What changed in this filing

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Item 1. Financial Statements

2020-08-03 compared with 2020-05-04 · 299 added, 175 removed, 653 unchanged (42% of the section changed)

2 unchanged sentences

CONSOLIDATED CONDENSED BALANCE SHEETS

March 31, 2020

June 30, 2020

December 31, 2019

30 unchanged sentences

Retained earnings

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Less treasury stock, at cost ( 10,949,702 and 240,000 shares)

5 unchanged sentences

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Three Months Ended March 31

Three Months Ended

Six Months Ended

(In millions, except per share data)

1 unchanged sentence

Net investment income

Investment gains (losses)

Investment gains (losses) (Note 2)

Non-insurance warranty revenue

9 unchanged sentences

Net income (loss) attributable to Loews Corporation

Basic and diluted net income (loss) per share

Basic net income (loss) per share

Diluted net income (loss) per share

Weighted average shares outstanding:

5 unchanged sentences

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended March 31

Three Months Ended

Six Months Ended

(In millions)

1 unchanged sentence

Other comprehensive income (loss), after tax

Net unrealized losses on investments with an allowance for credit losses

Net unrealized gains (losses) on other investments

Total unrealized gains (losses) on investments

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

Net unrealized gains on other investments

Total unrealized gains on investments

Unrealized losses on cash flow hedges

1 unchanged sentence

Foreign currency translation

Other comprehensive income (loss)

Other comprehensive income

Comprehensive income (loss)

9 unchanged sentences

(In millions)

Balance, April 1, 2019

Other comprehensive income

Dividends paid ($ 0.0625 per share)

Purchases of Loews Corporation treasury stock

Purchases of subsidiary stock from noncontrolling interests

Stock-based compensation

Balance, June 30, 2019

Balance, April 1, 2020

Other comprehensive income

Dividends paid ($ 0.0625 per share)

Deconsolidation of Diamond Offshore

Purchases of Loews Corporation treasury stock

Purchases of subsidiary stock from noncontrolling interests

Stock-based compensation

Balance, June 30, 2020

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY

Loews Corporation Shareholders

Comprehensive

Income (Loss)

Noncontrolling

(In millions)

Balance, January 1, 2019

2 unchanged sentences

Purchases of Loews Corporation treasury stock

Purchases of subsidiary stock from non- controlling interests

Purchases of subsidiary stock from noncontrolling interests

Stock-based compensation

Balance,March 31, 2019

Balance, June 30, 2019

Balance, December 31, 2019, as reported

1 unchanged sentence

Balance, January 1, 2020, as adjusted

Other comprehensive loss

Other comprehensive income

Dividends paid ($ 0.125 per share)

Deconsolidation of Diamond Offshore

Purchases of Loews Corporation treasury stock

Purchases of subsidiary stock from non-controlling interests

Purchases of subsidiary stock from noncontrolling interests

Stock-based compensation

Balance, March 31, 2020

Balance, June 30, 2020

See accompanying Notes to Consolidated Condensed Financial Statements.

1 unchanged sentence

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

(In millions)

15 unchanged sentences

Purchases of property, plant and equipment

Deconsolidation of Diamond Offshore

Change in short term investments

Net cash flow provided by investing activities

Net cash flow (used) provided by investing activities

Financing Activities:

5 unchanged sentences

Issuance of debt

Net cash flow used by financing activities

Net cash flow provided (used) by financing activities

Effect of foreign exchange rate on cash

7 unchanged sentences

Loews Corporation is a holding company.

Its 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 % owned subsidiary);

Its consolidated subsidiaries are engaged in the following lines of business:

commercial property and casualty insurance (CNA Financial Corporation (“CNA”), a 89.6 % owned subsidiary);

transportation and storage of natural gas and natural gas liquids (Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”), a wholly owned subsidiary);

1 unchanged sentence

and the manufacture of rigid plastic packaging solutions (Altium Packaging LLC (“Altium Packaging”), a 99 % owned subsidiary).

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

On April 26, 2020, Diamond Offshore and certain of its subsidiaries commenced proceedings under Chapter 11 of the United States Bankruptcy Code (“Chapter 11”).

Financial information in this Report has been prepared on the basis that Diamond Offshore will continue as a going concern, which presumes that it will be able to realize assets and discharge liabilities in the normal course of business as they come due.

As a result of the Chapter 11 proceedings, the principal and interest due under Diamond Offshore’s outstanding senior notes and revolving credit facility became immediately due and payable and have been presented as Short term debt in the unaudited Consolidated Condensed Balance Sheet as of March 31, 2020.

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, 2020 and December 31, 2019 and results of operations, comprehensive income and changes in shareholders’ equity and cash flows for the three months ended March 31, 2020 and 2019.

Net income (loss) for the first quarter of each of the years is not necessarily indicative of net income (loss) for that entire year.

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

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 June 30, 2020 and December 31, 2019 and results of operations, comprehensive income and changes in shareholders’ equity for the three and six months ended June 30, 2020 and 2019 and cash flows for the six months ended June 30, 2020 and 2019.

Net income (loss) for the second quarter and first 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, 2019.

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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 no shares attributable to employee stock-based compensation awards excluded from the diluted weighted average shares outstanding amounts for the three and six months ended June 30, 2020 and 2019 because the effect would have been antidilutive.

Accounting changes – In June of 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016 - 13, “Financial Instruments-Credit Losses (Topic 326) :

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An election has been made not to estimate an allowance for credit losses on accrued interest receivables.

