss)  1,380        $(33)     1,347 
Investment losses  (101)        (1,211)     (1,312)
Non-insurance warranty revenue  926                926 
Operating revenues and other  20  $926  $236   754  $305   2,241 
Total  7,897   926   236   (490)  305   8,874 
                         
Expenses:                        
                         
Insurance claims and policyholders’ benefits  4,683                   4,683 
Amortization of deferred acquisition costs  1,046                   1,046 
Non-insurance warranty expense  859                   859 
Operating expenses and other  851   633   404   810   1,196   3,894 
Interest  114   127   24   96   43   404 
Total  7,553   760   428   906   1,239   10,886 
Income (loss) before income tax  344   166   (192)  (1,396)  (934)  (2,012)
Income tax (expense) benefit  (40)  (43)  48   293   26   284 
Net income (loss)  304   123   (144)  (1,103)  (908)  (1,728)
Amounts attributable to noncontrolling interests  (32)              432   400 
Net income (loss) attributable to Loews Corporation $272  $123  $(144) $(1,103) $(476) $(1,328)

(c)Amounts presented for Diamond Offshore reflect the periodsperiod prior to the deconsolidation.


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36
Item 2. 
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with our Consolidated Condensed Financial Statements included under Item 1 of this Report, Risk Factors included under Part II, Item 1A of this Report, Risk Factors included in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 20202021 and June 30, 20202021 and the Consolidated Financial Statements, Risk Factors, and MD&A included in our Annual Report on Form 10-K for the year ended December 31, 2019.2020. This MD&A is comprised of the following sections:


Page
No.
  
Overview3937
Results of Operations4038
Consolidated Financial Results4038
CNA Financial4139
Boardwalk Pipelines5148
Loews Hotels & Co5349
Corporate5450
Diamond Offshore5551
Liquidity and Capital Resources5651
Parent Company5651
Subsidiaries5652
Investments5753
Critical Accounting Estimates6156
Accounting Standards Update6157
Forward-Looking Statements6157

OVERVIEW

Loews Corporation is a holding company and has fivefour reportable segments comprised of three individual consolidated operating subsidiaries, CNA Financial Corporation (“CNA”), Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”) and Loews Hotels Holding Corporation (“Loews Hotels & Co”); and the Corporate segment andsegment. In the first quarter of 2020, Diamond Offshore Drilling Inc. (“Diamond Offshore”). was a reportable segment; Diamond Offshore was deconsolidated during the second quarter of 2020. The Corporate segment is primarily comprised of Loews Corporation, excluding its subsidiaries, and the operations of Altium Packaging LLC (“Altium Packaging”). Diamond Offshore was deconsolidated during the second quarter of 2020. Each of the operating subsidiaries and Diamond Offshore are headed by a chief executive officer who is responsible for the operation through March 31, 2021. On April 1, 2021, Loews Corporation sold 47% of its business and has the duties and authority commensurate with that position.

On April 26, 2020 (the “Filing Date”), Diamond Offshore and certain of its direct and indirect subsidiaries filed voluntary petitionsinterest in the United States Bankruptcy CourtAltium Packaging to GIC, Singapore’s sovereign wealth fund, for the Southern District of Texas seeking relief under Chapter 11 of the United States Bankruptcy Code (the “Chapter 11 Filing”).$420 million in cash consideration. As a result of the Chapter 11 Filing and applicable U.S. generally accepted accounting principles,terms of this transaction, Loews Corporation no longer controls Diamond Offshore for accounting purposes,shares certain participating rights with GIC related to capital allocation and other decisions and was therefore Diamond Offshore was deconsolidated from its consolidated financial statements effectiverequired to deconsolidate Altium Packaging as of the Filing Date.date of the sale under accounting principles generally accepted in the United States of America (“GAAP”). Subsequent to deconsolidation, Loews Corporation’s investment in Altium Packaging is accounted for under the equity method of accounting, with Equity income (loss) reported in Operating expenses and other on the Consolidated Condensed Statements of Operations in the Corporate segment. For further information on the deconsolidations of Diamond Offshore and Altium Packaging see Note 2 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report.

Unless the context otherwise requires, the term “Company” as used herein means Loews Corporation including its consolidated subsidiaries, the terms “Parent Company,” “we,” “our,” “us” or like terms as used herein mean Loews Corporation excluding its subsidiaries, and the term “Net income (loss) attributable to Loews Corporation” as used herein means Net income (loss) attributable to Loews Corporation shareholders.shareholders and the term “subsidiaries” means Loews Corporation’s consolidated subsidiaries.

We rely upon our invested cash balances and distributions from our subsidiaries to generate the funds necessary to meet our obligations and to declare and pay any dividends to shareholders. The ability of subsidiaries to pay dividends is subject to, among other things, the availability of sufficient earnings and funds in such subsidiaries, applicable state laws, including in the case of the insurance subsidiaries of CNA, laws and rules governing the payment of dividends by regulated insurance companies (see Note 14 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2019)2020) and compliance with covenants in their respective loan agreements. Claims of creditors of our subsidiaries will generally have priority as to the assets of such subsidiaries over our claims and those of our creditors and shareholders.

39
37
RESULTS OF OPERATIONS

Consolidated Financial Results

The following table summarizes net income (loss) attributable to Loews Corporation by segment and net income (loss) per share attributable to Loews Corporation for the three and nine months ended September 30, 20202021 and 2019:2020:

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  2020  2019  2020  2019 
(In millions, except per share data)            
             
CNA Financial $192  $96  $272  $650 
Boardwalk Pipelines  20   29   123   161 
Loews Hotels & Co  (47)  3   (144)  28 
Corporate  (26)  (8)  (1,103)  13 
Diamond Offshore (a)      (48)  (476)  (137)
Net income (loss) attributable to Loews Corporation $139  $72  $(1,328) $715 
                 
Basic and diluted net income (loss) per share $0.50  $0.24  $(4.70) $2.34 

(a)Amounts presented for Diamond Offshore reflect the periods prior to deconsolidation. See Notes 2 and 14 of the Notes to the Consolidated Condensed Financial Statements included under Item 1.

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 

 2021  2020  2021  2020 
(In millions, except per share data)            
             
CNA Financial $229  $192  $838  $272 
Boardwalk Pipelines  38   20   170   123 
Loews Hotels & Co  13   (47)  (51)  (144)
Corporate  (60)  (26)  278   (1,103)
Diamond Offshore              (476)
Net income (loss) attributable to Loews Corporation $220  $139  $1,235  $(1,328)
                 
Basic net income (loss) per share $0.86  $0.50  $4.71  $(4.70)
                 
Diluted net income (loss) per share $0.85  $0.50  $4.70  $(4.70)

Net income attributable to Loews Corporation for the three months ended September 30, 20202021 was $220 million, or $0.85 per share, compared to $139 million, or $0.50 per share compared to net income of $72 million, or $0.24 per share in the comparable 20192020 period. Net lossincome attributable to Loews Corporation for the nine months ended September 30, 20202021 was $1.33$1.2 billion, or $4.70 per share, compared to a net incomeloss of $715 million,$1.3 billion, or $2.34$4.70 per share in the comparable 20192020 period.

Each of the company’s consolidated subsidiaries, CNA Financial Corporation, Boardwalk Pipelines, and Loews Hotels & Co, contributed meaningfully to the year-over-year increase in Loews’s 2021 third quarter net income as compared to the comparable 2020 period. As compared to the third quarter of 2020, CNA benefited from higher Property & Casualty non-catastrophe current accident year underwriting results and improved Life & Group business results primarily due to the absence of the active life premium deficiency charge recorded in the third quarter of 2020, partially offset by higher net catastrophe losses and lower investment gains. Loews Hotels & Co posted significantly improved year-over-year third quarter results due to the continuing rebound in leisure travel, especially at resort destinations. Boardwalk Pipelines revenues for the third quarter of 2021 increased compared to the comparable prior year period, reflecting the impact of recently completed growth projects and higher system utilization. The parent company investment portfolio experienced lower net investment income in the third quarter of 2021 compared to the comparable prior year period.

The increase in net income for the three months ended September 30, 2020 as compared to the 2019 period was driven by CNA. Property and casualty underwriting income before catastrophe losses and prior year development rose, as CNA posted an underlying combined ratio of 92.6%, down from 94.6% in the prior year period. CNA also benefited from higher net investment income, more net investment gains, and reduced net reserve charges in its Life & Group business. Offsetting these improvements were increased net catastrophe losses primarily from severe weather-related events.

Additionally, Loews Hotels & Co reported a net loss for the three months ended September 30, 2020 due to the revenue impact of the COVID-19 pandemic, and Boardwalk Pipelines’ net income also declined compared to the prior year period. The three months ended September 30, 2019 included a net loss from Diamond Offshore.

The net lossimproved results for the nine months ended September 30, 2021 compared to the comparable 2020 was driven by six main factors: (i) an investment loss caused byperiod are due to higher Property & Casualty non-catastrophe current accident year underwriting results at CNA, improved results for CNA’s Life & Group business which benefited from the write downabsence of the carrying valueactive life premium deficiency charge recorded in the third quarter of our interest in Diamond Offshore as a result of its bankruptcy filing on April 26, 2020; (ii) drilling rig impairment charges at Diamond Offshore; (iii) operating2020, lower net catastrophe losses at Loews Hotels; (iv) a reduction in CNA’sCNA, significantly higher net investment income at CNA and the parent company’s netcompany, and investment income; (v) net investment losses at CNAgains in 2021 as compared to net investment gainslosses in 2019; and (vi) lower property and casualty underwriting income2020 at CNA caused mainly by higher catastrophe losses.

The economic disruption caused byand in the COVID-19 pandemic and measures to mitigateparent company investment portfolio. All other segment improvements for the spread of the virus have significantly affected Loews’s results in 2020. The full impact of COVID-19 on Loews will depend on the duration of mandated and voluntary containment efforts, related economic policies, and other societal responsesnine months ended September 31, 2021 as compared to the pandemic.comparable 2020 period are primarily due to the reasons discussed in the three month comparison above. In addition, the nine months ended September 30, 2021 include a gain of $438 million (after tax) related to the sale of 47% of Altium Packaging and its deconsolidation on April 1, 2021. The nine months ended September 30, 2020 included a loss of $957 million (after tax), related to the bankruptcy filing and deconsolidation of Diamond Offshore, and impairment charges totaling $774 million ($408 million after tax and noncontrolling interests) at Diamond Offshore in the first quarter of 2020, prior to deconsolidation.

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38
CNA Financial

The following table summarizes the results of operations for CNA for the three and nine months ended September 30, 20202021 and 20192020 as presented in Note 1411 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report. For further discussion of Net investment income and Investment gains (losses), see the Investments section of this MD&A.

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
 2020  2019  2020  2019  2021  2020  2021  2020 
(In millions)                        
                        
Revenues:                        
Insurance premiums $1,953  $1,890  $5,672  $5,517  $2,059  $1,953  $6,056  $5,672 
Net investment income  517   487   1,380   1,573  513  
517
  1,608  
1,380
 
Investment gains (losses)  46   8   (101)  41  22  
46
  117  
(101
)
Non-insurance warranty revenue  317   292   926   858  357  
317
  1,054  
926
 
Other revenues  7   9   20   22   8   
7
   19   
20
 
Total  2,840   2,686   7,897   8,011  2,959  
2,840
  8,854  
7,897
 
Expenses:                            
Insurance claims and policyholders’ benefits  1,616   1,614   4,683   4,323  1,632  
1,616
  4,684  
4,683
 
Amortization of deferred acquisition costs  360   345   1,046   1,025  368  
360
  1,084  
1,046
 
Non-insurance warranty expense  293   278   859   801  330  
293
  973  
859
 
Other operating expenses  268   291   851   854  287  
268
  874  
851
 
Interest  52   31   114   120  28  
52
  85  
114
 
Total  2,589   2,559   7,553   7,123   2,645   
2,589
   7,700   
7,553
 
Income before income tax  251   127   344   888  314  
251
  1,154  
344
 
Income tax expense  (36)  (20)  (40)  (161)  (59)  
(36
)
  (219)  
(40
)
Net income  215   107   304   727  255  
215
  935  
304
 
Amounts attributable to noncontrolling interests  (23)  (11)  (32)  (77)  (26)  
(23
)
  (97)  
(32
)
Net income attributable to Loews Corporation $192  $96  $272  $650  $229  $192  $838  $272 

Three Months Ended September 30, 20202021 Compared to 2019the Comparable 2020 Period

Net income attributable to Loews Corporation increased $96$37 million for the three months ended September 30, 20202021 as compared with the 2019 period. The increase wascomparable 2020 period primarily due to improved non-catastrophe current accident year underwriting results, higher net investment income driven by limited partnership returns, higher investment gains and favorable net prior year loss reserve development in the current year period. Investment gains were driven by the favorable change in fair valueabsence of non-redeemable preferred stock and higher gains on sales of fixed maturity securities. Results for the three months ended September 30, 2020 also included a $74 million charge ($52 million after tax and noncontrolling interests) related to the recognition of aan active life reserve premium deficiency as a result offor long term care policies in the third quarter of 2020. Results for the three months ended September 30, 2021 also included improved non-catastrophe current accident year underwriting results. The three months ended September 30, 2020 gross premium valuation (“GPV”) in the long term care business as compared toalso included a $216$14 million charge ($151  million after(after tax and noncontrolling interests) related to recognitionthe early retirement of a premium deficiency as a result of the third quarter 2019 GPV. debt. These increases to net income were partially offset by lower investment gains and net catastrophe losses of $160$178 million ($112125 million after tax and noncontrolling interests) for the three months ended September 30, 20202021 as compared to $32$160 million ($22112 million after tax and noncontrolling interests) in the 2019comparable 2020 period. Net catastrophe losses for the three months ended September 30, 2021 included $114 million for Hurricane Ida. 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. In addition, there was a $14 million charge (after tax and noncontrolling interests) related to the early retirement of debt for the three months ended September 30, 2020.

