What changed in this filing

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Item 1. Financial Statements

2023-05-01 compared with 2022-10-31 · 332 added, 388 removed, 566 unchanged (56% of the section changed)

2 unchanged sentences

CONSOLIDATED CONDENSED BALANCE SHEETS

September 30, December 31,

March 31, December 31,

(Dollar amounts in millions, except per share data)

34 unchanged sentences

Retained earnings 15,293 14,931

Accumulated other comprehensive income (loss) ( 3,803 ) 186

Accumulated other comprehensive loss ( 3,062 ) ( 3,320 )

14,949 14,361

8 unchanged sentences

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended March 31 2023 2022

(In millions, except per share data)

1 unchanged sentence

Net investment income 569 432

Investment gains (losses) ( 96 ) 22 ( 166 ) 657

Investment losses ( 35 ) ( 11 )

Non-insurance warranty revenue 407 382

1 unchanged sentence

Total 3,783 3,402

Insurance claims and policyholders’ benefits 1,665 1,632 4,703 4,684

Insurance claims and policyholders’ benefits (re-measurement gain of $ 1 and $ 5 )

Amortization of deferred acquisition costs 379 344

1 unchanged sentence

Operating expenses and other 781 716

Equity method income ( 28 ) ( 25 )

Interest 95 96

14 unchanged sentences

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended March 31 2023 2022

(In millions)

2 unchanged sentences

Net unrealized losses on investments with an allowance for credit losses ( 8 ) ( 4 )

Net unrealized losses on other investments ( 1,327 ) ( 138 ) ( 4,284 ) ( 465 )

Total unrealized losses on investments ( 1,329 ) ( 138 ) ( 4,292 ) ( 465 )

Unrealized gains on cash flow hedges 4 2 28 14

Net unrealized gains (losses) on other investments 670 ( 2,643 )

Total unrealized gains (losses) on investments 662 ( 2,647 )

Impact of changes in discount rates used to measure long-duration contract liabilities ( 396 ) 1,635

Unrealized gains (losses) on cash flow hedges ( 2 ) 18

Pension and postretirement benefits 9 7

Foreign currency translation 16 ( 15 )

Other comprehensive loss ( 1,425 ) ( 153 ) ( 4,435 ) ( 438 )

Other comprehensive income (loss) 289 ( 1,002 )

Comprehensive income (loss) 693 ( 650 )

8 unchanged sentences

(In millions)

Balance, July 1, 2021

$ 19,398 $ 3 $ 3,121 $ 15,132 $ 327 $ ( 500 ) $ 1,315

Net income 246 220 26

Other comprehensive loss ( 153 ) ( 136 ) ( 17 )

Dividends paid ($ 0.0625 per share)

( 27 ) ( 16 ) ( 11 )

Purchases of Loews Corporation treasury stock ( 333 ) ( 333 )

Stock-based compensation ( 2 ) ( 2 )

Balance, September 30, 2021

Balance, January 1, 2022, as reported

$ 19,175 $ 2 $ 2,885 $ 14,776 $ 186 $ ( 3 ) $ 1,329

Balance, July 1, 2022

Cumulative effect adjustments from changes in

accounting standards (Note 1) ( 1,704 ) ( 22 ) ( 1,506 ) ( 176 )

Balance, January 1, 2022, as adjusted

17,471 2 2,885 14,754 ( 1,320 ) ( 3 ) 1,153

7 unchanged sentences

Other ( 1 ) ( 1 )

Balance, September 30, 2022

$ 14,653 $ 2 $ 2,886 $ 15,377 $ ( 3,803 ) $ ( 616 ) $ 807

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY

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, 2021

$ 19,181 $ 3 $ 3,133 $ 14,150 $ 581 $ ( 7 ) $ 1,321

Net income 1,332 1,235 97

Other comprehensive loss ( 438 ) ( 390 ) ( 48 )

Dividends paid ($ 0.1875 per share)

Balance, March 31, 2022

$ 16,576 $ 2 $ 2,859 $ 15,059 $ ( 2,216 ) $ ( 132 ) $ 1,004

Purchase of subsidiary stock from noncontrolling interests ( 18 ) ( 18 )

Purchases of Loews Corporation treasury stock ( 826 ) ( 826 )

Stock-based compensation 5 ( 11 ) 16

Other ( 3 ) ( 2 ) ( 1 )

Balance, September 30, 2021

Balance, January 1, 2023, as reported

$ 15,478 $ 2 $ 2,748 $ 15,144 $ ( 3,284 ) $ ( 12 ) $ 880

Balance, January 1, 2022

Cumulative effect adjustments from changes in

accounting standards (Note 1) ( 277 ) ( 213 ) ( 36 ) ( 28 )

Balance, January 1, 2023, as adjusted

15,201 2 2,748 14,931 ( 3,320 ) ( 12 ) 852

Net income 404 375 29

Other comprehensive loss ( 4,435 ) ( 3,989 ) ( 446 )

Other comprehensive income 289 258 31

Dividends paid ($ 0.0625 per share)

4 unchanged sentences

Other ( 7 ) ( 6 ) 2 ( 3 )

Balance, September 30, 2022

Balance, March 31, 2023

$ 15,314 $ 2 $ 2,716 $ 15,293 $ ( 3,062 ) $ ( 498 ) $ 863

2 unchanged sentences

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30

Three Months Ended March 31

(In millions)

19 unchanged sentences

Purchases of property, plant and equipment ( 159 ) ( 121 )

Dispositions 16 52

(Investment in) sale of interest in Altium Packaging ( 79 ) 417

Change in short term investments 647 696

22 unchanged sentences

transportation and storage of natural gas and natural gas liquids (Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”), a wholly owned subsidiary) and the operation of a chain of hotels (Loews Hotels Holding Corporation (“Loews Hotels & Co”), a wholly owned subsidiary).

Unless the context otherwise requires, the term “Company” means Loews Corporation including its consolidated subsidiaries, the term “Parent Company” means Loews Corporation excluding its subsidiaries, the term “Net income (loss) attributable to Loews Corporation” means Net income (loss) attributable to Loews Corporation shareholders and the term “subsidiaries” means Loews Corporation’s consolidated subsidiaries.

On April 1, 2021, Loews Corporation sold 47 % of Altium Packaging LLC (“Altium Packaging”), previously a 99 % owned subsidiary, for $ 420 million in cash consideration, and following the transaction Loews Corporation deconsolidated Altium Packaging.

Effective April 1, 2021, Loews Corporation’s investment in Altium Packaging is accounted for under the equity method of accounting, with the investment reported in Other assets on the Consolidated Condensed Balance Sheets and equity income (loss) reported in Operating expenses and other on the Consolidated Condensed Statements of Operations.

The transaction resulted in a gain of $ 555 million ($ 438 million after tax) for the nine months ended September 30, 2021, which was recorded in Investment gains (losses) on the Consolidated Condensed Statement of Operations.

For additional information regarding the deconsolidation of Altium Packaging, see Note 2 of the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

In the opinion of management, the accompanying unaudited Consolidated Condensed Financial Statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s financial position as of September 30, 2022 and December 31, 2021 and results of operations, comprehensive income (loss) and changes in shareholders’ equity for the three and nine months ended September 30, 2022 and 2021 and cash flows for the nine months ended September 30, 2022 and 2021, in each case in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Net income for the third quarter and first nine months of each of the years is not necessarily indicative of net income for that entire year.

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

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 March 31, 2023 and December 31, 2022 and results of operations, comprehensive income (loss), changes in shareholders’ equity and cash flows for the three months ended March 31, 2023 and 2022, in each case in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Net income for the first quarter of each of the years is not necessarily indicative of net income 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, 2022.

