UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

~~FORM~~

~~10-Q~~

~~[X]~~

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2019~~

2020

~~[ ]~~

☐ 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
~~incorporation or organization)~~		Identification No.)

667 Madison Avenue, New York, ~~N.Y.~~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 class	Trading Symbol(s)	~~Trading~~ ~~Symbol(s)~~	Name of each exchange on which registered
Common stock, par value $0.01 per share	L	L	New York Stock Exchange

~~ndicate~~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 ☐

~~Yes~~

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 ☐

~~Yes~~

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 ☐

~~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 ☒

~~Yes~~

As of ~~October~~

~~, 2019,~~July 24, 2020, there were

~~297,438,996~~ 280,444,197 shares of the registrant’s common stock outstanding.

Index

INDEX

~~Table of Contents~~

~~INDEX~~


		Page		No.
		~~No.~~
Part I. Financial Information

Item 1. Financial Statements (unaudited)

Consolidated Condensed Balance Sheets ~~September~~	3
June 30, ~~2019~~2020 and December 31, ~~2018~~2019			3

Consolidated Condensed Statements of ~~Income~~ Operations	4
Three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019			4

Consolidated Condensed Statements of Comprehensive Income (Loss)	5
Three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019			5

Consolidated Condensed Statements of Equity	6
Three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019			6

Consolidated Condensed Statements of Cash Flows ~~Nine~~	8
Six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019			8

Notes to Consolidated Condensed Financial Statements			9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			37

Item 3. Quantitative and Qualitative Disclosures about Market Risk			59	58

Item 4. Controls and Procedures			59	58

Part II. Other Information			59	58

Item 1. Legal Proceedings			59	58

Item 1A. Risk Factors			59

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			59	64

Item 6. Exhibits			60	64

Index

~~Table of Contents~~

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

	June 30, 2020			December 31, 2019
(Dollar amounts in millions, except per share data)

Assets:

Investments:
Fixed maturities, amortized cost of $38,414 and $38,157, less allowance for credit loss of $51 and $0	$	42,799		$	42,240
Equity securities, cost of $1,349 and $1,244		1,305			1,306
Limited partnership investments		1,742			2,004
Other invested assets, primarily mortgage loans, less allowance for credit loss of $20 and $0		1,125			1,072
Short term investments		4,515			4,628
Total investments		51,486			51,250
Cash		668			336
Receivables		8,431			7,675
Property, plant and equipment		10,475			15,568
Goodwill		764			767
Deferred non-insurance warranty acquisition expenses		2,916			2,840
Deferred acquisition costs of insurance subsidiaries		699			662
Other assets		3,000			3,145
Total assets	$	78,439		$	82,243

Liabilities and Equity:

Insurance reserves:
Claim and claim adjustment expense	$	22,270		$	21,720
Future policy benefits		12,596			12,311
Unearned premiums		4,996			4,583
Total insurance reserves		39,862			38,614
Payable to brokers		985			108
Short term debt		47			77
Long term debt		9,958			11,456
Deferred income taxes		875			1,168
Deferred non-insurance warranty revenue		3,852			3,779
Other liabilities		4,447			5,111
Total liabilities		60,026			60,313

Commitments and contingent liabilities

Preferred stock, $0.10 par value:
Authorized – 100,000,000 shares
Common stock, $0.01 par value:
Authorized – 1,800,000,000 shares
Issued – 291,393,899 and 291,210,222 shares		3			3
Additional paid-in capital		3,371			3,374
Retained earnings		14,316			15,823
Accumulated other comprehensive income (loss)		5			(68	)
		17,695			19,132
Less treasury stock, at cost (10,949,702 and 240,000 shares)		(491	)		(13	)
Total shareholders’ equity		17,204			19,119
Noncontrolling interests		1,209			2,811
Total equity		18,413			21,930
Total liabilities and equity	$	78,439		$	82,243

September 30,

December 31,

2019

2018

(Dollar amounts in millions, except per share data)

Assets:

Investments:

Fixed maturities, amortized cost of $38,287 and $38,234

$
42,489

$
39,699

Equity securities, cost of $1,315 and $1,479

1,317

1,293

Limited partnership investments

2,012

2,424

Other invested assets, primarily mortgage loans

995

901

Short term investments

4,574

3,869

Total investments

51,387

48,186

Cash

442

405

Receivables

7,622

7,960

Property, plant and equipment

15,561

15,511

Goodwill

772

665

Deferred
non-insurance
warranty acquisition expenses

2,772

2,513

Deferred acquisition costs of insurance subsidiaries

668

633

Other assets

3,275

2,443

Total assets

$
82,499

$
78,316

Liabilities and Equity:

Insurance reserves:

Claim and claim adjustment expense

$
21,596

$
21,984

Future policy benefits

12,305

10,597

Unearned premiums

4,608

4,183

Total insurance reserves

38,509

36,764

Payable to brokers

242

42

Short term debt

87

17

Long term debt

11,395

11,359

Deferred income taxes

1,141

841

Deferred
non-insurance
warranty revenue

3,707

3,402

Other liabilities

5,160

4,505

Total liabilities

60,241

56,930

Commitments and contingent liabilities

Preferred stock, $0.10 par value:

Authorized – 100,000,000 shares

Common stock, $0.01 par value:

Authorized – 1,800,000,000 shares

Issued – 312,550,764 and 312,169,189 shares

3

3

Additional
paid-in
capital

3,620

3,627

Retained earnings

16,427

15,773

Accumulated other comprehensive income (loss)

17

(880
)

20,067

18,523

Less treasury stock, at cost (13,324,637 and 100,000 shares)

(647
)

(5
)
Total shareholders’ equity

19,420

18,518

Noncontrolling interests

2,838

2,868

Total equity

22,258

21,386

Total liabilities and equity

$
82,499

$
78,316

See accompanying Notes to Consolidated Condensed Financial Statements.

Index

~~Table of Contents~~

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF ~~INCOME~~OPERATIONS

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
(In millions, except per share data)

Revenues:
Insurance premiums	$	1,850		$	1,824		$	3,719		$	3,627
Net investment income		644			551			807			1,208
Investment gains (losses) (Note 2)		(1,142	)		2			(1,358	)		33
Non-insurance warranty revenue		308			285			609			566
Operating revenues and other		650			961			1,632			1,946
Total		2,310			3,623			5,409			7,380

Expenses:
Insurance claims and policyholders’ benefits		1,642			1,352			3,067			2,709
Amortization of deferred acquisition costs		342			338			686			680
Non-insurance warranty expense		285			263			566			523
Operating expenses and other		992			1,231			3,018			2,380
Interest		123			164			267			305
Total		3,384			3,348			7,604			6,597
Income (loss) before income tax		(1,074	)		275			(2,195	)		783
Income tax (expense) benefit		228			(50	)		305			(162	)
Net income (loss)		(846	)		225			(1,890	)		621
Amounts attributable to noncontrolling interests		11			24			423			22
Net income (loss) attributable to Loews Corporation	$	(835	)	$	249		$	(1,467	)	$	643

Basic net income (loss) per share	$	(2.96	)	$	0.82		$	(5.16	)	$	2.10

Diluted net income (loss) per share	$	(2.96	)	$	0.82		$	(5.16	)	$	2.09

Weighted average shares outstanding:
Shares of common stock		281.48			303.84			284.26			306.82
Dilutive potential shares of common stock					0.70						0.62
Total weighted average shares outstanding assuming dilution		281.48			304.54			284.26			307.44

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

(In millions, except per share data)

Revenues:

Insurance premiums

$
1,890

$
1,853

$
5,517

$
5,453

Net investment income

525

494

1,733

1,551

Investment gains (losses):

Other-than-temporary impairment losses

(14
)

(3
)

(34
)

(9
)
Other net investment gains

22

18

75

30

Total investment gains

8

15

41

21

Non-insurance
warranty revenue

292

258

858

744

Operating revenues and other

960

988

2,906

3,010

Total

3,675

3,608

11,055

10,779

Expenses:

Insurance claims and policyholders’ benefits

1,614

1,312

4,323

3,978

Amortization of deferred acquisition costs

345

337

1,025

992

Non-insurance
warranty expense

278

235

801

676

Operating expenses and other

1,234

1,224

3,614

3,637

Interest

144

146

449

430

Total

3,615

3,254

10,212

9,713

Income before income tax

60

354

843

1,066

Income tax expense

(21
)

(65
)

(183
)

(149
)
Net income

39

289

660

917

Amounts attributable to noncontrolling interests

33

(11
)

55

(116
)
Net income attributable to Loews Corporation

$
72

$
278

$
715

$
801

Basic net income per share

$
0.24

$
0.88

$
2.34

$
2.50

Diluted net income per share

$
0.24

$
0.88

$
2.34

$
2.49

Weighted average shares outstanding:

Shares of common stock

301.65

315.90

305.08

320.81

Dilutive potential shares of common stock

0.70

0.91

0.65

0.92

Total weighted average shares outstanding assuming dilution

302.35

316.81

305.73

321.73

See accompanying Notes to Consolidated Condensed Financial Statements.

Index

~~Table of Contents~~

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
(In millions)

Net income (loss)	$	(846	)	$	225		$	(1,890	)	$	621

Other comprehensive income (loss), after tax
Changes in:
Net unrealized gains (losses) on investments with an allowance for credit losses		2						(9	)
Net unrealized gains on other investments		1,191			436			147			966
Total unrealized gains on investments		1,193			436			138			966
Unrealized losses on cash flow hedges					(6	)		(19	)		(12	)
Pension and postretirement benefits		6			7			20			15
Foreign currency translation		29			3			(55	)		20

Other comprehensive income		1,228			440			84			989

Comprehensive income (loss)		382			665			(1,806	)		1,610

Amounts attributable to noncontrolling interests		(119	)		(23	)		412			(84	)

Total comprehensive income (loss) attributable to Loews Corporation	$	263		$	642		$	(1,394	)	$	1,526

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

(In millions)

Net income

$
39
$
289

$
660

$

917

Other comprehensive income (loss), after tax

Changes in:

Net unrealized gains (losses) on investments with other-

than-temporary impairments

(1
)
4

(11
)
Net other unrealized gains (losses) on investments

41

(158
)
1,003

(746
)
Total unrealized gains (losses) on investments

41

(159
)
1,007

(757
)
Unrealized gains (losses) on cash flow hedges

(4
)

(16
)

14

Pension liability

10

8

25

27

Foreign currency translation

(31
)

(11
)

(41
)
Other comprehensive income (loss)

16

(151
)
1,005

(757
)

Comprehensive income

55

138

1,665

160

Amounts attributable to noncontrolling interests

31

7

(53
)

(34
)

Total comprehensive income attributable to Loews Corporation

$

86
$
145

$

1,612

$
126

See accompanying Notes to Consolidated Condensed Financial Statements.

Index

~~Table of Contents~~

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY

(Unaudited)

				Loews Corporation Shareholders
	Total			Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Common Stock Held in Treasury			Noncontrolling Interests
(In millions)

Balance, April 1, 2019	$	21,902		$	3	$	3,607		$	16,144		$	(390	)	$	(327	)	$	2,865
Net income		225								249									(24	)
Other comprehensive income		440											393						47
Dividends paid ($0.0625 per share)		(29	)							(19	)								(10	)
Purchases of Loews Corporation treasury stock		(151	)													(151	)
Purchases of subsidiary stock from noncontrolling interests		(2	)																(2	)
Stock-based compensation		7					6												1
Other		2					(1	)											3
Balance, June 30, 2019	$	22,394		$	3	$	3,612		$	16,374		$	3		$	(478	)	$	2,880

Balance, April 1, 2020	$	19,178		$	3	$	3,347		$	15,167		$	(1,093	)	$	(458	)	$	2,212
Net loss		(846	)							(835	)								(11	)
Other comprehensive income		1,228											1,098						130
Dividends paid ($0.0625 per share)		(27	)							(18	)								(9	)
Deconsolidation of Diamond Offshore		(1,087	)																(1,087	)
Purchases of Loews Corporation treasury stock		(33	)													(33	)
Purchases of subsidiary stock from noncontrolling interests		(19	)				5												(24	)
Stock-based compensation		13					13
Other		6					6			2									(2	)
Balance, June 30, 2020	$	18,413		$	3	$	3,371		$	14,316		$	5		$	(491	)	$	1,209

Loews Corporation Shareholders

Accumulated

Common

Additional

Other

Stock

Common

Paid-in

Retained

Comprehensive

Held in

Noncontrolling

Total

Stock

Capital

Earnings

Income (Loss)

Treasury

Interests

(In millions)

Balance, July 1, 2018

$

21,858

$
3

$
3,809

$

16,532

$
(625
)

$
(808
)

$
2,947

Net income

289

278

11

Other comprehensive loss

(151
)

(133
)

(18
)
Dividends paid ($0.0625 per share)

(30
)

(20
)

(10
)
Purchases of Loews treasury stock

(88
)

(88
)

Stock-based compensation

11

9

2

Other

(3
)

(5
)

2

Balance, September 30, 2018

$
21,886

$
3

$
3,813

$
16,790

$
(758
)

$
(896
)

$
2,934

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 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

See accompanying Notes to Consolidated Condensed Financial Statements.

Index

~~Table of Contents~~

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY

(Unaudited)

				Loews Corporation Shareholders
	Total			Common Stock		Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Common Stock Held in Treasury			Noncontrolling Interests
(In millions)

Balance, January 1, 2019	$	21,386		$	3	$	3,627		$	15,773		$	(880	)	$	(5	)	$	2,868
Net income		621								643									(22	)
Other comprehensive income		989											883						106
Dividends paid ($0.125 per share)		(116	)							(38	)								(78	)
Purchases of Loews Corporation treasury stock		(473	)													(473	)
Purchases of subsidiary stock from noncontrolling interests		(16	)																(16	)
Stock-based compensation		8					(13	)											21
Other		(5	)				(2	)		(4	)								1
Balance, June 30, 2019	$	22,394		$	3	$	3,612		$	16,374		$	3		$	(478	)	$	2,880

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 adjusted		21,925			3		3,374			15,818			(68	)		(13	)		2,811
Net loss		(1,890	)							(1,467	)								(423	)
Other comprehensive income		84											73						11
Dividends paid ($0.125 per share)		(114	)							(36	)								(78	)
Deconsolidation of Diamond Offshore		(1,087	)																(1,087	)
Purchases of Loews Corporation treasury stock		(478	)													(478	)
Purchases of subsidiary stock from noncontrolling interests		(37	)				5												(42	)
Stock-based compensation		9					(9	)											18
Other		1					1			1									(1	)
Balance, June 30, 2020	$	18,413		$	3	$	3,371		$	14,316		$	5		$	(491	)	$	1,209

Loews Corporation Shareholders

Accumulated

Common

Additional

Other

Stock

Common

Paid-in

Retained

Comprehensive

Held in

Noncontrolling

Total

Stock

Capital

Earnings

Income (Loss)

Treasury

Interests

(In millions)

Balance, January 1, 2018, as reported

$
24,566

$
3

$
3,151

$

16,096

$
(26
)

$
(20
)

$
5,362

Cumulative effect adjustments from changes in accounting standards

(91
)

(43
)

(28
)

(20
)
Balance, January 1, 2018, as adjusted

24,475

3

3,151

16,053

(54
)

(20
)

5,342

Net income

917

801

116

Other comprehensive loss

(757
)

(675
)

(82
)
Dividends paid ($0.1875 per share)

(170
)

(60
)

(110
)
Purchase of Boardwalk Pipeline
s
common units

(1,718
)

658

(29
)

(2,347
)
Purchases of Loews treasury stock

(876
)

(876
)

Stock-based compensation

19

10

9

Other

(4
)

(6
)

(4
)

6

Balance, September 30, 2018

$

21,886

$
3

$
3,813

$
16,790

$
(758
)

$
(896
)

$
2,934

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 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

See accompanying Notes to Consolidated Condensed Financial Statements.

Index

~~Table of Contents~~

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended June 30,	2020			2019
(In millions)

Operating Activities:

Net income (loss)	$	(1,890	)	$	621
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities, net		2,430			604
Changes in operating assets and liabilities, net:
Receivables		(574	)		(79	)
Deferred acquisition costs		(41	)		(47	)
Insurance reserves		1,181			203
Other assets		(280	)		(296	)
Other liabilities		(46	)		73
Trading securities		(340	)		(605	)
Net cash flow provided by operating activities		440			474

Investing Activities:

Purchases of fixed maturities		(5,356	)		(4,896	)
Proceeds from sales of fixed maturities		3,773			3,858
Proceeds from maturities of fixed maturities		1,622			1,374
Purchases of limited partnership investments		(90	)		(139	)
Proceeds from sales of limited partnership investments		259			559
Purchases of property, plant and equipment		(440	)		(505	)
Acquisitions					(256	)
Dispositions		11			136
Deconsolidation of Diamond Offshore		(483	)
Change in short term investments		526			6
Other, net		(147	)		(93	)
Net cash flow (used) provided by investing activities		(325	)		44

Financing Activities:

Dividends paid		(36	)		(38	)
Dividends paid to noncontrolling interests		(78	)		(78	)
Purchases of Loews Corporation treasury stock		(491	)		(478	)
Purchases of subsidiary stock from noncontrolling interests		(37	)		(16	)
Principal payments on debt		(465	)		(1,394	)
Issuance of debt		1,342			1,534
Other, net		(13	)		(15	)
Net cash flow provided (used) by financing activities		222			(485	)

Effect of foreign exchange rate on cash		(5	)		2

Net change in cash		332			35
Cash, beginning of period		336			405
Cash, end of period	$	668		$	440

Nine Months Ended September 30

2019

2018

(In millions)

Operating Activities:

Net income

$
660

$

917

Adjustments to reconcile net income to net cash provided (used) by operating activities, net

747

1,121

Changes in operating assets and liabilities, net:

Receivables

179

18

Deferred acquisition costs

(37
)

(24
)
Insurance reserves

337

108

Other assets

(386
)

(169
)
Other liabilities

315

(75
)
Trading securities

(544
)

1,499

Net cash flow provided by operating activities

1,271

3,395

Investing Activities:

Purchases of fixed maturities

(7,053
)

(8,244
)
Proceeds from sales of fixed maturities

4,872

6,622

Proceeds from maturities of fixed maturities

2,116

1,838

Purchases of limited partnership investments

(167
)

(381
)
Proceeds from sales of limited partnership investments

680

382

Purchases of property, plant and equipment

(743
)

(731
)
Acquisitions

(257
)

(14
)
Dispositions

137

110

Change in short term investments

26

(126
)
Other, net

(95
)

(173
)
Net cash flow used by investing activities

(484
)

(717
)
Financing Activities:

Dividends paid

(57
)

(60
)
Dividends paid to noncontrolling interests

(88
)

(110
)
Purchases of Loews treasury stock

(643
)

(889
)
Purchases of subsidiary stock from noncontrolling interests

(18
)

Purchase of Boardwalk Pipeline
s
common units

(1,504
)
Principal payments on debt

(1,796
)

(780
)
Issuance of debt

1,870

693

Other, net

(15
)

75

Net cash flow used by financing activities

(747
)

(2,575
)
Effect of foreign exchange rate on cash

(3
)

(4
)

Net change in cash

37

99

Cash, beginning of period

405

472

Cash, end of period

$
442

$
571

See accompanying Notes to Consolidated Condensed Financial Statements.

Index

~~Table of Contents~~

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”), ~~an 89% owned subsidiary); the operation of offshore oil and gas drilling rigs (Diamond Offshore Drilling, Inc. (“Diamond Offshore”),~~ a ~~53%~~89.6% owned subsidiary); transportation and storage of natural gas and natural gas liquids (Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”), a wholly owned subsidiary); 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 ~~(Consolidated Container Company~~(Altium Packaging LLC (“~~Consolidated Container”~~Altium Packaging”), a 99% owned subsidiary). Unless the context otherwise requires, the ~~terms “Company,” “Loews” and “Registrant”~~term “Company” as used herein ~~mean~~means Loews Corporation ~~excluding~~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.

In the second quarter of 2020, Diamond Offshore Drilling, Inc. (“Diamond Offshore”) was deconsolidated from the Company’s consolidated financial statements. 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~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 and results of operations, comprehensive income and changes in shareholders’ equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 and cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019. Net income (loss) for the ~~third~~second quarter and first ~~nine months~~half 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, ~~2018.~~2019.

The Company presents basic and diluted net income (loss) per share on the Consolidated Condensed Statements of ~~Income.~~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. There were no0 shares attributable to employee stock-based compensation awards excluded from the diluted weighted average shares outstanding amounts for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 because the effect would have been antidilutive.

Accounting changes

– In ~~February~~June of 2016, the Financial Accounting Standards Board (“FASB”) issued ~~ASU~~

~~2016-02,~~

~~“Leases (Topic 842)”~~Accounting Standards Update (“~~ASU~~

~~2016-02”~~ASU”).

Effective January 1, 2019, the updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. The Company adopted the updated accounting guidance using the modified retrospective method. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. The Company utilized the package of practical expedients allowing the Company to not reassess whether any expired or existing contracts contain a lease, the classification for any expired or existing leases or the initial direct costs for any existing leases. The Company has also elected to apply an exemption for short term leases whereby leases with initial lease terms of one year or less are not recorded on the balance sheet.

~~For leases where we are a lessee we have elected to account for lease and~~

~~non-lease~~

~~components as a single lease component, except subsea equipment leases. For leases where we are a lessor we have elected to combine the lease and~~

~~non-lease~~

components of our offshore drilling contracts, if certain conditions are met, and account for the combined component in accordance with the accounting treatment for the predominant component of the contract.

At adoption, the cumulative effect adjustment increased Other assets and Other liabilities by $642 million reflecting operating lease right of use assets, lease liabilities and the derecognition of deferred rent related primarily to lease agreements for office space and machinery and equipment. Subsequent to the adoption of ASU

~~2016-02,~~

Other assets and Other liabilities were adjusted to $3.1 billion and $5.1 billion as of January 1, 2019, as compared to $2.4 billion and $4.5 billion as of December 31, 2018. See Note 6 for additional information on leases.

~~Recently issued ASUs~~

~~– In June of~~ 2016 ~~the FASB issued ASU~~

~~2016-13,~~

~~“Financial Instruments – Credit~~-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The updated accounting guidance requires changes to the recognition of credit losses on financial instruments not accounted for at fair value through net income. ~~The~~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 ~~effective for interim and annual periods beginning after December 15, 2019. The~~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 ~~will be applied~~ using ~~the~~a modified retrospective method with a cumulative effect adjustment recorded to beginning ~~retained~~Retained earnings. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. A prospective transition ~~method~~approach is required for ~~debt~~available-for-sale fixed maturity securities that were purchased with credit deterioration (“PCD assets”) or have recognized an ~~other-than-temporary impairment~~OTTI write down prior to the effective date. The ~~primary changes will be the use~~cumulative effect of the ~~expected~~accounting change resulted in a $5 million decrease in Retained earnings, after tax and noncontrolling interests.

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 ~~loss model~~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.

Index

~~Table of Contents~~

~~mortgage loans, reinsurance and insurance receivables and other financing receivables and the use of the~~The allowance ~~method rather than the write-down method~~ for credit losses ~~within~~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

~~available-for-sale~~

~~fixed maturities portfolio. 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 ~~model will require~~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 ~~be presented at~~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. ~~Under~~

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 ~~method~~ for

~~available-for-sale~~

~~debt securities, the Company will record reversals of~~ credit losses ifon accrued interest receivables. The accrual of interest income is discontinued and the ~~estimate of credit losses declines. The Company~~asset is ~~currently evaluating the effect the guidance will have~~placed on ~~its consolidated financial statements, but does not expect the impact to be material.~~

The Company is currently in the process of evaluating existing impairment methodology, developing models to comply with the new guidance and accumulating the necessary internal and external information required to measure credit losses under the expected credit loss model. The Company is implementing changes to the information systems to assist with the accounting, including the recordingnonaccrual status within 90 days of the ~~allowance.~~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 ~~Company~~asset is ~~also evaluating additional changes~~returned to ~~processes to meet~~accrual status when the ~~reporting~~principal and ~~disclosure requirements of~~interest amounts contractually due are brought current, and future payments are expected. Interest receivables are presented in Receivables on the ~~new guidance.~~

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~~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, ~~2020;~~2021, however the FASB has

~~approved~~

proposed a one year deferral of the effective date. Early adoption is permitted. The Company may elect to apply the guidance using either a modified retrospective transition method or a full retrospective transition method. The guidance requires restatement of prior periods ~~presented and early adoption is permitted.~~presented. The Company plans to use the modified retrospective transition method at adoption and is currently evaluating ~~the method and timing of adoption and~~ the effect the updated guidance will have on its consolidated financial ~~statements.~~statements, including increased disclosure requirements. The annual updating of cash flow assumptions is expected to increase income statement volatility. The quarterly change in the discount rate is expected to increase volatility in the Company’s Shareholders’ equity, but that will be somewhat mitigated because Shadow Adjustments are eliminated under the new guidance. See Note 3 for further information on Shadow Adjustments. While the requirements of the new guidance represent a material change from existing accounting guidance, the underlying economics of ~~CNA’s~~the business and related cash flows

~~are~~

will be unchanged.