Nine Months Ended September 30, 20202021 Compared to 2019the Comparable 2020 Period

Net income attributable to Loews Corporation decreased $378increased $566 million for the nine months ended September 30, 20202021 as compared with the 2019 period. The decrease wascomparable 2020 period primarily due to netimproved current accident year underwriting results. Net catastrophe losses of $536were $357 million ($377251 million after tax and noncontrolling interests) for the nine months ended September 30, 20202021 as compared to $128$536 million ($90377 million after tax and noncontrolling interests) in the prior year period, lower net investment income and investment losses in the first nine months ofcomparable 2020 as compared with investment gains in the prior year period. Net catastrophe losses infor the first nine months ofended September 30, 2021 were driven by severe weather-related events, primarily Hurricane Ida and Winter Storms Uri and Viola. Net catastrophe losses for the nine months ended September 30, 2020 includeincluded $273 million primarily related to severe weather-related events, $195 million related to COVID-19 and $68 million related to civil unrest. The decreaseResults also reflect higher net investment income and investment gains during the nine months ended September 30, 2021 as compared with investment losses in the comparable 2020 period. Higher net investment income was driven by lower limited partnership and common stock returns and lower yields on the fixed income portfolio. Investment lossesinvestment gains were driven by higherlower impairment losses and the unfavorablefavorable change in fair value of non-non-redeemable preferred stock for the nine months ended September 30, 2021 as compared with the comparable 2020

41
39
redeemable preferred stock, partially offset by higher gains on salesperiod. Results for the nine months ended September 30, 2021 also reflect the absence of fixed maturity securities. These decreases were partially offset by a $74 million charge ($52 million after tax and noncontrolling interests) related to the recognition of an active life reserve premium deficiency for long term care policies in the third quartercomparable 2020 as compared to a $216 million charge ($151 million after tax and noncontrolling interests) in the third quarter 2019 related to recognition of a premium deficiency as a result of the GPV review.

Recent Developments

CNA’s 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 CNA’s results in the first three quarters of 2020 may not be indicative of its impacts for the remainder of 2020 or thereafter. See the Liquidity and Capital Resources and Investments sections of this MD&A and Risk Factors included under Part II, Item 1A of this Report for further discussion of the risks associated with COVID-19 and measures to mitigate the spread of the virus.

CNA experienced year-over-year growth in gross and net written premiums, excluding third party captives driven by rate increases across its property and casualty insurance lines of business. However, depressed economic conditions generally have had an unfavorable impact on premium exposures, resulting in a decrease in CNA’s estimated audit premiums during the second quarter of 2020 and causing an unfavorable impact on its net earned premiums. Additionally, in the second quarter of 2020, CNA 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 CNA’s net earned premiums in future quarters. Lower net earned premiums have had and may continue to have an unfavorable impact on CNA’s expense ratio. CNA’s expense ratio has also been unfavorably impacted by increases in its allowance for doubtful accounts for insurance receivables, more than offset by lower travel-related expenses. If general economic conditions do not improve in the remainder of 2020 or thereafter, CNA’s net written premiums, net earned premiums and expense ratio may continue to be unfavorably impacted as a result.

While CNA’s losses incurred during the first nine months of 2020 related to COVID-19 represent CNA’s 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 CNA’s 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 CNA to experience additional COVID-19 related catastrophe losses in future quarters.

CNA has 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 CNA’s portfolio, as its 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.period.

CNA’s Property & Casualty and Other Insurance Operations

CNA’s commercial property and casualty insurance operations (“Property & Casualty Operations”) include its Specialty, Commercial and International lines of business. CNA’s Other Insurance Operations outside of Property & Casualty Operations include its long term care business that is in run-off, certain corporate expenses, including interest on CNA’s corporate debt, and certain property and casualty businesses in run-off, including CNA Re, Asbestos & Environmental Pollution (“A&EP”), excess workers’ compensation and A&EP.legacy mass tort. We believe the presentation of CNA as one reportable segment is appropriate in accordance with applicable accounting standards on segment reporting. However, for purposes of this discussion and analysis of the results of operations, we provide greater detail with respect to CNA’s Property & Casualty Operations and Other Insurance Operations to enhance the reader’s understanding and to provide further transparency into key drivers of CNA’s financial results.

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Effective January 1, 2021, and in connection with the ceding of certain legacy reserves under a retroactive reinsurance agreement executed in February 2021, CNA changed the 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, is now reported as part of the Other Insurance Operations business. See Note 5 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report for further information on this retroactive reinsurance agreement. In addition, a determination was made to change the 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 and are now reported as part of the Other Insurance Operations business. These changes were made to better reflect the manner in which CNA is organized for purposes of making operating decisions and assessing performance. Prior period information has been conformed to the new presentation.

In assessing its insurance operations, CNA utilizes the core income (loss) financial measure. Core income (loss) is calculated by excluding from net income (loss), investment gains or losses and any cumulative effects of changes in accounting guidance. In addition, core income (loss) excludes the effects of noncontrolling interests. The calculation of core income (loss) excludes investment gains or losses because investment gains or losses are generally driven by economic factors that are not necessarily reflective of CNA’s primary insurance operations. Core income (loss) is deemed to be a non-GAAP financial measure and management believes this measure is useful for investors to evaluate its insurance operations. Please see the non-GAAP reconciliation of core income (loss) to net income (loss) that follows in this MD&A.

Recent Developments

As previously disclosed, CNA sustained a sophisticated cybersecurity attack in March of 2021 involving ransomware that caused a network disruption and impacted certain of its systems. CNA has incurred expenses within Other Insurance Operations related to the cybersecurity attack and expects these expenses will continue. Additionally, CNA anticipates making continued investments in technology to improve its security and infrastructure, which will increase expenses in future periods. While CNA does not believe that the March 2021 cybersecurity attack will have a material impact on its business, results of operations or financial condition, no assurances can be given at this time as it continues to assess the full impact from the incident, including costs, expenses and insurance coverage.

Property & Casualty Operations

In evaluating the results of Property & Casualty Operations, CNA utilizes 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, renewal premium change, rate, retention and new business are also utilized 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.

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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 period 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, represents gross written premiums excluding business which is ceded to third party captives, including business related to large warranty programs.

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The following tables summarize the results of CNA’s Property & Casualty Operations for the three and nine months ended September 30, 20202021 and 2019:2020:

Three Months Ended September 30, 2020 Specialty  Commercial  International  Total 
Three Months Ended September 30, 2021 Specialty  Commercial  International  Total 
(In millions, except %)                        
                        
Gross written premiums $1,855  $915  $238  $3,008  $1,953  $1,010  $276  $3,239 
Gross written premiums excluding third                
party captives  861   915   238   2,014 
Gross written premiums excluding third party captives 943  1,005  276  2,224 
Net written premiums  795   804   222   1,821  822  831  256  1,909 
Net earned premiums  734   857   236   1,827  773  893  271  1,937 
Net investment income  126   165   15   306  116  141  14  271 
Core income  168   52   27   247  173  27  17  217 
                            
Other performance metrics:                            
Loss ratio excluding catastrophes                
and development  60.0%  61.0%  60.1%  60.5%
Loss ratio excluding catastrophes and development 59.1% 61.5% 58.9% 60.2%
Effect of catastrophe impacts  1.0   17.0   3.0   8.7  0.4  18.6  3.4  9.2 
Effect of development-related items  (2.0)  0.6   0.1   (0.4)  (1.8)  0.5   1.1   (0.3)
Loss ratio  59.0%  78.6%  63.2%  68.8% 57.7% 80.6% 63.4% 69.1%
Expense ratio  30.5   32.3   34.9   31.8  30.6  30.4  32.1  30.7 
Dividend ratio      0.6       0.3  (0.1) 0.6     0.2 
Combined ratio  89.5%  111.5%  98.1%  100.9%  88.2%  111.6%  95.5%  100.0%
Combined ratio excluding catastrophes and development  90.5%  93.9%  95.0%  92.6% 89.6% 92.5% 91.0% 91.1%
                            
Rate  13%  11%  16%  12% 9% 6% 13% 8%
Renewal premium change  12   8   14   10  8  8  12  9 
Retention  86   81   70   82  80  83  79  81 
New business $104  $168  $58  $330  $147  $204  $54  $405 

Three Months Ended September 30, 2019 Specialty  Commercial  International  Total 
Three Months Ended September 30, 2020            
                        
Gross written premiums $1,766  $860  $226  $2,852  $1,855  $915  $238  $3,008 
Gross written premiums excluding third                
party captives  778   852   226   1,856 
Gross written premiums excluding third party captives 861  915  238  2,014 
Net written premiums  732   775   201   1,708  795  804  222  1,821 
Net earned premiums  712   813   236   1,761  734  857  236  1,827 
Net investment income  121   136   17   274  126  151  15  292 
Core income (loss)  153   97   (9)  241 
Core income 168  41  27  236 
                            
Other performance metrics:                            
Loss ratio excluding catastrophes                
and development  60.1%  61.5%  67.3%  61.7%
Loss ratio excluding catastrophes and development 60.0% 60.8% 60.1% 60.5%
Effect of catastrophe impacts  0.5   3.0   1.7   1.8  1.0  17.0  3.0  8.7 
Effect of development-related items  (2.8)  4.8   0.4   1.2   (2.0)  0.6   0.1   (0.4)
Loss ratio  57.8%  69.3%  69.4%  64.7% 59.0% 78.4% 63.2% 68.8%
Expense ratio  31.8   31.7   38.0   32.5  30.5  32.3  34.9  31.8 
Dividend ratio  0.2   0.6       0.4     0.6     0.3 
Combined ratio  89.8%  101.6%  107.4%  97.6%  89.5%  111.3%  98.1%  100.9%
Combined ratio excluding catastrophes and development  92.1%  93.8%  105.3%  94.6% 90.5% 93.7% 95.0% 92.6%
                            
Rate  6%  4%  10%  6% 13% 11% 17% 12%
Renewal premium change  9   5   6   7  15  9  15  12 
Retention  87   86   74   84  87  82  69  82 
New business $91  $173  $52  $316  $105  $168  $54  $327 

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Nine Months Ended September 30, 2021 Specialty  Commercial  International  Total 
(In millions, except %)            
             
Gross written premiums $5,650  $3,284  $958  $9,892 
Gross written premiums excluding third party captives  2,656   3,176   958   6,790 
Net written premiums  2,350   2,622   783   5,755 
Net earned premiums  2,270   2,629   789   5,688 
Net investment income  367   463   42   872 
Core income  531   233   67   831 
                 
Other performance metrics:                
Loss ratio excluding catastrophes and development  59.1%  60.8%  59.2%  59.9%
Effect of catastrophe impacts  0.4   12.6   2.0   6.3 
Effect of development-related items  (1.7)  0.6   0.3   (0.4)
Loss ratio  57.8%  74.0%  61.5%  65.8%
Expense ratio  30.4   31.4   33.3   31.3 
Dividend ratio  0.1   0.6       0.3 
Combined ratio  88.3%  106.0%  94.8%  97.4%
Combined ratio excluding catastrophes and development  89.6%  92.8%  92.5%  91.5%
                 
Rate  10%  8%  13%  10%
Renewal premium change  10   9   12   10 
Retention  84   82   76   82 
New business $370  $615  $204  $1,189 

Nine Months Ended September 30, 2020 Specialty  Commercial  International  Total 
(In millions, except %)            
             
Gross written premiums $5,331  $3,103  $822  $9,256 
Gross written premiums excluding third party captives  2,413   3,018   822   6,253 
Net written premiums  2,231   2,703   680   5,614 
Net earned premiums  2,124   2,470   699   5,293 
Net investment income  315   389   44   748 
Core income  354   96   15   465 
                 
Other performance metrics:                
Loss ratio excluding catastrophes                
and development  59.8%  60.4%  60.1%  60.1%
Effect of catastrophe impacts  5.7   14.3   8.9   10.1 
Effect of development-related items  (2.1)  2.1   (0.4)  0.1 
Loss ratio  63.4%  76.8%  68.6%  70.3%
Expense ratio  31.5   33.2   35.6   32.9 
Dividend ratio  0.1   0.6       0.3 
Combined ratio  95.0%  110.6%  104.2%  103.5%
Combined ratio excluding catastrophes and development  91.4%  94.2%  95.7%  93.3%
                 
Rate  11%  9%  12%  11%
Renewal premium change  11   8   11   9 
Retention  85   84   71   82 
New business $275  $564  $187  $1,026 

Nine Months Ended September 30, 2019            
Nine Months Ended September 30, 2020            
                        
Gross written premiums $5,191  $2,825  $837  $8,853  $5,331  $3,103  $822  $9,256 
Gross written premiums excluding third                
party captives  2,263   2,742   837   5,842 
Gross written premiums excluding third party captives
 2,413  3,018  822  6,253 
Net written premiums  2,143   2,536   709   5,388  2,231  2,703  680  5,614 
Net earned premiums  2,061   2,339   729   5,129  2,124  2,470  699  5,293 
Net investment income  410   480   47   937  315  354  44  713 
Core income  483   356   14   853  354  113  15  482 
                            
Other performance metrics:                            
Loss ratio excluding catastrophes                
and development  60.2%  61.8%  61.4%  61.1%
Loss ratio excluding catastrophes and development 59.8% 60.1% 60.1% 59.9%
Effect of catastrophe impacts  0.8   4.3   1.4   2.5  5.7  14.3  8.9  10.1 
Effect of development-related items  (2.9)  1.5   1.9   (0.2)  (2.1)  0.1   (0.4)  (0.8)
Loss ratio  58.1%  67.6%  64.7%  63.4% 63.4% 74.5% 68.6% 69.2%
Expense ratio  32.6   32.7   37.5   33.3  31.5  33.2  35.6  32.9 
Dividend ratio  0.2   0.6       0.4  0.1  0.6     0.3 
Combined ratio  90.9%  100.9%  102.2%  97.1%  95.0%  108.3%  104.2%  102.4%
Combined ratio excluding catastrophes and development  93.0%  95.1%  98.9%  94.8% 91.4% 93.9% 95.7% 93.1%
                            
Rate  4%  3%  7%  4% 12% 10% 13% 11%
Renewal premium change  7   5   5   6  13  9  11  11 
Retention  88   86   70   84  86  84  71  83 
New business $274  $522  $207  $1,003  $275  $564  $184  $1,023 

Three Months Ended September 30, 20202021 Compared to 2019the Comparable 2020 Period

Total gross written premiums increased $156 million for the three months ended September 30, 2020 as compared with the 2019 period. Total net written premiums increased $113 million for the three months ended September 30, 2020 as compared with the 2019 period.

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Gross written premiums, excluding third party captives, for Specialty increased $83$82 million for the three months ended September 30, 20202021 as compared with the 2019comparable 2020 period driven by strong rate and higher new business. Net written premiums for Specialty increased $63$27 million for the three months ended September 30, 20202021 as compared with the 2019comparable 2020 period. The increase in net earned premiums for the three months ended September 30, 20202021 was consistent with the trend in net written premiums in recent quarters for Specialty.