2 unchanged sentences

Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

For the three and nine months ended September 30, 2022 and 2021 there were no shares attributable to employee stock-based compensation awards excluded from the diluted weighted average shares outstanding amounts because the effect would have been antidilutive.

Recently issued Accounting Standards Updates (“ASUs”) – In August of 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-12, “Financial Services – Insurance (Topic 944):

For the three months ended March 31, 2023 and 2022 there were no shares attributable to employee stock-based compensation awards excluded from the diluted weighted average shares outstanding amounts because the effect would have been antidilutive.

Accounting changes – In August of 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-12, “Financial Services – Insurance (Topic 944):

Targeted Improvements to the Accounting for Long-Duration Contracts.” The updated accounting guidance requires changes to the measurement and disclosure of long-duration contracts.

For the Company, this includes CNA’s l ong term care a nd fully-ceded single premium immediate annuity business.

Entities will be required to review, and update if there is a change, cash flow assumptions (including morbidity and persistency) at least annually and to 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”).

The guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted, and may be applied using either a modified retrospective transition method or a full retrospective transition method.

Financial statements for prior periods presented will be adjusted to reflect the effects of applying the new accounting guidance.

The Company will adopt the new guidance effective January 1, 2023, using the modified retrospective method applied as of the transition date of January 1, 2021.

A published spot rate curve constructed from A+, A and A- rated U.S.

dollar denominated corporate bonds matched to the duration of the corresponding insurance liabilities will be used to calculate discount rates.

Long-duration contracts will be grouped into calendar year cohorts based on the contract issue date and

product line.

Long term care contracts will be grouped separately from the fully-ceded single premium immediate annuity contracts.

The most significant impact at the transition date will be the effect of updating the discount rate assumption to reflect an upper-medium grade fixed-income instrument yield, which will be partially offset by the de-recognition of Shadow Adjustments associated with long-duration contracts.

The Company expects the net impact of these changes will be a decrease of approximately $ 2.1 billion (after tax and noncontrolling interests) in Accumulated other comprehensive income (“AOCI”) as of the transition date of January 1, 2021.

There is a minimal transition impact expected to retained earnings.

The requirement to review, and update if there is a change, cash flow assumptions at least annually is expected to change the pattern of earnings being recognized.

Adoption will also significantly expand the Company’s disclosures, and will impact systems, processes and controls.

While the requirements of the new guidance represent a material change from existing accounting guidance, the new guidance will not impact capital and surplus under statutory accounting practices, cash flows, or the underlying economics of the business.

The Company continues to make progress in connection with these matters and is in the process of refining key accounting policy decisions, technology solutions and updates to internal controls associated with adoption of the new guidance.

These in-progress activities include modifications of actuarial valuation systems, data sourcing, analytical procedures and reporting processes.

Entities are required to review, and update if there is a change, cash flow assumptions (including morbidity and persistency) used to measure the liability for future policyholder benefits (“LFPB”) at least annually.

The LFPB must also be updated for actual experience at least annually.

The LFPB is reflected as Future policy benefits on the Consolidated Condensed Balance Sheets.

The discount rate assumption used to measure the LFPB must be updated quarterly using an upper-medium grade (low credit risk) fixed-income instrument yield, commonly interpreted as a single-A rate.

The effect of changes in cash flow assumptions and actual variances from expected experience are recorded in results of operations within Insurance claims and policyholders’ benefits.

The effect of changes in discount rate assumptions are recorded in Other comprehensive income (loss) (“OCI”).

In contrast, under legacy accounting guidance, cash flow and discount rate assumptions were locked in unless a premium deficiency emerged.

The discount rate assumption under legacy accounting guidance was determined using CNA’s internal investment portfolio yield, which was generally higher than a single-A yield.

The new guidance eliminates the need to hold shadow reserves associated with long term care reserves.

Under legacy accounting guidance, to the extent that unrealized gains on fixed maturity securities supporting long term care reserves would have resulted in a premium deficiency if realized, a related increase to Insurance reserves was recorded, net of tax, as a reduction of net unrealized gains (losses), through Other comprehensive income (loss) (shadow reserves).

The unit of account is the level at which reserves are measured.

Under the new guidance, the unit of account used to measure the LFPB is the cohort.

Cohorts are comprised of insurance contracts issued no more than one year apart, and must be further disaggregated according to policy benefit and insurance risk characteristics.

Under legacy accounting guidance, the LFPB was generally measured at the individual policy level.

Under the new guidance, the net premium ratio (“NPR”) is capped at 100%.

To the extent that NPR would otherwise exceed 100%, the LFPB is increased, and a loss is recognized immediately in the results of operations.

The NPR cap is applied at the cohort level each quarter when NPR is updated.

In contrast, under legacy accounting guidance, premium deficiency testing was performed annually at the product level.

See Note 5 to the Consolidated Condensed Financial Statements for further explanation of the NPR and LFPB calculations.

The Company adopted the new guidance effective January 1, 2023, using the modified retrospective method applied as of the transition date of January 1, 2021.

CNA’s run-off long term care business is in scope of the new guidance.

All prior periods presented in the financial statements have been adjusted to reflect application of the new guidance.

The original locked in discount rate, utilized for purposes of calculating the NPR under the new guidance, was based on the discount rate assumption used to calculate the LFPB immediately prior to the transition date.

While the requirements of the new guidance represent a material change from legacy accounting, the new guidance does not impact capital and surplus under statutory accounting practices, cash flows or the underlying economics of the business.

In December of 2022, the FASB issued ASU 2022-05, “Financial Services-Insurance (Topic 944):

Transition for Sold Contracts” (“ASU 2022-05”).

This guidance permits companies to make an election to exclude from the scope of ASU 2018-12 any insurance contracts that have been de-recognized prior to the effective date of ASU 2018-12, assuming that the company has no significant continuing involvement with the de-recognized contracts.

In the fourth quarter of 2022, CNA novated its block of legacy annuity business, which was fully-ceded prior to novation.

The Company has elected the ASU 2022-05 transition relief, and has excluded the novated legacy annuity business from the scope of ASU 2018-12.

Explanation of ASU 2018-12 Transition Impacts:

The following table presents a roll-forward of the pre-transition LFPB balance as of January 1, 2021:

(In millions)

Balance as of December 31, 2020, as reported $ 13,318

Reclassification of reserves for policyholders currently receiving benefits to Future policy benefits (a)

De-recognition of shadow reserves ( 3,293 )

Re-measurement using an upper-medium grade fixed income instrument yield discount rate 6,255

Other adjustments

Balance as of January 1, 2021, as adjusted $ 19,132

(a) In conjunction with the adoption of ASU 2018-12 , at January 1, 2023, the long term care reserves for policyholders currently receiving benefits were reclassified from Claim and claim adjustment expense to Future policy benefits.

This change was applied retrospectively as of January 1, 2021.

Shadow reserves associated with the long term care business were de-recognized as of the transition date in Accumulated other comprehensive income (“AOCI”).

The effect of re-measuring the LFPB at the single-A discount rate as of the transition date was similarly recorded in AOCI.

There are no cohorts for which the NPR exceeded 100% at the transition date.

CNA’s practice under legacy accounting guidance was to calculate and record premium deficiency reserves at the policy level.

Accordingly, an allocation methodology was not required to assign historical premium deficiency reserves to cohorts upon transition to ASU 2018-12.