~~. Acquisitions and Divestiture~~

~~Consolidated Container~~

2. Deconsolidation of Diamond Offshore

~~During the first nine months~~

On April 26, 2020 (the “Filing Date”), Diamond Offshore and certain of ~~2019, Consolidated Container paid approximately $260 million to complete~~

~~three~~

~~acquisitions of plastic packaging manufacturers located~~its direct and indirect subsidiaries filed voluntary petitions in the ~~U.S. and Canada, including the acquisition on June 14, 2019 of Tri State Distribution, Inc., a retail pharmaceutical packaging solutions provider. For the three~~

~~and nine~~

~~months ended September 30, 2019 revenues~~United States Bankruptcy Court for the ~~three acquisitions~~

~~since acquisition~~

~~were $35 million~~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 ~~$43 million~~applicable U.S. generally accepted accounting principles, Loews Corporation no longer controls Diamond Offshore for accounting purposes and, therefore, Diamond Offshore was deconsolidated from its consolidated financial statements effective as of the Filing Date. See Note 14 for Diamond Offshore’s revenues and expenses through the Filing Date.

~~net~~

Through the Filing Date, Diamond Offshore’s results were ~~not significant.~~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 ~~preliminary allocation of the purchase prices for the three acquisitions~~deconsolidation resulted in the recognition of ~~approximately $106~~a loss of $1.2 billion ($957 million after tax) during the three and six months ended June 30, 2020, which is reported within Investment gains (losses) on the Consolidated Condensed Statements of ~~goodwill~~Operations. This loss represents the difference between the carrying value and ~~approximately $90 million~~the estimated fair value, which was immaterial, of ~~intangible assets, primarily related to customer relationships, and are subject to change within~~Loews Corporation’s investment in equity securities of Diamond Offshore as of the ~~respective measurement periods. The acquisitions were funded with approximately $250 million of debt financing proceeds at Consolidated Container, as discussed in Note 7, and available cash.~~Filing Date.

~~Loews Hotels & Co~~

~~Loews Hotels & Co sold an owned hotel for approximately $127 million in May of 2019.~~

~~Table of Contents~~Index

3. Investments

Net investment income is as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,						Three Months Ended June 30,						Six Months Ended June 30
	2019			2018			2019			2018			2020			2019			2020			2019
(In millions)

Fixed maturity securities	$	452		$	449		$	1,362		$	1,339		$	430		$	455		$	868		$	910
Limited partnership investments		16			34			140			142			57			43			(45	)		124
Short term investments		13			10			42			30			2			14			9			29
Equity securities		16			10			62			32			50			16			6			46
Income ( loss ) from trading portfolio (a)		34			(7	)		144			13
Income (loss) from trading portfolio (a)														107			29			(22	)		110
Other		13			12			39			40			16			12			30			26
Total investment income		544			508			1,789			1,596			662			569			846			1,245
Investment expenses		(19	)		(14	)		(56	)		(45	)		(18	)		(18	)		(39	)		(37	)
Net investment income	$	525		$	494		$	1,733		$	1,551		$	644		$	551		$	807		$	1,208

(a)

Net unrealized gains (losses) related to changes in fair value on securities still held were ~~$17~~$80 and ~~$(23)~~$8 for the three months ended ~~September~~June 30, 2020 and 2019 and ~~2018~~$7 and ~~$55 and $(66)~~$48 for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.

Investment gains (losses) are as follows:


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended June 30,						Six Months Ended June 30
	2019			2018		2019			2018			2020			2019			2020			2019
(In millions)

Fixed maturity securities	$	3		$	10	$	(6	)	$	32		$	17		$	(3	)	$	(58	)	$	(9	)
Equity securities		7			2		60			(23	)		63			11			(70	)		53
Derivative instruments		(2	)		1		(13	)		10			(10	)		(6	)		(5	)		(11	)
Short term investments and other					2					2			(1	)					(14	)
Investment gains (a)	$	8		$	15	$	41		$	21

Deconsolidation of Diamond Offshore (see Note 2)													(1,211	)					(1,211	)
Investment gains (losses) (a)												$	(1,142	)	$	2		$	(1,358	)	$	33

(a)

Gross investment gains on

available-for-sale

securities were ~~$34~~$102 and ~~$42~~ $28for the three months ended ~~September~~June 30, 2020 and 2019 and ~~2018~~$131 and ~~$98 and $148~~$64 for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019. Gross investment losses on

available-for-sale

securities were ~~$31~~$85 and ~~$32~~ $31for the three months ended ~~September~~June 30, 2020 and 2019 and ~~2018~~$189 and ~~$104 and $116~~$73 for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~

2019.During the three and ~~nine~~six months ended ~~September~~June 30, 2020, $63of investment gains and $70 of investment losses were recognized due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2020. During the three and six months ended June 30, 2019, $7$11 and ~~$60~~$53 of ~~Net~~ investment gains were recognized due to the change in fair value of

non-redeemable

preferred stock still held as of ~~September~~June 30, ~~2019. During the three and nine months ended September 30, 2018, $2 of Net investment gains and $23 of Net investment losses were recognized due to the change in fair value of~~

~~non-redeemable~~

~~preferred stock still held as of September 30, 2018~~

2019.

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.

Index

The following table presents the activity related to the allowance on available-for-sale securities with credit impairments and PCD assets. Accrued interest receivables on available-for-sale fixed maturity securities totaled $373 million and is excluded from the estimate of expected credit losses and the amortized cost basis in the tables within this Note.

Three months ended June 30, 2020	Corporate and Other Bonds			Asset- backed		Total
(In millions)

Allowance for credit losses:
Balance as of April 1, 2020	$	49		$	-	$	49
Additions to the allowance for credit losses:
For securities for which credit losses were not previously recorded		10			12		22
For available-for-sale securities accounted for as PCD assets		1					1

Reductions to the allowance for credit losses:
Securities sold during the period (realized)		1					1

Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period		(20	)				(20	)
Total allowance for credit losses	$	39		$	12	$	51

Six months ended June 30, 2020

Allowance for credit losses:
Balance as of December 31, 2019	$	-		$	-	$	-
Additions to the allowance for credit losses:
Impact of adopting ASC 326		6					6
For securities for which credit losses were not previously recorded		58			12		70
For available-for-sale securities accounted for as PCD assets		2					2

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		1					1

Additional increases or (decrease) to the allowance for credit losses on securities that had an allowance recorded in a previous period		(20	)				(20	)
Total allowance for credit losses	$	39		$	12	$	51

The components of ~~other-than-temporary~~available-for-sale impairment ~~(“OTTI”)~~ losses recognized in earnings by asset type are ~~as follows:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

(In millions)

Fixed maturity securities
available-for-sale:

Corporate and other bonds

$

  12

$

  1

$

  24

$


  6

Asset-backed

2

2

10

3

Net OTTI losses recognized in earnings

$
14

$
3

$
34

$
9

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 June 30,					Six Months Ended June 30,
	2020			2019		2020		2019
(In millions)

Fixed maturity securities available-for-sale:
Corporate and other bonds	$	(1	)	$	6	$	90	$	12
Asset-backed		12					13		8
Impairment losses recognized in earnings	$	11		$	6	$	103	$	20

Index

~~Table of Contents~~

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


September 30, 2019	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
June 30, 2020												Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses (a)		Estimated Fair Value
(In millions)
Fixed maturity securities:
Corporate and other bonds	$	19,806	$	2,263	$	42	$	22,027
States, municipalities and political subdivisions		9,154		1,641				10,795
Asset-backed:
Residential mortgage-backed		4,718		157		1		4,874	$	(23	)
Commercial mortgage-backed		2,066		117		3		2,180		1
Other asset-backed		1,884		46		4		1,926		(3	)
Total asset-backed		8,668		320		8		8,980		(25	)
U.S. Treasury and obligations of government-sponsored enterprises		124		7				131
Foreign government		491		20				511
Redeemable preferred stock		10						10
Fixed maturities available-for-sale		38,253		4,251		50		42,454		(25	)
Fixed maturities trading		34		1				35
Total fixed maturity securities	$	38,287	$	4,252	$	50	$	42,489	$	(25	)



December 31, 2018

Fixed maturity securities:
Corporate and other bonds	$	18,764	$	791	$	395	$	19,160				$	20,305	$	2,680	$	143	$	39	$	22,803
States, municipalities and political subdivisions		9,681		1,076		9		10,748					9,426		1,702		1				11,127
Asset-backed:
Residential mortgage-backed		4,815		68		57		4,826	$	(20	)		3,617		169		2				3,784
Commercial mortgage-backed		2,200		28		32		2,196					2,151		70		93		12		2,116
Other asset-backed		1,975		11		24		1,962					1,940		52		33				1,959
Total asset-backed		8,990		107		113		8,984		(20	)		7,708		291		128		12		7,859
U.S. Treasury and obligations of government-sponsored enterprises		156		3				159					491		7						498
Foreign government		480		5		4		481					457		26						483
Redeemable preferred stock		10						10
Fixed maturities available-for-sale		38,081		1,982		521		39,542		(20	)		38,387		4,706		272		51		42,770
Fixed maturities trading		153		4				157					27		2						29
Total fixed maturities	$	38,234	$	1,986	$	521	$	39,699	$	(20	)

Total fixed maturity securities												$	38,414	$	4,708	$	272	$	51	$	42,799

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.

The net unrealized gains on

~~ailable for sale~~

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~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of ~~$2.0~~$2.1 billion and ~~$964 million~~$2.0 billion (after tax and noncontrolling interests).

Index

~~Table of Contents~~

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

September 30, 2019

Estimated
Fair Value

Gross
Unrealized
Losses

Estimated
Fair Value

Gross
Unrealized
Losses

Estimated
Fair Value

Gross
Unrealized
Losses

(In millions)

Fixed maturity securities:

Corporate and other bonds

$
890

$
26

$
200

$
16

$
1,090

$
42

States, municipalities and political subdivisions

20

2

22

Asset-backed:

Residential mortgage-backed

150

38

1

188

1

Commercial mortgage-backed

83

2

26

1

109

3

Other asset-backed

416

3

6

1

422

4

Total asset-backed

649

5

70

3

719

8

U.S. Treasury and obligations of government-sponsored enterprises

14

4

18

Foreign government

17

2

19

Total fixed maturity securities

$
1,590

$
31

$

278

$
19

$
1,868

$
50

December 31, 2018

Fixed maturity securities:

Corporate and other bonds
$
8,543
$
340
$
825
$
55
$
9,368
$
395

States, municipalities and political subdivisions

517

8

5

1

522

9

Asset-backed:

Residential mortgage-backed

1,932

23

1,119

34

3,051

57

Commercial mortgage-backed

728

10

397

22

1,125

32

Other asset-backed

834

21

125

3

959

24

Total asset-backed

3,494

54

1,641

59

5,135

113

U.S. Treasury and obligations of government-sponsored enterprises

21

19

40

Foreign government

114

2

124

2

238

4

Total fixed maturity securities
$
12,689
$
404
$
2,614
$
117
$
15,303
$
521

	Less than 12 Months				12 Months or Longer				Total
June 30, 2020	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	2,095	$	137	$	56	$	6	$	2,151	$	143
States, municipalities and political subdivisions		94		1						94		1
Asset-backed:
Residential mortgage-backed		53		1		21		1		74		2
Commercial mortgage-backed		971		92		14		1		985		93
Other asset-backed		746		32		14		1		760		33
Total asset-backed		1,770		125		49		3		1,819		128
U.S. Treasury and obligations of government-sponsored enterprises		4								4
Foreign government		4								4
Total fixed maturity securities	$	3,967	$	263	$	105	$	9	$	4,072	$	272

December 31, 2019

Fixed maturity securities:
Corporate and other bonds	$	914	$	21	$	186	$	11	$	1,100	$	32
States, municipalities and political subdivisions		34								34
Asset-backed:
Residential mortgage-backed		249		1		30				279		1
Commercial mortgage-backed		381		3		20		2		401		5
Other asset-backed		449		3		33		1		482		4
Total asset-backed		1,079		7		83		3		1,162		10
U.S. Treasury and obligations of government-sponsored enterprises		62		2		2				64		2
Foreign government		59		1		1				60		1
Total fixed maturity securities	$	2,148	$	31	$	272	$	14	$	2,420	$	45

Based on current facts and circumstances, the Company believes the unrealized losses presented in the ~~September~~June 30, ~~2019~~2020 securities in a gross unrealized loss position table above are not indicative of the ultimate ~~collectibility~~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 has no current intent to sell securities with unrealized losses, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost; accordingly, the Company has determined that there are0 additional ~~OTTI~~impairment losses to be recorded as of ~~September~~ June 30, ~~2019.~~

2020.

The following table presents the activity related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held as of September 30, 2019 and 2018 for which a portion of an OTTI loss was recognized in OCI.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

(In millions)

Beginning balance of credit losses on fixed maturity securities

$

16

$

21

$

18

$

27

Reductions for securities sold during the period

(2
)
(2
)

(8
)
Ending balance of credit losses on fixed maturity securities

$
16
$
19

$
16
$
19

~~Table of Contents~~

Contractual Maturity

The following table presents

available-for-sale

fixed maturity securities by contractual maturity.

September 30, 2019

December 31, 2018

Cost or

Estimated

Cost or

Estimated

Amortized

Fair

Amortized

Fair

Cost

Value

Cost

Value

(In millions)

Due in one year or less

$
1,071

$
1,091
$
1,350
$
1,359

Due after one year through five years

10,992

11,470

7,979

8,139

Due after five years through ten years

13,694

14,711

16,859

16,870

Due after ten years

12,496

15,182

11,893

13,174

Total

$

38,253

$

42,454

$

38,081

$

39,542

	June 30, 2020				December 31, 2019
	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value
(In millions)

Due in one year or less	$	1,472	$	1,469	$	1,334	$	1,356
Due after one year through five years		11,040		11,622		9,746		10,186
Due after five years through ten years		13,335		14,414		14,892		15,931
Due after ten years		12,540		15,265		12,134		14,714
Total	$	38,387	$	42,770	$	38,106	$	42,187

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

Index

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:

	Mortgage Loans Amortized Cost Basis by Origination Year (a)
As of June 30, 2020	2020		2019		2018		2017		2016			Prior		Total
(In millions)

DSCR ≥1.6x
LTV less than 55%	$	60	$	33	$	19	$	100	$	41		$	129	$	382
LTV 55% to 65%				32		29		41		4					106
LTV greater than 65%				5											5
DSCR 1.2x - 1.6x
LTV less than 55%				32		10		13		16			125		196
LTV 55% to 65%				83		32		32							147
LTV greater than 65%		19		74							��				93
DSCR ≤1.2x
LTV less than 55%				2		11							9		22
LTV 55% to 65%				14		14									28
LTV greater than 65%				22				37		24					83
Total	$	79	$	297	$	115	$	223	$	85		$	263	$	1,062

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

There were loans with an amortized cost of $22 million that were less than 90 days past due as of June 30, 2020, NaN of which were placed on nonaccrual status. NaN interest income was written off for the six months ended June 30, 2020.

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 ~~the~~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.

	June 30, 2020						December 31, 2019
	Contractual/ Notional		Estimated Fair Value				Contractual/ Notional		Estimated Fair Value
	Amount		Asset	(Liability)			Amount		Asset		(Liability)
(In millions)

With hedge designation:

Interest rate swaps	$	675		$	(29	)	$	715			$	(8	)

Without hedge designation:

Equity Options – purchased								57	$	1
– written								100				(1	)
Interest rate swaps		80			(4	)
Embedded derivative on funds withheld liability		197			(12	)		182				(7	)

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 privately placed debt securities. As of June 30, 2020, commitments to purchase or fund were approximately $1.2 billion and to sell were approximately $50 million under the terms of these investments.

September 30, 2019

December 31, 2018

Contractual/

Contractual/

Notional

Estimated Fair Value

Notional

Estimated Fair Value

Amount

Asset

(Liability)

Amount

Asset

(Liability)

(In millions)

With hedge designation:

Interest rate swaps
$
715
$
(13
)
$
500
$

11

Without hedge designation:

Equity markets:

Options – purchased

150

$

4

213

18

– written

98

(3
)
239
$
(17
)
Commodity futures – long

32

Embedded derivative on funds withheld liability

170

(9
)
172

4

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.

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

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

~~Table of Contents~~

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

adjusted.

~~The Company performs control~~

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 and (v) pricing validation, where prices received are compared to prices independently estimated by the Company.~~securities.

Index

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.

September 30, 2019

Level 1

Level 2

Level 3

Total

(In millions)

Fixed maturity securities:

Corporate bonds and other

$
161

$

22,090

$
428

$

22,679

States, municipalities and political subdivisions

10,795

10,795

Asset-backed

8,784

196

8,980

Fixed maturities
available-for-sale

161

41,669

624

42,454

Fixed maturities trading

31

4

35

Total fixed maturities

$
161

$
41,700

$
628

$
42,489

Equity securities

$
641

$
653

$
23

$
1,317

Short term and other

3,306

1,163

4,469

Payable to brokers

(30
)
(14
)

(44
)

December 31, 2018

Fixed maturity securities:

Corporate bonds and other
$
196
$
19,392
$
222
$
19,810

States, municipalities and political subdivisions

10,748

10,748

Asset-backed

8,787

197

8,984

Fixed maturities
available-for-sale

196

38,927

419

39,542

Fixed maturities trading

151

6

157

Total fixed maturities
$
196

$

39,078
$
425

$

39,699

Equity securities
$
704
$
570
$
19
$
1,293

Short term and other

2,647

1,111

3,758

Receivables

11

11

Payable to brokers

(23
)
(23
)

June 30, 2020	Level 1			Level 2			Level 3		Total
(In millions)

Fixed maturity securities:
Corporate bonds and other	$	519		$	22,710		$	555	$	23,784
States, municipalities and political subdivisions					11,127					11,127
Asset-backed					7,637			222		7,859
Fixed maturities available-for-sale		519			41,474			777		42,770
Fixed maturities trading					25			4		29
Total fixed maturities	$	519		$	41,499		$	781	$	42,799

Equity securities	$	642		$	636		$	27	$	1,305
Short term and other		4,349			60					4,409
Payable to brokers		(46	)		(33	)				(79	)

December 31, 2019

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	)

1517

Index

~~Table of Contents~~

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~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018:~~2019:

			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, April 1		Included in Net Income (Loss)			Included in OCI		Purchases		Sales			Settlements			Transfers into Level 3		Transfers out of Level 3			Balance, June 30		Liabilities Held at June 30			Liabilities Held at June 30
(In millions)

Fixed maturity securities:
Corporate bonds and other	$	496				$	59	$	4				$	(4	)						$	555				$	58
Asset-backed		197					18		35	$	(9	)		(5	)			$	(14	)		222					18
Fixed maturities available-for-sale		693	$	-			77		39		(9	)		(9	)	$	-		(14	)		777	$	-			76
Fixed maturities trading		3		1																		4		1
Total fixed maturities	$	696	$	1		$	77	$	39	$	(9	)	$	(9	)	$	-	$	(14	)	$	781	$	1		$	76

Equity securities	$	16	$	(4	)											$	15				$	27	$	(4	)

Index

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

$
-

15

101

$

-

(7
)

$
-

(16
)

624

$
-

16

Fixed maturities trading

4

4

Total fixed maturities

$
535

$
-

$
15

$
101

$
-

$
(7
)

$
-

$
(16
)

$
628

$
-

$
16

Equity securities

$
23

$
23

			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, April 1		Included in Net Income (Loss)			Included in OCI		Purchases		Sales		Settlements			Transfers into Level 3		Transfers out of Level 3			Balance, June 30		Liabilities Held at June 30			Liabilities Held at June 30
(In millions)


Fixed maturity securities:
Corporate bonds and other	$	253				$	12	$	76			$	(2	)			$	(1	)	$	338				$	10
Asset-backed		184					4						(4	)	$	40		(31	)		193					5
Fixed maturities available-for-sale		437	$	-			16		76	$	-		(6	)		40		(32	)		531	$	-			15
Fixed maturities trading		5		(1	)																4		(1	)
Total fixed maturities	$	442	$	(1	)	$	16	$	76	$	-	$	(6	)	$	40	$	(32	)	$	535	$	(1	)	$	15

Equity securities	$	21						$	2											$	23

~~Table of Contents~~Index

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

2018

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

$
94

$
67

$
(3
)

$
30

$
188

States,

municipalities

and political
subdivisions

1

(1
)

-

Asset-backed

273

$
(2
)

55

(25
)

29

$
(32
)

298

$
(2
)

$
1

Fixed maturities
available-for-sale

368

(2
)

$
-

122

$
-

(29
)

59

(32
)

486

(2
)

1

Fixed maturities

trading

7

(1
)

6

Total fixed maturities

$
375

$
(2
)

$
-

$
122

$
(1
)

$
(29
)

$
59

$
(32
)

$
492

$
(2
)

$
1

Equity securities

$
18

$
1

$
19

$
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, June 30		Liabilities Held at June 30			Liabilities Held at June 30
(In millions)

Fixed maturity securities:
Corporate bonds and other	$	468				$	22	$	71				$	(6	)						$	555				$	24
Asset-backed		165					10		80	$	(9	)		(9	)			$	(15	)		222					10
Fixed maturities available-for-sale		633	$	-			32		151		(9	)		(15	)	$	-		(15	)		777	$	-			34
Fixed maturities trading		4																				4
Total fixed maturities	$	637	$	-		$	32	$	151	$	(9	)	$	(15	)	$	-	$	(15	)	$	781	$	-		$	34

Equity securities	$	19	$	(7	)											$	15				$	27	$	(7	)

1720

Index

			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, January 1		Included in Net Income (Loss)			Included in OCI		Purchases		Sales		Settlements			Transfers into Level 3		Transfers out of Level 3			Balance, June 30		Liabilities Held at June 30			Liabilities Held at June 30
(In millions)

Fixed maturity securities:
Corporate bonds and other	$	222				$	20	$	132			$	(4	)			$	(32	)	$	338				$	17
Asset-backed		197					7		20				(8	)	$	45		(68	)		193					8
Fixed maturities available-for-sale		419	$	-			27		152	$	-		(12	)		45		(100	)		531	$	-			25
Fixed maturities trading		6		(2	)																4		(2	)
Total fixed maturities	$	425	$	(2	)	$	27	$	152	$	-	$	(12	)	$	45	$	(100	)	$	535	$	(2	)	$	25

Equity securities	$	19	$	2				$	2											$	23	$	3

~~Table of Contents~~

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,
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

$
222

$
34

$
211

$
(7
)

$
(32
)

$
428

$
29

Asset-backed

197

8

42

(12
)

$
45

(84
)

196

9

Fixed maturities
available-for-sale

419

$
-

42

253

$
-

(19
)

45

(116
)

624

$
-

38

Fixed maturities trading

6

(2
)

4

(2
)

Total fixed maturities

$
425

$
(2
)

$
42

$
253

$
-

$
(19
)

$
45

$
(116
)

$
628

$
(2
)

$
38

Equity securities

$
19

$
2

$
2

$
23

$
2

~~Table of Contents~~

Unrealized

Gains

Unrealized

(Losses)

Gains

Recognized in

(Losses)

Other

Net Realized 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

2018

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

$
98

$
(1
)

$
(1
)

$
69

$
(5
)

$
(7
)

$
35

$
188

$
(2
)
States, municipalities and political
subdivisions

1

(1
)

-

Asset-backed

335

5

(6
)

126

(72
)

(37
)

42

$
(95
)

298

$
(2
)

(2
)
Fixed maturities
available-for-sale

434

4

(7
)

195

(77
)

(45
)

77

(95
)

486

(2
)

(4
)
Fixed maturities trading

4

3

(1
)

6

2

Total fixed maturities

$
438

$
7

$
(7
)

$
195

$

(78
)

$
(45
)

$
77

$
(95
)

$
492

$
-

$
(4
)
Equity securities

$
22

$
(2
)

$
(1
)

$
19

$
(2
)

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


Major Category of Assets and Liabilities		Consolidated Condensed Statements of ~~Income~~Operations Line Items

Fixed maturity securities available-for-sale		Investment gains (losses)
Fixed maturity securities trading		Net investment income
Equity securities		Investment gains (losses) and Net investment income
Other invested assets		Investment gains (losses) and Net investment income
Derivative financial instruments held in a trading portfolio		Net investment income
Derivative financial instruments, other		Investment gains (losses) and Operating revenues and other
~~Life settlement contracts~~		~~Operating revenues and other~~

1921

Index

~~Table of Contents~~

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

~~Exchange traded derivatives~~

Equity options are valued using quoted market prices and are classified within Level 1 of the fair value hierarchy. ~~Level 2 derivatives primarily include currency forwards valued using observable market forward rates.~~

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.

2022

Index

~~Table of Contents~~

Significant Unobservable Inputs

The following tables present quantitative information about the significant unobservable inputs utilized ~~by the Company~~ 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 to the Company.~~available. The weighted average rate is calculated based on fair value.