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Gross written premiums for Commercial increased $55$95 million for the three months ended September 30, 20202021 as compared with the 2019comparable 2020 period driven by strong rate.rate and higher new business. Net written premiums for Commercial increased $29$27 million for the three months ended September 30, 20202021 as compared with the 2019comparable 2020 period. The increase in net earned premiums for the three months ended September 30, 20202021 was consistent with the trend in net written premiums in recent quarters for Commercial.

Gross written premiums for International increased $12$38 million for the three months ended September 30, 20202021 as compared with the 2019comparable 2020 period. Excluding the effect of foreign currency exchange rates, gross written premiums increased $9$26 million driven by growth in Europerate and Canada, partially offset by the continued impact of the strategic exit from certain Lloyd’s business classes.retention. Net written premiums for International increased $21$34 million for the three months ended September 30, 20202021 as compared with the 2019comparable 2020 period. Excluding the effect of foreign currency exchange rates, net written premiums increased $18$23 million for the three months ended September 30, 20202021 as compared with the 2019comparable 2020 period. NetThe increase in net earned premiums for the three months ended September 30, 2020 were2021 was consistent with the same periodtrend in 2019net written premiums for International.

CoreTotal core income increased $6decreased $19 million for the three months ended September 30, 20202021 as compared with the 2019comparable 2020 period primarily due to higher net catastrophe losses and lower net investment income, partially offset by improved non-catastrophe current accident year underwriting results, higher net investment income driven by limited partnership returns and favorable net prior year loss reserve development for the three months ended September 30, 2020 as compared with unfavorable net prior year loss reserve development in the 2019 period, largely offset by higher net catastrophe losses.results.

NetTotal net catastrophe losses were $160$178 million for the three months ended September 30, 20202021 as compared with $32$160 million in the 2019 period and primarily related to severe weather-related events.comparable 2020 period. For the three months ended September 30, 20202021 and 2019,2020, Specialty had net catastrophe losses of $7$3 million and $3$7 million, Commercial had net catastrophe losses of $146$166 million and $25$146 million and International had net catastrophe losses of $7$9 million and $4$7 million.

Favorable net prior year loss reserve development of $10 million and $15 million was recorded for the three months ended September 30, 2020 as compared with unfavorable net prior year loss reserve development of $16 million for the three months ended September 30, 2019.2021 and 2020. For the three months ended September 30, 20202021 and 2019,2020, Specialty recorded favorable net prior year loss reserve development of $16$15 million and $20$16 million, and Commercial recorded unfavorable net prior year loss reserve development of $2 million and $1 million and $35 million.International recorded unfavorable net prior year loss reserve development of $3 million and no net prior year loss reserve development. Further information on net prior year loss reserve development is included in Note 65 of the Notes to Consolidated Condensed Financial Statements included under Item 1.1 of this Report.

Specialty’s combined ratio improved 1.3 points for the three months ended September 30, 2021 as compared with the comparable 2020 period due to a 1.3 point improvement in the loss ratio driven by improved current accident year underwriting results.

Commercial’s combined ratio increased 0.3 points for the three months ended September 30, 20202021 as compared with the 2019 period primarily due to a 1.3 point improvement in the expense ratio, largely offset by a 1.2 point increase 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 favorable net prior year loss reserve development and higher net catastrophe losses.

Commercial’s combined ratio increased 9.9 points for the three months ended September 30,comparable 2020 as compared with the 2019 period due to a 9.32.2 point increase in the loss ratio and a 0.6 point increase in the expense ratio. The increase in the loss ratio was driven by higher net catastrophe losses, which were 17.0 points of the loss ratio for the three months ended September 30, 2020, as compared with 3.0 points of the loss ratio in the 2019 period, partially offset by lower unfavorable net prior year loss reserve development in the current year period. The increase in the expense ratio was driven by higher acquisition expenses partially offset by higher net earned premiums.

International’s combined ratio improved 9.3 points for the three months ended September 30, 2020 as compared with the 2019 period 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. The improvement in the expense ratio was driven by lower acquisition and underwriting expenses.

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Nine Months Ended September 30, 2020 Compared to 2019

Total gross written premiums increased $403 million for the nine months ended September 30, 2020 as compared with the 2019 period. Total net written premiums increased $226 million for the nine months ended September 30, 2020 as compared with the 2019 period.

Gross written premiums, excluding third party captives, for Specialty increased $150 million for the nine months ended September 30, 2020 as compared with the 2019 period driven by strong rate. Net written premiums for Specialty increased $88 million for the nine months ended September 30, 2020 as compared with the 2019 period. The increase in net earned premiums for the nine months ended September 30, 2020 was consistent with the trend in net written premiums in recent quarters for Specialty.

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

Gross written premiums for International decreased $15 million for the nine months ended September 30, 2020 as compared with the 2019 period. 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 2019 period. 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 2019 period. The decrease in net earned premiums for the nine months ended September 30, 2020 was consistent with the trend in net written premiums in recent quarters for International.

Core income decreased $388 million for the nine months ended September 30, 2020 as compared with the 2019 period primarily due to higher net catastrophe losses and lower net investment income driven by limited partnership and common stock returns.

Net catastrophe losses were $536 million for the nine months ended September 30, 2020 as compared with $128 million in the 2019 period. Net catastrophe losses for the nine months ended September 30, 2020 include $273 million primarily related to severe weather-related events, $195 million related to COVID-19 and $68 million related to civil unrest. Specialty net catastrophe losses of $120 million for the nine months ended September 30, 2020 included $109 million related to the COVID-19 pandemic and $11 million primarily related to severe weather-related events. Specialty net catastrophe losses were $16 million for the nine months ended September 30, 2019. Commercial net catastrophe losses of $354 million for the nine months ended September 30, 2020 included $240 million primarily related to severe weather-related events, $66 million related to civil unrest and $48 million related to the COVID-19 pandemic. Commercial net catastrophe losses were $102 million for the nine months ended September 30, 2019. International net catastrophe losses of $62 million for the nine months ended September 30, 2020 included $38 million related to the COVID-19 pandemic and $24 million primarily related to severe weather-related events. International net catastrophe losses were $10 million for the nine months ended September 30, 2019.

The COVID-19 catastrophe 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 CNA’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 the estimated audit premiums and an increase in the credit allowance for premiums receivables resulting from the depressed economic conditions.

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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. For the nine months ended September 30, 2020 and 2019, Specialty recorded favorable net prior year loss reserve development of $47 million and $58 million and Commercial recorded unfavorable net prior year loss reserve development of $42 million and $15 million. For the nine months ended September 30, 2020, International recorded favorable net prior year loss reserve development of $3 million as compared with unfavorable net prior year loss reserve development of $14 million in the 2019 period. Further information on net prior year loss reserve development is included in Note 6 of the Notes to Consolidated Condensed Financial Statements included under Item 1.

Specialty’s combined ratio increased 4.1 points for the nine months ended September 30, 2020 as compared with the 2019 period primarily due to a 5.3 point increase in the loss ratio partially offset by a 1.1 point improvement in the expense ratio. The increase in the loss ratio was primarily due to higher net catastrophe losses, which were 5.7 points of the loss ratio for the nine months ended September 30, 2020, as compared with 0.8 points of the loss ratio in the 2019 period. The improvement in the expense ratio was driven by lower underwriting expenses and higher net earned premiums.

Commercial’s combined ratio increased 9.7 points for the nine months ended September 30, 2020 as compared with the 2019 period 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, which were 14.3 points of the loss ratio for the nine months ended September 30, 2020, as compared with 4.3 point of the loss ratio in the 2019 period. The increase in the expense ratio was driven by higher acquisition expenses partially offset by higher net earned premiums.

International’s combined ratio increased 2.0 points for the nine months ended September 30, 2020 as compared with the 2019 period 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, which were 8.918.6 points of the loss ratio for the three months ended September 30, 2021 as compared with 17.0 points of the loss ratio in the comparable 2020 period. The improvement in the expense ratio was primarily due to higher net earned premiums and lower acquisition costs driven by ceded commissions.

International’s combined ratio improved 2.6 points for the three months ended September 30, 2021 as compared with the comparable 2020 period primarily due to a 2.8 point improvement in the expense ratio. The improvement in the expense ratio was driven by higher net earned premiums and lower acquisition costs.

Nine Months Ended September 30, 2021 Compared to the Comparable 2020 Period

Gross written premiums, excluding third party captives, for Specialty increased $243 million for the nine months ended September 30, 2021 as compared with the comparable 2020 period driven by rate and higher new business. Net written premiums for Specialty increased $119 million for the nine months ended September 30, 2021 as compared with the comparable 2020 period. The increase in net earned premiums for the nine months ended September 30, 2021 was consistent with the trend in net written premiums for Specialty.

Gross written premiums for Commercial increased $181 million for the nine months ended September 30, 2021 as compared with the comparable 2020 period driven by rate and higher new business. Net written premiums for Commercial decreased $81 million for the nine months ended September 30, 2021 as compared with the comparable 2020 period driven by the impact of the June 1, 2021 written premium catch-up resulting from the addition of the quota share treaty to the property reinsurance program. Excluding the impact of the June 1, 2021 written premium catch-up, net written premiums increased $31 million for the nine months ended September 30, 2021 as compared with the comparable 2020 period. Net earned premiums for Commercial increased $159 million for the nine months
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ended September 30, 2021 as compared with the comparable 2020 period. The increase in net earned premiums for the nine months ended September 30, 2021 was partially impacted by a reduction in estimated audit premiums related to COVID-19 in 2020 for Commercial.

Gross written premiums for International increased $136 million for the nine months ended September 30, 2021 as compared with the comparable 2020 period. Excluding the effect of foreign currency exchange rates, gross written premiums increased $82 million driven by rate and higher new business. Net written premiums for International increased $103 million for the nine months ended September 30, 2021 as compared with the comparable 2020 period. Excluding the effect of foreign currency exchange rates, net written premiums increased $57 million for the nine months ended September 30, 2021 as compared with the comparable 2020 period. The increase in net earned premiums for the nine months ended September 30, 2021 was consistent with the trend in net written premiums for International.

Total core income increased $349 million for the nine months ended September 30, 2021 as compared with the comparable 2020 period primarily due to improved current accident year underwriting results and higher net investment income driven by limited partnership and common stock returns.

Total net catastrophe losses were $357 million for the nine months ended September 30, 2021 as compared with $536 million in the comparable 2020 period. For the nine months ended September 30, 2021 and 2020, Specialty had net catastrophe losses of $9 million and $120 million, Commercial had net catastrophe losses of $332 million and $354 million and International had net catastrophe losses of $16 million and $62 million.

Favorable net prior year loss reserve development of $36 million and $58 million was recorded for the nine months ended September 30, 2021 and 2020. For the nine months ended September 30, 2021 and 2020, Specialty recorded favorable net prior year loss reserve development of $40 million and $47 million, Commercial recorded unfavorable net prior loss reserve development of $2 million and favorable net prior year loss reserve development of $8 million and International recorded unfavorable net prior year loss reserve development of $2 million and favorable net prior year loss reserve development of $3 million. Further information on net prior year loss reserve development is included in Note 5 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report.

Specialty’s combined ratio improved 6.7 points for the nine months ended September 30, 2021 as compared with the comparable 2020 period due to a 5.6 point improvement in the loss ratio and a 1.1 point improvement in the expense ratio. The improvement in the loss ratio was primarily due to lower net catastrophe losses and improved non-catastrophe current accident year underwriting results. Net catastrophe losses were 0.4 points of the loss ratio for the nine months ended September 30, 2020,2021, as compared with 1.45.7 points of the loss ratio in the 2019 period, partially offset by favorable net prior year loss reserve development in the current yearcomparable 2020 period. The improvement in the expense ratio was driven by lower acquisition and underwriting expenses.higher net earned premiums.

Commercial’s combined ratio improved 2.3 points for the nine months ended September 30, 2021 as compared with the comparable 2020 period primarily due to a 1.8 point improvement in the expense ratio. The improvement in the expense ratio was primarily due to higher net earned premiums and a favorable acquisition ratio. Net catastrophe losses were 12.6 points of the loss ratio for the nine months ended September 30, 2021 as compared with 14.3 points of the loss ratio for the comparable 2020 period.

International’s combined ratio improved 9.4 points for the nine months ended September 30, 2021 as compared with the comparable 2020 period due to a 7.1 point improvement in the loss ratio and a 2.3 point improvement in the expense ratio. The improvement in the loss ratio was driven by lower net catastrophe losses, which were 2.0 points of the loss ratio for the nine months ended September 30, 2021 as compared with 8.9 points of the loss ratio in the comparable 2020 period, and improved non-catastrophe current accident year underwriting results. The improvement in the expense ratio was driven by a favorable acquisition ratio and higher net earned premiums.

45
Other Insurance Operations

The following table summarizes the results of CNA’s Other Insurance Operations for the three and nine months ended September 30, 20202021 and 2019:2020:

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
   
Three Months Ended
September 30,
    
Nine Months Ended
September 30,
  
 2020  2019  2020  2019  2021  2020  2021  2020 
(In millions)                        
                        
Net earned premiums $127  $130  $380  $390  $123  $127  $369  $380 
Net investment income  211   213   632   636  242  225  736  667 
Core loss  (54)  (139)  (65)  (139)
Core income (loss) 20  (43) 10  (82)

Three Months Ended September 30, 20202021 Compared to 2019the Comparable 2020 Period

Core lossresults improved $85$63 million for the three months ended September 30, 20202021 as compared with the 2019comparable 2020 period. Results for the three months ended September 30, 2021 included no unlocking event for active life reserves as a result of the gross premium valuation (“GPV”). Core lossresults for the three months ended September 30, 2021 included a $31 million favorable impact from the reduction in long term care claim reserves resulting from the annual claim reserve reviews in the third quarter of 2021. Core results 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.policies. 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 lossresults for the three months ended September 30, 2020 also included a $36 million charge related to the increase in the structured settlement claim reserves andpartially offset by a $30 million favorable impact from the reduction in long term care claim reserves, both resulting from the annual claim experience studiesreserve reviews 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 the third quarter of 2020, relative to expectations, CNA experienced lower new claim frequency, higher claim terminations and more favorable claim severity amid the effects of COVID-19. Given the uncertainty of these trends CNA increased its 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.

48
Nine Months Ended September 30, 20202021 Compared to 2019the Comparable 2020 Period

Core lossresults improved $74$92 million for the nine months ended September 30, 20202021 as compared with the 2019comparable 2020 period. The drivers of the core loss decreaseimproved results were generally consistent with the three month discussion above. In addition, core results for the nine months ended September 30, 2021 included lower unfavorable net prior year loss reserve development related to legacy mass tort exposures as compared with the comparable 2020 period. Core results for the nine months ended September 30, 2021 also reflect expenses related to the March 2021 cybersecurity attack, the recognition of a $12 million loss resulting from the legacy excess workers’ compensation loss portfolio transfer (“EWC LPT”) and lower amortization of the deferred gain related to the A&EP Loss Portfolio Transfer (“LPT”) as compared with the comparable 2020 period. For further information on the A&EP LPT, EWC LPT and net prior year loss reserve development see Note 5 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report.