The following table presents after tax adjustments to the opening balance of Shareholders’ equity and Noncontrolling interests resulting from adoption of ASU 2018-12:

Accumulated other comprehensive income (loss) Retained earnings Noncontrolling interests

(In millions)

Balance as of December 31, 2020, as reported $ 581 $ 14,150 $ 1,321

De-recognition of shadow reserves 2,331 270

Re-measurement of LFPB using an upper-medium grade fixed

income instrument yield discount rate ( 4,428 ) ( 513 )

Other adjustments ( 5 ) ( 1 )

Balance as of January 1, 2021, as adjusted $ ( 1,516 ) $ 14,145 $ 1,077

The effects of adoption of ASU 2018-12 on the Consolidated Condensed Statement of Operations were as follows:

Three Months Ended March 31, 2022 As Reported Effect of Adoption As Adjusted

(In millions)

Insurance claims and policyholders’ benefits (a) $ 1,455 $ 23 $ 1,478

Income before income tax 462 ( 23 ) 439

Income tax expense ( 92 ) 5 ( 87 )

Net income 370 ( 18 ) 352

Amounts attributable to noncontrolling interests ( 32 ) 2 ( 30 )

Net income attributable to Loews Corporation 338 ( 16 ) 322

Basic net income per share 1.36 ( 0.06 ) 1.30

Diluted net income per share 1.36 ( 0.07 ) 1.29

(a) The effect of adopting ASU 2018-12 on Insurance claims and policyholders’ benefits is inclusive of the re-measurement gain of $ 5 million, which is presented parenthetically on the Consolidated Condensed Statement of Operations.

The effects of adoption of ASU 2018-12 on the Consolidated Condensed Balance Sheet were as follows:

December 31, 2022 As Reported Effect of Adoption As Adjusted

(In millions)

Other assets $ 3,941 $ 73 $ 4,014

Total assets 75,494 73 75,567

Claim and claim adjustment expenses (a) 25,099 ( 2,979 ) 22,120

Future policy benefits (a) 10,151 3,329 13,480

Total liabilities 60,016 350 60,366

Retained earnings 15,144 ( 213 ) 14,931

Accumulated other comprehensive income (loss) ( 3,284 ) ( 36 ) ( 3,320 )

Noncontrolling interests 880 ( 28 ) 852

Total equity 15,478 ( 277 ) 15,201

(a) In conjunction with the adoption of ASU 2018-12, at January 1, 2023, the long term care reserves for policyholders currently receiving benefits were reclassified from Claim and claim adjustment expense to Future policy benefits.

This change was applied retrospectively as of January 1, 2021.

The effects of adoption of ASU 2018-12 on the Consolidated Condensed Statement of Comprehensive Income (Loss) were as follows:

Three Months Ended March 31, 2022 As Reported Effect of Adoption As Adjusted

(In millions)

Net unrealized losses on other investments $ ( 1,611 ) $ ( 1,032 ) $ ( 2,643 )

Total unrealized losses on investments ( 1,615 ) ( 1,032 ) ( 2,647 )

Impact of changes in discount rates used to measure long-duration

contract liabilities 1,635 1,635

Other comprehensive loss ( 1,605 ) 603 ( 1,002 )

Comprehensive loss ( 1,235 ) 585 ( 650 )

Amounts attributable to noncontrolling interests 136 ( 60 ) 76

Total comprehensive loss attributable to Loews Corporation ( 1,099 ) 525 ( 574 )

The effects of adoption of ASU 2018-12 on the Consolidated Condensed Statements of Cash Flows were as follows:

Three Months Ended March 31, 2022 As Reported Effect of Adoption As Adjusted

(In millions)

Net income $ 370 $ ( 18 ) $ 352

Adjustments to reconcile net income to net cash provided by operating

activities, net 333 ( 5 ) 328

Insurance reserves 489 23 512

The effects of adoption of ASU 2018-12 on segment results of operations of CNA were as follows:

Three Months Ended March 31, 2022 As Reported Effect of Adoption As Adjusted

(In millions)

Insurance claims and policyholders’ benefits (a) $ 1,455 $ 23 $ 1,478

Income before income tax 378 ( 23 ) 355

Income tax expense ( 65 ) 5 ( 60 )

Net income 313 ( 18 ) 295

Amounts attributable to noncontrolling interests ( 32 ) 2 ( 30 )

Net income attributable to Loews Corporation 281 ( 16 ) 265

Net investment income is as follows:

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended March 31 2023 2022

(In millions)

1 unchanged sentence

Limited partnership investments 27 20

Short term investments 16

Equity securities (a) 12 2

Income (loss) from trading portfolio (a) 45 ( 15 )

Other 19 13 47 43

Total investment income 590 451

1 unchanged sentence

Net investment income $ 569 $ 432

(a) Net investment income (loss) recognized due to the change in fair value of equity and trading portfolio securities held as of September 30, 2022 and 2021 $ ( 68 ) $ ( 55 ) $ ( 179 ) $ ( 9 )

Investment gains (losses) are as follows:

Three Months Ended Nine Months Ended

September 30, September 30,

(a) Net investment income (loss) recognized due to the change in fair value of equity and trading portfolio securities held as of March 31, 2023 and 2022

$ 11 $ ( 31 )

Investment gains (losses) are as follows:

Three Months Ended March 31 2023 2022

(In millions)

2 unchanged sentences

Gross losses ( 57 ) ( 28 )

Investment gains (losses) on fixed maturity securities ( 111 ) 22 ( 128 ) 91

Investment losses on fixed maturity securities ( 22 ) ( 2 )

Equity securities (a) ( 14 ) ( 38 )

1 unchanged sentence

Short term investments and other 1

Altium Packaging (see Note 1) 555

Investment gains (losses) $ ( 96 ) $ 22 $ ( 166 ) $ 657

(a) Investment gains (losses) recognized due to the change in fair value of non-redeemable preferred stock included within equity securities held as of September 30, 2022 and 2021 $ ( 2 ) $ ( 2 ) $ ( 109 ) $ 15

Investment gains (losses) for the three months ended September 30, 2022 in the table above include a $ 35 million net loss related to the expected novation of a coinsurance agreement on CNA’s legacy annuity business, which was transacted on a funds withheld basis and gave rise to an embedded derivative.

The net loss of $ 35 million is comprised of a $ 59 million loss on the fixed maturity securities supporting the funds withheld liability to recognize unrealized losses which had been included in AOCI since the inception of the coinsurance agreement, partially offset by a $ 24 million gain on the associated embedded derivative.

Taken together, this net loss is the final recognition of changes in the valuation of the funds held assets and offsets previously recognized investment gains on the associated embedded derivative.

Investment losses $ ( 35 ) $ ( 11 )

(a) Investment losses recognized due to the change in fair value of non-redeemable preferred stock included within equity securities held as of March 31, 2023 and 2022

$ ( 2 ) $ ( 38 )

The components of available-for-sale impairment losses (gains) recognized in earnings by asset type are presented in the following table.

The table includes losses (gains) on securities with an intention to sell and changes in the allowance for credit losses on securities since acquisition date:

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended March 31 2023 2022

(In millions)

2 unchanged sentences

Asset-backed 2

Impairment losses (gains) recognized in earnings $ 25 $ 11 $ 55 $ 16

There were $ 8 million of losses on mortgage loans recognized during the three and nine months ended September 30, 2022 primarily due to changes in expected credit losses.

T here were no losses recognized on mortgage loans during the three and nine months ended September 30, 2021.

Impairment losses recognized in earnings $ 8 $ 10

T here were no losses recognized on mortgage loans during the three months ended March 31, 2023 and 2022.