September 30, 2019

Estimated
Fair Value

Valuation
Techniques

Unobservable
Inputs

Range
(Weighted
Average)

June 30, 2020

Estimated

Fair Value

Valuation

Techniques

Unobservable

Inputs

Range

(Weighted

Average)

(In millions)

Fixed maturity securities

496

Discounted cash flow

Credit spread

1% –

6% (2%)

693

Discounted cash flow

Credit spread

1% – 9% (3%)

December 31, 2018

December 31, 2019

Fixed maturity securities

228

Discounted cash flow

Credit spread

1% – 12% (3%)

525

Discounted cash flow

Credit spread

1% – 6% (2%)

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

Financial Assets and Liabilities Not Measured at Fair Value

The carrying amount, estimated fair value and the level of the fair value hierarchy of the ~~Company’s~~ 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 ~~capital~~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
	Carrying		Estimated Fair Value
September 30, 2019	Amount		Level 1	Level 2		Level 3		Total
June 30, 2020										Amount		Level 1	Level 2		Level 3		Total
(In millions)
Assets:
Other invested assets, primarily mortgage loans	$	923				$	950	$	950
Liabilities:
Short term debt		85		$	9		76		85
Long term debt		11,383			10,638		595		11,233

December 31, 2018


Assets:
Other invested assets, primarily mortgage loans	$	839				$	827	$	827	$	1,042				$	1,104	$	1,104

Liabilities:
Short term debt		15		$	14				14		45		$	8		37		45
Long term debt		11,345			10,111		653		10,764		9,947			10,038		738		10,776

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

Index

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 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 ~~mortgage loans, included in Other invested assets,~~these rigs were estimated using an income approach, whereby the fair value of each rig was estimated based on ~~the present value~~a calculation of the ~~expected~~rig’s future net cash ~~flows discounted at~~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 ~~current interest rate~~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 ~~similar financial instruments, adjusted for specific loan risk.~~

the six months ended June 30,2020 and is reported within Operating expenses and other on the Consolidated Condensed Statements of Operations.

~~Table of Contents~~

5.6. Claim and Claim Adjustment Expense Reserves

~~CNA’s property~~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. ~~CNA’s reserve~~Reserve projections are based primarily on detailed analysis of the facts in each case, ~~CNA’s~~ experience with similar cases and various historical development patterns. Consideration is given to historical patterns such as claim reserving trends and settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions and economic conditions, including inflation and public attitudes. All of these factors can affect the estimation of claim and claim adjustment expense reserves.

Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process. Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve. Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can affect ultimate claim costs. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as workers’ compensation, general liability and professional liability claims. Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined. There can be no assurance that ~~CNA’s~~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 ~~CNA’s~~the Company’s results of operations and/or equity. ~~CNA~~The Company reported catastrophe losses, net of reinsurance, of ~~$32~~$301 million and ~~$46~~$38 million for the three months ended ~~September~~June 30, 2020 and 2019 and ~~2018 and $128~~$376 million and ~~$106~~$96 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019. Net catastrophe losses for the three months ended June 30, 2020 included $182 million related to the COVID-19 pandemic, $61 million related to civil unrest and $58 million related primarily to severe weather-related events. Net catastrophe losses for the six months ended June 30, 2020 included $195 million related to the COVID-19 pandemic, $61 million related to civil unrest and $120 million related primarily to severe weather-related events. Net catastrophe losses in 2019

~~d 2018~~

related primarily to U.S. weather-related events.

Index

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.

Six Months Ended June 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		2,899			2,615
Increase (decrease) in provision for insured events of prior years		19			(36	)
Amortization of discount		98			98
Total net incurred (a)		3,016			2,677

Net payments attributable to:
Current year events		(256	)		(315	)
Prior year events		(2,342	)		(2,519	)
Total net payments		(2,598	)		(2,834	)

Foreign currency translation adjustment and other		(35	)		55

Net reserves, end of period		18,268			17,863
Ceded reserves, end of period		4,002			3,866
Gross reserves, end of period	$	22,270		$	21,729

Nine Months Ended September 30

2019

2018

(In millions)

Reserves, beginning of year:

Gross
$
21,984
$
22,004

Ceded

4,019

3,934

Net reserves, beginning of year

17,965

18,070

Net incurred claim and claim adjustment expenses:

Provision for insured events of current year

3,968

3,866

Increase (decrease) in provision for insured events of prior years

(65
)
(173
)
Amortization of discount

143

136

Total net incurred (a)

4,046

3,829

Net payments attributable to:

Current year events

(599
)
(658
)
Prior year events

(3,547
)
(3,415
)
Total net payments

(4,146
)
(4,073
)
Foreign currency translation adjustment and other

29

(80
)

Net reserves, end of period

17,894

17,746

Ceded reserves, end of period

3,702

3,858

Gross reserves, end of period

$

21,596
$

21,604

(a)

Total net incurred above does not agree to Insurance claims and policyholders’ benefits as reflected on the Consolidated Condensed Statements of ~~Income~~Operations due to amounts related to retroactive reinsurance deferred gain accounting, uncollectible reinsurance ~~and loss deductible receivables~~ and benefit expenses related to future policy benefits, which are not reflected in the table above.

~~Table of Contents~~

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.

~~CNA’s~~Unfavorable net prior year development of $22 million and favorable net prior year development of $31 million was recorded for commercial property and casualty operations (“Property & Casualty Operations”) ~~recorded~~for the three months ended June 30, 2020 and 2019 and unfavorable net prior year development of

~~$16~~ $7 million

~~and~~

~~fav~~

~~orable net prior year development of~~

~~$62 million for the three months ended~~

~~September 30, 2019 and 2018,~~ and favorable net prior year development

$45 million ~~and $~~

~~160~~

~~million~~was recorded for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~

2019.

The following table and discussion present details of the net prior year claim and claim adjustment expense reserve development in ~~CNA’s~~ Property & Casualty Operations:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

(In millions)

Medical professional liability
$
29
$
15
$
59
$
38

Other professional liability and management liability

(18
)
(45
)
(37
)
(113
)
Surety

(43
)
(20
)
(83
)
(50
)
Commercial auto

(16
)
1

(24
)
General liability

43

(5
)
36

13

Workers’ compensation

7

(2
)
2

(14
)
Other

14

(6
)
18

(34
)
Total pretax (favorable) unfavorable development
$
16
$
(62
)

$
(29
) $
(160
)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
(In millions)

Medical professional liability				$	15		$	10		$	30
Other professional liability and management liability	$	(9	)		(7	)		(6	)		(19	)
Surety					(15	)		(30	)		(40	)
Commercial auto		15			(3	)		24			(8	)
General liability		50			13			50			(7	)
Workers’ compensation		(61	)		(7	)		(74	)		(5	)
Property and other		27			(27	)		33			4
Total pretax (favorable) unfavorable development	$	22		$	(31	)	$	7		$	(45	)

Index

Three Months

2020

Unfavorable development in commercial auto was due to unfavorable claim severity in CNA’s middle market and construction business 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.

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.

2019

Unfavorable development in medical professional liability was primarily due to unfavorable outcomes on individual claims and higher than expected ~~indemnity~~ severity emergence in accident ~~years 2016 through 2018~~year 2017 in CNA’s ~~aging services~~dentists 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.~~

and 2016.

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 liability was primarily due to higher than expected large loss experience in CNA’s excess and umbrella business in accident year 2017.

Favorable development in other was primarily due to continued lower than expected claim severity in property from catastrophes in accident year 2017.

Six Months

2020

Favorable development in surety was primarily due to lower than expected frequency for accident years 2017 and prior.

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

Unfavorable development in general liability was driven by higher than expected emergence in mass tort ~~related~~exposures, primarily due to New York reviver statute-related claims from accident years ~~2009 and~~ prior ~~2015 and 2016.~~

to 2010.

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 ~~severity~~large loss activity in ~~aging services related to auto liability coverages.~~

~~2018~~

~~Unfavorable development~~accident year 2019 in ~~medical professional liability was primarily driven by higher than expected frequency~~CNA’s middle market, national accounts and ~~severity in aging services in accident years 2014 through 2017.~~marine business units.

2019

Favorable development in other professional liability and management liability was primarily driven by favorable outcomes on individual claims in accident years 2013 and prior in financial institutions.

~~Favorable development in surety was due to continued lower than expected loss emergence for accident years 2017 and prior.~~

~~Table of Contents~~

~~Nine Months~~

~~2019~~

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

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

institutions.

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 liability was primarily due to higher than expected emergence in mass tort as well as higher than expected large loss experience in CNA’s excess and umbrella business in accident year 2017.

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.26

Index

~~2018~~

~~Unfavorable development~~

medical professional liability was primarily due to higher than expected severity in accident years 2014 and 2017 in CNA’s hospitals business and higher than expected frequency and severity in aging services in accident years 2014 through 2017.

Favorable development in other professional liability and management liability was primarily due to lower than expected claim frequency for accident years 2013 through 2017 related to financial institutions and professional liability errors and omissions (“E&O”)

~~avorable severity for accident years 2012 and prior related to professional liability E&O, and favorable outcomes on individual claims in financial institutions in accident years 2013 and prior.~~

~~Favorable development~~

~~surety was due to lower than expected loss emergence for accident years 2017 and prior.~~

Favorable development for other coverages was due to lower than expected claim severity in catastrophes in accident year 2017 for property, better than expected frequency in the liability portion of the package business in Canada and general liability in Europe for casualty, better than expected large loss frequency in the energy book in recent accident years for energy and marine and lower than expected frequency in accident years 2015 and prior related to healthcare in Europe for healthcare and technology. This favorable development was partially offset by unfavorable development driven by higher than expected severity in Canada and higher than expected frequency in Hardy, both in accident year 2017, for property and increased severity in accident year 2017 related to professional indemnity.

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

In 2010, Continental Casualty Company (“CCC”) together with several ~~of CNA’s~~ insurance subsidiaries completed a transaction with National Indemnity Company (“NICO”), a subsidiary of Berkshire Hathaway Inc., under which substantially all of ~~CNA’s~~the legacy A&EP liabilities were ceded to NICO through a loss portfolio transfer (“loss portfolio transfer” or “LPT”). At the effective date of the transaction, ~~CNA ceded~~ 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. ~~CNA~~NICO was paid ~~NICO~~ a reinsurance premium of $2.0 billion and ~~transferred to NICO~~ 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.

~~Table of Contents~~

In years subsequent to the effective date of the LPT, ~~CNA recognized~~ adverse prior year development on ~~its~~ 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 ~~CNA recognizes~~ 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 ~~Income.~~

Operations.

The ~~following table presents the~~ impact of the ~~loss portfolio transfer~~LPT on the Consolidated Condensed Statements of ~~Income.~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

(In millions)

Additional amounts ceded under LPT:

Net A&EP adverse development before consideration of LPT
$
113

Provision for uncollectible third-party reinsurance on A&EP

(16
)
Total additional amounts ceded under LPT
$

-
$
-
$
-

97

Retroactive reinsurance benefit recognized

(7
)

(12
)

(43
)
(84
)
Pretax impact of deferred retroactive reinsurance

$

(7
) $

(12
)
$

(43
) $

13

~~CNA intends to complete its annual A&EP reserve review in~~Operations was the ~~fourth quarter~~recognition of a retroactive reinsurance benefit of $20 million and $14 million for the three months ended June 30, 2020 and 2019 and ~~maintain this timing for all future annual A&EP reserve reviews. CNA completed A&EP reserve reviews in both the first~~$34 million and ~~fourth quarters of 2018. Based upon CNA’s 2018 first quarter A&EP reserve review, net unfavorable prior year development of $113~~$36 million ~~was recognized before consideration of cessions to the LPT~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2018. The 2018 unfavorable development was driven by higher than anticipated defense costs on direct asbestos~~2020 and ~~environmental accounts and paid losses on assumed reinsurance exposures. Additionally, in 2018, CNA released a portion of its provision for uncollectible third party reinsurance.~~

2019. As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, the cumulative amounts ceded under the LPT were ~~$3.1~~$3.2 billion. The unrecognized deferred retroactive reinsurance benefit was ~~$331~~$358 million and ~~$374~~$392 million as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018~~2019 and is included within Other liabilities on the Consolidated Condensed Balance Sheets.

NICO established a collateral trust account as security for its obligations ~~to CNA.~~under the LPT. The fair value of the collateral trust account was $3.3 billion and ~~$2.7~~$3.7 billion as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~ 2019.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 ~~CNA’s~~the Company’s A&EP claims.

~~Long Term Care Policyholder Reserves~~

CNA’s operations include 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 care 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 study on an annual basis. The study reviews the sufficiency of existing reserves for policyholders currently on claim and includes an evaluation of expected benefit utilization and claim duration. CNA’s recorded claim and claim adjustment expense reserves reflect management’s best estimate after incorporating the results of the most recent study. In addition, claim and claim adjustment expense reserves are also maintained for the structured settlement obligations.

~~Table of Contents~~

CNA’s most recent annual long term care claim experience study was completed in the third quarter of 2019 and resulted in a $56 million pretax reduction in claim and claim adjustment expense reserves primarily due to lower claim severity than anticipated in the reserve estimates. CNA’s 2018 annual long term care claim experience study was completed in the third quarter of 2018 and resulted in a $31 million pretax reduction in claim and claim adjustment expense reserves.

Future policy benefit reserves represent the active life reserves related to CNA’s long term care policies which are the present value of expected future benefit payments and expenses less expected future premium. The determination of these reserves is fundamental to CNA’s financial results and requires management to make estimates and assumptions about expected investment and policyholder experience over the life of the contract. Since many of these contracts may be in force for several decades, these assumptions are subject to significant estimation risk.

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

Annually, management assesses the adequacy of its long term care future policy benefit reserves by performing a gross premium valuation (“GPV”) to determine if there is a premium deficiency. Management also uses the GPV process to evaluate the adequacy of its claim and claim adjustment expense reserves for structured settlement obligations. Under the GPV, management estimates required reserves using best estimate assumptions as of the date of the assessment without provisions for adverse deviation. The GPV required reserves are then compared to the existing recorded reserves. If the GPV required reserves are greater than the existing recorded reserves, the existing assumptions are unlocked and future policy benefit reserves are increased to the greater amount. Any such increase is reflected in the Company’s results of operations in the period in which the need for such adjustment is determined. Periodically, management engages independent third parties to assess the appropriateness of its best estimate assumptions. The most recent third party assessment, performed earlier this year, validated the assumption setting process and confirmed the best estimate assumptions appropriately reflected the experience data at that time.

~~In the third quarter of 2019, CNA performed the GPV for the long term care future policy benefit reserves. This GPV indicated a premium deficiency primarily driven by lower discount rate assumptions.~~

~~Recognition of the premium deficiency resulted in a~~

~~$216~~

~~million pretax increase in policyholders’ benefits reflected in the Company’s results of operations.~~

~~6. Leases~~

The Company’s lease agreements primarily cover office facilities and machinery and equipment and expire at various dates. The Company’s leases are predominantly operating leases, which are included in Other assets and Other liabilities on the Consolidated Condensed Balance Sheet. The Company’s lease agreements do not contain significant residual value guarantees, restrictions or covenants.

Operating lease right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The discount rate used to determine the commencement date present value of lease payments is the interest rate implicit in the lease, or when that is not readily determinable, the Company utilizes its incremental borrowing rate. The Company’s operating lease right of use asset was $612 million and the Company’s operating lease liability was $694 million at September 30, 2019.

Operating lease cost was $31 million and $90 million, variable lease cost was $5 million and $14 million and short term lease cost was $1 million and $5 million for the three and nine months ended September 30, 2019. Cash paid for amounts included in operating lease liabilities was $28 million and $87 million for the three and nine months ended September 30, 2019.

~~Table of Contents~~

~~The table below presents the future minimum lease payments to be made under~~

~~non-cancelable~~

~~operating leases as of December 31, 2018:~~

Year Ended December 31

(In millions)

2019
$

75

2020

79

2021

79

2022

68

2023

57

Thereafter

344

Total
$
702

~~The table below presents the maturities of lease liabilities:~~

Operating

As of September 30, 2019

Leases

(In millions)

2019 (a)
$
25

2020

111

2021

109

2022

98

2023

87

Thereafter

435

Total

865

Less: discount

171

Total lease liabilities
$
694

~~(a)~~

~~For the three-month period beginning October 1, 2019.~~

~~The table below presents the weighted average remaining lease term for operating leases and weighted average discount rate used in calculating the operating lease asset and liability.~~


~~As of September 30, 2019~~

~~Weighted average remaining lease term~~	~~9.5~~	~~Years~~
~~Weighted average discount rate~~	~~4.7~~	%

7. Debt

~~CNA Financial~~

In May of ~~2019, CNA~~2020, Loews Corporation completed a public offering of ~~$500~~$500 million aggregate principal amount of ~~its 3.9%~~3.2% senior notes due May ~~1, 2029 and used the net~~15, 2030. The proceeds ~~to redeem the entire $500 million outstanding aggregate principal balance~~ of its 5.9% senior notes due August 15, 2020. The redemption of the $500 million senior notes resulted in a loss of $21 million ($15 million after tax and noncontrolling interests) and is included in Interest expense on the Consolidated Condensed Statements of Incomethis offering are available for ~~the nine months ended September 30, 2019.~~general corporate purposes.

~~Boardwalk Pipelines~~27

Index

~~In May of 2019, Boardwalk Pipelines completed a public offering of $500 million aggregate principal amount of its 4.8% senior notes due May 3, 2029.~~

~~he proceeds were used~~

~~retire the outstanding $350 million aggregate principal amount of~~

~~Boardwalk~~

~~Pipeline~~

’

~~5.8~~

~~% senior~~

~~notes at maturity and reduce outstanding borrowings under its revolving credit facility.~~

~~Consolidated Container~~

In June of 2019, Consolidated Container entered into a credit agreement providing for a $250 million term loan in conjunction with the acquisitions discussed in Note 2. The term loan is a variable rate facility which bears interest at a floating rate equal to the London Interbank Offered Rate (“LIBOR”) plus an applicable margin of 3.5% and matures on June 14, 2026.

~~Table of Contents~~

8. Shareholders’ Equity

Accumulated other comprehensive income (loss)

The tables below present the changes in AOCI by component for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2019:~~2020:

	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, April 1, 2019 (a)	$	18		$	527		$	(1	)	$	(786	)	$	(148	)	$	(390	)
Other comprehensive income (loss) before reclassifications, after tax of $(1), $(114), $2, $0 and $0		(1	)		434			(6	)					3			430
Reclassification of losses from accumulated other comprehensive income, after tax of $0, $0, $0, $(3) and $0		1			2						7						10
Other comprehensive income (loss)		-			436			(6	)		7			3			440
Amounts attributable to noncontrolling interests					(46	)					(1	)					(47	)
Balance, June 30, 2019	$	18		$	917		$	(7	)	$	(780	)	$	(145	)	$	3

	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, April 1, 2020	$	(10	)	$	(15	)	$	(25	)	$	(842	)	$	(201	)	$	(1,093	)
Other comprehensive income (loss) before reclassifications, after tax of $0, $(321), $2, $0 and $0		(2	)		1,209			(1	)		(2	)		29			1,233
Reclassification of (income) losses from accumulated other comprehensive income, after tax of $(1), $4, $(1), $(2) and $0		4			(18	)		1			8						(5	)
Other comprehensive income		2			1,191			-			6			29			1,228
Amounts attributable to noncontrolling interests					(126	)					(1	)		(3	)		(130	)
Balance, June 30, 2020	$	(8	)	$	1,050		$	(25	)	$	(837	)	$	(175	)	$	5

Index

	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 (a)	$	14	$	57		$	5		$	(793	)	$	(163	)	$	(880	)
Other comprehensive income (loss) before reclassifications, after tax of $(2), $(254), $4, $0 and $0		3		955			(12	)		(1	)		20			965
Reclassification of losses from accumulated other comprehensive income, after tax of $0, $(1), $0, $(5) and $0		1		7						16						24
Other comprehensive income (loss)		4		962			(12	)		15			20			989
Amounts attributable to noncontrolling interests				(102	)					(2	)		(2	)		(106	)
Balance, June 30, 2019	$	18	$	917		$	(7	)	$	(780	)	$	(145	)	$	3

	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)	$	-		$	918		$	(6	)	$	(855	)	$	(125	)	$	(68	)
Other comprehensive income (loss) before reclassifications, after tax of $13, $(34), $8, $0 and $0		(50	)		143			(20	)		(1	)		(55	)		17
Reclassification of losses from accumulated other comprehensive income, after tax of $(11), $(2), $(1), $(5) and $0		41			4			1			21						67
Other comprehensive income (loss)		(9	)		147			(19	)		20			(55	)		84
Amounts attributable to noncontrolling interests		1			(15	)					(2	)		5			(11	)
Balance, June 30, 2020	$	(8	)	$	1,050		$	(25	)	$	(837	)	$	(175	)	$	5

(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.

Total

Accumulated

OTTI

Unrealized

Foreign

Other

Gains

Gains (Losses)

Cash Flow

Pension

Currency

Comprehensive

(Losses)

on Investments

Hedges

Liability

Translation

Income (Loss)

(In millions)

Balance, July 1, 2018
$
17
$
244
$
13
$
(774
) $
(125
) $
(625
)
Other comprehensive income (loss) before reclassifications, after tax of $0, $40, $(2), $0 and $0

(1
)

(148
)
(149
)
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $0, $2, $0, $(1) and $0

(10
)
8

(2
)
Other comprehensive income (loss)

(1
)

(158
)
-

8

-

(151
)
Amounts attributable to noncontrolling interests

17

1

18

Balance, September 30, 2018
$
16
$
103
$
13
$
(765
) $
(125
) $
(758
)

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)

-

41

(4
)

10

(31
)

16

Amounts attributable to noncontrolling interests

(5
)

3

(2
)
Balance, September 30, 2019

$
18

$
953

$
(11
)

$
(770
)

$
(173
)

$
17

~~Table of Contents~~

Total

OTTI

Gains

Unrealized

Gains

(Losses)

Cash Flow

Pension

Foreign

Currency

Accumulated

Other

Comprehensive

(Losses)

on

Investments

Hedges

Liability

Translation

Income (Loss)

(In millions)

Balance, January 1, 2018, as reported
$
22
$
673
$
-
$
(633
) $
(88
) $
(26
)
Cumulative effect adjustment from changes in
accounting standards, after tax of $0, $8, $0, $0 and
$0

4

98

(130
)
(28
)
Balance, January 1, 2018, as adjusted

26

771

-

(763
)
(88
)
(54
)
Other comprehensive income (loss) before reclassifications, after tax of $3, $190, $(4), $0 and $0

(12
)
(718
)
12

(41
)
(759
)
Reclassification of (gains) losses from accumulated
other comprehensive
income, after tax of $0
, $7, $0,
$(6) and $0

1

(28
)
2

27

2

Other comprehensive income (loss)

(11
)
(746
)
14

27

(41
)
(757
)
Amounts attributable to noncontrolling interests

1

78

(1
)
4

82

Purchase of Boardwalk Pipelines common units

(1
)
(28
)
(29
)
Balance, September 30, 2018
$
16
$
103
$
13
$
(765
) $
(125
) $
(758
)

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

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

Major Category of AOCI	Affected Line Item

~~Major Category of AOCI~~		~~Affected Line Item~~
~~OTTI~~Net unrealized gains (losses) on investments with an allowance for credit losses, Net unrealized gains (losses) on investments with OTTI losses and Net unrealized gains (losses) on other investments		Investment gains (losses)
Unrealized gains (losses) on ~~investments~~		~~Investment gains (losses)~~
~~Cash~~cash flow hedges		Operating revenues and other, Interest expense and Operating expenses and other
Pension ~~liability~~ and postretirement benefits		Operating expenses and other

Index

~~Table of Contents~~

Treasury Stock

~~The Company~~Loews Corporation repurchased ~~13.2~~10.7 million and ~~17.4~~9.8 million shares of ~~Loews~~its common stock at an aggregate cost of ~~$642~~$478 million and ~~$876~~$473 million during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018.~~2019.

9. 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 ~~Income.~~

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 ~~13:~~14:

	Three Months Ended June 30,				Six Months Ended June 30
	2020		2019		2020		2019
(In millions)

Non-insurance warranty – CNA Financial	$	308	$	285	$	609	$	566

Transportation and storage of natural gas and NGLs and other services – Boardwalk Pipelines		286		321		618		660
Lodging and related services – Loews Hotels & Co		16		185		158		365
Rigid plastic packaging and recycled resin – Corporate		244		223		500		437
Contract drilling – Diamond Offshore (a)		71		216		300		450
Total revenues from contracts with customers		617		945		1,576		1,912
Other revenues		33		16		56		34
Operating revenues and other	$	650	$	961	$	1,632	$	1,946

(a)	Revenues presented for Diamond Offshore reflect the periods prior to the deconsolidation. See Notes 2 and 14 for further discussion.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

(In millions)

Non-insurance
warranty services – CNA Financial

$

292

$

258

$
858

$
744

Contract drilling – Diamond Offshore

254

287

704

851

Transportation and storage of natural gas and NGLs and other services –
Boardwalk Pipelines

287

274

947

886

Lodging and related services – Loews Hotels & Co

147

167

512

550

Rigid plastic packaging and recycled resin – Corporate

252

223

689

652

Total revenues from contracts with customers

940

951

2,852

2,939

Other revenues

20

37

54

71

Operating revenues and other
$
960


$
988
   $
2,906
   $
3,010

Receivables from contracts with customers

– As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, receivables from contracts with customers were approximately ~~$428~~$237 million and ~~$434~~$458 million and are included within Receivables on the Consolidated Condensed Balance ~~Sheets~~Sheets.