Life & Group Policyholder Reserves

Annually, in the third quarter, CNA assesses the adequacy of its long term care future policy benefit reserves by performing a gross premium valuation (“GPV”)GPV to determine if there is a premium deficiency. See the Insurance Reserves section of our MD&A included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 20192020 for further information on the reserving process.

46
The September 30, 20202021 GPV indicated that the recorded reserves included a premium deficiencymargin 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 CNA’s best estimate assumptions at that date with no margin for adverse deviation.approximately $72 million. A summary of the changes in the GPV resultsestimated reserve margin is presented in the table below:

(In millions)      
      
Long term care active life reserve - change in estimated reserve margin      
      
September 30, 2019 estimated margin $- 
September 30, 2020 estimated margin $- 
       
Changes in underlying discount rate assumptions(a)  (609) 65 
Changes in underlying morbidity assumptions  51  205 
Changes in underlying persistency assumptions  152  (233)
Changes in underlying premium rate action assumptions  318  27 
Changes in underlying expense and other assumptions  14   8 
       
September 30, 2020 Premium Deficiency $(74)
September 30, 2021 Estimated Margin $72 

(a)
Including cost of care inflation assumption.

The premium deficiencyincrease in the margin in 2021 was primarily driven by changes in discount rate assumptions due to lowerhigher near term 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 theunderlying morbidity assumptions. These favorable drivers were partially offset by unfavorable changes to underlying persistency and morbidity assumptions.

CNA’s projections do not indicate a pattern of expected profits in earlier future years followed by expected losses in later future years. As such, CNA will not establishhas determined that additional future policy benefit reserves for profits followed by losses in periods whereare not currently required based on 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.most recent projections.

49
The table below summarizes the estimated pretax impact on CNA’s results of operations from various hypothetical revisions to its 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, CNA has 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, CNA believes they could occur based on past variances in experience and its expectations of the ranges of future experience that could reasonably occur. Any required increase in the recorded reserves resulting from a hypothetical revision in the table below would first reduce the margin in the carried reserves before it would affect results from operations. Any actual adjustment would be dependent on the specific policies affected and, therefore, may differ from the estimates summarized below. The estimated impacts to results of operations in the table below are after consideration of the existing margin.

September 30, 2020 Estimated Reduction to Pretax Income 
(In millions)   
    
Hypothetical revisions   
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 CNA’s long term care operations:

September 30, 2020 
Claim and claim adjustment
expenses
  
Future
policy benefits
  Total 
(In millions)         
          
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 (a)  204   3,035   3,239 
Ceded reserves (b)  137   265   402 
Total gross reserves $3,766  $12,978  $16,744 

December 31, 2019         
          
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 (a)  167   2,615   2,782 
Ceded reserves (b)  159   226   385 
Total gross reserves $3,716  $12,311  $16,027 

(a)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, after tax and noncontrolling interests, as a reduction of net unrealized gains through Other comprehensive income (loss) (“Shadow Adjustments”).
(b)Ceded reserves relate to claim or policy reserves fully reinsured in connection with a sale or exit from the underlying business.
September 30, 2021 
Estimated Reduction
to Pretax Income
 
(In millions)   
    
Hypothetical revisions   
Morbidity:   
2.5% increase in morbidity $300 
5% increase in morbidity  600 
Persistency:    
5% decrease in active life mortality and lapse $100 
10% decrease in active life mortality and lapse  300 
Discount rates:    
25 basis point decline in new money interest rates $100 
50 basis point decline in new money interest rates  200 
Premium rate actions:    
25% decrease in anticipated future premium rate increases $- 
50% decrease in anticipated future premium rate increases  - 

50
47
Non-GAAP Reconciliation of Core Income (Loss) to Net Income

The following table reconciles core income (loss) to net income attributable to Loews Corporation for the three and nine months ended September 30, 20202021 and 2019:2020:

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
 2020  2019  2020  2019  2021  2020  2021  2020 
(In millions)                        
                        
Core income (loss):                        
Property & Casualty Operations $247  $241  $465  $853  $217  $236  $831  $482 
Other Insurance Operations  (54)  (139)  (65)  (139) 20  (43) 10  (82)
Total core income  193   102   400   714  237  193  841  400 
Investment gains (losses)  36   6   (81)  30  18  36  94  (81)
Consolidating adjustments including noncontrolling interests  (37)  (12)  (47)  (94) (26) (37) (97) (47)
Net income attributable to Loews Corporation $192  $96  $272  $650  $229  $192  $838  $272 

Boardwalk Pipelines

Current Events

In the third quarter of 2020, the COVID-19 pandemic and measures to mitigate the spread of COVID-19 continued to impact the world and the United States. An excess supply of energy products has also led to disruptions in the energy sector and volatility in energy prices during 2020. Boardwalk Pipelines’ operations are considered essential critical infrastructure under current Cybersecurity and Infrastructure Security Agency guidelines and the impacts from COVID-19 and the volatile energy prices have not beenA significant to Boardwalk Pipelines’ business, though some of its customers have been and continue to be directly impacted by COVID-19 and the volatility in commodity prices.

The safety of Boardwalk Pipelines’ employees and operations while providing uninterrupted service to its customers remains its primary focus. Although it is difficult to reasonably determine the ongoing and future impacts of the COVID-19 pandemic and the volatility in energy prices, an extended downturn in the economy and depressed energy prices could negatively affect Boardwalk Pipelines’ customers and their businesses and could in turn have a material adverse effect on Boardwalk Pipelines’ business.

Firm Agreements

A substantial portion of Boardwalk Pipelines’ transportation and storage capacity is contracted for under firm agreements. For the twelve months ended September 30, 2020, approximately 90% of Boardwalk Pipelines’ revenues wereare fee-based, being derived from fixed fees under firm agreements. Boardwalk Pipelines expects to earn revenues of approximately $9.2 billion from fixed fees under committed firm agreements in place as of September 30, 2020, including agreements for transportation, storage and other services, over the remaining term of those agreements. For the nine months ended September 30, 2020, Boardwalk Pipelines added approximately $643 million from the comparable amount at December 31, 2019, from contracts entered into during 2020. For Boardwalk Pipelines’ customers that are charged its maximum applicable tariff rates related to its Federal Energy Regulatory Commission (“FERC”) regulated operating subsidiaries, the revenues expected to be earned from fixed fees under committed firm agreements reflect the current tariff rate for such services for the term of the agreements, however, the tariff rates may be subject to future adjustment. The estimated revenues from fixed fees under committed firm agreements may also include estimated revenues that are anticipated under executed precedent transportation agreements for projects that are subject to regulatory approvals. The revenues expected to be earned from fixed fees under committed firm agreements do not include additional revenues Boardwalk Pipelines has recognized and may recognizecapacity reservation charges under firm agreements based on actual utilization of the contracted pipeline or storage capacity, any expected revenues for periods after the expiration dates of the existing agreements, execution of precedent agreements associated with growth projects or other events that occurred or will occur subsequentcustomers, which do not vary significantly period to September 30, 2020.

Contract Renewals

Each year a portion of Boardwalk Pipelines’ firm transportation and storage agreements expire. The rates Boardwalk Pipelines is able to charge customersperiod, but are heavily influencedimpacted by marketlonger term trends (both short and longer term), including the available supply, geographical location of natural gas production, the competition between producing basins, competition with other pipelines for supply and markets, the demand for gas by end-usersin its business such as power plants,

51
petrochemical facilitieslower pricing on contract renewals and liquefied natural gas export facilities and the price differentials between the gas supplies and the market demand for the gas (basis differentials). Boardwalk Pipelines’ storage rates are additionally impacted by natural gas price differentials between time periods, such as winter to summer (time period price spreads), and the volatility in time period price spreads. Demand for firm service is primarily based on market conditions which can vary across Boardwalk Pipelines’ pipeline systems. While Boardwalk Pipelines has not seen a significant change in the demand for its transportation services as a result of the COVID-19 pandemic or the volatility in energy prices and excess supply of energy products, if these conditions remain for an extended period of time or re-occur, Boardwalk Pipelines could see a decline in the demand for its services. Boardwalk Pipelines focuses its marketing efforts on enhancing the value of the capacity that is up for renewal and works with customers to match gas supplies from various basins to new and existing customers and markets, including aggregating supplies at key locations along its pipelines to provide end-use customers with attractive and diverse supply options. If the market perceives the value of Boardwalk Pipelines’ available capacity to be lower than its long term view of the capacity, Boardwalk Pipelines may seek to shorten contract terms until market perception improves.

Over the past several years, as a result of market conditions, Boardwalk Pipelines has renewed some expiring contracts at lower rates or for shorter terms than in the past. In addition to normal contract expirations, in the 2018 to 2020 timeframe, transportation agreements associated with its significant pipeline expansion projects that were placed into service in the 2007-2009 timeframe, have expired. A substantial portion of the capacity associated with the pipeline expansion projects was recontracted, usually at lower rates or lower volumes, which has negatively impactedother factors. Boardwalk Pipelines’ operating revenues.

Resultscosts and expenses do not vary significantly based upon the amount of Operationsproducts transported, with the exception of costs recorded in fuel and transportation expense, which are netted with fuel retained on our Consolidated Condensed Statements of Operations. For further information on Boardwalk Pipelines’ revenue recognition policies see Note 1 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2020.

The following table summarizes the results of operations for Boardwalk Pipelines for the three and nine months ended September 30, 20202021 and 20192020 as presented in Note 1411 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
 2020  2019  2020  2019  2021  2020  2021  2020 
(In millions)                        
                        
Revenues:                        
Operating revenues and other $289  $296  $926  $969  $307  $289  $991  $926 
Total  289   296   926   969  307  
289
  991  
926
 
Expenses:                            
Operating and other  219   212   633   616  215  
219
  641  
633
 
Interest  44   45   127   136   40   
44
   121   
127
 
Total  263   257   760   752  255  
263
  762  
760
 
Income before income tax  26   39   166   217  52  
26
  229  
166
 
Income tax expense  (6)  (10)  (43)  (56) (14) 
(6
)
 (59) 
(43
)
Net income attributable to Loews Corporation $20  $29  $123  $161  $38  $20  $170  $123 

Three Months Ended September 30, 20202021 Compared to 2019the Comparable 2020 Period

Total revenues decreased $7increased $18 million for the three months ended September 30, 20202021 as compared with the 2019 periodcomparable 2020 period. Including fuel and transportation expense, revenues increased $21 million, primarily driven by contract expirations that were recontracted at overall lower average rates and lower utilization-related revenues, partially offset by revenues from recently completed growth projects and higher storage and parking and lending (“PAL”) revenues due to favorable market conditions.utilization-based revenues.

Operating and other expenses increased $7decreased $4 million for the three months ended September 30, 20202021 as compared with the 2019comparable 2020 period. Excluding fuel and transportation expense, which was offset with operating revenues, operating and other expenses were essentially flat.

48
Interest expenses decreased $4 million for the three months ended September 30, 2021 as compared with the comparable 2020 period, primarily due to lower average interest rates and lower average outstanding long term debt balances.

Nine Months Ended September 30, 2021 Compared to the Comparable 2020 Period

Total revenues increased $65 million for the nine months ended September 30, 2021 as compared with the comparable 2020 period, primarily driven by recently completed growth projects and higher system utilization from colder winter weather experienced during the first quarter of 2021.

Operating and other expenses increased $8 million for the nine months ended September 30, 2021 as compared with the comparable 2020 period, primarily due to an increased asset base from recently completed growth projects and the expiration of property tax abatements, partially offset by the timing of maintenance projects and lower employee-related costs.projects.

52
Nine Months Ended September 30, 2020 Compared to 2019

Total revenuesInterest expense decreased $43$6 million for the nine months ended September 30, 20202021 as compared with the 2019 period. Including the effect of items in fuel and transportation expense and excluding net proceeds of approximately $24 million as a result of drawing on letters of credit due to a customer bankruptcy in the 2019 period, operating revenues decreased $24 million driven by contract expirations that were recontracted at overall lower average rates, partially offset by revenues from recently completed growth projects and higher storage and PAL revenues due to favorable market conditions.

Operating expenses increased $17 million for the nine months ended September 30,comparable 2020 as compared with the 2019 period. Excluding items offset in operating revenues, operating expenses increased $14 million, primarily due to an increased asset base from recently completed growth projects and the expiration of property tax abatements. Interest expense decreased $9 million for the nine months ended September 30, 2020 as compared with the 2019 period, primarily due to lower average interest rates and lower average outstanding debt.long term debt balances.

Loews Hotels & Co

The following table summarizes the results of operations for Loews Hotels & Co for the three and nine months ended September 30, 20202021 and 20192020 as presented in Note 1411 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
 2020  2019  2020  2019  2021  2020  2021  2020 
(In millions)                        
                        
Revenues:                        
Operating revenue $22  $127  $140  $437  $107  $22  $222  $140 
Gain on sale of assets  24       37         
24
     
37
 
Revenues related to reimbursable expenses  14   29   59   85   27   
14
   67   
59
 
Total  60   156   236   522  134  
60
  289  
236
 
Expenses:                            
Operating and other:                            
Operating  53   113   219   372  93  
53
  231  
219
 
Asset impairments  10       30   11     
10
     
30
 
Reimbursable expenses  14   29   59   85  27  
14
  67  
59
 
Depreciation  15   14   45   45  15  
15
  47  
45
 
Equity (income) loss from joint ventures  22   (11)  51   (49) (26) 
22
  (17) 
51
 
Interest  8   6   24   16  8  
8
  25  
24
 
Total  122   151   428   480   117   
122
   353   
428
 
Income (loss) before income tax  (62)  5   (192)  42  17  
(62
)
 (64) 
(192
)
Income tax (expense) benefit  15   (2)  48   (14)  (4)  
15
   13   
48
 
Net income (loss) attributable to Loews Corporation $(47) $3  $(144) $28  $13  $(47) $(51) $(144)

Due toLoews Hotels & Co’s results have been significantly impacted by the COVID-19 pandemicpandemic. By April 2020, most hotel properties owned and/or operated by Loews Hotels & Co had temporarily suspended operations. These hotel properties gradually resumed operations at various times, culminating with all hotels having resumed operations by June 30, 2021. During 2021, occupancy rates have gradually improved as social distancing restrictions were scaled back and efforts to mitigate the spread of the virus, twentyvaccinations helped reduce infection rates, with hotel properties located in resort destinations improving sooner than hotel properties located in city centers. However, occupancy levels have not reached pre-pandemic levels at many hotels owned and/or operated by Loews Hotels & Co temporarily suspended operations in March of 2020, with two additional hotels suspending operations in April of 2020. Of these twenty-two hotels, five were not operational as of September 30, 2020. Additionally, two hotels completed construction prior to the pandemic; one delayed opening until June of 2020, and the opening date of the second continues to be evaluated. However, occupancy rates at the operational hotels remain lower than those from the prior year, or even occupancy rates prior to March of 2020. Although Loews Hotels & Co has enacted significant measures to adjust the operating cost structure of each hotel during these suspensions and subsequent resumptions of operations, deferred most capital expenditures and reduced the operating costs of its management company, these measures could not offset the impact of significant lost revenues. Loews Hotels & Co has therefore incurred significant operating losses since the start of the pandemic.