The following tables present a summary of fixed maturity securities:

September 30, 2022 Cost or Amortized Cost Gross Unrealized

March 31, 2023 Cost or Amortized Cost Gross Unrealized

Gains Gross Unrealized

18 unchanged sentences

Total fixed maturity securities $ 41,899 $ 870 $ 3,418 $ 2 $ 39,349

December 31, 2021 Cost or Amortized Cost Gross Unrealized

Gains Gross Unrealized

Losses Allowance

for Credit Losses Estimated

(In millions)

December 31, 2022

Fixed maturity securities:

10 unchanged sentences

Foreign government 617 1 43 575

Redeemable preferred stock 3 3

Fixed maturities available-for-sale 41,032 652 4,056 1 37,627

1 unchanged sentence

Total fixed maturity securities $ 41,102 $ 652 $ 4,056 $ 1 $ 37,697

The net unrealized gains and losses on available-for-sale investments included in the tables above are recorded as a component of AOCI.

When presented in AOCI, these amounts are net of tax and noncontrolling interests and any required Shadow Adjustments.

To the extent there are unrealized gains on fixed income securities supporting the reserves of certain products within the Life & Group business that would result in a premium deficiency, or would impact the reserve balance if realized, a related increase in Insurance reserves is recorded as a reduction of net unrealized gains (losses), net of tax and noncontrolling interests, through Other comprehensive income (loss) (“Shadow Adjustments”).

As of September 30, 2022

and December 31, 2021, the net unrealized gains and losses on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $ 41 million and $ 2.2 billion (after tax and noncontrolling interests).

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:

The available-for-sale fixed maturity 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, 2022 Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses

March 31, 2023 Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses

(In millions)

26 unchanged sentences

Total fixed maturity securities $ 25,234 $ 2,946 $ 4,277 $ 1,110 $ 29,511 $ 4,056

The following table presents the estimated fair value and gross unrealized losses of fixed maturity securities in a gross unrealized loss position for which an allowance for credit loss has not been recorded, by ratings distribution.

September 30, 2022 December 31, 2021

The following table presents the estimated fair value and gross unrealized losses of available-for-sale fixed maturity securities in a gross unrealized loss position for which an allowance for credit loss has not been recorded, by ratings distribution.

March 31, 2023 December 31, 2022

Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses

7 unchanged sentences

Total $ 28,266 $ 3,418 $ 29,511 $ 4,056

Based on current facts and circumstances, the unrealized losses presented in the September 30, 2022 securities in the gross unrealized loss position table above are not believed to be indicative of the ultimate collectibility of the current amortized cost of the securities, but rather are primarily attributable to changes in risk-free interest rates and a general market widening of credit spreads.

In reaching this determination, the recent volatility in risk-free rates and credit spreads, as well as the fact that the unrealized losses are concentrated in investment grade issuers, were considered.

Based on current facts and circumstances, the unrealized losses presented in the March 31, 2023 securities in the gross unrealized loss position table above are not believed to be indicative of the ultimate collectibility of the current amortized cost of the securities, but rather are primarily attributable to changes in risk-free interest rates and a general market widening of credit spreads.

In reaching this determination, the continued volatility in risk-free rates and credit spreads, as well as the fact that the unrealized losses are concentrated in investment grade issuers, were considered.

Additionally, there is no current intent to sell securities with unrealized losses, nor is it more likely than not that sale will be required prior to recovery of amortized cost;

accordingly, it was determined that there are no additional impairment losses to be recorded at September 30, 2022.

accordingly, it was determined that there are no additional impairment losses to be recorded at March 31, 2023.

The following tables present the activity related to the allowance on available-for-sale securities with credit impairments and purchased credit-deteriorated (“PCD”) assets.

Accrued interest receivables on available-for-sale fixed maturity securities totaled $ 401 million, $ 369 million and $ 387 million as of September 30, 2022, December 31, 2021 and September 30, 2021 and are excluded from the estimate of expected credit losses and the amortized cost basis in the tables within this Note.

Three months ended September 30, 2022 Corporate and Other Bonds

Asset-backed Total

(In millions)

Allowance for credit losses:

Balance as of July 1, 2022

Additions to the allowance for credit losses:

Available-for-sale securities accounted for as PCD assets —

Reductions to the allowance for credit losses:

Write-offs charged against the allowance —

Additional decreases to the allowance for credit losses

on securities that had an allowance recorded in a previous period

Total allowance for credit losses $ — $ 3 $ 3

Three months ended September 30, 2021 Corporate and Other Bonds Asset-backed Total

Accrued interest receivables on available-for-sale fixed maturity securities totaled $ 407 million, $ 394 million and $ 389 million as of March 31, 2023, December 31, 2022 and March 31, 2022 and are excluded from the estimate of expected credit losses and the amortized cost basis in the tables within this Note.

Three months ended March 31, 2023 Corporate and Other Bonds Asset-backed Total

(In millions)

Allowance for credit losses:

Balance as of July 1, 2021

$ 24 $ 21 $ 45

Additions to the allowance for credit losses:

Available-for-sale securities accounted for as PCD assets 2 2

Reductions to the allowance for credit losses:

Write-offs charged against the allowance 16 16

Total allowance for credit losses $ 10 $ 21 $ 31

Nine months ended September 30, 2022

Allowance for credit losses:

Balance as of January 1, 2023

$ 11 $ 7 $ 18

Additions to the allowance for credit losses:

1 unchanged sentence

Reductions to the allowance for credit losses:

Write-offs charged against the allowance 12 12

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 3 3

Additional increases or (decreases) to the allowance for credit

losses on securities that had an allowance recorded in a previous period

1 ( 7 ) ( 6 )

Total allowance for credit losses $ 1 $ 1 $ 2

Nine months ended September 30, 2021

Three months ended March 31, 2022 Corporate and Other Bonds Asset-backed Total

(In millions)

Allowance for credit losses:

1 unchanged sentence

$ 11 $ 7 $ 18

Additions to the allowance for credit losses:

Securities for which credit losses were not previously recorded 14 14

Available-for-sale securities accounted for as PCD assets 4 4 8

Reductions to the allowance for credit losses:

Securities sold during the period (realized) 6 6

Write-offs charged against the allowance 16 16

Additional decreases to the allowance for credit losses

Additional increases or (decreases) to the allowance for credit losses

on securities that had an allowance recorded in a previous period

1 ( 2 ) ( 1 )

Total allowance for credit losses $ 12 $ 5 $ 17

1 unchanged sentence

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Cost or Amortized Cost Estimated Fair

12 unchanged sentences

Mortgage Loans Amortized Cost Basis by Origination Year (a)

As of September 30, 2022

As of March 31, 2023

(In millions)

13 unchanged sentences

A summary of the aggregate contractual or notional amounts and gross estimated fair values related to derivative financial instruments follows.

The contractual or notional amounts for derivatives are used to calculate the exchange of contractual payments under related agreements and may not be representative of the potential for gain or loss on these

Gross estimated fair values of derivative positions are currently presented in Equity securities, Receivables and Payable to brokers on the Consolidated Condensed Balance Sheets.

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Contractual/Notional Amount Estimated Fair Value Contractual/Notional Amount Estimated Fair Value

3 unchanged sentences

Without hedge designation:

Equity markets:

Options – purchased $ 142 $ 6

Futures – short 102 $ ( 1 ) $ 169

Warrants 117 6 117 $ 6

Interest rate swaps 240 16 240 19

Embedded derivative on funds withheld liability 220 1 270 $ ( 12 )

Currency forwards 13 ( 1 ) 12 $ ( 1 )

Investment Commitments

1 unchanged sentence

These investments are recorded once funded, and the related commitments may include future capital calls from various third-party limited partnerships, signed and accepted mortgage loan applications and obligations related to private placement securities.

As of September 30, 2022, commitments to purchase or fund were approximately $ 1.6 billion and to sell were approximately $ 100 million under the terms of these investments.