Deferred revenue

– As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, deferred revenue resulting from contracts with customers was approximately ~~$3.8 billion and $3.5~~$3.9 billion and is ~~primarily related to~~reported as Deferred

non-insurance

warranty revenue ~~as reported~~and within Other liabilities on the Consolidated Condensed Balance Sheets. Approximately ~~$778~~$574 million and ~~$685~~$533 million of revenues recognized during the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 were included in deferred revenue as of December 31, ~~2018~~2019 and ~~2017.~~2018.

Performance obligations

– As of ~~September~~June 30, ~~2019,~~2020, approximately ~~$13.1~~$13.0 billion of estimated operating revenues is expected to be recognized in the future related to outstanding performance obligations. The balance relates primarily to ~~revenues for~~ transportation and storage of natural gas and ~~NGLs at Boardwalk Pipelines~~natural gas liquids and

hydrocarbons (“NGLs”) services and non-insurance

warranty ~~services at CNA.~~ revenue. Approximately ~~$0.6~~$1.2 billion will be recognized during the remaining ~~three~~six months of ~~2019, $2.1~~2020, $2.1 billion in ~~2020~~2021 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 June 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.

Index

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

As of June 30, 2020
(In millions)

A- to A++	$	2,717
B- to B++		926
Insolvent		4
Total voluntary reinsurance outstanding balance (a)	$	3,647

(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 June 30, 2020, an allowance for doubtful accounts of $33 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. Benefit Plans

The Company has elected to exclude variable consideration related entirely to wholly unsatisfied performance obligations and contracts where revenue is recognized based upon the right to invoice the customer. Therefore, the estimated operating revenues exclude contract drilling dayrate revenue at Diamond Offshore and interruptible service contract revenue at Boardwalk Pipelines.

~~Table of Contents~~

~~10. Benefit Plans~~

~~The Company and its subsidiaries have~~ 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 plans:

Pension Benefits

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

(In millions)

Service cost
$
2
$
2
$
5
$
6

Interest cost

29

27

88

82

Expected return on plan assets

(39
)
(44
)
(119
)
(134
)
Amortization of unrecognized net loss

10

11

33

32

Settlement charge

1

3

7

Curtailment gain

(1
)

(1
)

Net periodic (benefit) cost
$
2
$
(4
) $
9
$
(7
)

	Pension Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
(In millions)

Service cost	$	1		$	1		$	2		$	3
Interest cost		23			30			46			59
Expected return on plan assets		(44	)		(40	)		(87	)		(80	)
Amortization of unrecognized net loss		12			12			23			23
Amortization of unrecognized prior service cost		1						1
Settlement charge		3			2			7			2
Net periodic (benefit) cost	$	(4	)	$	5		$	(8	)	$	7

	Other Postretirement Benefits
	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
(In millions)

Interest cost	$	1					$	1		$	1
Expected return on plan assets		(1	)	$	(1	)		(2	)		(2	)
Net periodic benefit	$	-		$	(1	)	$	(1	)	$	(1	)

Index

Other Postretirement Benefits

Three Months Ended

Nine Months Ended

September 30,

September 30,

2019

2018

2019

2018

(In millions)

Interest cost
$
1
$
1
$
2
$
2

Expected return on plan assets

(1
)
(2
)
(3
)
Amortization of unrecognized prior service benefit

(1
)
(2
)
Amortization of unrecognized net gain

(1
)
(1
)
(1
)
(1
)
Net periodic (benefit)
cost
$
-
$
(2
) $
(1
) $

(4
)

~~11.~~12. 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~~

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. The case ~~will be~~has been set for trial in early 2021.

~~Table of Contents~~

The Company ~~and its subsidiaries are~~is from time to time ~~parties~~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 will materially affect the Company’s results of operations or equity.

~~12.~~13. Commitments and Contingencies

CNA Guarantees

In the course of selling business entities and assets to third parties, CNA indemnified purchasers for certain losses, some of which are not limited by a contractual monetary amount. As of September 30, 2019, CNA had outstanding unlimited indemnifications that included tax liabilities arising prior to a purchaser’s ownership of an entity or asset, defects in title at the time of sale, employee claims arising prior to closing and in some cases losses arising from certain litigation and undisclosed liabilities. Certain provisions of the indemnification agreements survive indefinitely while others survive until the applicable statutes of limitation expire, or until the agreed upon contract terms expire.

CNA ~~also~~has provided guarantees, if the primary obligor fails to perform, to holders of structured settlement annuities ~~provided~~issued by a previously owned subsidiary. As of ~~September~~June 30, ~~2019,~~2020, the potential amount of future payments CNA could be required to pay under these guarantees was approximately $1.7 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.

~~13.~~14. Segments

~~The Company~~

Loews Corporation has 5 reportable segments comprised of 43 individualconsolidated operating subsidiaries, CNA, ~~Diamond Offshore,~~ Boardwalk Pipelines and Loews Hotels & Co; ~~and~~ the Corporate segment ~~which includes~~and Diamond Offshore. The Corporate segment is primarily comprised of Loews Corporation excluding its subsidiaries and the operations of ~~Consolidated Container.~~Altium Packaging. Diamond Offshore was deconsolidated during the second quarter of 2020. See Note 2 for further information on the deconsolidation of Diamond Offshore. Each of the operating subsidiaries isand Diamond Offshore are 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 ~~the Company’s~~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, ~~2018.~~2019.

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

Index

~~Table of Contents~~

~~Statements of Income~~Total assets by segment are presented in the following tables.

CNA

Diamond

Boardwalk

Loews

Three Months Ended September 30, 2019

Financial

Offshore

Pipelines

Hotels & Co

Corporate

Total

(In millions)

Revenues:

Insurance premiums

$
1,890

$
1,890

Net investment income

487

$
2

$
36

525

Investment gains

8

8

Non-insurance
warranty revenue

292

292

Operating revenues and other

9

249

$
296

$
156

250

960

Total

2,686

251

296

156

286

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

322

212

145

264

1,234

Interest

31

31

45

6

31

144

Total

2,559

353

257

151

295

3,615

Income (loss) before income tax

127

(102
)
39

5

(9
)
60

Income tax (expense) benefit

(20
)
10

(10
)
(2
)
1

(21
)
Net income (loss)

107

(92
)
29

3

(8
)
39

Amounts attributable to noncontrolling interests

(11
)
44

33

Net income (loss) attributable to Loews Corporation

$
96

$
(48
)
$
29

$
3

$
(8
)
$
72

June 30, 2020	CNA Financial		Boardwalk Pipelines		Loews Hotels & Co		Corporate		Diamond Offshore		Total
(In millions)

Total assets	$	62,055	$	9,321	$	1,697	$	5,366	$	-	$	78,439

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 June 30, 2020	CNA Financial			Boardwalk Pipelines			Loews Hotels & Co			Corporate			Diamond Offshore (a)			Total
(In millions)

Revenues:

Insurance premiums	$	1,850														$	1,850
Net investment income		534								$	110						644
Investment gains (losses)		69									(1,211	)					(1,142	)
Non-insurance warranty revenue		308															308
Operating revenues and other		5		$	296		$	34			244		$	71			650
Total		2,766			296			34			(857	)		71			2,310

Expenses:

Insurance claims and policyholders’ benefits		1,642															1,642
Amortization of deferred acquisition costs		342															342
Non-insurance warranty expense		285															285
Operating expenses and other		283			210			123			260			116			992
Interest		31			41			8			32			11			123
Total		2,583			251			131			292			127			3,384
Income (loss) before income tax		183			45			(97	)		(1,149	)		(56	)		(1,074	)
Income tax (expense) benefit		(32	)		(11	)		25			241			5			228
Net income (loss)		151			34			(72	)		(908	)		(51	)		(846	)
Amounts attributable to noncontrolling interests		(16	)											27			11
Net income (loss) attributable to Loews Corporation	$	135		$	34		$	(72	)	$	(908	)	$	(24	)	$	(835	)

(a)	Amounts presented for Diamond Offshore reflect the periods prior to the deconsolidation.

~~Table of Contents~~Index

CNA

Diamond

Boardwalk

Loews

Three Months Ended September 30, 2018

Financial

Offshore

Pipelines

Hotels & Co

Corporate

Total

(In millions)

Revenues:

Insurance premiums

$
1,853

$
1,853

Net investment income

487

$
2

$
5

494

Investment gains

15

15

Non-insurance
warranty revenue

258

258

Operating revenues and other

9

287

$
279

$
190

223

988

Total

2,622

289

279

190

228

3,608

Expenses:

Insurance claims and policyholders’ benefits

1,312

1,312

Amortization of deferred acquisition costs

337

337

Non-insurance
warranty expense

235

235

Operating expenses and other

303

311

197

169

244

1,224

Interest

34

34

44

7

27

146

Total

2,221

345

241

176

271

3,254

Income (loss) before income tax

401

(56
)

38

14

(43
)

354

Income tax (expense) benefit

(66
)

5

(10
)

(3
)

9

(65
)
Net income (loss)

335

(51
)

28

11

(34
)

289

Amounts attributable to noncontrolling interests

(35
)

24

(11
)
Net income (loss) attributable to Loews Corporation

$
300

$
(27
)

$
28

$
11

$
(34
)

$
278

Three Months Ended June 30, 2019	CNA Financial			Boardwalk Pipelines			Loews Hotels & Co			Corporate			Diamond Offshore (a)			Total
(In millions)

Revenues:

Insurance premiums	$	1,824														$	1,824
Net investment income		515					$	1		$	33		$	2			551
Investment gains		2															2
Non-insurance warranty revenue		285															285
Operating revenues and other		4		$	327			185			223			222			961
Total		2,630			327			186			256			224			3,623

Expenses:

Insurance claims and policyholders’ benefits		1,352															1,352
Amortization of deferred acquisition costs		338															338
Non-insurance warranty expense		263															263
Operating expenses and other		279			209			163			245			335			1,231
Interest		55			46			5			27			31			164
Total		2,287			255			168			272			366			3,348
Income (loss) before income tax		343			72			18			(16	)		(142	)		275
Income tax (expense) benefit		(64	)		(19	)		(6	)		3			36			(50	)
Net income (loss)		279			53			12			(13	)		(106	)		225
Amounts attributable to noncontrolling interests		(30	)											54			24
Net income (loss) attributable to Loews Corporation	$	249		$	53		$	12		$	(13	)	$	(52	)	$	249

434

Index

~~Table of Contents~~

Six Months Ended June 30, 2020	CNA Financial			Boardwalk Pipelines			Loews Hotels & Co			Corporate			Diamond Offshore (a)			Total
(In millions)

Revenues:

Insurance premiums	$	3,719														$	3,719
Net investment income (loss)		863								$	(56	)					807
Investment losses		(147	)								(1,211	)					(1,358	)
Non-insurance warranty revenue		609															609
Operating revenues and other		13		$	637		$	176			501		$	305			1,632
Total		5,057			637			176			(766	)		305			5,409

Expenses:

Insurance claims and policyholders’ benefits		3,067															3,067
Amortization of deferred acquisition costs		686															686
Non-insurance warranty expense		566															566
Operating expenses and other		583			421			290			528			1,196			3,018
Interest		62			83			16			63			43			267
Total		4,964			504			306			591			1,239			7,604
Income (loss) before income tax		93			133			(130	)		(1,357	)		(934	)		(2,195	)
Income tax (expense) benefit		(4	)		(34	)		33			284			26			305
Net income (loss)		89			99			(97	)		(1,073	)		(908	)		(1,890	)
Amounts attributable to noncontrolling interests		(9	)											432			423
Net income (loss) attributable to Loews Corporation	$	80		$	99		$	(97	)	$	(1,073	)	$	(476	)	$	(1,467	)

CNA

Diamond

Boardwalk

Loews

Nine Months Ended September 30, 2019

Financial

Offshore

Pipelines

Hotels & Co

Corporate

Total

(In millions)

Revenues:

Insurance premiums

$
5,517

$
5,517

Net investment income

1,573

$
6

$

1

$
153

1,733

Investment gains

41

41

Non-insurance
warranty revenue

858

858

Operating revenues and other

22

705

$
969

521

689

2,906

Total

8,011

711

969

522

842

11,055

Expenses:

Insurance claims and policyholders’ benefits

4,323

4,323

Amortization of deferred acquisition costs

1,025

1,025

Non-insurance
warranty expense

801

801

Operating expenses and other

854

940

616

464

740

3,614

Interest

120

92

136

16

85

449

Total

7,123

1,032

752

480

825

10,212

Income (loss) before income tax

888

(321
)

217

42

17

843

Income tax (expense) benefit

(161
)

52

(56
)

(14
)

(4
)

(183
)
Net income (loss)

727

(269
)

161

28

13

660

Amounts attributable to noncontrolling interests

(77
)

132

55

Net income (loss) attributable to Loews Corporation

$
650

$
(137
)

$
161

$
28

$
13

$
715

Index

Six Months Ended June 30, 2019	CNA Financial			Boardwalk Pipelines			Loews Hotels & Co			Corporate			Diamond Offshore (a)			Total
(In millions)

Revenues:

Insurance premiums	$	3,627														$	3,627
Net investment income		1,086					$	1		$	117		$	4			1,208
Investment gains		33															33
Non-insurance warranty revenue		566															566
Operating revenues and other		13		$	673			365			439			456			1,946
Total		5,325			673			366			556			460			7,380

Expenses:

Insurance claims and policyholders’ benefits		2,709															2,709
Amortization of deferred acquisition costs		680															680
Non-insurance warranty expense		523															523
Operating expenses and other		563			404			319			476			618			2,380
Interest		89			91			10			54			61			305
Total		4,564			495			329			530			679			6,597
Income (loss) before income tax		761			178			37			26			(219	)		783
Income tax (expense) benefit		(141	)		(46	)		(12	)		(5	)		42			(162	)
Net income (loss)		620			132			25			21			(177	)		621
Amounts attributable to noncontrolling interests		(66	)											88			22
Net income (loss) attributable to Loews Corporation	$	554		$	132		$	25		$	21		$	(89	)	$	643

336

Index

~~Table of Contents~~

CNA

Diamond

Boardwalk

Loews

Nine Months Ended September 30, 2018

Financial

Offshore

Pipelines

Hotels & Co

Corporate

Total

(In milli
o
ns)

Revenues:

Insurance premiums

$
5,453

$
5,453

Net investment income

1,483

$
6

$
1

$
61

1,551

Investment gains

21

21

Non-insurance
warranty revenue

744

744

Operating revenues and other

30

853

$
901

573

653

3,010

Total

7,731

859

901

574

714

10,779

Expenses:

Insurance claims and policyholders’ benefits

3,978

3,978

Amortization of deferred acquisition costs

992

992

Non-insurance
warranty expense

676

676

Operating expenses and other

904

927

598

494

714

3,637

Interest

104

92

131

22

81

430

Total

6,654

1,019

729

516

795

9,713

Income (loss) before income tax

1,077

(160
)

172

58

(81
)

1,066

Income tax (expense) benefit

(181
)

59

(24
)

(17
)

14

(149
)
Net income (loss)

896

(101
)

148

41

(67
)

917

Amounts attributable to noncontrolling interests

(95
)

47

(68
)

(116
)
Net income (loss) attributable to Loews Corporation

$
801

$
(54
)

$
80

$
41

$
(67
)

$
801

~~Table of Contents~~

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 Report on Form

10-Q

for the quarter ended March 31, ~~2019~~2020 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, ~~2018.~~2019. This MD&A is comprised of the following sections:

	Page
	No.

		Page No.
Overview			37
Results of Operations			38
Consolidated Financial Results			38
CNA Financial			39
~~Diamond Offshore~~			47
Boardwalk Pipelines			49	47
Loews Hotels & Co		50
Corporate			51
~~Corporate~~Diamond Offshore			52
Liquidity and Capital Resources			52
Parent Company		52
Subsidiaries			52
~~Subsidiaries~~Investments			53	54
~~Investments~~			54
Critical Accounting Estimates			58	57
Accounting Standards Update			58
Forward-Looking Statements			58

OVERVIEW

~~OVERVIEW~~

~~We are~~Loews Corporation is a holding company and ~~have~~has five reportable segments comprised of ~~four~~three individual consolidated operating subsidiaries, CNA Financial Corporation (“CNA”~~), Diamond Offshore Drilling, Inc. (“Diamond Offshore”~~), Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”) and Loews Hotels Holding Corporation (“Loews Hotels & Co”); the Corporate segment and Diamond Offshore Drilling Inc. (“Diamond Offshore”). The Corporate segment is primarily comprised of Loews Corporation excluding its subsidiaries and the ~~Corporate segment. The~~ operations of ~~Consolidated Container Company~~Altium Packaging LLC (“~~Consolidated Container”~~Altium Packaging”) ~~are included in~~. Diamond Offshore was deconsolidated during the ~~Corporate segment.~~second quarter of 2020. Each of ~~our~~the operating subsidiaries isand Diamond Offshore are 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.

On April 26, 2020 (the “Filing Date”), Diamond Offshore and certain of its direct and indirect subsidiaries filed voluntary petitions in the United States Bankruptcy Court 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 the Chapter 11 Filing and applicable U.S. generally accepted accounting principles, Loews Corporation no longer controls Diamond Offshore for accounting purposes, and therefore, Diamond Offshore was deconsolidated from its consolidated financial statements effective as of the Filing Date.

Unless the context otherwise requires, the term “Company” as used herein means Loews Corporation including its 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.

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 ~~our~~ shareholders. The ability of ~~our~~ 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, ~~2018)~~2019) 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.

Unless the context otherwise requires, references in this Report to “Loews Corporation,” “the Company,” “Parent Company,” “we,” “our,” “us” or like terms refer to the business of Loews Corporation excluding its subsidiaries.

Index

~~Table of Contents~~

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~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

(In millions, except per share data)

CNA Financial
$
96
$
300
$
650
$
801

Diamond Offshore

(48
)
(27
)
(137
)
(54
)
Boardwalk Pipelines

29

28

161

80

Loews Hotels & Co

3

11

28

41

Corporate

(8
)
(34
)
13

(67
)
Net income attributable to Loews Corporation
$
72
$
278
$
715
$
801



Basic net income per share
$
0.24
$
0.88
$
2.34
$
2.50



Diluted net income per share
$
0.24
$
0.88
$
2.34
$
2.49

2019:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
(In millions, except per share data)

CNA Financial	$	135		$	249		$	80		$	554
Boardwalk Pipelines		34			53			99			132
Loews Hotels & Co		(72	)		12			(97	)		25
Corporate		(908	)		(13	)		(1,073	)		21
Diamond Offshore (a)		(24	)		(52	)		(476	)		(89	)
Net income (loss) attributable to Loews Corporation	$	(835	)	$	249		$	(1,467	)	$	643

Basic net income (loss) per share	$	(2.96	)	$	0.82		$	(5.16	)	$	2.10

Diluted net income (loss) per share	$	(2.96	)	$	0.82		$	(5.16	)	$	2.09

(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.

Net ~~income~~loss attributable to Loews Corporation for the three months ended ~~September~~June 30, ~~2019~~2020 was ~~$72~~$835 million, or ~~$0.24~~$2.96 per share, compared to ~~$278~~net income of $249 million, or ~~$0.88~~$0.82 per share in the comparable ~~2018~~2019 period. Net ~~income~~loss attributable to Loews Corporation for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 was ~~$715 million,~~$1.5 billion, or ~~$2.34~~$5.16 per share, compared to ~~$801~~net income of $643 million, or ~~$2.49~~$2.09 per share, in the comparable ~~2018~~2019 period.

Net income for the three and nine months ended September 30, 2019 included a charge of $151 million (after tax and noncontrolling interests) related to the recognition of an active life reserve premium deficiency in the long term care business at CNA that was primarily driven by changes in interest rate assumptions. Absent this charge,The net ~~income~~loss for the three months ended ~~September~~June 30, ~~2019 decreased mainly due~~2020 was driven by (i) the investment loss of $957 million to ~~lower results~~write down the carrying value of our interest in Diamond Offshore as a result of its bankruptcy filing on April 26, 2020, (ii) significant catastrophe losses at CNA, and ~~Diamond Offshore,~~(iii) operating losses at Loews Hotels & Co. These factors were partially offset by ~~higher parent company net~~increased investment ~~income.~~

~~Earnings for the nine months ended September 30, 2019 were impacted by the long term care charge~~income at CNA and ~~lower results~~the parent company as well as investment gains at CNA.

The net loss for the six months ended June 30, 2020 was caused by (i) the investment loss from the write down of our Diamond Offshore ~~partially offset by higher earnings~~carrying value discussed above, (ii) Diamond Offshore drilling rig impairment charges of $408 million in the first quarter of 2020, (iii) catastrophe losses at ~~Boardwalk Pipelines reflecting Loews’s 100% ownership of the company~~CNA, (iv) operating losses at Loews Hotels & Co, and (v) investment losses at CNA in ~~2019~~2020 as compared to ~~51% for a portion~~gains in the first six months of 2019.

The economic disruption caused by the coronavirus disease 2019 (“COVID-19”) pandemic and measures to mitigate the spread of the ~~prior year period,~~virus significantly affected Loews’s results in the first half of 2020. The full impact of COVID-19 on Loews and ~~higher parent company net investment income.~~our businesses will be dependent on the pandemic’s duration and scope and economic policies and other responses to the pandemic.

Index

~~Table of Contents~~

CNA Financial

The following table summarizes the results of operations for CNA for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 as presented in Note 1314 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report. For further discussion of Net investment income and ~~Net investment~~Investment gains (losses), see the Investments section of this MD&A.

													Three Months Ended						Six Months Ended
	Three Months Ended September 30,						Nine Months Ended September 30,						June 30,						June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
(In millions)

Revenues:
Insurance premiums	$	1,890		$	1,853		$	5,517		$	5,453		$	1,850		$	1,824		$	3,719		$	3,627
Net investment income		487			487			1,573			1,483			534			515			863			1,086
Investment gains		8			15			41			21
Investment gains (losses)														69			2			(147	)		33
Non-insurance warranty revenue		292			258			858			744			308			285			609			566
Other revenues		9			9			22			30			5			4			13			13
Total		2,686			2,622			8,011			7,731			2,766			2,630			5,057			5,325
Expenses:
Insurance claims and policyholders’ benefits		1,614			1,312			4,323			3,978			1,642			1,352			3,067			2,709
Amortization of deferred acquisition costs		345			337			1,025			992			342			338			686			680
Non-insurance warranty expense		278			235			801			676			285			263			566			523
Other operating expenses		291			303			854			904			283			279			583			563
Interest		31			34			120			104			31			55			62			89
Total		2,559			2,221			7,123			6,654			2,583			2,287			4,964			4,564
Income before income tax		127			401			888			1,077			183			343			93			761
Income tax expense		(20	)		(66	)		(161	)		(181	)		(32	)		(64	)		(4	)		(141	)
Net income		107			335			727			896			151			279			89			620
Amounts attributable to noncontrolling interests		(11	)		(35	)		(77	)		(95	)		(16	)		(30	)		(9	)		(66	)
Net income attributable to Loews Corporation	$	96		$	300		$	650		$	801		$	135		$	249		$	80		$	554

Three Months Ended ~~September~~June 30, ~~2019~~2020 Compared to ~~2018~~

2019

Net income attributable to Loews Corporation ~~decreased $204~~was $135 million for the three months ended ~~September~~June 30, ~~2019~~2020 as compared with ~~the 2018 period. Net income decreased primarily as a result of a $216~~$249 million ~~charge ($151 million after tax and noncontrolling interests) related to the recognition of a premium deficiency as a result of the third quarter gross premium valuation (“GPV”)~~ in the ~~long term care business~~2019 period. The decrease was primarily due to net catastrophe losses of $301 million for the three months ended June 30, 2020 as compared to $38 million in the 2019 period and unfavorable net prior year loss reserve ~~development~~development. Net catastrophe losses in ~~the~~2020 include $182 million related to COVID-19, $61 million related to civil unrest and $58 million related primarily to severe weather-related events. These results were partially offset by favorable net investment income driven by limited partnership and common stock returns, favorable non-catastrophe current accident year ~~period.~~

~~Nine Months Ended September 30, 2019 Compared to 2018~~

~~Net income attributable to Loews Corporation decreased $151 million for the nine months ended September 30, 2019 as compared with the 2018 period~~underwriting results and higher investment gains. Investment gains were driven by the ~~charge related to the recognition~~favorable change in fair value of ~~a premium deficiency as a result~~non-redeemable preferred stock and higher gains on sales of ~~the third quarter GPV discussed above and lower favorable net~~fixed maturity securities. The prior year ~~loss reserve development as well as~~period included a $15 million charge (after tax and noncontrolling interests) related to the early retirement of ~~debt, partially offset by higher~~debt.