The resumption of operations for the remaining hotels that continue to have suspended operations, as well as the potential for hotels which have resumed operations to re-suspend operations, will depend on numerous factors, many of which are outside Loews Hotels & Co’s control. Although occupancy at operational hotel properties has increased, and is expected to increase, gradually, it is nonetheless highly dependent on the travel behavior of potential hotel guests, driven largely by factors outside Loews Hotels & Co’s control, including government capacity restrictions, travel restrictions and the duration and scope of the COVID-19 pandemic. While the duration of the COVID-19 outbreak and related financial impact cannot be estimated at this time, Loews Hotels & Co’s results of operations,Co.

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49
financial condition and cash flows will be materially adversely affected for the remainderThe increase in operating revenues of 2020, and likely thereafter. The severity of the impact on Loews Hotels & Co will depend in large part on the duration of containment efforts, either mandated or voluntary,$85 million and the perceptionsincrease in operating expenses of health risks associated with COVID-19 related to business and leisure travel. In addition, once the COVID-19 outbreak is mitigated or contained, whenever that may be, historical travel patterns, both domestic and international, may continue to be disrupted either on a temporary basis or with longer term effects. These factors have contributed to impairment charges$40 million for the three andmonths ended September 30, 2021 as compared with the comparable 2020 period, when operations were significantly impacted by the pandemic, was due to improved performance. For the nine months ended September 30, 2020, and may lead to additional impairment charges in future periods.

Reduced occupancy and average daily rates caused by the COVID-19 pandemic and resulting mitigation efforts and operating cost reduction measures are the primary reasons for the decrease in2021 operating revenues of $105 million and $297improved by $82 million and operating expenses increased $12 million as compared with the comparable 2020 period. The nine-month comparison is impacted by pre-pandemic business levels prior to mid-March 2020 followed by results that were significantly impacted by the pandemic for the remainder of $602020. Through 2021, occupancy levels have gradually increased leading to improved revenues at most hotel properties, with operating expenses also increasing to support the increased demand levels. As all properties have not resumed all levels of pre-pandemic service offerings, hotel operating expenses, including staffing levels, will increase as those return.

Equity (income) loss from joint ventures improved $48 million and $153$68 million for the three and nine months ended September 30, 20202021 as compared with the 2019 periods. Additionally,comparable 2020 periods driven by the resumption of operations and associated occupancy improvement at all joint venture hotels. The three months ended September 30, 2021 was the first quarter during which all 9,000 rooms that are part of the Universal Orlando Resort joint ventures were open for the full quarter. In addition, pre-opening costs included in equity income(income) loss from joint ventures decreased $33$1 million and $100$8 million for the three and nine months ended September 30, 20202021 as compared with the 2019 periods driven primarily by the COVID-19 pandemic.comparable 2020 periods.

Loews Hotels & Co considers events or changes in circumstances that indicate the carrying amount of its assets may not be recoverable. For the three and nine months ended September 30, 2020, Loews Hotels & Co recorded impairment charges of $10 million and $30 million to reduce the carrying value of certain assets to their estimated fair value. The nine months ended September 30, 2019 includes impairment charges of $11 million.

Loews Hotels & Co recorded gains on the sale of assets of $24 million and $37 million for the three and nine months ended September 30, 2020 related to sales of an office building in the third quarter and an owned hotel in the second quarter.

Interest expense for the three and nine months ended September 30, 2020 increased $2 million and $8 million primarily due to the increase in debt balances and less capitalized interest related to recently completed hotel development projects as compared with the 2019 periods.quarter.

Corporate

Corporate operations consist primarily of investment income, interest expense and administrative costs at the Parent Company, operating results of Altium Packaging, Parent Company interest expense and other Parent Company administrative costs.Company. Investment income includes earnings on cash and short term investments held at the Parent Company to meet current and future liquidity needs, as well as results of limited partnership investments and the trading portfolio held at the Parent Company. Corporate also includes the operating results of Altium Packaging through March 31, 2021 and the loss related to the Parent Company’s equity method investment in Altium Packaging beginning on April 1, 2021, as a result of the sale of 47% of the Parent Company’s interest in Altium Packaging and the resulting deconsolidation. See Note 2 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report for further information.

The following table summarizes the results of operations for Corporate for the three and nine months ended September 30, 20202021 and 20192020 as presented in Note 1411 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
 2020  2019  2020  2019  2021  2020  2021  2020 
(In millions)                        
                        
Revenues:                        
Net investment income (loss) $23  $36  $(33) $153  $(30) $23  $40  $(33)
Investment loss          (1,211)    
Investment gains (losses)       540  
(1,211
)
Operating revenues and other  253   250   754   689   1   
253
   282   
754
 
Total  276   286   (490)  842  (29) 
276
  862  
(490
)
Expenses:                            
Operating and other  275   264   810   740  27  
275
  365  
810
 
Interest  33   31   96   85   23   
33
   93   
96
 
Total  308   295   906   825  50  
308
  458  
906
 
Income (loss) before income tax  (32)  (9)  (1,396)  17  (79) 
(32
)
 404  
(1,396
)
Income tax (expense) benefit  6   1   293   (4) 19  
6
  (126) 
293
 
Net income (loss) attributable to Loews Corporation $(26) $(8) $(1,103) $13  $(60) $(26) $278  
$
(1,103
)

54
50
Net investment incomeloss for the Parent Company decreased $13was $30 million for the three months ended September 30, 20202021 as compared with net investment income of $23 million for the 2019comparable 2020 period, primarily due to decreased earnings from short term investments and lower results from equity based investments in the Parent Company trading portfolio. Net investment income for the Parent Company for the nine months ended September 30, 2021 was $40 million as compared with a net investment loss wasof $33 million for the comparable 2020 period, primarily due to improved results from equity based investments in the Parent Company trading portfolio.

Investment gains of $540 million for the nine months ended September 30, 2020 as compared with net investment income2021 were primarily due to a gain of $153$555 million in($438 million after tax) on the 2019 period as a resultsale of the significant decline in equity based investments in response to the COVID-19 pandemic and related containment measures.

47% of Altium Packaging. Investment loss of $1.2 billion ($957 million after tax) for the nine months ended September 30, 2020 was due to the loss recognized upon deconsolidation of Diamond Offshore as a result of its Chapter 11 Filing.

Operating revenues and other include Altium Packaging revenues of $280 million for 2021, prior to its deconsolidation on April 1, 2021, and $253 million and $252 million for the three months ended September 30, 2020 and 2019 and $753 million and $689 million for the nine months ended September 30, 2020 and 2019. The increase of $1 million for the three months ended September 30, 2020 as compared with the 2019 period reflects higher volumes, largely offset by the pass-through effect of lower year-over-year resin prices. The increase of $64 million for the nine months ended September 30, 2020 as compared with the 2019 period reflects an increase of $60 million related to acquisitions in 2019 and higher volumes as a result of higher COVID-19 related demand for household chemicals, water and beverage, partially offset by the pass-through effect of lower year-over-year resin prices. Altium Packaging’s contracts generally provide for resin price changes to be passed through to its customers on a short-term lag, generally about one month. When a pass-through occurs, revenues and expenses generally change by the same amount so that Altium Packaging’s gross margin returns to the same level as prior to the change in prices.

Operating and other expenses include Altium Packaging operating expenses of $247 million for the three months ended September 30, 2020 and 2019 and $729 million and $675 million for the nine months ended September 30, 2020 and 2019, which include depreciation and amortization expense. The increase in operating expenses of $54 million for the nine months ended September 30, 2020 as compared with the 2019 period is primarily due to acquisitions in 2019.

Corporate Operating and other expenses were $28 million and $17 million for the three months ended September 30, 2020 and 2019 and $81 million and $65 million for the nine months ended September 30, 2020 and 2019. The increases of $11 million and $16 million for the three and nine months ended September 30, 20202020.

Operating and other expenses decreased by $248 million and $445 million for the three and nine months ended September 30, 2021 as compared with the 2019comparable 2020 periods are primarily due to the deconsolidation of Altium Packaging as the three and nine months ended September 30, 2020 included $247 million and $729 million of Operating and other expenses for Altium Packaging. Operating and other expenses also include legal and other corporate overhead expenses at the Parent Company. In addition, pursuant to the deconsolidation of Altium Packaging, the related loss related to the Parent Company’s investment in Altium Packaging is included in Operating and other expenses.

Interest expenses increased $2decreased $10 million for the three months ended September 30, 20202021 as compared with the 2019comparable 2020 period primarily due to the deconsolidation of Altium Packaging as the three months ended September 30, 2020 included $12 million of interest expense for Altium packaging. Interest expenses decreased $3 million for the nine months ended September 30, 2021 as compared with the comparable 2020 period primarily due to the deconsolidation of Altium Packaging as of April 1, 2021, partially offset by the May of 2020 issuance of the Parent Company’s $500 million aggregate principal amount of 3.2% senior notes due May 15, 2030. Interest expenses increased $11and a charge of approximately $14 million to write off debt issuance costs for the early retirement of debt at Altium Packaging in the first quarter of 2021.

Income tax expense was $126 million for the nine months ended September 30, 20202021 as compared with an income tax benefit of $293 million for the 2019 periodcomparable 2020 period. The income tax expense for the nine months ended September 30, 2021 is primarily due to the issuance byrecognition of $117 million of taxes on the Parent Company mentioned above and incremental borrowings byinvestment gain related to the sale of 47% of Altium Packaging and also includes the recognition of a $40 million deferred tax liability resulting from the asset held for sale designation of Altium Packaging in the first quarter of 2021. The income tax benefit for the nine months ended September 30, 2020 is primarily due to fund its 2019 acquisitions.the recognition of taxes on the investment loss related to the deconsolidation of Diamond Offshore.

Diamond Offshore

Amounts presented for Diamond Offshore for the nine months ended September 30, 2020 reflect the periods prior to its deconsolidation in the second quarter of 2020. Contract drilling revenues and contract drilling expenses were $287 million and $676$254 million for the nine months ended September 30, 2020 and 2019. Contract drilling expenses were $254 million and $594 million for the nine months ended September 30, 2020 and 2019. Results for the nine months ended September 30, 2020 included in our Consolidated Condensed Financial Statements reflect only the period through the April 26, 2020 deconsolidation and also reflect lower average daily revenue earned as compared with the 2019 period.2020. Operating and other expenses for the nine months ended September 30, 2020 includesincluded an aggregate asset impairment charge of $774 million ($408 million after tax and noncontrolling interests) recognized in the first quarter of 2020. For more information on the deconsolidation of Diamond Offshore see Note 2 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report.

55
LIQUIDITY AND CAPITAL RESOURCES

Parent Company

Parent Company cash and investments, net of receivables and payables, totaled $3.5$3.6 billion at September 30, 20202021 as compared to $3.3$3.5 billion at December 31, 2019.2020. During the nine months ended September 30, 2020,2021, we received $755$460 million in dividends from CNA, including a special dividend of $485$182 million. We also received a $199 million dividend from Altium Packaging in February of 2021. Cash outflows during the nine months ended September 30, 20202021 included the payment of $678$825 million to fund treasury stock purchases, $53$49 million of cash dividends to our shareholders $123and $32 million of cash contributions to Loews Hotels & CoCo. On April 1, 2021, Loews Corporation sold its 47% interest in Altium Packaging to GIC and $19received $420 million to purchase common shares of CNA.in cash consideration. As a holding company we depend on dividends from our subsidiaries and returns on our investment portfolio to fund our obligations. We

51
also have an effective Registration Statement on file with the Securities and Exchange Commission (“SEC”) registering the future sale of an unlimited amount of our debt and equity securities from time to time. We are not responsible for the liabilities and obligations of our subsidiaries and there are no Parent Company guarantees.

In May of 2020, we completed a public offering of $500 million aggregate principal amount of 3.2% senior notes due May 15, 2030. The proceeds of this offering are available for general corporate purposes.

Depending on market and other conditions, we may purchase our shares and shares of our subsidiariessubsidiaries’ outstanding common stock in the open market, in privately negotiated transactions or otherwise. During the nine months ended September 30, 2020,2021, we purchased 16.115.7 million shares of Loews Corporation common stock. As of October 29, 2021, we had purchased an additional 0.1 million shares of Loews Corporation common stock and 564,430in 2021 at an aggregate cost of $5 million. As of October 29, 2021, there were 253,684,412 shares of CNALoews Corporation common stock.stock outstanding.

Future uses of our cash may include investing in our subsidiaries, new acquisitions, dividends and/or repurchases of our and our subsidiaries’ outstanding common stock. 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 and business needs.

Subsidiaries

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 CNA’s cash flows. At this time, CNA does not believe these impacts would give rise to a material liquidity concern given its overall liquid assets and anticipated future cash flows.

CNA’s cash provided by operating activities was $1.4 billion for the nine months ended September 30, 2020 and $980$1,354 million for the nine months ended September 30, 2019.2021 and $1,408 million for the comparable 2020 period. The increasedecrease in cash provided by operating activities was driven by an increase inthe payment of the EWC LPT premium, increased ceded premiums collected, lower net claim paymentspaid and lower incomehigher taxes paid, partially offset by an increase in gross premiums collected, lower claim payments and a lowerhigher level of distributions from limited partnerships. For further information on the EWC LPT see Note 5 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report.