As of March 31, 2023, commitments to purchase or fund were approximately $ 1.7 billion and to sell were approximately $ 125 million under the terms of these investments.

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, 2022 Level 1

Corporate bonds and other includes obligations of the United States of America (“U.S.”) Treasury, government-sponsored enterprises, foreign governments and redeemable preferred stock.

March 31, 2023 Level 1

Level 3 Total

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Payable to brokers ( 81 ) ( 81 )

December 31, 2021 Level 1 Level 2 Level 3 Total

(In millions)

December 31, 2022

Fixed maturity securities:

7 unchanged sentences

Short term and other 4,539 167 4,706

Receivables 19 19

Payable to brokers ( 82 ) ( 82 )

The following tables present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2022 and 2021:

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 Liabilities Held at September 30

Unrealized Gains (Losses) Recognized in Other Comprehensive Income (Loss) on Level 3 Assets and Liabilities Held at September 30

2022 Balance, July 1 Included in Net Income

Included in OCI Purchases Sales

Transfers into

Level 3 Transfers out of Level 3

Balance, September 30

(In millions)

Fixed maturity securities:

Corporate bonds and other $ 846 $ 1 $ ( 50 ) $ 9 $ ( 4 ) $ 802 $ ( 51 )

States, municipalities and political

subdivisions 46 ( 4 ) 42 ( 4 )

Asset-backed 641 7 ( 38 ) 116 ( 14 ) $ 47 $ ( 43 ) 716 ( 38 )

Fixed maturities available-for-sale 1,533 8 ( 92 ) 125 $ — ( 18 ) 47 ( 43 ) 1,560 $ — ( 93 )

Fixed maturities trading — —

Total fixed maturities $ 1,533 $ 8 $ ( 92 ) $ 125 $ — $ ( 18 ) $ 47 $ ( 43 ) $ 1,560 $ — $ ( 93 )

Equity securities $ 47 $ ( 7 ) $ ( 10 ) $ 30 $ ( 7 )

Unrealized Gains (Losses) Recognized in Other Comprehensive Income (Loss) on Level 3 Assets and Liabilities Held at September 30

2021 Balance, July 1 Included in Net Income Included in OCI Purchases Sales Settlements Transfers into

Level 3 Transfers out of Level 3 Balance, September 30

(In millions)

Fixed maturity securities:

Corporate bonds and other $ 883 $ 1 $ 1 $ 55 $ ( 11 ) $ ( 52 ) $ 877 $ 2

States, municipalities and political

subdivisions 57 57

Asset-backed 410 1 1 83 $ ( 9 ) ( 11 ) $ 41 ( 38 ) 478

Fixed maturities available-for-sale 1,350 2 2 138 ( 9 ) ( 22 ) 41 ( 90 ) 1,412 $ — 2

Fixed maturities trading — —

Total fixed maturities $ 1,350 $ 2 $ 2 $ 138 $ ( 9 ) $ ( 22 ) $ 41 $ ( 90 ) $ 1,412 $ — $ 2

Equity securities $ 36 $ ( 2 ) $ 1 $ ( 11 ) $ 11 $ ( 10 ) $ 25 $ ( 3 )

Unrealized Gains (Losses) Recognized in Other Comprehensive Income (Loss) on Level 3 Assets and Liabilities Held at September 30

Unrealized Gains (Losses) Recognized in Other Comprehensive Income (Loss) on Level 3 Assets and Liabilities Held at March 31

2023 Balance, January 1 Included in Net Income

2 unchanged sentences

Level 3 Transfers out of Level 3

Balance, September 30

Balance, March 31

(In millions)

8 unchanged sentences

Equity securities $ 35 $ ( 6 ) $ 29 $ ( 6 )

Unrealized Gains (Losses) Recognized in Other Comprehensive Income (Loss) on Level 3 Assets and Liabilities Held at September 30

Unrealized Gains (Losses) Recognized in Other Comprehensive Income (Loss) on Level 3 Assets and Liabilities Held at March 31

2022 Balance, January 1 Included in Net Income Included in OCI Purchases Sales Settlements Transfers into

Level 3 Transfers out of Level 3 Balance, September 30

Level 3 Transfers out of Level 3 Balance, March 31

(In millions)

21 unchanged sentences

The weighted average rate is calculated based on fair value.

September 30, 2022 Estimated

March 31, 2023 Estimated

Fair Value Valuation Techniques Unobservable Inputs Range (Weighted Average)

9 unchanged sentences

Carrying Amount Estimated Fair Value

September 30, 2022 Level 1 Level 2 Level 3 Total

March 31, 2023 Level 1 Level 2 Level 3 Total

(In millions)

6 unchanged sentences

Long term debt 8,160 7,035 586 7,621

Claim and Claim Adjustment Expense Reserves and Future Policy Benefit Reserves

Property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including incurred but not reported (“IBNR”) claims as of the reporting date.

Claim and Claim Adjustment Expense Reserves

Claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including incurred but not reported (“IBNR”) claims as of the reporting date.

Reserve projections are based primarily on detailed analysis of the facts in each case, experience with similar cases and various historical development patterns.

Consideration is given to historical patterns such as claim reserving trends and settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions and economic conditions including inflation and public attitudes.

All of these factors can affect the estimation of claim and claim adjustment expense reserves.

4 unchanged sentences

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.

Claim and claim adjustment expense reserves are also maintained for structured settlement obligations.

In developing the claim and claim adjustment expense reserve estimates for structured settlement obligations, actuaries review mortality experience on an annual basis.

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.

1 unchanged sentence

Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in the Company’s results of operations and/or equity.

Catastrophe losses, net of reinsurance, of $ 114 million and $ 178 million were recorded for the three months ended September 30, 2022 and 2021 and $ 171 million and $ 357 million were recorded for the nine months ended September 30, 2022 and 2021.

Catastrophe losses for the three and nine months ended September 30, 2022 were driven primarily by severe weather related events, including $ 87 million for Hurricane Ian.

Catastrophe losses for the three months ended September 30, 2021 included $ 114 million for Hurricane Ida.

Catastrophe losses for the nine months ended September 30, 2021 were driven by severe weather related events, primarily Hurricane Ida and Winter Storms Uri and Viola.

The Company reported catastrophe losses, net of reinsurance, of $ 52 million and $ 19 million for the three months ended March 31, 2023 and 2022 primarily related to severe weather related events.

Liability for Unpaid Claim and Claim Adjustment Expenses

The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves of the Life & Group business.

Nine Months Ended September 30

The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves.

Three Months Ended March 31

2023 2022 (a)

(In millions)

3 unchanged sentences

Net reserves, beginning of year 16,929 16,300

Reduction of net reserves due to the excess workers’ compensation loss portfolio transfer ( 632 )

Net incurred claim and claim adjustment expenses:

Provision for insured events of current year 1,326 1,188

Decrease in provision for insured events of prior years ( 144 ) ( 130 )

Increase (decrease) in provision for insured events of prior years 13 ( 7 )

Amortization of discount 11 12

Total net incurred (a)

Total net incurred (b)

Net payments attributable to:

6 unchanged sentences

Gross reserves, end of period $ 22,409 $ 21,415

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

(a) In conjunction with the adoption of ASU 2018-22, at January 1, 2023, long term care reserves for policyholders currently receiving benefits were reclassified from Claim and claim adjustment expenses into Future policy benefits and this change was applied retrospectively as of January 1, 2021.

For additional information see Note 1.

(b) Total net incurred above does not agree to Insurance claims and policyholders’ benefits as reflected on the Consolidated Condensed Statements of Operations due to amounts related to retroactive reinsurance deferred gain accounting and uncollectible reinsurance, which are not reflected in the table above.