Six Months Ended June 30, 2020 Compared to 2019

Net income attributable to Loews Corporation was $80 million for the six months ended June 30, 2020 as compared with $554 million in the 2019 period. The decrease was primarily due to net catastrophe losses of $376 million for the six months ended June 30, 2020 as compared to $96 million in the prior year period, lower net investment income and investment losses in the first six months of 2020 as compared with investment gains in the prior year period. Net catastrophe losses in 2020 include $195 million related to COVID-19, $61 million related to civil unrest and $120 million related primarily to severe weather-related events. Net investment income decreased driven by lower limited partnership and common stock returns and the investment losses were driven by the unfavorable change in fair value of non-redeemable preferred stock and higher impairment losses on fixed maturity securities.

Recent Developments

During the second quarter of 2020, CNA’s underwriting results were negatively impacted by COVID-19 and the related depressed economic conditions. In many geographic locations, the virus’ spread continues to accelerate. Areas where the virus has largely been brought under control continue to be at risk of a second wave. Accordingly, it remains

Index

the case that several 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 and second 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 ~~investment gains.~~written premiums, excluding third party captives driven by rate increases across its property and casualty insurance lines of business. Depressed economic conditions generally have had an unfavorable impact on premium exposures, including audit premium adjustments, policy endorsements and mid-term cancellations and adjustments. This is particularly the case in CNA’s Commercial lines of business where shelter in place restrictions and reduced economic activity has caused businesses to reduce payroll or otherwise shutter operations. As a result, CNA recorded a decrease in its estimated audit premiums during the second quarter of 2020 impacting its net earned premiums. If general economic conditions do not improve in the latter half of 2020 or thereafter, CNA’s net written premiums and net earned premiums may continue to be unfavorably impacted as a result.

Net written premiums are also impacted by the terms and conditions and related cost of reinsurance programs. In the second quarter of 2020, CNA renewed multiple property and casualty reinsurance treaties at higher costs as well as purchased additional coverage, which will have an unfavorable impact on CNA’s net earned premiums in future quarters. Lower net earned premiums had an unfavorable impact on CNA’s expense ratio in the second quarter of 2020. CNA’s expense ratio was also unfavorably impacted by an increase in its allowance for doubtful accounts for insurance receivables as certain customers, across a broad spectrum of industries and markets, have been impacted by lost business, affecting CNA’s ability to collect amounts owed to it. These impacts could continue through the remainder of 2020, and possibly thereafter, as the situation continues to evolve.

While CNA’s losses incurred during the first six months of 2020 related to COVID-19 represent CNA’s best estimate of ultimate insurance losses resulting from events occurring in the first six 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 continue to rapidly evolve, 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 additional 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, ~~there was adverse prior year reserve development recorded for~~ the ~~nine months ended September 30, 2018 under the 2010 asbestos and environmental pollution (“A&EP”) loss portfolio transfer as further discussed~~impact from lower frequency is mostly offset by higher severity in ~~Note 5~~certain areas of the ~~Notes to Consolidated Condensed Financial Statements included under Item 1.~~

portfolio.

~~Table of Contents~~

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 and A&EP. CNA’s products and services are primarily marketed through independent agents, brokers and managing general underwriters to a wide variety of customers, including small, medium and large businesses, insurance companies, associations, professionals and other groups. 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.

Index

In assessing ~~CNA’s~~its insurance operations, ~~the Company~~CNA utilizes the core income (loss) financial measure. Core income (loss) is calculated by excluding from net income (loss) ~~(i) net~~, investment gains or losses ~~(ii) income or loss from discontinued operations, (iii)~~and any cumulative effects of changes in accounting ~~guidance and (iv) deferred tax asset and liability remeasurement as a result of an enacted U.S. federal tax rate change.~~guidance. In addition, core income (loss) excludes the effects of noncontrolling interests. The calculation of core income (loss) excludes ~~net~~ investment gains or losses because ~~net~~ investment gains or losses are generally driven by economic factors that are not necessarily ~~consistent with key drivers~~reflective of ~~underwriting performance, and are therefore not considered an indication of trends in~~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 ~~investors as management uses this measure to assess financial performance.~~evaluate its insurance operations.

Property & Casualty Operations

In evaluating the results of Property & Casualty Operations, CNA utilizes the loss ratio, the expense ratio, the dividend ratio and the combined ratio. These ratios are calculated using GAAP financial results. The loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums. The expense ratio is the percentage of insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of policyholders’ dividends incurred to net earned premiums. The combined ratio is the sum of the loss, expense and dividend ratios. In addition, ~~CNA also utilizes~~ 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 ~~changes.~~change. For certain products within Small Business, where quantifiable, rate includes the influence of new business as well. Exposure represents the measure of risk used in the pricing of the insurance product. Retention represents the percentage of premium dollars renewed in comparison to the expiring premium dollars from policies available to renew. Renewal premium change, rate and retention presented for the prior 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, ~~excludes~~represents gross written premiums excluding business which is mostly ceded to third party captives, including business related to large warranty programs.

Index

~~Table of Contents~~

The following tables summarize the results of CNA’s Property & Casualty Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018:~~

Three Months Ended September 30, 2019

Specialty

Commercial

International

Total

(In millions, except %)

Gross written premiums
$
     1,766
$
860
$
226
$
     2,852

Gross written premiums excluding third party captives

778

852

226

1,856

Net written premiums

732

775

201

1,708

Net earned premiums

712

813

236

1,761

Net investment income

121

136

17

274

Core income (loss)

153

97

(9
)
241

Other performance metrics:

Loss and loss adjustment expense ratio

57.8
%
69.3
%
69.4
%
64.7
%
Expense ratio

31.8

31.7

38.0

32.5

Dividend ratio

0.2

0.6

0.4

Combined ratio

89.8
%
101.6
%
107.4
%
97.6
%


Rate

6
%
4
%
10
%
6
%
Renewal premium change

8

5

6

6

Retention

87

84

71

83

New business
$
91
$
173
$
52
$
316

Three Months Ended September 30, 2018

Gross written premiums
$
     1,715
$
758
$
230
$
     2,703

Gross written premiums excluding third party captives

714

756

230

1,700

Net written premiums

688

697

196

1,581

Net earned premiums

684

782

255

1,721

Net investment income

124

144

14

282

Core income

177

127

1

305

Other performance metrics:

Loss and loss adjustment expense ratio

54.5
%
63.5
%
67.6
%
60.5
%
Expense ratio

32.3

33.2

36.3

33.3

Dividend ratio

0.2

0.7

0.4

Combined ratio

87.0
%
97.4
%
103.9
%
94.2
%


Rate

2
%
2
%
4
%
2
%
Renewal premium change

5

4

8

5

Retention

85

84

72

83

New business
$
93
$
122
$
71
$
286

2019:

Three Months Ended June 30, 2020	Specialty			Commercial			International			Total
(In millions, except %)

Gross written premiums	$	1,762		$	1,126		$	277		$	3,165
Gross written premiums excluding third
party captives		811			1,044			277			2,132
Net written premiums		742			949			239			1,930
Net earned premiums		705			795			224			1,724
Net investment income		133			177			14			324
Core income (loss)		90			20			(14	)		96

Other performance metrics:
Loss ratio excluding catastrophes
and development		59.9	%		59.0	%		59.9	%		59.5	%
Effect of catastrophe impacts		15.0			19.0			19.9			17.5
Effect of development-related items		(2.9	)		6.0			(1.2	)		1.4
Loss ratio		72.0	%		84.0	%		78.6	%		78.4	%
Expense ratio		32.0			33.9			36.7			33.6
Dividend ratio		0.2			0.6						0.3
Combined ratio		104.2	%		118.5	%		115.3	%		112.3	%
Combined ratio excluding catastrophes
and development		92.1	%		93.5	%		96.6	%		93.4	%

Rate		12	%		9	%		13	%		11	%
Renewal premium change		11			8			11			9
Retention		85			83			74			83
New business	$	96		$	205		$	62		$	363

Three Months Ended June 30, 2019

Gross written premiums	$	1,724		$	1,024		$	287		$	3,035
Gross written premiums excluding third
party captives		755			958			287			2,000
Net written premiums		713			912			249			1,874
Net earned premiums		688			763			243			1,694
Net investment income		134			154			15			303
Core income		161			120			17			298

Other performance metrics:
Loss ratio excluding catastrophes
and development		59.9	%		61.7	%		60.1	%		60.8	%
Effect of catastrophe impacts		0.1			4.9			0.2			2.2
Effect of development-related items		(2.6	)		(0.1	)		(0.1	)		(1.1	)
Loss ratio		57.4	%		66.5	%		60.2	%		61.9	%
Expense ratio		33.1			32.6			37.3			33.4
Dividend ratio		0.2			0.6						0.4
Combined ratio		90.7	%		99.7	%		97.5	%		95.7	%
Combined ratio excluding catastrophes
and development		93.2	%		94.9	%		97.4	%		94.6	%

Rate		4	%		3	%		7	%		4	%
Renewal premium change		5			5			8			6
Retention		89			87			70			84
New business	$	97		$	186		$	75		$	358

Index

Six Months Ended June 30, 2020	Specialty			Commercial			International			Total
(In millions, except %)

Gross written premiums	$	3,476		$	2,188		$	584		$	6,248
Gross written premiums excluding third
party captives		1,552			2,103			584			4,239
Net written premiums		1,436			1,899			458			3,793
Net earned premiums		1,390			1,613			463			3,466
Net investment income		189			224			29			442
Core income (loss)		186			44			(12	)		218

Other performance metrics:
Loss ratio excluding catastrophes
and development		59.7	%		60.1	%		60.1	%		59.9	%
Effect of catastrophe impacts		8.2			12.8			11.9			10.9
Effect of development-related items		(2.3	)		3.0			(0.7	)		0.4
Loss ratio		65.6	%		75.9	%		71.3	%		71.2	%
Expense ratio		32.1			33.6			36.1			33.2
Dividend ratio		0.2			0.6						0.4
Combined ratio		97.9	%		110.1	%		107.4	%		104.8	%
Combined ratio excluding catastrophes
and development		92.0	%		94.3	%		96.2	%		93.5	%

Rate		10	%		9	%		11	%		10	%
Renewal premium change		10			8			9			9
Retention		85			84			72			82
New business	$	170		$	403		$	130		$	703

~~Table of Contents~~

Six Months Ended June 30, 2019

Gross written premiums	$	3,425		$	1,965		$	611		$	6,001
Gross written premiums excluding third
party captives		1,485			1,891			611			3,987
Net written premiums		1,411			1,761			508			3,680
Net earned premiums		1,349			1,526			493			3,368
Net investment income		289			344			30			663
Core income		330			259			23			612

Other performance metrics:
Loss ratio excluding catastrophes
and development		60.2	%		61.9	%		58.5	%		60.7	%
Effect of catastrophe impacts		1.0			5.1			1.3			2.9
Effect of development-related items		(2.9	)		(0.3	)		2.7			(0.9	)
Loss ratio		58.3	%		66.7	%		62.5	%		62.7	%
Expense ratio		33.0			33.2			37.2			33.7
Dividend ratio		0.2			0.6						0.4
Combined ratio		91.5	%		100.5	%		99.7	%		96.8	%
Combined ratio excluding catastrophes
and development		93.4	%		95.7	%		95.7	%		94.8	%

Rate		3	%		3	%		6	%		4	%
Renewal premium change		6			5			4			5
Retention		89			86			69			84
New business	$	182		$	350		$	155		$	687

Nine Months Ended September 30, 2019

Specialty

Commercial

International

Total

(In millions, except %)

Gross written premiums
$
     5,191
$
2,825
$
837
$
     8,853

Gross written premiums excluding third party captives

2,263

2,742

837

5,842

Net written premiums

2,143

2,536

709

5,388

Net earned premiums

2,061

2,339

729

5,129

Net investment income

410

480

47

937

Core income

483

356

14

853

Other performance metrics:

Loss and loss adjustment expense ratio

58.1
%
67.6
%
64.7
%
63.4
%
Expense ratio

32.6

32.7

37.5

33.3

Dividend ratio

0.2

0.6

0.4

Combined ratio

90.9
%
100.9
%
102.2
%
97.1
%


Rate

4
%
3
%
7
%
4
%
Renewal premium change

6

4

5

5

Retention

88

86

69

83

New business
$
274
$
522
$
207
$
     1,003

Nine Months Ended September 30, 2018

Gross written premiums
$
     5,222
$
2,563
$
884
$
     8,669

Gross written premiums excluding third party captives

2,130

2,483

884

5,497

Net written premiums

2,062

2,339

762

5,163

Net earned premiums

2,039

2,278

739

5,056

Net investment income

376

450

43

869

Core income

531

403

17

951

Other performance metrics:

Loss and loss adjustment expense ratio

55.1
%
63.0
%
65.0
%
60.1
%
Expense ratio

31.8

33.3

36.8

33.2

Dividend ratio

0.2

0.7

0.4

Combined ratio

87.1
%
97.0
%
101.8
%
93.7
%


Rate

2
%
1
%
3
%
2
%
Renewal premium change

5

5

6

5

Retention

84

85

79

84

New business
$
266
$
462
$
247
$
975

Three Months Ended ~~September~~June 30, ~~2019~~2020 Compared to ~~2018~~

2019

Total gross written premiums increased ~~$149~~$130 million for the three months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018~~2019 period. Total net written premiums increased ~~$127~~$56 million for the three months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018~~2019 period.

Gross written premiums, excluding third party captives, for Specialty increased $56 million for the three months

Index

ended June 30, 2020 as compared with the 2019 period driven by strong rate. Net written premiums for Specialty increased $29 million for the three months ended June 30, 2020 as compared with the 2019 period. The increase in net earned premiums for the three months ended June 30, 2020 was consistent with the trend in net written premiums in recent quarters for Specialty.

Gross written premiums for Commercial increased $102 million for the three months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018~~2019 period driven by strong rate and higher new ~~business and rate.~~business. Net written premiums for Commercial increased ~~$78~~$37 million for the three months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018~~2019 period. The increase in net earned premiums for the three months ended June 30, 2020 was consistent with the trend in net written premiums partially 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 $10 million for the three months ended June 30, 2020 as compared with the 2019 period. Excluding the effect of foreign currency exchange rates, gross written premiums decreased $3 million driven by the continued impact of the strategic exit from certain Lloyd’s business classes, offset by growth in Europe and Canada. Net written premiums decreased $10 million for the three months ended June 30, 2020 as compared with the 2019 period. Excluding the effect of foreign currency exchange rates, net written premiums decreased $6 million for the three months ended June 30, 2020 as compared with the 2019 period. The decrease in net earned premiums for the three months ended June 30, 2020 was consistent with the trend in net written premiums in recent quarters for ~~Commercial~~International.

Core income decreased $202 million for the three months ended ~~September~~June 30, 2020 as compared with the 2019 period due to higher net catastrophe losses and unfavorable net prior year loss reserve development, including a $50 million charge for mass tort exposures primarily due to New York reviver statute-related claims.

Net catastrophe losses were $301 million for the three months ended June 30, 2020 as compared with $38 million in the 2019 period. Net catastrophe losses for the three months ended June 30, 2020 included $182 million related to COVID-19, $61 million related to civil unrest and $58 million related primarily to severe weather-related events. Specialty net catastrophe losses of $105 million for the three months ended June 30, 2020 included $103 million related to the COVID-19 pandemic. Specialty net catastrophe losses were $1 million for the three months ended June 30, 2019. Commercial net catastrophe losses of $151 million for the three months ended June 30, 2020 included $43 million related to the COVID-19 pandemic, $61 million related to civil unrest and $47 million related primarily to severe weather-related events. Commercial net catastrophe losses were $37 million for the three months ended June 30, 2019. International net catastrophe losses of $45 million for the three months ended June 30, 2020 included $36 million related to the COVID-19 pandemic. International net catastrophe losses were $1 million for the three months ended June 30, 2019.

The COVID-19 losses in the second quarter of 2020 follow 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 recent timing of the event, 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.

Unfavorable net prior year loss reserve development of $22 million and favorable net prior year loss reserve development of $31 million was recorded for the three months ended June 30, 2020 and 2019. For the three months ended June 30, 2020 and 2019, Specialty recorded favorable net prior year loss reserve development of $20 million and $18 million and Commercial recorded unfavorable net prior year loss reserve development of $45 million as compared with favorable net prior year loss reserve development of $12 million. For the three months ended June 30, 2020, International recorded favorable net prior year loss reserve development of $3 million as compared with $1 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 13.5 points for the three months ended June 30, 2020 as compared with the 2019 period. The loss ratio increased 14.6 points driven by higher net catastrophe losses, or 15.0 points of the loss ratio, for the three months ended June 30, 2020. The expense ratio improved 1.1 points for the three months ended

Index

June 30, 2020 as compared with the 2019 period driven by lower underwriting expenses and higher net earned premiums.

Commercial’s combined ratio increased 18.8 points for the three months ended June 30, 2020 as compared to the 2019 period. The loss ratio increased 17.5 points driven by higher net catastrophe losses and unfavorable net prior year loss reserve development. The combined ratio excluding catastrophes and development improved 1.4 points for the three months ended June 30, 2020 as compared with the 2019 period which reflects a 0.7 point net benefit related to COVID-19 from lower loss frequency as a result of shelter in place restrictions and an adverse impact from a reduction in estimated audit premiums. These items decreased the loss ratio by 1.8 points and increased the expense ratio by 1.1 points. Excluding the impacts of COVID-19, the combined ratio excluding catastrophes and development improved 0.7 points due to the loss ratio.

International’s combined ratio increased 17.8 points for the three months ended June 30, 2020 as compared with the 2019 period. The loss ratio increased 18.4 points driven by higher net catastrophe losses, or 19.9 points of the loss ratio, for the three months ended June 30, 2020. The combined ratio excluding catastrophes and development improved 0.8 points for the three months ended June 30, 2020 as compared with the 2019 period due to a 0.2 point improvement in the loss ratio excluding catastrophes and development primarily driven by lower loss frequency from the impact of COVID-19 as well as 0.6 points of improvement in the expense ratio driven by lower acquisition and underwriting expenses.

Six Months Ended June 30, 2020 Compared to 2019

Total gross written premiums increased $247 million for the six months ended June 30, 2020 as compared with the 2019 period. Total net written premiums increased $113 million for the six months ended June 30, 2020 as compared with the 2019 period.

Gross written premiums, excluding third party captives, for Specialty increased ~~$64~~$67 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018~~2019 period driven by strong ~~retention and~~ rate. Net written premiums for Specialty increased ~~$44~~$25 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018~~2019 period. The increase in net earned premiums for the six months ended June 30, 2020 was consistent with the trend in net written premiums in recent quarters for ~~Specialty~~Specialty.

Gross written premiums for Commercial increased $223 million for the ~~three~~six months ended ~~September~~June 30, ~~2019.~~

2020 as compared with the 2019 period driven by strong rate and higher new business. Net written premiums for Commercial increased $138 million for the six months ended June 30, 2020 as compared with the 2019 period. The increase in net earned premiums for the six months ended June 30, 2019 was consistent with the trend in net written premiums partially offset by a reduction in the estimated audit premiums as a result of the economic slowdown arising from COVID-19 for Commercial.

~~Table of Contents~~

Gross written premiums for International decreased $4$27 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018~~2019 period. Excluding the effect of foreign currency exchange rates, gross written premiums ~~increased $1~~decreased $18 million ~~or 1%~~ driven by the continued impact of the strategic exit from certain Lloyd’s business classes, offset by growth in Canada ~~largely offset by the premium reduction from Hardy’s strategic exit from certain business classes announced in the fourth quarter of 2018.~~and Europe. Net written premiums ~~for International increased $5~~decreased $50 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018~~2019 period. Excluding the effect of foreign currency exchange rates, net written premiums ~~increased $10~~decreased $42 million ~~or 5%,~~ for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018 period driven by a change in the timing of ceded reinsurance contract renewals.~~2019 period. The decrease in net earned premiums for the six months ended June 30, 2020 was consistent with the trend in net written premiums in recent quarters for ~~International for the three months ended September 30, 2019.~~

International.

Core income decreased ~~$64~~$394 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018~~2019 period ~~primarily~~ due to higher net catastrophe losses, lower net investment income driven by limited partnership and common stock returns and unfavorable net prior year loss reserve development ~~partially offset by lower net catastrophe losses.~~

in the current year period including a $50 million charge for mass tort exposures primarily due to New York reviver statute-related claims.

Net catastrophe losses were ~~$32~~$376 million for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 as compared with ~~$46~~$96 million in the ~~2018~~2019 period. ~~For~~Net catastrophe losses for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 included $195 million related to COVID-19, $61 million related to civil unrest and ~~2018,~~$120 million related primarily to severe weather-related events. Specialty ~~had~~ net catastrophe losses of $3$113 million ~~and $16~~for the six months ended June 30, 2020 included $109 million related to the COVID-19 pandemic. Specialty net catastrophe losses were $13 million for the six months ended June 30, 2019. Commercial ~~had~~ net catastrophe losses of ~~$25~~$208 million ~~in both periods~~for the six months ended June 30, 2020 included $48 million related to the COVID-19 pandemic, $61 million related to civil unrest and $99 million related primarily to severe weather-related events. Commercial net catastrophe losses were $77 million for the six months ended June 30, 2019. International ~~had~~ net catastrophe losses of $4$55 million ~~and $5 million.~~for the six months ended June 30, 2020 included $38 million related

Index

to the COVID-19 pandemic. International net catastrophe losses were $6 million for the six months ended June 30, 2019.

Unfavorable net prior year loss reserve development of ~~$16~~$7 million and favorable net prior year loss reserve development of $45 million was recorded for the six months ended June 30, 2020 and 2019. For the six months ended June 30, 2020 and 2019, Specialty recorded favorable net prior year loss reserve development of $31 million and $38 million and Commercial recorded unfavorable net prior year loss reserve development of $41 million as compared with favorable net prior year loss reserve development of ~~$60 million was recorded for~~$20 million. For the ~~three~~six months ended ~~September~~June 30, ~~2019 and 2018. For the three months ended September 30, 2019 and 2018, Specialty~~2020, International recorded favorable net prior year loss reserve development of ~~$20~~$3 million ~~and $53 million and Commercial recorded~~as compared with unfavorable net prior year loss reserve development of ~~$35~~$13 million ~~as compared with favorable net prior year loss reserve development of $5 million. For~~in the ~~three months ended September 30,~~ 2019 ~~and 2018, International recorded unfavorable net prior year loss reserve development of $1 million as compared with favorable net prior year loss reserve development of $2 million.~~period. Further information on net prior year loss reserve development is included in Note 56 of the Notes to Consolidated Condensed Financial Statements included under Item 1.

Specialty’s combined ratio increased ~~2.8~~6.4 points for the ~~three~~six months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018~~2019 period. The loss ratio increased ~~3.3~~7.3 points ~~primarily~~ due to higher net catastrophe losses, or 8.2 points of the loss ratio, for the six months ended June 30, 2020. The expense ratio improved 0.9 points for the six months ended June 30, 2020 as compared with the 2019 period driven by lower ~~favorable~~underwriting expenses and higher net earned premiums.

Commercial’s combined ratio increased 9.6 points for the six months ended June 30, 2020 as compared to the 2019 period. The loss ratio increased 9.2 points driven by higher net catastrophe losses and unfavorable net prior year loss reserve development. The ~~expense~~combined ratio excluding catastrophes and development improved ~~0.5~~1.4 points for the ~~three~~six months ended ~~September~~June 30, 2020 as compared to the 2019 period which reflects a 0.3 point net benefit related to COVID-19 from lower loss frequency as a result of shelter in place restrictions and an adverse impact from a reduction in the estimated audit premiums. These items decreased the loss ratio by 0.9 points and increased the expense ratio by 0.6 points. Excluding the impacts of COVID-19, the combined ratio excluding catastrophes and development improved 1.1 points due to the loss ratio.

International’s combined ratio increased 7.7 points for the six months ended June 30, 2020 as compared with the ~~same period in 2018 driven by a favorable acquisition ratio.~~

~~Commercial’s combined ratio increased 4.2 points for the three months ended September 30,~~ 2019 ~~as compared to the 2018~~ period. The loss ratio increased ~~5.8~~8.8 points ~~primarily due to unfavorable~~driven by higher net ~~prior year~~catastrophe losses, or 11.9 points of the loss ~~development in the current year period. The expense~~ ratio, for the ~~three~~six months ended ~~September~~June 30, ~~2019 improved 1.5 points as compared with the 2018 period driven by a favorable acquisition ratio.~~

International’s combined ratio increased 3.5 points for the three months ended September 30, 2019 as compared with the 2018 period. The loss ratio increased 1.8 points, driven by unfavorable net prior year loss reserve development in the current year period as compared with favorable development in the prior year period and an increase in large property losses in Hardy and Europe. The expense ratio increased 1.7 points for the three months ended September 30, 2019 as compared with the 2018 period driven by lower net earned premiums.