CNA paid cash dividends of $3.11$1.89 per share on its common stock, including a special cash dividend of $2.00$0.75 per share, induring the nine months ended September 30, 2020.2021. On October 30, 2020,29, 2021, CNA’s Board of Directors declared a quarterly cash dividend of $0.37$0.38 per share, payable December 3, 20202, 2021 to shareholders of record on November 16, 2020.15, 2021. CNA’s declaration and payment of future dividends is at the discretion of its Board of Directors and will depend on many factors, including CNA’s earnings, financial condition, business needs and regulatory constraints.

In August of 2020, CNA completed a public offering of $500 million aggregate principal amount of its 2.1% senior notes due August 15, 2030 and used the net proceeds to redeem the entire $400 million outstanding aggregate principal balance of its 5.8% senior notes due August 15, 2021 and for general corporate purposes. CNA has an effective shelf registration statement under which it may publicly issue debt, equity or hybrid securities from time to time.

Dividends from Continental Casualty Company (“CCC”), a subsidiary of CNA, 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 the timing and amount of dividends paid in the preceding 12 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, 2020,2021, CCC was in a positive earned surplus position. CCC paid dividends of $855$600 million and $940$855 million during the nine months ended September 30, 20202021 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.

56
CNA has an effective shelf registration statement on file with the SEC under which it may publicly issue debt, equity or hybrid securities from time to time.

Boardwalk Pipelines’ cash provided by operating activities decreased $35increased $26 million for the nine months ended September 30, 20202021 as compared to the 2019comparable 2020 period, primarily due to the change in net income and the timing of receivables and accrued liabilities.income.

For the nine months ended September 30, 20202021 and 2019,2020, Boardwalk Pipelines’ capital expenditures were $351$239 million and $276$351 million, consisting primarily of a combination of growth and maintenance capital.

In August of 2020,May 2021, Boardwalk Pipelines completed a public offering of $500 million aggregate principal amount of its 3.4% senior notes due February 15, 2031, which utilizedentered into an amended revolving credit agreement to decrease the remainingborrowing capacity underfrom $1.5 billion to $1.0 billion and extend the maturity date to May 27, 2026, although the maturity date may be further extended for two one-year extensions at Boardwalk Pipelines’ shelf registration statement.election. As of September 30, 2021, Boardwalk Pipelines intends to use the proceeds to retire the outstanding $440 million aggregate principal amount of its 4.5% senior notes due 2021 in November of 2020, to fund growth capital expenditures and for general corporate purposes. Initially, the proceeds were used to reducehad no outstanding borrowings under its revolving credit facility. In the second quarter of 2022, Boardwalk Pipelines anticipates thatexpects to retire the $300 million outstanding aggregate principal amount of its existing4.0% notes at maturity through available capital resources, including, but not limited to, using available cash, borrowing under its revolving credit facility and cash flowsor publicly issuing debt securities. Boardwalk Pipelines has an effective shelf registration statement on file with the SEC under which it may publicly issue debt securities, warrants or rights from operating activities, will be adequatetime to fund its operations and capital expenditures for 2020.time.

On November 19, 2020, Boardwalk Pipelines will pay a distribution of $102 million to the Company.
52
Certain of the hotels wholly or partially owned by subsidiaries of Loews Hotels & Co are financed by debt facilities, with a number of different lenders. Each of the loan agreements underlying these facilities contain a variety of financial and operational covenants. As a result of the impacts of COVID-19, Loews Hotels & Co has proactively requested certain lenders, where applicable, to (1) temporarily waive certain covenants to avoid an event of default and/or further restriction of the hotel’s cash balances through the establishment of lockboxes and other measures; (2) temporarily allow funds previously restricted directly or indirectly under the hotel’s underlying loan agreement for the renewal, replacement and addition of building improvements, furniture and fixtures to be used instead for hotel operations and maintenance; (3) allow hotels under development to defer required completion and opening dates; and/or (4)(3) defer certain interest and/or principal payments while the hotels operations arewere temporarily suspended or significantly impacted by a decline in occupancy. Loews Hotels & Co also continues to work with lenders on loans that are being reviewed for extension. These discussions with lenders are ongoing and may require Loews Hotels & Co to make principal paydowns, establish restricted cash reserves or provide guaranties of a subsidiary’s debt to otherwise avoid an event of default. Through the date of this Report, none of Loews Hotels & CoCo’s subsidiaries is not in default on any of its loans.

Additionally, due to temporary suspensionAs of operations and lost revenues in certain joint venture entities,September 30, 2021, Loews Hotels & Co has received capital call noticesthree subsidiaries with mortgage loans that mature within twelve months and is actively working with lenders to refinance $190 million in accordance with the underlying joint venture agreements to support the properties’ operations. Throughcurrent maturities of long-term debt.

In October 30, 2020,2021 Loews Hotels & Co announced the development of the Loews Arlington Hotel and Convention Center in Arlington, Texas. The hotel, for which Loews Hotels & Co will serve as manager and hold a majority equity interest, is expected to open in early 2024 with approximately 888 guestrooms and over 250,000 square feet of function space. The approximately $550 million hotel project will be funded approximately $35through a mix of partner contributions in 2021 and 2022 before drawing on a $300 million construction loan. Based on the timing of construction relative to these joint ventures in 2020.the seasonality of Loews Hotels & Co’s business, a Loews Corporation capital contribution may be required.

Through October 30, 2020,29, 2021, Loews Hotels & Co received capital contributions in 2021 of $127$32 million from Loews Corporation. Additional funding from Loews Corporation during the remainder of 2020 will be needed and will depend on numerous factors, including how quickly properties are able to return to sustainable operating levels.

INVESTMENTS

Investment activities of our non-insurance subsidiaries primarily consist of investments in fixed income securities, including short term investments. The Parent Company portfolio also includes equity securities, including short sales and derivative instruments, and investments in limited partnerships. These types of investments generally presenthave greater volatility, less liquidity and greater risk than fixed income investments and are included within Results of Operations – Corporate.

We enterThe Parent Company enters into short sales and investinvests in certain derivative instruments that are used for asset and liability management activities, income enhancements to theits portfolio management strategy and to benefit from anticipated future movements in the underlying markets. If such movements do not occur as anticipated, then significant losses may occur. Monitoring procedures include senior management review of daily reports of existing positions and valuation fluctuations to seek to ensure that open positions are consistent with the portfolio strategy.

Credit exposure associated with non-performance by counterparties to derivative instruments is generally limited to the uncollateralized change in fair value of the derivative instruments recognized in the Consolidated Condensed Balance Sheets. We mitigate theThe risk of non-performance is mitigated by monitoring the creditworthiness of counterparties and diversifying derivatives by using multiple counterparties. WeCollateral is occasionally require collateralrequired from derivative investment counterparties depending on the amount of the exposure and the credit rating of the counterparty.

57
Insurance

CNA maintains a large portfolio of fixed maturity and equity securities, including large amounts of corporate and government issued debt securities, residential and commercial mortgage-backed securities, other asset-backed securities and investments in limited partnerships which pursue a variety of long and short investment strategies across a broad array of asset classes. CNA’s investment portfolio supports its obligation to pay future insurance claims and provides investment returns which are an important part of CNA’s overall profitability.

The financial market disruption in the first quarter of 2020 significantly impacted CNA’s investment portfolio. Losses from its limited partnership and common and preferred equity portfolios, as well as the recognition of impairment losses on certain fixed maturity holdings, negatively impacted net income for the three months ended March 31, 2020. While financial markets have broadly recovered during the second and third quarters of 2020, CNA’s net investment income and net investment gains (losses) are lower for the nine months ended September 30, 2020 as compared with the 2019 period. There could be continued volatility in CNA’s investment portfolio.
53
Net Investment Income

The significant components of CNA’s 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
September 30,
  
Nine Months Ended
September 30,
 
  2020  2019  2020  2019 
(In millions)            
             
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 and noncontrolling interests $326  $337  $977  $1,018 
Net investment income after tax and noncontrolling interests $377  $356  $1,011  $1,147 

Effective income yield for the fixed income securities portfolio, before tax  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%
   
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
  2021  2020  2021  2020 
(In millions)            
             
Fixed income securities:            
Taxable fixed income securities $360  $363  $1,075  $1,094 
Tax-exempt fixed income securities  77   80   236   238 
Total fixed income securities  437   443   1,311   1,332 
Limited partnership and common stock investments  77   71   294   30 
Other, net of investment expense  (1)  3   3   18 
Net investment income $513  $517  $1,608  $1,380 
                 
Effective income yield for the fixed income securities portfolio  4.3
%  4.5
%
  4.3
%  4.6
%
Limited partnership and common stock return  3.8
%  4.1
%  16.4
%  1.7
%

CNA’s pretax net investment income for the three months ended September 30, 2020 increased $30 million as compared with the 2019 period, driven by limited partnership returns partially offset by lower yields on the fixed income portfolio.

CNA’s pretax net investment income decreased $193$228 million for the nine months ended September 30, 20202021 as compared with the 2019comparable 2020 period, driven by limited partnership and common stock returns andpartially offset by lower yields in the fixed income portfolio.

58
Investment Gains (Losses)

The components of CNA’s investment gains (losses) are presented in the following table:

 
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
 2020  2019  2020  2019  2021  2020  2021  2020 
(In millions)                        
                        
Investment gains (losses):                        
Fixed maturity securities:                        
Corporate and other bonds $14  $7  $(105)    $36  $14  $115  $(105)
States, municipalities and political subdivisions  6   1   39  $13  1  6     39 
Asset-backed  6   (5)  34   (19)  (15)  6   (24)  34 
Total fixed maturity securities  26   3   (32)  (6) 22  26  91  (32)
Non-redeemable preferred stock  25   7   (45)  60  (2) 25  17  (45)
Short term and other  (5)  (2)  (24)  (13) 2  (5) 9  (24)
Total investment gains (losses)  46   8   (101)  41  22  46  117  (101)
Income tax (expense) benefit  (10)  (2)  20   (11) (4) (10) (23) 20 
Amounts attributable to noncontrolling interests  (3)  (1)  9   (3)  (2)  (3)  (10)  9 
Investment gains (losses) attributable to Loews Corporation
 $33  $5  $(72) $27  $16  $33  $84  $(72)

CNA’s investment gains (losses) increased $38decreased $24 million for the three months ended September 30, 20202021 as compared with the 2019comparable 2020 period. The increase was

CNA’s investment gains (losses) increased $218 million for the nine months ended September 30, 2021 as compared with the comparable 2020 period driven by lower impairment losses and the favorable change in fair value of non-redeemable preferred stock and higher net realized investment gains on sales of fixed maturity securities. Pretax impairment losses of $5 million on available-for-sale securities and $3 million of credit losses on mortgage loans were recognized in the current quarter.

CNA’s investment gains (losses) decreased $142 million for the nine months ended September 30, 2020 as compared with the 2019 period. 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.stock.

Further information on CNA’s investment gains and losses is set forth in Note 3 of the Notes to Consolidated Condensed Financial Statements included under Item 1.1 of this Report.

54
Portfolio Quality

The following table presents the estimated fair value and net unrealized gains (losses) of CNA’s fixed maturity securities by rating distribution:

 September 30, 2020  December 31, 2019  September 30, 2021  December 31, 2020 
 
Estimated
Fair Value
  
Net
Unrealized
Gains
(Losses)
  
Estimated
Fair Value
  
Net
Unrealized
Gains
(Losses)
  
Estimated
Fair Value
  
Net
Unrealized
Gains
(Losses)
  
Estimated
Fair Value
  
Net
Unrealized
Gains
(Losses)
 
(In millions)                        
                        
U.S. Government, Government agencies and Government-sponsored enterprises $4,026  $127  $4,136  $95  $2,938  $57  $3,672  $117 
AAA  3,623   452   3,254   349  3,778  371  3,627  454 
AA  6,773   961   6,663   801  7,737  833  7,159  1,012 
A  9,470   1,296   9,062   1,051  9,538  1,159  9,543  1,390 
BBB  17,488   2,105   16,839   1,684  18,505  2,215  18,007  2,596 
Non-investment grade  2,521   38   2,253   101  2,573  123  2,623  149 
Total $43,901  $4,979  $42,207  $4,081  $45,069  $4,758  $44,631  $5,718 

59
As of September 30, 20202021 and December 31, 2019,2020, 1% of CNA’s fixed maturity portfolio was rated internally. AAA rated securities included $1.9$1.7 billion and $1.5$1.8 billion of pre-fundedpre-refunded municipal bonds as of September 30, 20202021 and December 31, 2019.2020.

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

September 30, 2020 
Estimated
Fair Value
  
Gross
Unrealized
Losses
 
September 30, 2021 
Estimated
Fair Value
  
Gross
Unrealized
Losses
 
(In millions)            
            
U.S. Government, Government agencies and Government-sponsored enterprises $99  $1  $1,200  $9 
AAA  37   1  388  5 
AA  244   9  906  16 
A  642   21  1,191  18 
BBB  1,264   71  1,187  31 
Non-investment grade  816   78  396  10 
Total $3,102  $181  $5,268  $89 

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:

September 30, 2020 
Estimated
Fair Value
  
Gross
Unrealized
Losses
 
September 30, 2021 
Estimated
Fair Value
  
Gross
Unrealized
Losses
 
(In millions)            
            
Due in one year or less $142  $8  $133  $5 
Due after one year through five years  819   54  709  13 
Due after five years through ten years  1,479   83  2,639  33 
Due after ten years  662   36  1,787  38 
Total $3,102  $181  $5,268  $89 

55
Duration

A primary objective in the management of CNA’s investment portfolio is to optimize return relative to the corresponding liabilities and respective liquidity needs. CNA’s 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. CNA also continually monitors exposure to issuers of securities held and broader industry sector exposures and may from time to time adjust such exposures based on its views of a specific issuer or industry sector.

A further consideration in the management of CNA’s 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, CNA segregates investments for asset/liability management purposes. The segregated investments support the long term care and structured settlement liabilities in Other Insurance Operations.

60
The effective durations of CNA’s 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 September 30, 2021  December 31, 2020 
Estimated
Fair Value
Effective
Duration
(Years)
 
Estimated
Fair Value
Effective
Duration
(Years)
 
Estimated
Fair Value
  
Effective
Duration
(Years)
  
Estimated
Fair Value
  
Effective
Duration
(Years)
 
(In millions of dollars)                   
                   
Investments supporting Other Insurance Operations$18,7009.0 $18,0158.9 $18,431  9.3  
$
18,518
  9.2 
Other investments 27,4084.5  26,8134.1 28,520  5.1   
28,839
  4.5 
Total$46,1086.3 $44,8286.0 $46,951  6.7  
$
47,357
  6.3 

CNA’s 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, CNA periodically reviews 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 CNA’s Short term investments are presented in the following table:

 
September 30,
2020
  
December 31,
2019
 
(In millions)
      
       
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, CNA shifted its commercial paper holdings to U.S. Treasury securities.