Net Prior Year Development

1 unchanged sentence

These changes can be favorable or unfavorable.

For commercial property and casualty operations (“Property & Casualty Operations”) favorable net prior year development of $ 17 million and $ 10 million was recorded for the three months ended September 30, 2022 and 2021 and favorable net prior year development of $ 66 million and $ 36 million was recorded for the nine months ended September 30, 2022 and 2021.

Unfavorable net prior year loss reserve development of $ 64 million and $ 40 million was recorded for CNA’s operations outside of Property & Casualty Operations (“Other Insurance Operations”) for the nine months ended September 30, 2022 and 2021.

The following table and discussion presents details of the net prior year loss reserve development in Property & Casualty Operations and Other Insurance Operations:

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

For commercial property and casualty operations (“Property & Casualty Operations”) unfavorable net prior year development of $ 13 million was recorded for the three months ended March 31, 2023 and favorable net prior year development of $ 12 million was recorded for the three months ended March 31, 2022.

The following table presents details of the net prior year loss reserve development in Property & Casualty Operations:

Three Months Ended March 31

(In millions)

Medical professional liability $ 9 $ 8

Other professional liability and management liability 9 22 10

Surety ( 20 ) ( 15 ) ( 48 ) ( 53 )

Commercial auto 21 30

General liability 41

Workers’ compensation ( 2 ) ( 2 )

Property and other 6 ( 9 )

Other insurance operations 64 40

Total pretax (favorable) unfavorable development $ 13 $ ( 12 )

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

Unfavorable development in medical professional liability was due to higher than expected large loss activity in recent accident years.

Unfavorable development in other professional liability and management liability was due to higher than expected claim severity and frequency in CNA’s cyber and professional errors and omissions businesses in multiple accident years.

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

Unfavorable development in commercial auto was due to higher than expected claim severity in CNA’s construction business in multiple accident years.

Unfavorable development in general liability was due to higher than expected claim severity in construction, middle market and small business across multiple accident years.

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

Favorable development in property and other was mainly due to lower than expected loss emergence in a recent accident year for warranty.

Unfavorable development in other insurance operations was largely associated with legacy mass tort abuse claims, including the recent Diocese of Rochester proposed settlement.

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

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

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

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

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

Unfavorable development in other insurance operations was due to legacy mass tort exposures, primarily related to abuse.

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

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The effect of the deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders’ benefits on the Consolidated Condensed Statements of Operations.

The impact of the LPT on the Consolidated Condensed Statements of Operations was the recognition of a retroactive reinsurance benefit of $ 17 million and $ 8 million for the three months ended September 30, 2022 and 2021 and $ 40 million and $ 30 million for the nine months ended September 30, 2022 and 2021 .

As of September 30, 2022 and December 31, 2021, the cumulative amounts ceded under the LPT were $ 3.4 billion.

The unrecognized deferred retroactive reinsurance benefit was $ 389 million and $ 429 million as of September 30, 2022 and December 31, 2021 and is included within Other liabilities on the Consolidated Condensed Balance Sheets.

The impact of the LPT on the Consolidated Condensed Statements of Operations was the recognition of a retroactive reinsurance benefit of $ 8 million and $ 12 million for the three months ended March 31, 2023 and 2022 .

As of March 31, 2023 and December 31, 2022, the cumulative amounts ceded under the LPT were $ 3.5 billion.

The unrecognized deferred retroactive reinsurance benefit was $ 417 million and $ 425 million as of March 31, 2023 and December 31, 2022 and is included within Other liabilities on the Consolidated Condensed Balance Sheets.

NICO established a collateral trust account as security for its obligations under the LPT.

The fair value of the collateral trust account was $ 2.3 billion as of September 30, 2022.

The fair value of the collateral trust account was $ 2.5 billion as of March 31, 2023.

In addition, Berkshire Hathaway Inc.

guaranteed the payment obligations of NICO up to the aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement.

NICO is responsible for claims handling and billing and collection from third-party reinsurers related to the majority of the A&EP claims.

NICO is responsible for claims handling and billing and collection from third-party reinsurers related to A&EP claims.

Credit Risk for Ceded Reserves

1 unchanged sentence

Receivables due from reinsurers with lower financial strength ratings are primarily due from captive reinsurers and are backed by collateral arrangements.

Life & Group Policyholder Reserves

CNA’s Life & Group business includes its run-off long term care business as well as structured settlement obligations not funded by annuities related to certain property and casualty claimants.

Long term care policies provide benefits for nursing homes, assisted living facilities and home health care subject to various daily and lifetime caps.

Generally, policyholders must continue to make periodic premium payments to keep the policy in force and CNA has the ability to increase policy premiums, subject to state regulatory approval.

CNA maintains both claim and claim adjustment expense reserves as well as future policy benefit reserves for policyholder benefits for its Life & Group business.

Claim and claim adjustment expense reserves consist of estimated reserves for long term care policyholders that are currently receiving benefits, including claims that have been incurred but are not yet reported.

In developing the claim and claim adjustment expense reserve estimates for long term care policies, CNA’s actuaries perform a detailed claim reserve review on an annual basis.

The review analyzes the sufficiency of existing reserves for policyholders currently on claim and includes an evaluation of expected benefit utilization and claim duration.

In addition, claim and claim adjustment expense reserves are also maintained for the structured settlement obligations.

In developing the claim and claim adjustment expense reserve estimates for structured settlement obligations, CNA’s actuaries review mortality experience on an annual basis.

CNA’s recorded claim and claim adjustment expense reserves reflect management’s best estimate after incorporating the results of the most recent reviews.

CNA’s most recent annual claim reserve reviews were completed in the third quarter of 2022.

The long term care claim reserve review resulted in a $ 25 million pretax reduction in reserves driven by a $ 107 million favorable impact from the release of all remaining IBNR reserves established during 2020 and 2021 in response to the COVID-19 pandemic partially offset by an $ 82 million unfavorable impact from higher claim severity, including utilization and cost of care inflation, than anticipated in the reserve estimates.

The structured settlement claim reserve review resulted in a $ 5 million pretax reduction in reserves due to discount rate assumption changes.

CNA’s 2021 annual claim reserve reviews were completed in the third quarter of 2021 resulting in a $ 40 million pretax reduction in long term care reserves primarily due to lower claim severity than anticipated in the reserve estimates and a $ 2 million pretax increase in the structured settlement claim reserves primarily due to lower discount rate assumptions and mortality assumption changes.

Future policy benefit reserves consist of active life reserves related to CNA’s long term care policies for policyholders that are not currently receiving benefits and represent the present value of expected future benefit payments and expenses less expected future premium.

The determination of these reserves requires management to make estimates and assumptions about expected investment and policyholder experience over the life of the contract.

Since many of these contracts may be in force for several decades, these assumptions are subject to significant estimation risk.

The actuarial assumptions that CNA believes are subject to the most variability are morbidity, persistency, discount rates and anticipated future premium rate increases.

Future Policy Benefits Reserves

Future policy benefits reserves are related to CNA’s run-off long term care business, which is included in Other Insurance Operations.

The determination of Future policy benefits reserves requires management to make estimates and assumptions about expected policyholder experience over the remaining life of the policy.

Since policies may be in force for several decades, these assumptions are subject to significant estimation risk.

As a result of this variability, CNA’s future policy benefits reserves may be subject to material increases if actual experience develops adversely to its expectations.

The LFPB is computed using the net level premium method, which incorporates cash flow assumptions and discount rate assumptions.

Under the net level premium method, the LFPB is equal to the present value of future benefits and claim settlement expenses less the present value of future net premiums.

Net premiums are equal to gross premiums multiplied by the NPR.