~~Nine Months Ended September 30, 2019 Compared to 2018~~

Total gross written premiums increased $184 million for the nine months ended September 30, 2019 as compared with the 2018 period. Total net written premiums increased $225 million for the nine months ended September 30, 2019 as compared with the 2018 period.

Gross written premiums for Commercial increased $262 million for the nine months ended September 30, 2019 as compared with the 2018 period driven by higher new business and rate. Net written premiums for Commercial increased $197 million for the nine months ended September 30, 2019 as compared with the 2018 period. The increase in net earned premiums was consistent with the trend in net written premiums in recent quarters for Commercial for the nine months ended September 30, 2019.

Gross written premiums for Specialty, excluding third party captives, increased $133 million for the nine months ended September 30, 2019 as compared with the 2018 period driven by higher new business, strong retention and rate. Net written premiums for Specialty increased $81 million for the nine months ended September 30, 2019 as compared with the 2018 period. The increase in net earned premiums was consistent with the trend in net written premiums in recent quarters for Specialty for the nine months ended September 30, 2019.

~~Table of Contents~~

Gross written premiums for International decreased $47 million for the nine months ended September 30, 2019 as compared with the 2018 period. Excluding the effect of foreign currency exchange rates, gross written premiums decreased by $17 million, or 2%, for the nine months ended September 30, 2019 as compared with the 2018 period driven by the premium reduction from Hardy’s strategic exit from certain business classes announced in the fourth quarter of 2018. Net written premiums for International decreased $53 million for the nine months ended September 30, 2019 as compared with the 2018 period. Excluding the effect of foreign currency exchange rates, net written premiums decreased $25 million, or 3%, for the nine months ended September 30, 2019 as compared with the 2018 period. The decrease in net earned premiums was consistent with the trend in net written premiums in recent quarters for International for the nine months ended September 30, 2019.

~~Core income decreased $98 million for the nine months ended September 30, 2019 as compared with the 2018 period primarily due to lower favorable net prior year loss reserve development,~~2020, partially offset by ~~higher net investment income driven by higher limited partnership and common stock returns.~~

Net catastrophe losses were $128 million for the nine months ended September 30, 2019 as compared with $106 million in the 2018 period. For the nine months ended September 30, 2019 and 2018, Specialty had net catastrophe losses of $16 million and $22 million, Commercial had net catastrophe losses of $102 million and $73 million and International had net catastrophe losses of $10 million and $11 million.

Favorable net prior year loss reserve development of $29 million and $158 million was recorded for the nine months ended September 30, 2019 and 2018. For the nine months ended September 30, 2019 and 2018, Specialty recorded favorable net prior year loss reserve development of $58 million and $127 million, Commercial recorded unfavorable net prior year loss reserve development of $15 million as compared with favorable net prior year loss reserve development of $27 million and International recorded unfavorable net prior year loss reserve development of $14 million as compared with favorable net prior year loss reserve development of $4 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.

Specialty’s combined ratio increased 3.8 points for the nine months ended September 30, 2019 as compared with the 2018 period. The loss ratio increased 3.0 points primarily due to lower favorable net prior year loss reserve development. The expense ratio increased 0.8 points for the nine months ended September 30, 2019 as compared with the 2018 period driven by higher employee costs.

Commercial’s combined ratio increased 3.9 points for the nine months ended September 30, 2019 as compared to the 2018 period. The loss ratio increased 4.6 points driven by the current accident year and unfavorable net prior year loss reserve development in the current year period. The expense ratio improved 1.1 points for the ~~nine~~six months ended ~~September~~June 30, ~~2019 improved 0.6 points~~2020 as compared with the ~~2018 period driven by a favorable acquisition ratio partially offset by higher employee costs.~~

~~International’s combined ratio increased 0.4 points for the nine months ended September 30,~~ 2019 as compared with the 2018 period. The loss ratio improved 0.3 points, driven by improved current accident year underwriting results largely offset by unfavorable net prior year loss reserve development in the current year period. The expense ratio increased 0.7 points for the nine months ended September 30, 2019 as compared with the 2018 period driven by lower ~~net earned premiums.~~

acquisition and underwriting expenses.

Other Insurance Operations

The following table summarizes the results of CNA’s Other Insurance Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

(In millions)

Net earned premiums
$
130
$
133
$
390
$
398

Net investment income

213

205

636

614

Core income (loss)

(139
)
12

(139
)
(83
)

2019:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2020		2019			2020			2019
(In millions)

Net earned premiums	$	126	$	130		$	253		$	260
Net investment income		210		212			421			423
Core income (loss)		3		(4	)		(11	)

~~Table of Contents~~

Three Months Ended ~~September~~June 30, ~~2019~~2020 Compared to ~~2018~~

2019

Core ~~loss was $139 million, an increase~~income of ~~$151~~$3 million for the three months ended ~~September~~June 30, ~~2019 as compared with the 2018 period. The increase~~2020 was primarily driven by ~~a $170 million charge related to recognition of an active life reserve premium deficiency partially offset by a $44 million reduction~~better than expected persistency in the long term care ~~claim reserves resulting from~~business.

Six Months Ended June 30, 2020 Compared to 2019

Core loss of $11 million for the ~~annual claim experience study. The favorable claim reserve development~~six months ended June 30, 2020 was primarily due to lower claim severity than anticipated in the reserve estimates. Core income for the three months ended September 30, 2018 included a $24 million reduction in long term care claim reserves resulting from the 2018 annual claim experience study.

~~Nine Months Ended September 30, 2019 Compared to 2018~~

Core loss was $139 million, an increase of $56 million for the nine months ended September 30, 2019 as compared with the 2018 period. The drivers of core income for the nine month period were generally consistent with the three month discussion above. The prior period included

~~non-recurring~~

costs of $27 million associated with the transition to a new IT infrastructure service provider. In addition, the 2018 period included adverse net prior year reserve development for A&EP under the loss portfolio transfer, as further discussed in Note 5 of the Notes to Consolidated Condensed Financial Statements included under Item 1.

~~Long Term Care Policyholder Reserves~~

Annually, CNA assesses the adequacy of its long term care future policy benefit reserves by performing the 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 Reportinterest expense on ~~Form~~

~~10-K~~

~~for the year ended December 31, 2018 for further information on the reserving process.~~

Prior to September 30, 2019, the active life reserves for long term care were based on the actuarial best estimate assumptions established at December 31, 2015 as a result of a reserve unlocking. The September 30, 2018 GPV indicated the carried reserves included a margin of approximately $182 million. The September 30, 2019 GPV indicated a premium deficiency of $216 million and future policy benefit reserves were increased accordingly. As a result, the long term care active life reserves carried as of September 30, 2019 represent management’s best estimate assumptions at that date with no margin for adverse deviation. A summary of the changes in the GPV results is presented in the table below:

(In millions)

Long term care active life reserve - change in estimated reserve margin

September 30, 2018 estimated margin
$
             182


Changes in underlying discount rate assumptions

(280
)
Changes in underlying morbidity assumptions

32

Changes in underlying persistency assumptions and inforce policy inventory

(234
)
Changes in underlying premium rate action assumptions

58

Changes in underlying expense and other assumptions

26

September 30, 2019 Premium Deficiency
$
(216
)

The premium deficiency was primarily driven by changes in discount rate assumptions driven by lower expected reinvestment rates, contemplating both near-term market indications and long-term normative assumptions. The premium deficiency was also adversely affected by the recognition of margin in earnings in recent quarters and changes in persistency assumptions, primarily from lower projected active life mortality rates. These unfavorable drivers werecorporate debt partially offset by ~~higher~~better than expected ~~rate increases on active rate increase programs, new planned rate increase filings and favorable changes to the underlying morbidity and expense assumptions.~~

~~As a result of the premium deficiency, CNA’s projections no longer indicate a pattern of expected profits~~persistency in ~~earlier future years followed by expected losses in later future years. As such, CNA will no longer establish additional future policy benefit reserves for profits followed by losses in periods where~~ the long term care business ~~generates core income. The need for these additional future policy benefit reserves will be~~

~~re-evaluated~~

~~in connection with~~and amortization of the ~~next GPV, which is expected~~deferred gain related to ~~be completed in~~ the ~~third quarter of 2020.~~A&EP loss portfolio transfer.

Index

~~Table of Contents~~

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 the 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 actual adjustment would be dependent on the specific policies affected and, therefore, may differ from the estimates summarized below.


~~September 30, 2019~~	Estimated Reduction to Pretax Income
~~(In millions)~~

~~Hypothetical revisions~~
~~Morbidity:~~
~~5% increase in morbidity~~	$	~~664~~
~~10% increase in morbidity~~		~~1,329~~
~~Persistency:~~
~~5% decrease in active life mortality and lapse~~	$	~~208~~
~~10% decrease in active life mortality and lapse~~		~~427~~
~~Discount rates:~~
~~50 basis point decline in new money interest rates~~	$	~~309~~
~~100 basis point decline in new money interest rates~~		~~675~~
~~Premium rate actions:~~
~~25% decrease in anticipated future premium rate increases~~	$	58
~~50% decrease in anticipated future premium rate increases~~		~~115~~

~~The following table summarizes policyholder reserves for CNA’s long term care operations:~~

September 30, 2019

Claim and claim
adjustment
expenses

Future
policy benefits

Total

(In millions)

Long term care
$
2,840
$
9,415
$
     12,255

Structured settlement annuities

519

519

Other

13

13

Total

3,372

9,415

12,787

Shadow adjustments (a)

168

2,664

2,832

Ceded reserves (b)

167

226

393

Total gross reserves
$
3,707
$
12,305
$
16,012



December 31, 2018

Long term care
$
2,761
$
9,113
$
11,874

Structured settlement annuities

530

530

Other

14

14

Total

3,305

9,113

12,418

Shadow adjustments (a)

115

1,250

1,365

Ceded reserves (b)

181

234

415

Total gross reserves
$
3,601
$
10,597
$
14,198

~~(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.~~

~~Table of Contents~~

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 ~~CNA segment for the~~ three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018:~~

Three Months Ended
September 30,

Nine Months Ended
September 30,

2019

2018

2019

2018

(In millions)

Core income (loss):

Property & Casualty Operations
$
241
$
305
$
853
$
951

Other Insurance Operations

(139
)
12

(139
)
(83
)
Total core income

102

317

714

868

Investment gains (after tax)

6

12

30

19

Consolidating adjustments including purchase accounting and noncontrolling interests

(12
)
(29
)
(94
)
(86
)
Net income attributable to Loews Corporation
$
96
$
300
$
650
$
801

2019:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
(In millions)

Core income (loss):
Property & Casualty Operations	$	96		$	298		$	218		$	612
Other Insurance Operations		3			(4	)		(11	)
Total core income		99			294			207			612
Investment gains (losses)		53			1			(117	)		24
Consolidating adjustments including noncontrolling
interests		(17	)		(46	)		(10	)		(82	)
Net income attributable to Loews Corporation	$	135		$	249		$	80		$	554

Boardwalk Pipelines

~~Diamond Offshore~~

~~Overview~~

Current Events

In 2020, the ~~end~~world and the United States experienced the unprecedented impacts of the ~~third quarter~~COVID-19 pandemic and measures to mitigate the spread of ~~2019, the average price for Brent crude oil was at the~~

~~$60-per-barrel~~

level. Industry-wide floater utilization was approximately 66% based on industry analyst reports, which was relatively unchanged from the previous quarter but an increase from approximately 58% for the comparable quarterCOVID-19. An excess supply of ~~2018. During 2019, there~~energy products has ~~been~~also led to a slight improvement in average dayrates in some geographic markets; however, dayrates remain low compared to previous periods, as the increase in oil prices from earlier lows has not resulted in significantly higher dayrates at a sustained or consistent level. Some industry analysts indicate that, based on historical data, utilization rates will have to increase to the 80%-range before pricing power shifts to the drilling contractor from the customer.

During the first nine months of 2019, the number of contract tenders for 2020 and 2021 floater project commencements increased, primarily for work in the North Sea and Australia markets. Presently, many of these tenders have been limited to single-well contracts, with options for future wells. Although some geographic areas appear to be improving, other markets show little or no sign of recovery at this time.

~~From a supply perspective, some industry analysts have reported a three rig~~significant decrease in energy prices. Boardwalk Pipelines’ operations are considered essential critical infrastructure under current Cybersecurity and Infrastructure Security Agency guidelines, and it has taken measures to ensure the ~~global supply~~safety of floater rigs during the third quarter of 2019. However, the offshore contract drilling market remains oversupplied, providing for a challenging offshore drilling market in the near term. As of the date of this report, industry analysts report that there are approximately 80 stacked or uncontracted floatersits employees and approximately 30 newbuild floaters currently under construction that are scheduled for delivery during the remainder of 2019 through 2022. Of these rigs under construction, some industry analysts report that only one rig is currently contracted for future work. In addition, during the next twelve months, approximately 70 contracted floaters are estimatedoperations while maintaining uninterrupted service to ~~be rolling off their current contracts, which will further add to the over-supply of floaters.~~

~~As a result of these challenges, Diamond Offshore and other offshore drillers are continuing to actively seek ways to drive efficiency, reduce~~

~~non-productive~~

time on rigs and provide technical innovation to customers. Diamond Offshore anticipates that these efficiencies and innovations will result in the faster drilling and completion of wells, leading to lower overall well costs to the benefit of its customers.

~~Contract Drilling Backlog~~

Diamond Offshore’s contract drilling backlog was $1.8 billion as of October 1, 2019 (based on information available at that time) and $2.0 billion as of January 1, 2019 (the date reported in our Annual Report on Form

~~10-K~~

for the year ended December 31, 2018). The contract drilling backlog by year as of October 1, 2019 is $0.2 billion in 2019 (for the three-month period beginning October 1, 2019), $0.8 billion in 2020 and an aggregate of $0.8 billion in 2021 through 2024. Contract drilling backlog as of October 1, 2019 excludes future gross margin commitments of $30 million for 2019, approximately $25 million for 2020 and an aggregate $75 million in 2021 through 2023, payable by a customer in the form of a guarantee of gross margin to be earned on future contracts or by direct payment at the end of each of the three respective periods, pursuant to terms of an existing contract.

~~Table of Contents~~

Diamond Offshore’s contract drilling backlog includes only firm commitments (typically represented by signed contracts) and is calculated by multiplying the contracted operating dayrate by the firm contract period. Diamond Offshore’s calculation also assumes full utilization of its drilling equipment for the contract period (excluding scheduled shipyard and survey days); however, the amount of actual revenue earned and the actual periods during which revenues are earned will be different than the amounts and periods stated above due to various factors affecting utilization such as weather conditions and unscheduled repairs and maintenance. Contract drilling backlog excludes revenues for mobilization, demobilization, contract preparation and customer reimbursables. Changes in Diamond Offshore’s contract drilling backlog between periods are generally a function of the performance of work on term contracts, as well as the extension or modification of existing term contracts and the execution of additional contracts. In addition, under certain circumstances, Diamond Offshore’s customers may seek to terminate or renegotiate its contracts, which could adversely affect its reported backlog.

~~Results of Operations~~

The following ~~table~~ summarizes the material impacts to Boardwalk Pipelines’ business and the key actions it has taken to mitigate the current impacts from both the COVID-19 pandemic and the volatility in energy prices:

●

Boardwalk Pipelines’ business has not been significantly impacted by the recent volatility in commodity prices. However, some of its customers are directly impacted by changes in commodity prices, which may impact Boardwalk Pipelines’ ability to renew contracts at existing terms or may impact the customers’ ability to make payment for the services Boardwalk Pipelines provides. The COVID-19 pandemic and decreased energy prices could cause a disruption of the normal operations of many of Boardwalk Pipelines’ customers, including the temporary closure or reduction of plant operations or shut-in of production. While energy prices remain volatile, prices have somewhat improved from the level that they were during portions of the first and second quarters. If energy prices remain at current levels for a sustained period of time or decline again, Boardwalk Pipelines could be exposed to increased credit risk or the increased risk of customers filing for bankruptcy protection. During 2020, Boardwalk Pipelines has not had any significant customers declare bankruptcy.

●

Through the date of this Report, Boardwalk Pipelines has not experienced any significant operational disruptions and its pipeline throughput has remained stable. For the six months ended June 30, 2020, Boardwalk Pipelines transported approximately 1.5 trillion cubic feet of natural gas and approximately 44.3 million barrels of natural gas liquids and hydrocarbons (“NGLs”), an increase in excess of 7% from the comparable period in 2019 for each commodity. Boardwalk Pipelines’ results of operations for the second quarter of 2020 have not been materially impacted as a result of the COVID-19 pandemic or the volatility in energy prices.

●

Boardwalk Pipelines did not experience any significant changes in its workforce composition and was able to implement its business continuity plans with no significant impact to its ability to maintain its operations. Boardwalk Pipelines continues to maintain strong physical and cybersecurity measures in order to both serve its operational needs with a remote workforce and keep its integrated pipeline and storage systems running to provide reliable service to its customers.

●

Through the date of this Report, Boardwalk Pipelines’ balance sheet remains strong and it continues to have sufficient liquidity and it expects to continue to fund its operations through its operating cash flows. Boardwalk Pipelines has approximately $1.2 billion of available borrowing capacity under its revolving credit facility and does not have any debt maturities until February of 2021.

Index

The safety of Boardwalk Pipelines’ employees and operations ~~for Diamond Offshore for~~while providing uninterrupted service to its customers remains its primary focus. Although it is difficult to reasonably determine the ~~three~~ongoing and ~~nine months ended September 30, 2019 and 2018 as presented in Note 13~~future impacts 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,

2019

2018

2019

2018

(In millions)

Revenues:

Net investment income
$
2
$
2
$
6
$
6

Contract drilling revenues

242

281

676

834

Other revenues

7

6

29

19

Total

251

289

711

859

Expenses:

Contract drilling expenses

202

188

594

562

Other operating expenses

Impairment of assets

27

Other expenses

120

123

346

338

Interest

31

34

92

92

Total

353

345

1,032

1,019

Loss before income tax

(102
)
(56
)
(321
)
(160
)
Income tax benefit

10

5

52

59

Amounts attributable to noncontrolling interests

44

24

132

47

Net loss attributable to Loews Corporation
$
(48
) $
(27
) $
(137
) $
(54
)

~~Three Months Ended September 30, 2019 Compared to 2018~~

~~Contract drilling revenue decreased $39 million for~~COVID-19 pandemic and the three months ended September 30, 2019 as compared with the 2018 period, primarily due to lower average daily revenue earned reflecting the impact of lower dayrates earned under contracts that commenced after the 2018 period. This decrease was partially offset by the effect of incremental revenue earning days, due to fewer

~~non-productive~~

days and fewer planned shipyard projects and mobilization of rigs. Contract drilling expense increased $14 million for the three months ended September 30, 2019 as compared with the 2018 period, primarily due to increased costs for repairs and maintenance and other rig operating costs, partially offset by the absence of costs for a rig which was soldvolatility in energy prices, an extended downturn in the ~~second quarter of 2019.~~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.

Net loss attributable to Loews Corporation increased $21 million for the three months ended September 30, 2019 as compared with the 2018 period, reflecting lower margins from contract drilling services, primarily due to lower contract drilling revenues, higher depreciation expense due to capital expenditures since the latter part of 2018 and a loss of $3 million (after tax and noncontrolling interests) on the disposition of assets. These unfavorable impacts on results were partially offset by the absence of costs related to the settlement of a legal claim in the 2018 period.

~~Table of Contents~~

~~Nine Months Ended September 30, 2019 Compared to 2018~~

Contract drilling revenue decreased $158 million for the nine months ended September 30, 2019 as compared with the 2018 period, primarily due to lower average daily revenue earned and the effect of fewer revenue earning days. Contract drilling expense increased $32 million for the nine months ended September 30, 2019 as compared with the 2018 period, primarily due to incremental amortization of previously deferred contract preparation and mobilization costs and increased rig operating costs for the current fleet. These increases were partially offset by reduced costs for the rig that was sold in the second quarter of 2019 and lower fuel costs for the current fleet.

Net loss attributable to Loews Corporation increased $83 million for the nine months ended September 30, 2019 as compared with the 2018 period, reflecting lower margins from contract drilling services, primarily due to lower contract drilling revenues, higher depreciation expense primarily due to capital expenditures and the completion of software implementation projects in 2019 and a lower tax benefit as compared to the prior year period. These unfavorable impacts on results were partially offset by the absence of costs related to the settlement of a legal claim in the 2018 period and the absence of an impairment charge recorded in the 2018 period.

~~Boardwalk Pipelines~~

Firm Agreements

A substantial portion of Boardwalk Pipelines’ transportation and storage capacity is contracted for under firm agreements. For the ~~last~~ twelve months ended ~~September~~June 30, ~~2019,~~2020, approximately ~~88%~~90% of Boardwalk Pipelines’ revenues ~~excluding retained fuel,~~ were derived from fixed fees under firm agreements. Boardwalk Pipelines expects to earn revenues of approximately ~~$10.3~~$9.3 billion from fixed fees under committed firm agreements in place as of ~~September~~June 30, ~~2019,~~2020, including agreements for transportation, storage and other services, over the remaining term of those agreements. ~~This amount has increased by~~For the six months ended June 30, 2020, Boardwalk Pipelines added approximately ~~$1.2 billion~~$502 million from the comparable amount at December 31, ~~2018,~~2019, from contracts entered into during ~~2019.~~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 recognize 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, or execution of precedent agreements associated with growth projects or other events that occurred or will occur subsequent to ~~September~~June 30, ~~2019.~~

2020.

Contract ~~renewals~~Renewals

Each year a portion of Boardwalk Pipelines’ firm transportation and storage agreements expire. The rates Boardwalk Pipelines is able to charge customers are heavily influenced by market 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-users such as power plants, petrochemical facilities 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. ~~The amount of~~While Boardwalk Pipelines has not seen a significant change in ~~firm reservation fees under contract reflects~~ the ~~overall market trends, including~~demand for its services as a result of the ~~impact from~~COVID-19 pandemic or the volatility in energy prices, if these conditions remain for an extended period of time or re-occur, Boardwalk ~~Pipelines’ growth projects.~~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~~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 impacted Boardwalk Pipelines’ operating revenues.

~~Table of Contents~~

Index

Results of Operations

The following table summarizes the results of operations for Boardwalk Pipelines for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 as presented in Note 1314 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:

													Three Months Ended						Six Months Ended
	Three Months Ended September 30,						Nine Months Ended September 30,						June 30,						June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
(In millions)

Revenues:
Other revenue, primarily operating	$	296		$	279		$	969		$	901
Operating revenues and other													$	296		$	327		$	637		$	673
Total		296			279			969			901			296			327			637			673
Expenses:
Operating		212			197			616			598
Operating and other														210			209			421			404
Interest		45			44			136			131			41			46			83			91
Total		257			241			752			729			251			255			504			495
Income before income tax		39			38			217			172			45			72			133			178
Income tax expense		(10	)		(10	)		(56	)		(24	)		(11	)		(19	)		(34	)		(46	)
Amounts attributable to noncontrolling interests											(68	)
Net income attributable to Loews Corporation	$	29		$	28		$	161		$	80		$	34		$	53		$	99		$	132

Three Months Ended ~~September~~June 30, ~~2019~~2020 Compared to ~~2018~~

2019

Total revenues ~~increased $17~~decreased $31 million for the three months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018~~2019 period. ~~Excluding~~Including the ~~net~~ effect of items ~~offset~~ in fuel and transportation expense ~~primarily retained fuel, operating revenues increased $17 million primarily driven by Boardwalk Pipelines’ recently completed growth projects, partially offset by contract restructuring~~ and ~~contract expirations that were recontracted at overall lower average rates.~~

Operating expenses increased $15 million for the three months ended September 30, 2019 as compared with the 2018 period. Excluding items offset in operating revenues, operating expenses increased $10 million as compared with the prior year period primarily due to higher maintenance project expenses and an increased asset base from recently completed growth projects.

~~Net income attributable to Loews Corporation increased $1 million for the three months ended September 30, 2019 as compared with the 2018 period due to the changes discussed above.~~

~~Nine Months Ended September 30, 2019 Compared to 2018~~

Total revenues increased $68 million for the nine months ended September 30, 2019 as compared with the 2018 period. Excluding the net effect of items offset in fuel and transportation expense, primarily retained fuel, andexcluding net proceeds of approximately ~~$24~~$26 million as a result of drawing on letters of credit due to a customer bankruptcy in 2019, operating revenues ~~increased $47~~decreased $6 million ~~primarily~~ driven by ~~Boardwalk Pipelines’ recently completed growth projects, partially offset by contract restructuring and~~ contract expirations that were recontracted at overall lower average ~~rates.~~

rates, partially offset by revenues from recently completed growth projects and higher storage and parking and lending (“PAL”) revenues due to favorable market conditions.

Operating expenses ~~increased $18 million~~were essentially flat for the ~~nine~~three months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018~~2019 period. Interest expense decreased $5 million for the three months ended June 30, 2020 as compared with the 2019 period primarily due to lower interest rates from borrowings under Boardwalk Pipelines’ revolving credit facility and higher capitalized interest.