In addition to short term investments, CNA held $442 million and $242 million of cash as of September 30, 2020 and December 31, 2019.

 
September 30,
2021
  
December 31,
2020
 
(In millions)
      
       
Short term investments:      
U.S. Treasury securities $916  $1,702 
Other  219   205 
Total short term investments $1,135  $1,907 

CRITICAL ACCOUNTING ESTIMATES

Certain accounting policies require us to make estimates and judgments that affect the amounts reflected in the Consolidated Condensed Financial Statements. Such estimates and judgments necessarily involve varying, and possibly significant, degrees of uncertainty. Accordingly, certain amounts currently recorded in the financial statements will likely be adjusted in the future based on new available information and changes in other facts and circumstances. See the Critical Accounting Estimates and the Insurance Reserves sections of our MD&A included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 20192020 for further information.

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ACCOUNTING STANDARDS UPDATE

For a discussion of accounting standards updates that have been adopted or will be adopted in the future, please read Note 1 of the Notes to Consolidated Condensed Financial Statements included under Item 1.1 of this Report.

FORWARD-LOOKING STATEMENTS

Investors are cautioned that certain statements contained in this Report as well as in other of our and our subsidiaries’ SEC filings and periodic press releases and certain oral statements made by us and our subsidiaries and our and their officials during presentations may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements include, without limitation, any statement that does not directly relate to any historical or current fact and may project, indicate or imply future results, events, performance

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or achievements. Such statements may contain the words “expect,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “will be,” “will continue,” “will likely result,” and similar expressions. In addition, any statement concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible actions taken by us or our subsidiaries are also forward-looking statements as defined by the Act. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to a variety of risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those anticipated or projected.

Developments in any of the risks or uncertainties facing us or our subsidiaries, including those described under Part II, Item 1A, Risk Factors in this Report, Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019,2020, Part II, Item 1A, Risk Factors in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 20202021 and June 30, 20202021 and in our other filings with the SEC, could cause our results to differ materially from results that have been or may be anticipated or projected. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made and we expressly disclaim any obligation or undertaking to update these statements to reflect any change in our expectations or beliefs or any change in events, conditions or circumstances on which any forward-looking statement is based.

Item 3.
Item 3.Quantitative and Qualitative Disclosures about Market Risk.

There were no material changes in our market risk components as of September 30, 2020.2021. See 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, 20192020 for further information. Additional information related to portfolio duration and market conditions is discussed in the Investments section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included under Part I, Item 2.

Item 4.
Item 4.Controls and Procedures.

The Company maintains a system of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), which is designed to ensure that information required to be disclosed by the Company in reports that it files or submits under 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 by the Company under the Exchange Act is accumulated and communicated to the Company’s management on a timely basis to allow decisions regarding required disclosure.

The Company’s management, including the Company’s principal executive officer (“CEO”) and principal financial officer (“CFO”) conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Report and, based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2020.2021.

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 20202021 that have materially affected or that are reasonably likely to materially affect the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.
Item 1.Legal Proceedings.

Information on our legal proceedings is set forth in Note 129 to the Consolidated Condensed Financial Statements included under Part I, Item 1.

Item 1A.
Item 1A.Risk Factors.

Our business and the businesses of our subsidiaries face many risks and uncertainties. These risks and uncertainties could lead to events or circumstances that have a material adverse effect on our business, results of operations, cash flows, financial condition or equity and/or the business, results of operations, cash flows, financial condition, or equity of one or more of our subsidiaries. Our Annual Report on Form 10-K for the year ended December 31, 20192020 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 20202021 and June 30, 20202021 include a detailed discussiondiscussions of certain risk factors facing the company. The information presentedExcept as described below, updates and supplements suchthere have been no material changes to the risk factors and should be readpreviously disclosed in conjunction with the Risk Factors included under Part I, Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 20192020 and Part II, Item 1A1A. Risk Factors of our Quarterly Reports on Form 10-Q for the quarters ended March 31, 20202021 and June 30, 2020.2021.

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Risks Related to Us and Our Subsidiary, CNA Financial Corporation (“CNA”)

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

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

CNA’s, or its 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 CNA’s data processing and storage systems or the systems of third-party vendors, or unavailability of communications facilities. An interruption of CNA’s system availability occurred in March of 2021 as a result of a cybersecurity attack sustained by CNA. Please refer to the immediately following risk factor for further information regarding this incident. Likewise, CNA could experience a significant failure, interruption or corruption of one or more of its 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 coronavirus disease (“COVID-19”) pandemicshut-down or unavailability of one or more of CNA’s or its vendors’ systems or facilities for these and measuresother reasons could significantly impair CNA’s ability to mitigateperform critical business functions on a timely basis.

In addition, because CNA’s information technology and telecommunications systems interface with and depend on third-party systems, CNA 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 CNA’s 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 spread ofability to issue financial statements in a timely manner.

The foregoing risks could also expose CNA to monetary and reputational damages. Potential exposures resulting from the virusMarch 2021 cybersecurity attack, described in the immediately following risk factor, as well as any future incidents may include substantially increased compliance costs, as well as increased costs relating to investments in computer system and security-related upgrades, with those costs potentially not recoverable under relevant insurance coverage. CNA anticipates making continued investments to improve its security and infrastructure. These expenses are not recoverable under relevant insurance coverage. If CNA’s business continuity plans or system security do not sufficiently address these risks, they could have resulted in significant risk across CNA’s enterprise, which have had, and may continue to have,a material adverse impactseffect on itsCNA’s business, results of operations and financial condition, the extent of which cannot be determined with any certainty at this time.condition.

The COVID-19 outbreak, and actions seeking to mitigate
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Based on the spread ofinformation currently known, CNA does not believe that the virus, accelerated in both breadth and scope through the month of February 2020, 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 yet known and may not emerge for some time.

Risks presented by the ongoing effects of COVID-19 that are known at this time include the following:

Broad economic impact:  The economic effect of the pandemic has been broad in nature and has significantly impacted business operations across all industries, including CNA. Depressed economic conditions have led to and may continue to lead to decreased insured exposures causing CNA 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 CNA’s 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 CNA’s ability to collect amounts owed by policyholders. CNA recorded a decrease in its estimated audit premiums during the second quarter of 2020 impacting its net earned premium and if general economic conditions do not improve in the remainder of 2020 or thereafter, CNA’s net written premiums and net earned premiums may be depressed, which may2021 cybersecurity attack will have a material impact on its business, results of operations or financial condition, but no assurances can be given as it continues to assess the full impact from the incident, including costs, expenses and insurance coverage. CNA may also be subject to future incidents that could have a material adverse effect on its business, results of operations or financial condition or may result in operational impairments and financial condition, the extent of which cannot be determined with any certainty at this time.

While CNA’s losses, incurred during the first nine months of 2020 related to COVID-19 and measures to mitigate its spread represent CNA’s best estimate of its 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 CNA’s 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 CNAsignificant harm to experience additional COVID-19 related catastrophe losses in future quarters, which could be material.its reputation.

Financial marketsAny significant breach in CNA’s data security infrastructure or its vendors’ facilities and investments:systems could disrupt business, cause financial losses and damage its reputation, and insurance coverage may not be available for claims related to a breach.

A significant breach of CNA’s data security infrastructure may result from actions by its employees, vendors, third-party administrators, or unknown third parties or through cyber attacks. The COVID-19 pandemic has also significantly impacted financial markets. As investorsrisk of a breach can exist whether software services are in CNA’s data centers or CNA uses cloud-based software services. Breaches have embarked on a flight to quality, risk free rates have decreased. In addition, liquidity concernsoccurred, and overall economic uncertainties drove increased volatilitymay occur again, in credit spreadsCNA’s systems and equity markets. While government actions to date have provided some stability to financial markets, economic prospects in the short term continuesystems of its vendors and third party administrators.

Such a breach could affect CNA’s data framework or cause a failure to be depressedprotect the personal information of its customers, claimants or employees, or sensitive and CNA remains in a historically low interest rate environment. The unabated spread of the virus and 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 CNA’s investment portfolio results and valuations,confidential information regarding its business and may result in additional volatility oroperational impairments and financial losses, as well as significant harm to its 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 its investment portfolio,this regard. During the third quarter of 2021, CNA was notified of a breach of certain systems of a third party administrator, which could be material.

The valueresulted in breach notifications sent by such administrator to potentially impacted persons, including a limited number of CNA’s fixed maturity investments is subject to risk that certain investments may default or become impaired due to deterioration in the financial condition of issuers of the investments it holds or in the underlying collateral of the security or loan, particularly in industries heavily impacted by COVID-19CNA claimants. While CNA does not believe such notifications and mitigatingresultant actions including energy, retail, travel, entertainment, and real estate. CNA’s municipal bond portfolio is also subject to risks of default by state and local governments and agencies that are under increased strain related to the pandemic.

These significant financial market disruptions maywill have a material impactadverse effect on its business, this or similar incidents, or any other such breach of CNA’s or its vendors’ data security infrastructure could have a material adverse effect on its business, results of operations and financial condition, the extent of which cannot be determined with any certainty at this time.condition.

ClaimsCNA sustained a sophisticated cybersecurity attack in March of 2021 involving ransomware that caused a network disruption and impacted certain of its systems. Upon detection, CNA undertook steps to address the incident, including engaging a team of third-party forensic experts and notifying law enforcement and key regulators. CNA restored network systems and resumed normal operations. CNA is continuing to assess all actions that it will take to improve its existing systems.

CNA’s investigation revealed that an unauthorized third party copied some personal information relating to certain current and former employees, contractor workers and their dependents and certain other persons, including some policyholders. In July of 2021, CNA provided notifications to the impacted individuals and to regulators, in accordance with applicable law. Although CNA currently has no indication that the impacted data has been misused, or that CNA or its policyholder data was specifically targeted by the unauthorized third party, it may be subject to subsequent investigations, claims or actions in addition to other costs, fines, penalties, or other obligations related litigation:  Claim activityto impacted data, whether or not such data is misused. In addition, the misuse, or perceived misuse, of sensitive or confidential information regarding its business or policyholders could cause harm to CNA’s reputation and related litigation has increased, and may continue to increase significantly,result in certain linesthe loss of business as a result of the pandemic and mitigating actions. CNA has experienced, and is likely to continue to experience, increased frequency in claim submissions in product lines that are implicated

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by the virus and the mitigating activities taken by itswith existing or potential 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, CNA’s 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. CNA has 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 materialadversely impact on CNA’sits business, results of operations and financial condition, the extent of which cannot be determined with any certainty at this time.condition.

Although CNA has also begunmaintains cybersecurity insurance coverage insuring against costs resulting from cyber attacks (including the March 2021 attack), CNA does not expect that the amount available under its coverage and/or its coverage policy to incur substantialcover all losses. Costs and expenses relatedincurred and likely to litigation activitybe incurred by CNA in connection with COVID-related legal claims. These actions primarily relatethe March 2021 attack include both direct and indirect costs and not all may be covered by its insurance coverage. In addition, potential disputes with its insurers about the availability of insurance coverage for claims relating to denial of claims submittedthe March 2021 attack or any future incident could occur. Further, both as a result of the pandemicMarch 2021 attack and industry trends generally, CNA will incur higher costs for the mitigating actions under commercial property policies for business interruptionreplenishment of its current policy through the end of the term, as well as future cybersecurity insurance coverage including lockdowns and closing of certain businesses. The significance of such litigation, both in substance and volume, andbeyond the resultant activities CNA has initiated, including external counsel engagement, and the costs related thereto, may have a material impact on CNA’s business, results of operations and financial condition, the extent of which cannot be determined with any certainty at this time.current term.

Regulatory impact: The regulatory environment is rapidly evolving in direct response toBased on the pandemic andinformation currently known, CNA does not believe that the mitigating actions being taken. Numerous regulatory authorities to which CNA’s 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 CNA is now, and may be, subject to mayMarch 2021 cybersecurity attack will have a material impact on its business, results of operations andor financial condition, but no assurances can be given as it continues to assess the extent of which cannot be determined with any certainty at this time.

Risks Related to Usfull impact from the incident, including costs, expenses and Our Subsidiary, Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”)

The outbreak of COVID-19 and the measures to mitigate the spread of COVID-19 could materially adversely affect Boardwalk Pipelines’ business, financial condition and results of operations.

The outbreak of COVID-19 is materially negatively impacting worldwide economic and commercial activity and financial markets and has impacted global demand for oil and petrochemical products. COVID-19 has also resulted in significant business and operational disruptions, including business closures, supply chains disruptions, travel restrictions, stay-at-home orders and limitations on the availability of workforces. If significant portions of Boardwalk Pipelines’ workforce are unable to work effectively, including because of illness, quarantines, government actions, facility closures or other restrictions in connection with COVID-19, Boardwalk Pipelines’ business could be materially adversely affected. Boardwalk Pipelinesinsurance coverage. CNA may also be unablesubject to perform fully on its contracts and its costs may increase as a result of the COVID-19 outbreak. These cost increases may not be fully recoverable. It is possiblefuture incidents that the continued spread of COVID-19 could also further cause disruption in Boardwalk Pipelines’ customers’ business; cause delay, or limit the ability of its customers to perform, including making timely payments to Boardwalk Pipelines; and cause other unpredictable events. The impact of COVID-19 has impacted capital markets, which may impact Boardwalk Pipelines’ customers’ financial position, and recoverability of its receivables from its customers may be at risk. The full impact of COVID-19 is unknown and continues to evolve. The extent to which COVID-19 negatively impacts Boardwalk Pipelines’ business and operations will depend on the severity, location and duration of the effects and spread of COVID-19, the continued actions undertaken by federal, state and local governments and health officials to contain the virus or treat its effects, and how quickly and to what extent economic conditions improve and normal business and operating conditions resume.

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Risks Related to Us and Our Subsidiary, Loews Hotels Holding Corporation (“Loews Hotels & Co”)

The COVID-19 pandemic and efforts to mitigate the spread of the virus have had, and are expected to continue to have a material adverse impacteffect on Loews Hotels & Co’sits business, results of operations or financial condition and cash flows.