The NPR is generally the ratio of the present value of benefits and expense payments to the present value of gross premiums, expected over the lifetime of the policy.

As a result of the modified retrospective adoption of ASU 2018-12, the NPR calculation incorporates the original locked in discount rate and the reserve balance as of the transition date of January 1, 2021.

The key cash flow assumptions used to estimate the LFPB are morbidity, persistency (inclusive of mortality), anticipated future premium rate increases and expenses.

Morbidity is the frequency and severity of injury, illness, sickness and diseases contracted.

Persistency is the percentage of policies remaining in force and can be affected by policy lapses, benefit reductions and death.

Discount rates are influenced by the investment yield on assets supporting long term care reserves which is subject to interest rate and market volatility and may also be affected by changes to the Internal Revenue Code.

Future premium rate increases are generally subject to regulatory approval, and therefore the exact timing and size of the approved rate increases are unknown.

As a result of this variability, CNA’s long term care reserves may be subject to material increases if actual experience develops adversely to CNA’s expectations.

Annually, in the third quarter, CNA assesses the adequacy of its long term care future policy benefit reserves by performing a gross premium valuation (“GPV”) to determine if there is a premium deficiency.

Under the GPV, management estimates required reserves using best estimate assumptions as of the date of the assessment without provisions for adverse deviation.

The GPV required reserves are then compared to the existing recorded reserves.

If the GPV required reserves are greater than the existing recorded reserves, the existing assumptions are unlocked and future policy benefit reserves are increased to the greater amount.

Any such increase is reflected in the Company’s results of operations in the period in which the need for such adjustment is determined.

If the GPV required reserves are less than the existing recorded reserves, assumptions remain locked in and no adjustment is made.

The GPV for the long term care future policy benefit reserves, performed in the third quarters of 2022 and 2021, indicated recorded reserves included a pretax margin of approximately $ 125 million and $ 72 million as of September 30, 2022 and 2021.

Expense assumptions relate to claim adjudication.

The practical expedient that allows locking in the expense assumption has not been elected.

The discount rate is determined using the upper-medium grade fixed income instrument yield curve.

CNA has elected to update the NPR and the LFPB for actual experience on a quarterly basis.

A quarterly assessment is also made as to whether evidence suggests that cash flow assumptions should be updated.

Annually in the third quarter, actuarial analysis is performed on policyholder morbidity, persistency, premium rate increases and expense experience.

This analysis, combined with judgment, informs the setting of updated cash flow assumptions used to estimate the LFPB.

Actuarial analysis includes predictive modeling, actual to expected experience comparisons and trend analysis.

Applicable industry research is also considered.

Quarterly, to derive the upper-medium grade fixed income instrument yield discount rate assumption, a published spot rate curve constructed from single-A rated U.S.

dollar denominated corporate bonds is used.

Linear interpolation is used to determine yield assumptions for tenors that fall between points for which observable rates are available.

For cash flows that are projected to occur beyond the tenor for which market-observable rates are available, judgment is applied to estimate a normative rate which is graded to over 10 years.

Quarterly, the updated NPR is used to derive an updated LFPB as of the beginning of the current quarter measured at the original locked in discount rate.

The updated LFPB is then compared to the existing carrying amount of the liability as of the same date (measured at the original locked in discount rate) to determine the re-measurement gain (loss), which is presented parenthetically within the Insurance claims and policyholders’ benefits line on the Consolidated Condensed Statements of Operations.

Insurance contracts are grouped into cohorts according to issue year.

Contracts assumed through reinsurance are generally included within the same cohorts as contracts issued directly by CNA, according to issue year.

The issue year for assumed contracts is defined according to the date that the assumption of insurance risk incepted.

For assumed contracts that were reinsured concurrently with the issuance of the underlying direct contract, issue year is defined as the year that the underlying policy was issued.

For contracts that were already in-force when assumed, issue year is defined as the year in which the reinsurance agreement incepted.

For group long term care business, issue year is defined as the year the individual insurance certificate was issued.

Long term care is CNA’s only long-duration product line, therefore, cohorts are not further disaggregated by product.

The following table summarizes balances and changes in the LFPB.

(In millions)

Present value of future net premiums

Balance, January 1 $ 3,993 $ 4,735

Effect of changes in discount rate ( 74 ) ( 880 )

Balance, January 1, at original locked in discount rate 3,919 3,855

Effect of changes in cash flow assumptions (a)

Effect of actual variances from expected experience (a) ( 49 ) ( 18 )

Adjusted balance, January 1 3,870 3,837

Interest accrual 52 53

Net premiums:

earned during period ( 111 ) ( 112 )

Balance, end of period at original locked in discount rate 3,811 3,778

Effect of changes in discount rate 154 525

Balance, March 31 $ 3,965 $ 4,303

Present value of future benefits & expenses

Balance, January 1 $ 17,472 $ 22,745

Effect of changes in discount rate ( 125 ) ( 5,942 )

Balance, January 1, at original locked in discount rate 17,347 16,803

Effect of changes in cash flow assumptions (a)

Effect of actual variances from expected experience (a) ( 50 ) ( 23 )

Adjusted balance, January 1 17,297 16,780

Interest accrual 242 241

Benefit & expense payments ( 302 ) ( 233 )

Balance, end of period at original locked in discount rate 17,237 16,788

Effect of changes in discount rate 704 3,517

Balance, March 31 $ 17,941 $ 20,305

Net LFPB $ 13,976 $ 16,002

(a) As of March 31, 2023 and 2022, the re-measurement gain of $ 1 million and $ 5 million presented parenthetically on the Consolidated Condensed Statement of Operations is comprised of the effect of changes in cash flow assumptions and the effect of actual variances from expected experience.

Earned premiums associated with the long term care business were $ 115 million and $ 120 million for the three months ended March 31, 2023 and 2022.

The following table presents undiscounted expected future benefit and expense payments and undiscounted expected future gross premiums.

Three Months Ended March 31

(In millions)

Expected future benefit and expense payments $ 33,759 $ 33,674

Expected future gross premiums 5,729 5,969

Discounted expected future gross premiums at the upper-medium grade fixed income instrument yield discount rate were $ 4.0 billion and $ 4.6 billion as of March 31, 2023 and 2022.

The weighted average effective duration of the LFPB calculated using the original locked in discount rate was 12 years as of March 31, 2023 and 2022.

The weighted average interest rates in the table below are calculated based on the rate used to discount all future cash flows.

March 31, December 31,

2023 2022 2022

Original locked in discount rate 5.26 % 5.31 % 5.27 %

Upper-medium grade fixed income instrument discount rate 4.92 3.67 5.23

For the three months ended March 31, 2023, immediate charges to net income resulting from adverse development that caused NPR to exceed 100% were $ 13 million.

There were no such charges for the three months ended March 31, 2022.

The portion of losses recognized in a prior period due to NPR exceeding 100% which, due to favorable development, was reversed through net income for the three months ended March 31, 2023 and 2022 was $ 11 million and $ 1 million.