Six Months Ended June 30, 2020 Compared to 2019

Total revenues decreased $36 million for the six months ended June 30, 2020 as compared with the 2019 period. Including the effect of items in fuel and transportation expense and excluding the impact from the customer bankruptcy discussed above, operating revenues decreased $16 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 six months ended June 30, 2020 as compared with the 2019 period. Excluding items offset in operating revenues, operating expenses increased ~~$15~~$13 million, ~~as compared with the prior year period~~ primarily due to ~~higher maintenance project expenses and~~ an increased asset base from recently completed growth ~~projects.~~

~~Net income attributable to Loews Corporation increased $81~~projects, higher litigation expenses and the expiration of property tax abatements. Interest expense decreased $8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018~~2019 period primarily due to ~~the changes discussed above~~lower interest rates from borrowings under Boardwalk Pipelines’ revolving credit facility and ~~the impact of the Company owning 100% of~~higher capitalized interest and allowance for funds used during construction related to Boardwalk ~~Pipelines, which increased from 51% with the purchase of Boardwalk Pipelines common units on July 18, 2018.~~Pipelines’ capital projects.

Index

~~Table of Contents~~

Loews Hotels & Co

The following table summarizes the results of operations for Loews Hotels & Co for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 as presented in Note 1314 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:

													Three Months Ended						Six Months Ended
	Three Months Ended September 30,						Nine Months Ended September 30,						June 30,						June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
(In millions)

Revenues:
Operating revenue	$	127		$	148		$	437		$	472		$	9		$	159		$	118		$	310
Gain on sale of owned hotel					23						23
Gain on sale of hotel														13						13
Revenues related to reimbursable expenses		29			19			85			79			12			27			45			56
Total		156			190			522			574			34			186			176			366
Expenses:
Operating and other:
Operating		113			129			372			399			50			130			166			260
Asset impairments at owned hotels					22			11			22
Asset impairments														20			7			20			10
Reimbursable expenses		29			19			85			79			12			27			45			56
Depreciation		14			16			45			49			16			15			30			31
Equity income from joint ventures		(11	)		(17	)		(49	)		(55	)
Equity (income) loss from joint ventures														25			(16	)		29			(38	)
Interest		6			7			16			22			8			5			16			10
Total		151			176			480			516			131			168			306			329
Income before income tax		5			14			42			58
Income tax expense		(2	)		(3	)		(14	)		(17	)
Net income attributable to Loews Corporation	$	3		$	11		$	28		$	41

Income (loss) before income tax														(97	)		18			(130	)		37
Income tax (expense) benefit														25			(6	)		33			(12	)
Net income (loss) attributable to Loews Corporation													$	(72	)	$	12		$	(97	)	$	25

Due to the COVID-19 pandemic and efforts to mitigate the spread of the virus, twenty 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, one resumed operations in May, twelve in June and five in July, with the operations of the remaining four hotels still temporarily suspended. Only two owned hotels and two managed hotels did not suspend operations. Additionally, two hotels completed construction prior to the pandemic; one delayed opening until June, and the second is expected to open later this year. However, all operational hotels are experiencing very limited occupancy. 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 four 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 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 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. These factors have contributed to impairment charges for the three months ended June 30, 2020, and may lead to additional impairment charges in future periods.

~~Operating~~Reduced occupancy caused by the COVID-19 pandemic and mitigation efforts as well as related operating cost reduction measures are the primary reasons for the decrease in operating revenues ~~decreased $21~~of $150 million and ~~$35~~$192 million and operating expenses of $80 million and $94 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018 periods primarily due to hotel renovations during the three and nine months ended September 30,~~ 2019 and the sale of two owned hotel properties, one of which occurred in the second quarter of 2019 and one of which occurred in the third quarter of 2018. Revenues for the three months ended September 30, 2019 were also impacted by lower management fees of $2 million due to reduced operating revenues at managed properties. In addition, Loews Hotels operating revenues and expenses for the three and nine months ended September 30, 2019 include a $12 million reduction due to the reclassification of services provided to customers by a third party vendor.

~~Operating expenses~~period. Additionally, equity income from joint ventures decreased ~~$16~~$41 million and ~~$27~~$67 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018 periods due to~~2019 period driven primarily by the ~~above stated reclassification and the aforementioned sale of an owned hotel in 2018.~~COVID-19 pandemic.

Index

Loews Hotels & Co considers events or changes in circumstances that indicate the carrying amount of ~~a long-lived asset~~its assets may not be recoverable. ~~Asset impairments for~~During the ~~nine~~second quarter of 2020, Loews Hotels & Co recorded impairment charges of $20 million to reduce the carrying value of certain assets to their estimated fair value. The three and six months ended ~~September~~June 30, 2019 include impairment charges of ~~$11~~$7 million ~~in 2019 related to the~~and $10 million.

~~write-off~~

Loews Hotels & Co recorded a gain of ~~previously capitalized costs due to the change in plans for an owned property and~~$13 million on the sale of ~~another~~an owned ~~property. Asset impairments~~hotel in the second quarter of ~~$22 million~~2020.

Interest expense for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018 reflect reductions in the carrying value of two owned properties.~~

~~Interest expense decreased $1~~2020 increased $3 million and $6 million ~~for~~primarily due to the ~~three~~increase in debt balances and ~~nine months ended September 30, 2019~~less capitalized interest related to recently completed hotel development projects as compared with the ~~2018 periods due to additional capitalized interest on development projects in progress.~~

2019 period.

Equity income from joint ventures decreased $6 million for both the three and nine months ended September 30, 2019 as compared with the 2018 periods. The decrease for the three months ended September 30, 2019 was primarily due to

~~pre-opening~~

expenses for properties recently opened and properties currently under development of $2 million. In addition, the threat of Hurricane Dorian negatively impacted results at the properties in the Universal Orlando joint venture. The decrease for the nine months ended September 30, 2019 was primarily due to

~~pre-opening~~

~~expenses for properties under development of $8 million partially offset by the improved performance of several properties.~~

~~Net income decreased $8 million and $13 million for the three and nine months ended September 30, 2019 as compared to the 2018 period due to the changes discussed above.~~

Corporate

~~Table of Contents~~

~~Corporate~~

Corporate operations consist primarily of investment income at the Parent Company, operating results of ~~Consolidated Container, corporate~~Altium Packaging, Parent Company interest ~~expenses~~expense and other ~~corporate~~Parent Company administrative costs. 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 trading portfolio.~~

Company.

The following table summarizes the results of operations for Corporate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018~~2019 as presented in Note 1314 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:

													Three Months Ended						Six Months Ended
	Three Months Ended September 30,						Nine Months Ended September 30,						June 30,						June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
(In millions)

Revenues:
Net investment income	$	36		$	5		$	153		$	61
Other revenues		250			223			689			653
Net investment income (loss)													$	110		$	33		$	(56	)	$	117
Investment loss														(1,211	)					(1,211	)
Operating revenues and other														244			223			501			439
Total		286			228			842			714			(857	)		256			(766	)		556
Expenses:
Operating and other		264			244			740			714			260			245			528			476
Interest		31			27			85			81			32			27			63			54
Total		295			271			825			795			292			272			591			530
Income (loss) before income tax		(9	)		(43	)		17			(81	)		(1,149	)		(16	)		(1,357	)		26
Income tax (expense) benefit		1			9			(4	)		14			241			3			284			(5	)
Net income (loss) attributable to Loews Corporation	$	(8	)	$	(34	)	$	13		$	(67	)	$	(908	)	$	(13	)	$	(1,073	)	$	21

Net investment income for the Parent Company increased ~~$31 million and $92~~$77 million for the three ~~and nine~~ months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018 periods~~2019 period primarily due to improved performance of equity based investments in the Parent Company trading ~~portfolio, partially offset by lower~~portfolio. Net investment loss was $56 million for the six months ended June 30, 2020 as compared with net investment income ~~from limited partnership investments~~of $117 million in the 2019 period as a result of ~~lower invested balances.~~

the significant decline in equity based investments in response to the COVID-19 pandemic and related containment measures.

~~Other~~Investment loss of $1.2 billion ($957 million after tax) for the three and six months ended June 30, 2020 was due to the loss recognized upon deconsolidation of Diamond Offshore as a result of its Chapter 11 Filing.

Operating revenues ~~increased $27~~and other include Altium Packaging revenues of $244 million and ~~$36~~$223 million for the three ~~and nine~~ months ended ~~September~~June 30, 2020 and 2019 and $500 million and $437 million for the six months ended June 30, 2020 and 2019. The increase of $21 million for the three months ended June 30, 2020 as compared with the ~~2018 periods, reflecting~~2019 period reflects an increase ~~in Consolidated Container’s operations~~ of ~~$35 million and $43~~$25 million related to acquisitions in ~~2019. For~~2019, partially offset by the ~~three~~pass-through effect of lower year-over-year resin prices and lower volumes. The increase of $63 million for the six months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018~~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 in the ~~increase in revenues was~~first quarter of 2020 for household chemicals, water and beverage, partially offset by the pass-through effect of lower year-over-year resin prices. ~~Consolidated Container’s~~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 ~~Consolidated Container’s~~Altium Packaging’s gross margin returns to the same level as prior to the change in prices.

Index

Operating and other expenses ~~increased $20~~include Altium Packaging operating expenses of $236 million and ~~$26~~$222 million for the three ~~and nine~~ months ended ~~September~~June 30, 2020 and 2019 and $482 million and $428 million for the six months ended June 30, 2020 and 2019, which include depreciation and amortization expense. The increase in operating expenses of $14 million for the three months ended June 30, 2020 as compared with the ~~2018 periods,~~2019 period is primarily due to an increase ~~in Consolidated Container’s expenses~~ of ~~$35 million and $44~~$24 million related to acquisitions in 2019, ~~and operating personnel expenses at Consolidated Container,~~ partially offset by lower ~~corporate overhead expenses.~~ resin prices and lower volumes. The increase in operating expenses of $54 million for the six months ended June 30, 2020 as compared with the 2019 period is primarily due to acquisitions in 2019.

Interest expenses increased $4$5 million and $9 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 as compared with the ~~2018~~2019 periods ~~primarily~~ due to the May of 2020 issuance of the Parent Company’s $500 million aggregate principal amount of 3.2% senior notes due May 15, 2030 and incremental borrowings associated with funding ~~Consolidated Container’s~~Altium Packaging’s 2019 acquisitions.

Diamond Offshore

~~Net results improved $26~~

Contract drilling revenues were $69 million and ~~$80~~$207 million for the three ~~and nine~~ months ended ~~September~~June 30, 2020 and 2019 and $287 million and $434 million for the six months ended June 30, 2020 and 2019. Contract drilling expenses were $69 million and $225 million for the three months ended June 30, 2020 and 2019 and $254 million and $392 million for the six months ended June 30, 2020 and 2019. Results for the three and six months ended June 30, 2020 noted above, and included in our Consolidated Condensed Financial Statements, reflect only the periods through the April 26, 2020 deconsolidation and also reflect lower average daily revenue earned as compared with the ~~2018 periods primarily due to~~2019 periods. Operating and other expenses for the ~~changes discussed above.~~

six months ended June 30, 2020 includes an aggregate asset impairment charge of $774 million ($408 million after tax and noncontrolling interests) recognized in the first quarter of 2020.

LIQUIDITY AND CAPITAL RESOURCES

Parent Company

Parent Company cash and investments, net of receivables and payables, totaled ~~$3.5~~$3.6 billion at ~~September~~June 30, ~~2019~~2020 as compared to ~~$3.1~~$3.3 billion at December 31, ~~2018.~~2019. During the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, we received ~~$817~~$665 million in dividends from ~~our subsidiaries,~~CNA, including a special dividend ~~from CNA~~ of $485 million. Cash ~~inflows also included $183 million from Loews Hotels & Co. Cash~~ outflows during the six months ended June 30, 2020 included the payment of ~~$643~~$491 million to fund treasury stock purchases, ~~and $57~~$36 million of cash dividends to our ~~shareholders.~~shareholders, $87 million of cash contributions to Loews Hotels & Co and $19 million to purchase common shares of CNA. Loews Corporation anticipates providing Loews Hotels & Co additional capital support during the remainder of 2020. As a holding company we depend on dividends from our subsidiaries and returns on our investment portfolio to fund our obligations. We also have an

~~Table of Contents~~

effective ~~registration statement~~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.~~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 subsidiaries outstanding common stock in the open market or otherwise. During the ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, we purchased ~~13.2~~10.7 million shares of Loews Corporation common ~~stock. As of October 25, 2019, we had purchased an additional 1.8 million~~stock and 564,430 shares of ~~Loews~~CNA common ~~stock at an aggregate cost of $90 million. As of October 25, 2019, there were 297,438,996 shares of Loews common stock outstanding.~~

stock.

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, CNA cash flows have been and may continue to be adversely impacted by lower premium volumes, suspensions and cancellations of policies, return of premiums or premium refunds, and increased claim and defense cost payments. 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 ~~$980~~$650 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019 as compared with $868~~2020 and $514 million for the ~~2018 period.~~six months ended June 30, 2019. The increase in cash provided by operating activities was driven by

Index

lower net claim payments, an increase in premiums collected and lower income taxes ~~paid. CNA believes that its present cash flows~~paid, partially offset by a lower level of distributions from ~~operating, investing and financing activities are sufficient to fund its current and expected working capital and debt obligation needs.~~

limited partnerships.

CNA ~~declared and~~ paid dividends of ~~$3.05~~$2.74 per share on its common stock, including a special dividend of $2.00 per share ~~during~~in the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. On ~~October 25, 2019,~~July 31, 2020, CNA’s Board of Directors declared a quarterly dividend of ~~$0.35~~$0.37 per share, ~~on its common stock,~~ payable ~~December 2, 2019~~September 3, 2020 to shareholders of record on ~~November 11, 2019.~~August 17, 2020. 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.

CNA has an effective shelf registration statement under which it may publicly issue debt, equity or hybrid securities from time to time.

Dividends from ~~the~~ 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 ~~(“Department”~~(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 ~~twelve~~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~~June 30, ~~2019,~~2020, CCC was in a positive earned surplus position. The maximum allowable dividend CCC could pay during 2019 that would not be subject to the Department’s prior approval is approximately $1.4 billion, less dividends paid during the preceding twelve months measured at that point in time. CCC paid dividends of ~~$116~~$815 million and $805 million during the ~~three~~six months ended ~~December 31, 2018~~June 30, 2020 and ~~$940 million during the nine months ended September 30,~~ 2019. ~~As of September 30, 2019, CCC is able to pay approximately $327 million of dividends that would not be subject to prior approval of the Department.~~ The actual level of dividends paid in any year is determined after an assessment of available dividend capacity, holding company liquidity and cash needs as well as the impact the dividends will have on the statutory surplus of the applicable insurance company.

Diamond Offshore’s cash provided by operating activities for the nine months ended September 30, 2019 decreased $203 million as compared to the 2018 period, due to lower cash collected from the performance of contract drilling services and higher income tax payments, net of refunds, primarily in Diamond Offshore’s foreign tax jurisdictions. Incremental cash used for operations during the 2019 period was partially offset by a net decrease in cash expenditures related to contract drilling and general and administrative costs.

Diamond Offshore expects capital expenditures for the fourth quarter of 2019 to be approximately $110 million to $130 million for a total spend of approximately $360 million to $380 million in 2019. Capital expenditures in 2019 include spending associated with projects under its capital maintenance and replacement programs, including equipment upgrades for the

~~Ocean BlackHawk~~

~~Ocean BlackHornet~~

~~and~~

~~Ocean Courage~~

~~and other large shipyard projects. In addition, other specific projects for 2019 include approximately $110 million in capitalized costs associated with the reactivation and upgrade of the~~

~~Ocean Onyx~~

~~and approximately $20 million associated with the reactivation of the~~

~~Ocean Endeavor.~~

~~At September 30, 2019, Diamond Offshore has no significant purchase obligations, except for those related to its direct rig operations, which arise during the normal course of business.~~

~~Table of Contents~~

~~As of October 25, 2019, Diamond Offshore had $1.2 billion available under its credit agreements.~~

On September 25, 2019, S&P Global Ratings (“S&P”) downgraded Diamond Offshore’s corporate and senior unsecured notes credit ratings to CCC+ from B. The rating outlook from S&P changed to stable from negative. Diamond Offshore’s current corporate credit rating from Moody’s Investor Services (“Moody’s”) is B2 and its current senior unsecured notes credit rating from Moody’s is B3. The rating outlook from Moody’s is negative. These credit ratings are below investment grade and could raise Diamond Offshore’s cost of financing. Consequently, Diamond Offshore may not be able to issue additional debt in amounts and/or with terms that it considers to be reasonable. These ratings could limit Diamond Offshore’s ability to pursue other business opportunities.

Diamond Offshore will make periodic assessments of its capital spending programs based on industry conditions and will make adjustments if it determines they are required. Diamond Offshore, may, from time to time, issue debt or equity securities, or a combination thereof, to finance capital expenditures, the acquisition of assets and businesses or for general corporate purposes. Diamond Offshore has an effective shelf registration statement under which it may publicly issue debt, equity or hybrid securities from time to time. Diamond Offshore’s ability to access the capital markets by issuing debt or equity securities will be dependent on its results of operations, financial condition, credit ratings, market conditions and other factors beyond its control at the time Diamond Offshore seeks such access.

Boardwalk Pipelines’ cash provided by operating activities ~~increased $81~~decreased $45 million for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 compared to the ~~2018~~2019 period, primarily due to the change in net income and the timing of ~~receivables.~~

receivables and accrued liabilities.

For the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2020 and ~~2018,~~2019, Boardwalk Pipelines’ capital expenditures were ~~$263~~$246 million and ~~$345~~$180 million, consisting of a combination of growth and maintenance capital. ~~During the nine months ended September 30, 2019 and 2018, Boardwalk Pipelines purchased $13 million and $10 million of natural gas to be used as base gas for its pipeline system.~~

As of ~~September~~June 30, ~~2019,~~2020, Boardwalk Pipelines had ~~$260~~$215 million of outstanding borrowings under its credit facility. As of July 31, 2020, Boardwalk Pipelines had $240 million of outstanding borrowings and approximately $1.2 billion of available borrowing capacity under its credit facility. Boardwalk Pipelines anticipates that its existing capital resources, including its revolving credit facility and cash flows from operating activities, will be adequate to fund its operations ~~for 2019. Boardwalk Pipelines may seek to access the debt markets to fund some or all~~and capital expenditures for ~~growth projects, acquisitions or for general corporate purposes.~~2020. Boardwalk Pipelines has an effective shelf registration statement under which it may publicly issue debt securities, warrants or rights from time to time.

~~Boardwalk Pipelines paid distributions~~Certain of ~~$77 million~~the hotels wholly or partially owned by 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. 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 ~~nine months ended September 30, 2019~~renewal, replacement and ~~2018. The Company~~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) defer certain interest and/or principal payments while the hotels operations are 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 under the applicable loan agreements, even under current circumstances. These discussions with lenders are ongoing and may require Loews Hotels & Co to make principal paydowns or provide guaranties of a subsidiary’s debt to otherwise avoid an event of default. Through the date of this Report, there are no loans where a lender has notified Loews Hotels & Co of an event of default.

Additionally, due to temporary suspension of operations and lost revenues in certain joint venture entities, Loews Hotels & Co has received ~~distributions of $77 million and $52 million for the nine months ended September 30, 2019 and 2018. The distributions received~~capital call notices in ~~2019 reflect the Company owning 100% of Boardwalk Pipelines, which increased from 51%~~accordance with the ~~purchase of Boardwalk Pipelines common units on~~underlying joint venture agreements to support the properties’ operations. Through July ~~18, 2018.~~

~~For the nine months ended September 30, 2019, Consolidated Container paid~~31, 2020, Loews Hotels & Co funded approximately ~~$260~~$27 million to ~~complete three acquisitions~~these joint ventures in 2020.

Through July 31, 2020, Loews Hotels & Co received capital contributions of ~~plastic packaging manufacturers located in~~$112 million from Loews Corporation. Additional funding from Loews Corporation during the ~~U.S.~~remainder of 2020 will be needed and ~~Canada, funded with approximately $250 million of debt financing proceeds and available cash, see Notes 2 and 7 for further discussion.~~will depend on numerous factors, including how quickly properties are able to return to sustainable operating levels.

Index

INVESTMENTS

Investment activities of

non-insurance

subsidiaries primarily ~~include~~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 present greater volatility, less liquidity and greater risk than fixed income investments and are included within Results of Operations – Corporate.

We enter into short sales and invest in certain derivative instruments that are used for asset and liability management activities, income enhancements to ~~our~~the 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 ~~our~~the portfolio strategy.

~~Table of Contents~~

Credit exposure associated with

non-performance

by counterparties to ~~our~~ 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 the risk of

non-performance

by monitoring the creditworthiness of counterparties and diversifying derivatives by using multiple counterparties. We occasionally require collateral from ~~our~~ derivative investment counterparties depending on the amount of the exposure and the credit rating of the counterparty.

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, ~~and~~ 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 partially recovered during the second quarter of 2020, there could be continued volatility in its investment portfolio.

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,

2019

2018

2019

2018

(In millions)

Fixed income securities:

Taxable fixed income securities
$
383
$
366
$
1,151
$
1,070

Tax-exempt
fixed income securities

79

93

241

298

Total fixed income securities

462

459

1,392

1,368

Limited partnership and common stock investments

18

23

157

96

Other, net of investment expense

7

5

24

19

Pretax net investment income
$
487
$
487
$
1,573
$
1,483



Fixed income securities after tax and noncontrolling interests
$
337
$
338
$
1,018
$
1,010



Net investment income after tax and noncontrolling interests
$
356
$
357
$
1,147
$
1,091



Effective income yield for the fixed income securities portfolio, before tax

4.8
%
4.7
%
4.8
%
4.7
%
Effective income yield for the fixed income securities portfolio, after tax

3.9
%
3.9
%
3.9
%
3.9
%
Limited partnership and common stock return

0.9
%
0.9
%
7.7
%
4.0
%

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020			2019
(In millions)

Fixed income securities:
Taxable fixed income securities	$	360	$	385	$	731		$	768
Tax-exempt fixed income securities		80		80		158			162
Total fixed income securities		440		465		889			930
Limited partnership investments		44		37		(26	)		113
Common stock		40		6		(15	)		26
Other, net of investment expense		10		7		15			17
Pretax net investment income	$	534	$	515	$	863		$	1,086
Fixed income securities after tax and noncontrolling interests	$	323	$	341	$	651		$	681
Net investment income after tax and noncontrolling interests	$	385	$	376	$	634		$	791

Effective income yield for the fixed income securities
portfolio, before tax	4.6	%	4.8	%	4.6	%	4.8	%
Effective income yield for the fixed income securities
portfolio, after tax	3.8	%	3.9	%	3.8	%	3.9	%
Limited partnership and common stock return	5.0	%	2.1	%	(2.3	)%	6.8	%

~~Net~~

Index

CNA’s pretax net investment income ~~after tax and noncontrolling interests~~ for the three months ended ~~September~~June 30, ~~2019 decreased $1~~2020 increased $19 million as compared with the ~~2018 period. Net investment income after tax and noncontrolling interests increased $56 million for the nine months ended September 30,~~ 2019 ~~as compared with the 2018~~ period, driven by limited partnership and common stock ~~returns.~~

returns offset by lower yields on the fixed income portfolio. The limited partnership returns for the three months ended June 30, 2020 include limited partnerships representing 55% reporting on a current basis with no reporting lag and 45% reporting on a lag, primarily three months or less. Limited partnerships reporting on a current basis include substantially all of CNA’s hedge funds.

CNA’s pretax net investment income decreased $223 million for the six months ended June 30, 2020 as compared with the 2019 period, driven by limited partnership and common stock returns and lower yields in the fixed income portfolio.

~~Table of Contents~~

~~Net~~ Investment Gains (Losses)

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

													Three Months Ended						Six Months Ended
	Three Months Ended September 30,						Nine Months Ended September 30,						June 30,						June 30,
	2019			2018			2019			2018			2020			2019			2020			2019
(In millions)

Investment gains (losses):
Fixed maturity securities:
Corporate and other bonds	$	7		$	8					$	36		$	(40	)	$	(7	)	$	(119	)	$	(7	)
States, municipalities and political subdivisions		1			9		$	13			35			33			4			33			12
Asset-backed		(5	)		(7	)		(19	)		(39	)		24						28			(14	)
Total fixed maturity securities		3			10			(6	)		32			17			(3	)		(58	)		(9	)
Non-redeemable preferred stock		7			2			60			(23	)		63			11			(70	)		53
Short term and other		(2	)		3			(13	)		12			(11	)		(6	)		(19	)		(11	)
Total investment gains		8			15			41			21
Income tax (expense)		(2	)		(3	)		(11	)		(2	)
Total investment gains (losses)														69			2			(147	)		33
Income tax (expense) benefit														(16	)		(1	)		30			(9	)
Amounts attributable to noncontrolling interests		(1	)		(1	)		(3	)		(2	)		(6	)					12			(2	)
Net investment gains attributable to Loews Corporation	$	5		$	11		$	27		$	17

Investment gains (losses) attributable to Loews Corporation													$	47		$	1		$	(105	)	$	22

~~Net~~CNA’s investment gains ~~after tax and noncontrolling interests~~(losses) increased $67 million for the three months ended ~~September~~June 30, ~~2019 decreased $6 million~~2020 as compared with the ~~2018 period. The decrease was driven by higher OTTI losses recognized in earnings.~~

~~Net investment gains after tax and noncontrolling interests for the nine months ended September 30,~~ 2019 ~~increased $10 million as compared with the 2018~~ period. The increase was driven by the favorable change in fair value of

non-redeemable

preferred stock ~~partially offset~~and higher net realized investment gains on sales of fixed maturity securities. Pretax impairment losses of $11 million on available-for-sale securities were recognized in the current quarter.