In response to the spread of COVID-19, governments across the globe implemented measures to mitigate the spread, such as through city, regional or national lockdowns or stay-at-home orders, narrowly defined and widespread business closures, restrictions on travel, limitations on large group gatherings and quarantines, among others. Beyond the existence of governmental restrictions, the perception of health risks associated with COVID-19 continues to further limit business and leisure travel. Furthermore, theme parks in Orlando, Florida, which temporarily closed and reopened with capacity restrictions, now operate at reduced capacity levels. In addition, certain coastal beaches repeatedly have been ordered closed and professional sports leagues suspended or modified their seasons with no or limited spectators permitted in attendance. The spread of the coronavirus, including its resurgence, and the containment efforts have had, and continue to have, macro-economic implications, including increased unemployment levels, declines in economic growth rates and possibly a global recession, the effects of which could be felt well beyond the time the spread of the virus is mitigated or contained. These developments have caused unprecedented disruptions to the global economy and normal business operations across sectors, including the hospitality industry that depends on active levels of business and leisure travel, very little of which is occurring in the current environment.

Loews Hotels & Co suspended operations at twenty of its owned and/or operated hotels in March of 2020, with two additional hotels suspending operations in April of 2020. Of these twenty-two hotels, five were not operational as of the end of September 2020. Additionally, two hotels completed construction prior to the pandemic; one delayed opening until June of 2020, and the opening date of the second continues to be evaluated. However, occupancy rates at the operational hotels remain substantially lower than those from the prior year, or even occupancy rates prior to March of 2020. As such, revenues have been substantially lower and may be insufficient to offset certain fixed costs, such as insurance and property taxes. The remaining hotels that are not operational continue to be evaluated to determine when it is prudent to resume operations, which may not be until after 2020. The potential for the suspension or resuspension of operations at operating hotels varies by hotel property and will depend on numerous factors, many of which are outside Loews Hotels & Co’s control. In addition, as a result of the COVID-19 crisis, Loews Hotels & Co has had to implement a number of new measures for the health and safety of its guests and employees. These new measures, which may need to remain in place for the foreseeable future, have resulted and will continue to result in increased costs.

Given that Loews Hotels & Co ownsoperational impairments and leases, relativefinancial losses, as well as significant harm to some of its competitors, a higher proportion of its hotel properties, compared to the number of properties that it manages for third-party owners, it may as a result of COVID-19 and mitigation measures face increased risks associated with mortgage debt, including the possibility of default, cash trap periods, the inability to draw further loan disbursements and reduced availability of replacement financing at reasonable rates or at all; difficulty reducing costs; declines in real estate values and potential additional impairments in the value of Loews Hotels & Co’s assets; and a limited ability to respond to market conditions by, for instance, restricting its growth strategy. In addition, uncertain or fluctuating real estate valuations and the inability for third party purchasers to obtain capital may prevent Loews Hotels & Co from selling properties on acceptable terms.

While the duration of the COVID-19 outbreak and related financial impact cannot be estimated at this time, Loews Hotels & Co expects its results of operations, financial condition and cash flows will be materially adversely affected throughout 2020, and likely thereafter. The severity of the impact on Loews Hotels & Co will depend in large part on the duration of containment efforts, either mandated or voluntary, and the perceptions of health risks associated with COVID-19 related to business and leisure travel. In addition, once the COVID-19 outbreak is mitigated or contained, whenever that may be, historical travel patterns, both domestic and international, may continue to be disrupted either on a temporary basis or with longer term effects. For example, certain travel is dependent on commercial airlines restoring capacity, and their inability to restore full capacity could impact demand for Loews Hotels & Co’s services. Additionally, businesses now forced to rely on remote working and videoconferences may reduce the level of business travel both to save costs and to reduce the risk of exposure for their employees, and they may also seek alternatives to large public gatherings such as industry conferences. Leisure travelers may also be less inclined to travel or gather in large groups out of ongoing safety concerns, regardless of the lifting of mandated or recommended restrictions. In addition, with the expected adverse impact on jobs and the economy more broadly, at least in the short term, leisure travel will likely be further impacted due to economic reasons. Any of these trends could have continuing material adverse effects on Loews Hotels & Co’s results of operations, financial condition and cash flow.

As part of cost containment efforts, Loews Hotels & Co put a substantial number of its employees on unpaid leaves of absence or have severed them from the organization. When conditions warrant the resumption of operations that necessitate increased staffing levels, it may not be able to find or attract sufficient talent to fill the roles that have been furloughed or eliminated. Additionally, many of its service providers and suppliers have also put their employees onCNA’s reputation.

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leaves of absence or have severed employees. Should they be unable to find or attract sufficient talent to fill the roles that they have furloughed or eliminated, Loews Hotels & Co may not have the requisite services or supplies available to resume operations at the time or in the manner of its choosing.

Loews Hotels & Co continues to evaluate spending and manage operating expenses, including eliminating non-essential spending, reducing costs related to marketing, sales, and technology and deferring planned renovations, all of which could impair its ability to compete effectively and harm its business. Loews Hotels & Co has received and may receive additional demands or requests from labor unions that represent its employees, whether in the course of its periodic renegotiation of collective bargaining agreements or otherwise, for additional compensation, healthcare benefits, operational protocols or other terms that could increase costs, and could experience labor disputes or disruptions as it continues to implement mitigation plans. Some actions Loews Hotels & Co has taken, or may take in the future, to reduce costs for it or its third-party owners may negatively impact guest loyalty, owner preference, and its ability to attract and retain employees, and its reputation and market share may suffer as a result. Further, once the effects of the pandemic subside, the recovery period could be extended and certain operational changes, particularly with respect to enhanced health and safety measures, may continue to be necessary and could increase ongoing costs.

Hotels are buildings designed to remain open every hour of every day. As Loews Hotels & Co has not previously suspended the operations of its hotels (other than in connection with planned renovations) for an extended period of time, there may be mechanical systems that require material repair and maintenance to restart for hotels that remain under a suspension of operations, or for facilities and outlets within operational hotels that continue to not be utilized.

Loews Hotels & Co and its partners are constructing hotels in various markets. Those construction projects could be delayed as a result of COVID-19 and containment efforts associated with it, including those applicable to or affecting contractors, suppliers and inspectors required to review projects.

As a manager of hotels owned by joint ventures that Loews Hotels & Co invests in and by third parties, Loews Hotels & Co earns fees based on the revenues that those managed hotels generate. As a result of reduced revenues described above due to COVID-19 and mitigating measures, Loews Hotels & Co’s fee-based revenues are also materially reduced. These properties also have contracts that require payments by Loews Hotels & Co to preserve its management of the hotel if the hotel’s operating results do not achieve certain performance levels. These payments may be uneconomical for Loews Hotels & Co and lead to Loews Hotels & Co no longer managing one or more of those properties.

In properties in which Loews Hotels & Co has an ownership interest, Loews Hotels & Co leases space to third-party tenants and earns both fixed and variable amounts of rent, depending on each underlying lease arrangement. Some of these tenants informed Loews Hotels & Co that their operations are similarly impacted by COVID-19 business restrictions causing rent abatement periods in certain circumstances. In addition, variable rent, which is generally tied to the tenant’s sales, is materially adversely affected by the effects of the pandemic.

Risks Related to Us and Our Subsidiary, Altium Packaging LLC (“Altium Packaging”)

The COVID-19 pandemic may have an adverse impact on Altium Packaging.

Altium Packaging manufactures packaging that is used with products in critical infrastructure sectors, such as the pharmaceutical, household and industrial cleaning and food and beverage markets, and is thus an essential business as contemplated by state and local orders. It therefore continues to operate nearly all of its manufacturing facilities at full capacity to support those sectors. However, certain of Altium Packaging’s end markets, such as its commercial food services, institutional food and automotive customers, have been negatively impacted and its sales to those customers have been adversely affected. In addition, if widespread infections were to affect any of its facilities or workers, including those supporting critical infrastructure sectors, it may be required to temporarily shut down or otherwise modify the working conditions at such facilities to address the infections. Any such changes could cause Altium Packaging to be unable to meet demand from its customers if it cannot provide support from other facilities in its network.

Risks Related to Us and Our Subsidiaries Generally

Failures or interruptions in or breaches to our or our subsidiaries’ computer systems or those of our third party vendors could materially and adversely affect our or our subsidiaries’ operations.

We and our subsidiaries are dependent upon information technologies, computer systems and networks, including those maintained by us and our subsidiaries and those maintained and provided to us and our subsidiaries by third parties (for example, “software-as-a-service” and cloud solutions), to conduct operations and are reliant on technology to help increase efficiency in our and their businesses. We and our subsidiaries are dependent upon operational and financial computer systems to process the data necessary to conduct almost all aspects of our and their businesses. Any failure of our or our subsidiaries’ computer systems, or those of our or their customers, vendors or others with whom we and they do business, could materially disrupt business operations.

Computer, telecommunications and other business facilities and systems could become unavailable or impaired from a variety of causes, including cyber attacks or other cyber incidents, storms and other natural disasters, terrorist attacks, fires, utility outages, theft, design defects, human error or complications encountered as existing systems are replaced or upgraded. Cyber attacks and other cyber incidents are occurring more frequently, are constantly evolving in nature, are becoming more sophisticated and are being carried out by groups and individuals with a wide range of expertise and motives. The COVID-19 pandemic is having widespread impacts on the wayU.S. government has issued public warnings that indicate energy assets may be specific targets of cyber attacks, which can have catastrophic consequences, and hotel chains, among other consumer-facing businesses, have been subject to various cyber attacks targeting payment card and other sensitive consumer information. Cyber attacks and cyber incidents take many forms, including cyber extortion, denial of service, social engineering, introduction of viruses or malware, exploiting vulnerabilities in hardware, software or other infrastructure, hacking, website defacement, theft of passwords and other credentials, unauthorized use of computing resources for digital currency mining and business email compromise. CNA was recently subjected to a cybersecurity incident. In addition, one of CNA’s vendors also recently experienced a cybersecurity incident. For additional information about these incidents see “Risks Related to Us and Our Subsidiary, CNA Financial Corporation” above under this Part II, Item 1A.

As with other large companies, we and our subsidiaries operate.

The spread of COVID-19 and mitigating measures has had,our and continuestheir third party vendors have experienced cyber attacks and other cyber incidents and expect this to have, macroeconomic implications, including increased unemployment levels, declines in economic growth rates and possibly a global recession, the effects of which could be felt well beyond the time during which the spread of the virus is continuing. These developments have caused unprecedented disruptions to the global economy and normal business operations across

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sectors and countries, including the sectors and countries in whichcontinue. If we and our subsidiaries operate. Because ofand our and their third party vendors do not allocate and effectively manage the sizeresources necessary to continue to build and breadth of the pandemic, all of the directmaintain our and indirect consequences of COVID-19 are not yet known andtheir information technology security infrastructure, or if we or our subsidiaries or our or our subsidiaries’ vendors fail to timely identify or appropriately respond to cyber attacks or other cyber incidents, then this may not emerge for some time.

As a result of the COVID-19 pandemic workplace restrictions, both voluntary and those imposed by governmental authorities, large portions ofdisrupt our and our subsidiaries’ employees are working from home, which may disruptoperations, cause significant damage to our or their productivity. Similar workplace restrictions are in place at manyassets and surrounding areas, cause loss of life or serious bodily injury, impact our or their data framework or cause a failure to protect personal information of customers or employees.

The foregoing risks relating to disruption of service, interruption of operations and data loss could impact our and our subsidiaries’ ability to timely perform critical vendors, which may resultbusiness functions, resulting in interruptionsdisruption or deterioration in service delivery or failure by vendors to properly perform required services. In addition, having shifted to remote working arrangementsour and being more dependent on internetour subsidiaries’ operations and telecommunications accessbusiness and capabilities, weexpose us and our subsidiaries to significant financial losses and monetary and reputational damages. In addition, potential exposures include substantially increased compliance costs and required computer system upgrades and security related investments. The breach of confidential information also face a heightened risk of cybersecurity attacks orcould give rise to legal liability and regulatory action under data security incidents. Weprotection and our subsidiaries also self-insure our health benefitsprivacy laws and therefore may experience increased medical claims as a result ofregulations, both in the pandemic.U.S. and foreign jurisdictions.

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

Items 2 (a) and (b) are inapplicable.

(c) STOCK REPURCHASES

Period 
(a) Total number
of shares
purchased
  
(b) Average
price paid per
share
  
(c) Total number of
shares purchased as
part of publicly
announced plans or
programs
  
(d) Maximum number of shares
(or approximate dollar value)
of shares that may yet be
purchased under the plans or
programs (in millions)
 
             
July 1, 2020 -            
July 31, 2020  -   N/A   N/A   N/A 
                 
August 1, 2020 -                
August 31, 2020  1,250,171  $36.56   N/A   N/A 
                 
September 1, 2020 -                
September 30, 2020  4,154,083   35.82   N/A   N/A 
Period 
(a) Total number
of shares
purchased
  
(b) Average
price paid per
share
  
(c) Total number of
shares purchased as
part of publicly
announced plans or
programs
  
(d) Maximum number of shares
(or approximate dollar value)
of shares that may yet be
purchased under the plans or
programs (in millions)
 
             
July 1, 2021 -            
July 31, 2021
  
2,590,255
  
$
54.01
   
N/A
   
N/A
 

                
August 1, 2021 -                
August 31, 2021
  
1,730,048
   
54.60
   
N/A
   
N/A
 
                 
September 1, 2021 -                
September 30, 2021
  
1,834,131
   
53.74
   
N/A
   
N/A
 

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61
Item 6.
Item 6.Exhibits.

Description of Exhibit
Exhibit
Number
  
Certification by the Chief Executive Officer of the Company pursuant to Rule 13a-14(a) and Rule 15d-14(a)
31.1*
  
Certification by the Chief Financial Officer of the Company pursuant to Rule 13a-14(a) and Rule 15d-14(a)
31.2*
  
Certification by the Chief Executive Officer of the Company pursuant to 18 U.S.C. Section 1350 (as adopted by Section 906 of the Sarbanes-Oxley Act of 2002)
32.1*
  
Certification by the Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350 (as adopted by Section 906 of the Sarbanes-Oxley Act of 2002)
32.2*
  
XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document101.INS *
  
Inline XBRL Taxonomy Extension Schema101.SCH *
  
Inline XBRL Taxonomy Extension Calculation Linkbase101.CAL *
  
Inline XBRL Taxonomy Extension Definition Linkbase101.DEF *
  
Inline XBRL Taxonomy Label Linkbase101.LAB *
  
Inline XBRL Taxonomy Extension Presentation Linkbase101.PRE *
  
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)104*

*Filed herewith.

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62
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.

 
LOEWS CORPORATION
 
(Registrant)
   
Dated:  November 2, 20201, 2021
By:
/s/ David B. Edelson
  
DAVID B. EDELSON
  
Senior Vice President and
  
Chief Financial Officer
  
(Duly authorized officer
  
and principal financial
  
officer)


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