Shareholders’ Equity

Accumulated other comprehensive income (loss)

The tables below present the changes in AOCI by component for the three and nine months ended September 30, 2021 and 2022 :

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)

The tables below present the changes in AOCI by component for the three months ended March 31, 2022 and 2023 :

rates used to

contracts Foreign Currency Translation Total Accumulated Other Comprehensive Income (Loss)

(In millions)

Balance, July 1, 2021

$ — $ 1,271 $ ( 11 ) $ ( 863 ) $ ( 70 ) $ 327

Other comprehensive income (loss) before reclassifications, after tax of $ 0 , $ 32 , $ 0 , $ 0 and $ 0

( 121 ) 1 3 ( 33 ) ( 150 )

Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $ 0 , $ 5 , $ 0 , $( 2 ) and $ 0

Balance, January 1, 2022, as reported

$ ( 2 ) $ 930 $ ( 6 ) $ ( 636 ) $ — $ ( 100 ) $ 186

Other comprehensive income (loss) — ( 138 ) 2 16 ( 33 ) ( 153 )

Amounts attributable to noncontrolling interests 14 ( 1 ) 4 17

Balance, September 30, 2021

Cumulative effect adjustments from changes in accounting standards (Note 1), after tax of $ 0 , $ 617 , $ 0 , $ 0 , $( 1,063 ) and $ 0

2,079 ( 3,585 ) ( 1,506 )

Balance, July 1, 2022

Balance, January 1, 2022, as adjusted

( 2 ) 3,009 ( 6 ) ( 636 ) ( 3,585 ) ( 100 ) ( 1,320 )

1 unchanged sentence

( 4 ) ( 2,644 ) 15 2 1,635 ( 15 ) ( 1,011 )

Reclassification of (gains) losses from accumulated other comprehensive loss, after tax of $ 0 , $( 11 ), $( 1 ), $( 2 ) and $ 0

( 2 ) 102 ( 2 ) 6 104

Reclassification of losses from accumulated other comprehensive loss, after tax of $ 0 , $( 1 ), $( 1 ), $( 2 ), $ 0 and $ 0

Other comprehensive income (loss) ( 4 ) ( 2,643 ) 18 7 1,635 ( 15 ) ( 1,002 )

Amounts attributable to noncontrolling interests 275 ( 1 ) ( 169 ) 1 106

Balance, September 30, 2022

$ ( 10 ) $ ( 2,924 ) $ 22 $ ( 620 ) $ ( 271 ) $ ( 3,803 )

(In millions)

Balance, January 1, 2021

$ — $ 1,563 $ ( 23 ) $ ( 877 ) $ ( 82 ) $ 581

Other comprehensive income (loss) before reclassifications, after tax of $ 1 , $ 104 , $( 3 ), $ 0 and $ 0

Balance, March 31, 2022

$ ( 6 ) $ 641 $ 12 $ ( 630 ) $ ( 2,119 ) $ ( 114 ) $ ( 2,216 )

Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $( 1 ), $ 20 , $( 2 ), $( 7 ) and $ 0

Balance, January 1, 2023, as reported

$ ( 7 ) $ ( 2,469 ) $ 14 $ ( 622 ) $ — $ ( 200 ) $ ( 3,284 )

Other comprehensive income (loss) — ( 465 ) 14 32 ( 19 ) ( 438 )

Amounts attributable to noncontrolling interests 49 ( 3 ) 2 48

Balance, September 30, 2021

Cumulative effect adjustments from changes in accounting standards (Note 1), after tax of $ 0 , $ 0 , $ 0 , $ 0 , $ 11 and $ 0

( 36 ) ( 36 )

Balance, January 1, 2022

Balance, January 1, 2023, as adjusted

( 7 ) ( 2,469 ) 14 ( 622 ) ( 36 ) ( 200 ) ( 3,320 )

1 unchanged sentence

( 8 ) 652 ( 2 ) ( 396 ) 16 262

Reclassification of (gains) losses from accumulated other comprehensive loss, after tax of $ 1 , $( 15 ), $ 0 , $( 5 ) and $ 0

( 3 ) 117 1 18 133

Reclassification of losses from accumulated other comprehensive loss, after tax of $ 0 , $( 4 ), $ 0 , $( 2 ), $ 0 and $ 0

Other comprehensive income (loss) ( 8 ) 670 ( 2 ) 9 ( 396 ) 16 289

Amounts attributable to noncontrolling interests 1 ( 68 ) ( 1 ) 39 ( 2 ) ( 31 )

Balance, September 30, 2022

Balance, March 31, 2023

$ ( 14 ) $ ( 1,867 ) $ 12 $ ( 614 ) $ ( 393 ) $ ( 186 ) $ ( 3,062 )

5 unchanged sentences

Treasury Stock

Loews Corporation repurchased 10.5 million and 15.7 million shares of its common stock at aggregate costs of $ 614 million and $ 826 million during the nine months ended September 30, 2022 and 2021.

Loews Corporation purchased 0.7 million shares of CNA’s common stock at an aggregate cost of $ 26 million during the nine months ended September 30, 2022.

In February of 2022, Boardwalk Pipelines completed a public offering of $ 500 million aggregate principal amount of its 3.6 % senior notes due September 1, 2032.

Boardwalk Pipelines used the proceeds to retire the outstanding $ 300 million aggregate principal amount of its 4.0 % senior notes due June 2022 in March of 2022, to fund growth capital expenditures and for general corporate purposes.

Loews Corporation repurchased 8.2 million and 2.1 million shares of its common stock at aggregate costs of $ 486 million and $ 129 million during the three months ended March 31, 2023 and 2022.

Revenue from Contracts with Customers

1 unchanged sentence

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 11:

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

Three Months Ended March 31 2023 2022

(In millions)

2 unchanged sentences

Lodging and related services – Loews Hotels & Co 185 146

Rigid plastic packaging and recycled resin – Corporate (a) 280

Total revenues from contracts with customers 571 516

1 unchanged sentence

Operating revenues and other $ 594 $ 540

(a) Revenues presented reflect the consolidated results of Altium Packaging through March 31, 2021.

Receivables from contracts with customers – As of September 30, 2022 and December 31, 2021, receivables from contracts with customers were approximately $ 144 million and $ 145 million and are included within Receivables on the Consolidated Condensed Balance Sheets.

Deferred revenue – As of September 30, 2022 and December 31, 2021, deferred revenue resulting from contracts with customers was approximately $ 4.8 billion and $ 4.6 billion and is reported as Deferred non-insurance warranty revenue and within Other liabilities on the Consolidated Condensed Balance Sheets.

Approximately $ 1.0 billion and $ 916 million of revenues recognized during the nine months ended September 30, 2022 and 2021 were included in deferred revenue as of December 31, 2021 and 2020.

Performance obligations – As of September 30, 2022, approximately $ 13.4 billion of estimated operating revenues is expected to be recognized in the future related to outstanding performance obligations.

Receivables from contracts with customers – As of March 31, 2023 and December 31, 2022, receivables from contracts with customers were approximately $ 160 million and $ 168 million and are included within Receivables on the Consolidated Condensed Balance Sheets.

Deferred revenue – As of March 31, 2023 and December 31, 2022, deferred revenue resulting from contracts with customers was approximately $ 4.8 billion and is reported as Deferred non-insurance warranty revenue and within Other liabilities on the Consolidated Condensed Balance Sheets.

Approximately $ 397 million and $ 374 million of revenues recognized during the three months ended March 31, 2023 and 2022 were included in deferred revenue as of December 31, 2022 and 2021.

Performance obligations – As of March 31, 2023, approximately $ 13.5 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 services for natural gas and natural gas liquids and hydrocarbons (“NGLs”) at Boardwalk Pipelines and non-insurance warranty revenue at CNA.

Approximately $ 0.8 billion will be recognized during the remaining three months of 2022 , $ 2.7 billion in 2023 and the remainder in following years.

Approximately $ 2.1 billion will be recognized during the remaining nine months of 2023 , $ 2.3 billion in 2024 and the remainder in following years.

The actual timing of recognition may vary due to factors outside of the Company’s control.

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

The following tables present the components of net periodic (benefit) cost for the defined benefit plans:

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

Pension Benefits

Three Months Ended Nine Months Ended

September 30, September 30,

2022 2021 2022 2021

What changed 10-Q

Item 1. Financial Statements