CNA’s investment gains (losses) decreased $180 million for the six months ended June 30, 2020 as compared with the 2019 period. The decrease was driven by higher ~~OTTI~~impairment losses and the unfavorable change in fair value of non-redeemable preferred stock. Pretax impairment losses of $103 million on available-for-sale securities and $13 million of credit losses on mortgage loans were recognized ~~in earnings.~~for the six months ended June 30, 2020.

Further information on CNA’s investment gains and ~~losses, including OTTI~~ losses is set forth in Note 3 of the Notes to Consolidated Condensed Financial Statements included under Item 1.

Index

Portfolio Quality

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

										June 30, 2020					December 31, 2019
												Net					Net
												Unrealized					Unrealized
	September 30, 2019				December 31, 2018					Estimated		Gains			Estimated		Gains
	Estimated Fair Value		Net Unrealized Gains (Losses)		Estimated Fair Value		Net Unrealized Gains (Losses)			Fair Value		(Losses)			Fair Value		(Losses)
(In millions)

U.S. Government, Government agencies and Government-sponsored enterprises	$	4,432	$	114	$	4,334	$	(24	)
U.S. Government, Government agencies and
Government-sponsored enterprises										$	3,997	$	149		$	4,136	$	95
AAA		3,057		360		3,027		245			3,599		443			3,254		349
AA		6,731		860		6,510		512			6,717		920			6,663		801
A		9,040		1,112		8,768		527			9,257		1,218			9,062		1,051
BBB		16,718		1,670		14,205		274			16,867		1,742			16,839		1,684
Non-investment grade		2,481		85		2,702		(73	)		2,338		(38	)		2,253		101
Total	$	42,459	$	4,201	$	39,546	$	1,461		$	42,775	$	4,434		$	42,207	$	4,081

As of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, 1% of CNA’s fixed maturity portfolio was rated internally. AAA rated securities included ~~$1.3~~$1.9 billion and $1.5 billion of

~~pre-refunded~~

pre-funded municipal bonds as of ~~September~~June 30, ~~2019~~2020 and December 31, ~~2018.~~2019.

~~Table of Contents~~

The following table presents CNA’s

available-for-sale

fixed maturity securities in a gross unrealized loss position by ratings distribution:

September 30, 2019

Estimated
Fair Value

Gross
Unrealized
Losses

(In millions)

U.S. Government, Government agencies and Government-sponsored enterprises
$
171
$
1

AAA

35

1

AA

29

A

456

4

BBB

568

12

Non-investment
grade

609

32

Total
$
1,868
$
50

			Gross
	Estimated		Unrealized
June 30, 2020	Fair Value		Losses
(In millions)

U.S. Government, Government agencies and
Government-sponsored enterprises	$	7
AAA		40	$	1
AA		238		9
A		919		35
BBB		1,729		111
Non-investment grade		1,139		116
Total	$	4,072	$	272

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, 2019

Estimated
Fair Value

Gross
Unrealized
Losses

(In millions)

Due in one year or less
$
27

Due after one year through five years

377
$
12

Due after five years through ten years

1,127

22

Due after ten years

337

16

Total
$
1,868
$
50

			Gross
	Estimated		Unrealized
June 30, 2020	Fair Value		Losses
(In millions)

Due in one year or less	$	158	$	16
Due after one year through five years		1,154		73
Due after five years through ten years		2,168		136
Due after ten years		592		47
Total	$	4,072	$	272

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

Index

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.

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, 2019				December 31, 2018				June 30, 2020			December 31, 2019
	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	$	18,003		9.0	$	16,212		8.4	$	18,370	8.8	$	18,015	8.9
Other investments		26,655		4.1		25,428		4.4		26,165	4.1		26,813	4.1
Total	$	44,658		6.0	$	41,640		6.0	$	44,535	6.0	$	44,828	6.0

~~Table of Contents~~

~~The~~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, ~~2018.~~2019.

Short Term Investments

The carrying value of the components of CNA’s Short term investments are presented in the following table:

					June 30,		December 31,
	September 30, 2019		December 31, 2018		2020		2019
(In millions )

Short term investments:
Commercial paper		$ 1,004		$ 705			$	1,181
U.S. Treasury securities		256		185	$	1,251		364
Other		234		396		207		316
Total short term investments		$ 1,494		$ 1,286	$	1,458	$	1,861

Beginning in early March and continuing into the second quarter of 2020, CNA shifted its commercial paper holdings to U.S. Treasury securities.

In addition to short term investments, CNA held $586 million and $242 million of cash as of June 30, 2020 and December 31, 2019.

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, ~~2018~~2019 for further information.

Index

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.

FORWARD-LOOKING STATEMENTS

Investors are cautioned that certain statements contained in this Report as well as ~~some statements~~ in other SEC filings and periodic press releases and ~~some~~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 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, ~~2018,~~2019, Part II, Item 1A, Risk Factors in our Quarterly Report on Form

10-Q

for the quarter ended March 31, ~~2019~~2020 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.

~~Table of Contents~~

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

There were no material changes in our market risk components as of ~~September~~June 30, ~~2019.~~2020. 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, ~~2018~~2019 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. 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~~June 30, ~~2019.~~2020.

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~~June 30, ~~2019~~2020 that have materially affected or that are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Information on our legal proceedings is set forth in Note 1112 to the Consolidated Condensed Financial Statements included under Part I, Item 1.

Index

Item 1A. Risk Factors.

Our Annual Report on Form

10-K

for the year ended December 31, ~~2018~~2019 and our Quarterly Report on Form

10-Q

for the quarter ended March 31, ~~2019~~2020 include a detailed discussion of certain risk factors facing the company. NoThe information presented below updates ~~or additions have been made to~~and supplements such risk factors and should be read in conjunction with the Risk Factors included under Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 and Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

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

The coronavirus disease (“COVID-19”) pandemic and measures to mitigate the spread of the virus have resulted in significant risk across CNA’s enterprise, which have had, and may continue to have, material adverse impacts on its business, results of operations and financial condition, the extent of which cannot be determined with any certainty at this time.

The COVID-19 outbreak, and actions seeking to mitigate the spread of the virus, accelerated in both breadth and scope through the month of February 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’ spread continues to accelerate. Areas where the virus has largely been brought under control continue to be at risk of ~~September 30, 2019.~~a second wave. Accordingly, it remains the case that several 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 latter half of 2020 or thereafter, CNA’s net written premiums and net earned premiums may continue to be depressed, which may have a material impact on its business, results of operations and financial condition, the extent of which cannot be determined with any certainty at this time.

While CNA’s losses incurred during the first six 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 six 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 continue to rapidly evolve, 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 additional or extended shelter in place restrictions and business closures, could cause CNA to experience additional COVID-19 related catastrophe losses in future quarters, which could be material.

Financial markets and investments: The COVID-19 pandemic has also significantly impacted financial markets. As investors have embarked on a flight to quality, risk free rates have decreased. In addition, liquidity concerns and overall economic uncertainties drove increased volatility in credit spreads and equity markets. While government actions to date have provided some stability to financial markets, economic prospects in the short term continue to be depressed and 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, particularly in the U.S., 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, and may result in additional volatility or losses in its investment portfolio, which could be material.

The value of CNA’s fixed maturity investments is subject to risk that certain investments may default or become

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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-19 and mitigating 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 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.

Claims and related litigation: Claim activity and related litigation has increased, and may continue to increase significantly, in certain lines of business as a result of the pandemic and mitigating actions. CNA has experienced, and is likely to continue to experience, increased frequency in claim submissions in product lines that are implicated by the virus and the mitigating activities taken by its 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 half of 2020 and may experience continued losses, which could be material.

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

CNA has also begun to incur substantial expenses related to litigation activity in connection with COVID-related legal claims. These actions primarily relate to denial of claims submitted as a result of the pandemic and the mitigating actions under commercial property policies for business interruption coverage, including lockdowns and closing of certain businesses. The significance of such litigation, both in substance and volume, and the resultant activities 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.

Regulatory impact: The regulatory environment is rapidly evolving in direct response to the pandemic and the mitigating actions being taken. Numerous regulatory authorities to which 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 may have a material impact on its business, results of operations and financial condition, the extent of which cannot be determined with any certainty at this time.

Risks Related to Us 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 recent outbreak of COVID-19 is materially negatively impacting worldwide economic and commercial activity and financial markets, as well as 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 Pipelines may also be unable 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 possible 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

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risk. The full impact of COVID-19 is unknown and is rapidly evolving. 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 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.

Boardwalk Pipelines is exposed to credit risk relating to default or bankruptcy by its customers.

Credit risk relates to the risk of loss resulting from the default by a customer of its contractual obligations or the customer filing bankruptcy. Boardwalk Pipelines has credit risk with both its existing customers and those supporting its growth projects. Credit risk exists in relation to its growth projects, both because the expansion customers make long term firm capacity commitments to Boardwalk Pipelines for such projects and certain of those expansion customers agree to provide credit support as construction for such projects progresses. If a customer fails to post the required credit support or defaults during the growth project process, overall returns on the project may be reduced to the extent an adjustment to the scope of the project occurs or Boardwalk Pipelines is unable to replace the defaulting customer with a customer willing to pay similar rates. In 2019, Boardwalk Pipelines had an expansion customer declare bankruptcy for which it was able to use the credit support obtained during the growth project process to cover a portion of their remaining long-term commitment.

Natural gas producers comprise a significant portion of Boardwalk Pipelines’ revenues and have supported several of its growth projects. As of June 30, 2020, approximately 35% of Boardwalk Pipelines’ projected operating revenues under committed firm agreements will be generated from contracts with natural gas producers. During the first quarter of 2020, the prices of oil and natural gas declined significantly because of worldwide competition in the oil markets and continued increases in domestic oil and gas supplies. Should the prices of natural gas and oil remain at current levels for a sustained period of time or decline again, Boardwalk Pipelines could be exposed to increased credit risk associated with its producer customer group, including the increased risk of customers filing for bankruptcy protection, which could materially adversely impact its business.

Boardwalk Pipelines’ credit exposure also includes receivables for services provided, future performance under firm agreements and volumes of gas owed by customers for imbalances or gas loaned by Boardwalk Pipelines to them under certain no-notice and parking and lending services.

Changes in energy prices, including natural gas, oil and natural gas liquids and hydrocarbons (“NGLs”), impact the supply of and demand for those commodities, which could impact Boardwalk Pipelines’ business.

Boardwalk Pipelines’ customers, especially producers and certain plant operators, are directly impacted by changes in commodity prices. The prices of natural gas, oil and NGLs fluctuate in response to changes in both domestic and worldwide supply and demand, market uncertainty and a variety of additional factors, including for natural gas the realization of potential liquefied natural gas exports and demand growth within the power generation market. The declines in the pricing levels of natural gas, oil and NGLs prices experienced during the first quarter of 2020 and in recent history have adversely affected the businesses of Boardwalk Pipelines’ producer customers and historically, has reduced the demand for its services and could result in defaults or the non-renewal of its contracted capacity when existing contracts expire. The current erosion in commodity prices could affect the operations of certain of Boardwalk Pipelines’ industrial customers, including the temporary closure or reduction of plant operations, resulting in decreased deliveries to those customers. Future increases in the price of natural gas and NGLs could make alternative energy and feedstock sources more competitive and reduce demand for natural gas and NGLs. A reduced level of demand for natural gas and NGLs could reduce the utilization of capacity on Boardwalk Pipelines’ systems and reduce the demand for its services.

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 impact on Loews Hotels & Co’s results of operations, 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 deferred the start of their seasons with no spectators anticipated to be permitted in attendance. The spread of the coronavirus, including its resurgence, and the containment

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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 all but four hotels during the first half of 2020, two of which are owned properties and two of which are managed hotels. Along with the four Loews Hotels & Co hotels that remained open, 18 have reopened, 6 of which are owned properties, 9 are joint venture properties and 3 are managed; however, occupancy rates at all of these 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 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 owns and leases, relative 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 us 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 on 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. It has received and may receive additional demands or requests from labor unions that represent our 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

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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, are being negatively impacted and its sales to those customers are being 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

The COVID-19 pandemic is having widespread impacts on the way we and our subsidiaries operate.

The spread of COVID-19 and mitigating measures has had, and continues 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 sectors and countries, including the sectors and countries in which we and our subsidiaries operate. Because of the size and breadth of the pandemic, all of the direct and indirect consequences of COVID-19 are not yet known and 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 of our and our subsidiaries’ employees are working from home, which may disrupt their productivity. Similar workplace restrictions are in place at many of our and our subsidiaries’ critical vendors, which may result in interruptions in service delivery or failure by vendors to properly perform required services. In addition, having shifted to remote working arrangements and being more dependent on internet and telecommunications access and capabilities, we and our subsidiaries also face a heightened risk of cybersecurity attacks or data security incidents. We and our subsidiaries also self-insure our health benefits and therefore may experience increased medical claims as a result of the pandemic.

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

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

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, 2019 - July 31, 2019

341,240

$ 54.18

N/A

N/A

August 1, 2019 - August 31, 2019

1,620,985

48.55

N/A

N/A

September 1, 2019 - September 30, 2019

1,431,981

49.78

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)

April 1, 2020 -
April 30, 2020	N/A	N/A	N/A	N/A

May 1, 2020 -
May 31, 2020	200,000	$ 28.58	N/A	N/A

June 1, 2020 -
June 30, 2020	798,380	33.48	N/A	N/A

~~Table of Contents~~

Item 6. Exhibits.

	Exhibit
Description of Exhibit	Number

~~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 document			101.INS *

Inline XBRL Taxonomy Extension Schema	101.SCH *

~~Inline XBRL Taxonomy Extension Schema~~			101.SCH *

Inline XBRL Taxonomy Extension Calculation Linkbase			101.CAL *

Inline XBRL Taxonomy Extension Definition Linkbase			101.DEF *

Inline XBRL Taxonomy Label Linkbase	101.LAB *

~~Inline XBRL Taxonomy Label Linkbase~~			101.LAB *

Inline XBRL Taxonomy Extension Presentation Linkbase			101.PRE *

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)			104*

*Filed herewith.

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SIGNATURES

~~Table of Contents~~

~~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: ~~October 28, 2019~~August 3, 2020	By:	/s/ David B. Edelson
		DAVID B. EDELSON
		Senior Vice President and
		Chief Financial Officer
		(Duly authorized officer
		and principal financial
		officer)


				Loews Corporation Shareholders
												Accumulated			Common
						Additional						Other			Stock
				Common		Paid-in			Retained			Comprehensive			Held in			Noncontrolling
	Total			Stock		Capital			Earnings			Income (Loss)			Treasury			Interests
(In millions)
Balance, July 1, 2018	$	21,858		$	3	$	3,809		$	16,532		$	(625	)	$	(808	)	$	2,947
Net income		289								278									11
Other comprehensive loss		(151	)										(133	)					(18	)
Dividends paid ($0.0625 per share)		(30	)							(20	)								(10	)
Purchases of Loews treasury stock		(88	)													(88	)
Stock-based compensation		11					9												2
Other		(3	)				(5	)											2
Balance, September 30, 2018	$	21,886		$	3	$	3,813		$	16,790		$	(758	)	$	(896	)	$	2,934

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 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


Nine Months Ended September 30	2019			2018
(In millions)
Operating Activities:
Net income	$	660		$	917
Adjustments to reconcile net income to net cash provided (used) by operating activities, net		747			1,121
Changes in operating assets and liabilities, net:
Receivables		179			18
Deferred acquisition costs		(37	)		(24	)
Insurance reserves		337			108
Other assets		(386	)		(169	)
Other liabilities		315			(75	)
Trading securities		(544	)		1,499
Net cash flow provided by operating activities		1,271			3,395
Investing Activities:
Purchases of fixed maturities		(7,053	)		(8,244	)
Proceeds from sales of fixed maturities		4,872			6,622
Proceeds from maturities of fixed maturities		2,116			1,838
Purchases of limited partnership investments		(167	)		(381	)
Proceeds from sales of limited partnership investments		680			382
Purchases of property, plant and equipment		(743	)		(731	)
Acquisitions		(257	)		(14	)
Dispositions		137			110
Change in short term investments		26			(126	)
Other, net		(95	)		(173	)
Net cash flow used by investing activities		(484	)		(717	)
Financing Activities:
Dividends paid		(57	)		(60	)
Dividends paid to noncontrolling interests		(88	)		(110	)
Purchases of Loews treasury stock		(643	)		(889	)
Purchases of subsidiary stock from noncontrolling interests		(18	)
Purchase of Boardwalk Pipeline s common units					(1,504	)
Principal payments on debt		(1,796	)		(780	)
Issuance of debt		1,870			693
Other, net		(15	)		75
Net cash flow used by financing activities		(747	)		(2,575	)
Effect of foreign exchange rate on cash		(3	)		(4	)

Net change in cash		37			99
Cash, beginning of period		405			472
Cash, end of period	$	442		$	571

	September 30, 2019				December 31, 2018
	Cost or		Estimated		Cost or		Estimated
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
(In millions)
Due in one year or less	$	1,071	$	1,091	$	1,350	$	1,359
Due after one year through five years		10,992		11,470		7,979		8,139
Due after five years through ten years		13,694		14,711		16,859		16,870
Due after ten years		12,496		15,182		11,893		13,174
Total	$	38,253	$	42,454	$	38,081	$	39,542


	September 30, 2019							December 31, 2018
	Contractual/							Contractual/
	Notional		Estimated Fair Value					Notional		Estimated Fair Value
	Amount		Asset		(Liability)			Amount		Asset		(Liability)
(In millions)
With hedge designation:
Interest rate swaps	$	715			$	(13	)	$	500	$	11
Without hedge designation:
Equity markets:
Options – purchased		150	$	4					213		18
– written		98				(3	)		239			$	(17	)
Commodity futures – long									32
Embedded derivative on funds withheld liability		170				(9	)		172		4


Year Ended December 31
(In millions)
2019	$	75
2020		79
2021		79
2022		68
2023		57
Thereafter		344
Total	$	702


	Operating
As of September 30, 2019	Leases
(In millions)
2019 (a)	$	25
2020		111
2021		109
2022		98
2023		87
Thereafter		435
Total		865
Less: discount		171
Total lease liabilities	$	694


																Total
																Accumulated
	OTTI			Unrealized									Foreign			Other
	Gains			Gains (Losses)			Cash Flow			Pension			Currency			Comprehensive
	(Losses)			on Investments			Hedges			Liability			Translation			Income (Loss)
(In millions)
Balance, July 1, 2018	$	17		$	244		$	13		$	(774	)	$	(125	)	$	(625	)
Other comprehensive income (loss) before reclassifications, after tax of $0, $40, $(2), $0 and $0		(1	)		(148	)											(149	)
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $0, $2, $0, $(1) and $0					(10	)					8						(2	)
Other comprehensive income (loss)		(1	)		(158	)		-			8			-			(151	)
Amounts attributable to noncontrolling interests					17						1						18
Balance, September 30, 2018	$	16		$	103		$	13		$	(765	)	$	(125	)	$	(758	)


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)		-			41			(4	)		10			(31	)		16
Amounts attributable to noncontrolling interests					(5	)								3			(2	)
Balance, September 30, 2019	$	18		$	953		$	(11	)	$	(770	)	$	(173	)	$	17


																Total
	OTTI Gains			Unrealized Gains (Losses)			Cash Flow			Pension			Foreign Currency			Accumulated Other Comprehensive
	(Losses)			on Investments			Hedges			Liability			Translation			Income (Loss)
(In millions)
Balance, January 1, 2018, as reported	$	22		$	673		$	-		$	(633	)	$	(88	)	$	(26	)
Cumulative effect adjustment from changes in accounting standards, after tax of $0, $8, $0, $0 and $0		4			98						(130	)					(28	)
Balance, January 1, 2018, as adjusted		26			771			-			(763	)		(88	)		(54	)
Other comprehensive income (loss) before reclassifications, after tax of $3, $190, $(4), $0 and $0		(12	)		(718	)		12						(41	)		(759	)
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $0 , $7, $0, $(6) and $0		1			(28	)		2			27						2
Other comprehensive income (loss)		(11	)		(746	)		14			27			(41	)		(757	)
Amounts attributable to noncontrolling interests		1			78						(1	)		4			82
Purchase of Boardwalk Pipelines common units								(1	)		(28	)					(29	)
Balance, September 30, 2018	$	16		$	103		$	13		$	(765	)	$	(125	)	$	(758	)


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


	CNA			Diamond			Boardwalk			Loews
Three Months Ended September 30, 2019	Financial			Offshore			Pipelines			Hotels & Co			Corporate			Total
(In millions)
Revenues:

Insurance premiums	$	1,890														$	1,890
Net investment income		487		$	2								$	36			525
Investment gains		8															8
Non-insurance warranty revenue		292															292
Operating revenues and other		9			249		$	296		$	156			250			960
Total		2,686			251			296			156			286			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			322			212			145			264			1,234
Interest		31			31			45			6			31			144
Total		2,559			353			257			151			295			3,615
Income (loss) before income tax		127			(102	)		39			5			(9	)		60
Income tax (expense) benefit		(20	)		10			(10	)		(2	)		1			(21	)
Net income (loss)		107			(92	)		29			3			(8	)		39
Amounts attributable to noncontrolling interests		(11	)		44												33
Net income (loss) attributable to Loews Corporation	$	96		$	(48	)	$	29		$	3		$	(8	)	$	72


Nine Months Ended September 30, 2019	Specialty			Commercial			International			Total
(In millions, except %)

Gross written premiums	$	5,191		$	2,825		$	837		$	8,853
Gross written premiums excluding third party captives		2,263			2,742			837			5,842
Net written premiums		2,143			2,536			709			5,388
Net earned premiums		2,061			2,339			729			5,129
Net investment income		410			480			47			937
Core income		483			356			14			853

Other performance metrics:
Loss and loss adjustment expense ratio		58.1	%		67.6	%		64.7	%		63.4	%
Expense ratio		32.6			32.7			37.5			33.3
Dividend ratio		0.2			0.6						0.4
Combined ratio		90.9	%		100.9	%		102.2	%		97.1	%


Rate		4	%		3	%		7	%		4	%
Renewal premium change		6			4			5			5
Retention		88			86			69			83
New business	$	274		$	522		$	207		$	1,003

Nine Months Ended September 30, 2018

Gross written premiums	$	5,222		$	2,563		$	884		$	8,669
Gross written premiums excluding third party captives		2,130			2,483			884			5,497
Net written premiums		2,062			2,339			762			5,163
Net earned premiums		2,039			2,278			739			5,056
Net investment income		376			450			43			869
Core income		531			403			17			951

Other performance metrics:
Loss and loss adjustment expense ratio		55.1	%		63.0	%		65.0	%		60.1	%
Expense ratio		31.8			33.3			36.8			33.2
Dividend ratio		0.2			0.7						0.4
Combined ratio		87.1	%		97.0	%		101.8	%		93.7	%


Rate		2	%		1	%		3	%		2	%
Renewal premium change		5			5			6			5
Retention		84			85			79			84
New business	$	266		$	462		$	247		$	975


(In millions)

Long term care active life reserve - change in estimated reserve margin

September 30, 2018 estimated margin	$	182

Changes in underlying discount rate assumptions		(280	)
Changes in underlying morbidity assumptions		32
Changes in underlying persistency assumptions and inforce policy inventory		(234	)
Changes in underlying premium rate action assumptions		58
Changes in underlying expense and other assumptions		26

September 30, 2019 Premium Deficiency	$	(216	)


September 30, 2019	Claim and claim adjustment expenses		Future policy benefits		Total
(In millions)

Long term care	$	2,840	$	9,415	$	12,255
Structured settlement annuities		519				519
Other		13				13
Total		3,372		9,415		12,787
Shadow adjustments (a)		168		2,664		2,832
Ceded reserves (b)		167		226		393
Total gross reserves	$	3,707	$	12,305	$	16,012


December 31, 2018

Long term care	$	2,761	$	9,113	$	11,874
Structured settlement annuities		530				530
Other		14				14
Total		3,305		9,113		12,418
Shadow adjustments (a)		115		1,250		1,365
Ceded reserves (b)		181		234		415
Total gross reserves	$	3,601	$	10,597	$	14,198