The accrual of interest income is discontinued and the asset is placed on nonaccrual status in the quarter that the payment becomes delinquent.

The accrual of interest income is discontinued and the asset is placed on nonaccrual status within 90 days of the interest becoming delinquent.

Interest accrued but not received for assets on nonaccrual status is reversed through Net investment income.

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The effect of changes in cash flow assumptions will be recorded in Net income and the effect of changes in discount rate assumptions will be recorded in Other comprehensive income (“OCI”).

This guidance is effective for interim and annual periods beginning after December 15, 2021 and will be adopted on January 1, 2022.

This guidance is effective for interim and annual periods beginning after December 15, 2021, however the FASB has 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.

The Company is currently evaluating the method of adoption and the effect the updated guidance will have on its consolidated financial statements, including increased disclosure requirements.

The Company plans to use the modified retrospective transition method at adoption and is currently evaluating the effect the updated guidance will have on its consolidated financial statements, including increased disclosure requirements.

The annual updating of cash flow assumptions is expected to increase income statement volatility.

While the requirements of the new guidance represent a material change from existing accounting guidance, the underlying economics of the business and related cash flows will be unchanged.

Deconsolidation of Diamond Offshore

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 Diamond Offshore’s 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.

See Note 14 for Diamond Offshore’s revenues and expenses through the Filing Date.

Through the Filing Date, Diamond Offshore’s results were included in Loews Corporation’s consolidated financial statements and Loews Corporation recognized in its earnings its proportionate share of Diamond Offshore’s losses through such date.

The deconsolidation resulted in the recognition of a loss of $ 1.2 billion ($ 957 million after tax) during the three and six months ended June 30, 2020, which is reported within Investment gains (losses) on the Consolidated Condensed Statements of Operations.

This loss represents the difference between the carrying value and the estimated fair value, which was immaterial, of Loews Corporation’s investment in equity securities of Diamond Offshore as of the Filing Date.

Net investment income is as follows:

Three Months Ended March 31 ,

Three Months Ended

Six Months Ended

(In millions)

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Net investment income

Net unrealized gains (losses) related to changes in fair value on securities still held were $( 117 ) and $ 44 for the three months ended March 31, 2020 and 2019.

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

Investment gains (losses) are as follows:

Three Months Ended March 31 ,

Three Months Ended

Six Months Ended

(In millions)

3 unchanged sentences

Short term investments and other

Investment gains (a)

Gross investment gains on available-for-sale securities were $ 29 and $ 36 for the three months ended March 31, 2020 and 2019.

Gross investment losses on available-for-sale securities were $ 104 and $ 42 for the three months ended March 31, 2020 and 2019.

During the three months ended March 31, 2020 and 2019, $ 133 of net investment losses and $ 42 of net investment gains were recognized due to the change in fair value of non-redeemable preferred stock still held as of March 31, 2020 and 2019 .

Deconsolidation of Diamond Offshore (see Note 2)

Investment gains (losses) (a)

Gross investment gains on available-for-sale securities were $ 102 and $ 28 for the three months ended June 30, 2020 and 2019 and $ 131 and $ 64 for the six months ended June 30, 2020 and 2019 .

Gross investment losses on available-for-sale securities were $ 85 and $ 31 for the three months ended June 30, 2020 and 2019 and $ 189 and $ 73 for the six months ended June 30, 2020 and 2019.

During the three and six months ended June 30, 2020 , $ 63 of 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, $ 11 and $ 53 of investment gains were recognized due to the change in fair value of non-redeemable preferred stock still held as of June 30, 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.

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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.

March 31, 2020

Three months ended June 30 , 2020

Corporate and

1 unchanged sentence

Allowance for credit losses:

Balance as of April 1, 2020

Additions to the allowance for credit losses:

For securities for which credit losses were not previously recorded

For available-for-sale securities accounted for as PCD assets

Reductions to the allowance for credit losses:

Securities sold during the period (realized)

Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period

Total allowance for credit losses

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 ASU 2016-13

Impact of adopting ASC 326

For securities for which credit losses were not previously recorded

3 unchanged sentences

Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis

Additional increases or (decrease) to the allowance for credit losses on securities that had an allowance recorded in a previous period

Total allowance for credit losses

1 unchanged sentence

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

Three Months Ended March 31,

Three Months Ended

Six Months Ended

(In millions)

3 unchanged sentences

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

March 31, 2020

June 30, 2020

(In millions)

9 unchanged sentences

Foreign government

Redeemable preferred stock

Fixed maturities available-for-sale

19 unchanged sentences

Prior period amounts were not adjusted for the adoption of this standard.

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

The net unrealized gains on available-for-sale investments included in the tables above are recorded as a component of Accumulated other comprehensive income (loss) (“AOCI”).

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

To the extent that unrealized gains on fixed income securities supporting long term care products and structured settlements not funded by annuities would result in a premium deficiency if those gains were realized, a related increase in Insurance reserves is recorded, net of tax and noncontrolling interests, as a reduction of net unrealized gains through Other comprehensive income (loss) (“Shadow Adjustments”).

As of March 31, 2020 and December 31, 2019, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $ 1.5 billion and $ 2.0 billion (after tax and noncontrolling interests).

As of June 30, 2020 and December 31, 2019, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $ 2.1 billion and $ 2.0 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:

March 31, 2020

June 30, 2020

(In millions)

9 unchanged sentences

Foreign government

Redeemable preferred stock

Total fixed maturity securities

11 unchanged sentences

Total fixed maturity securities

The following tables present the estimated fair value and gross unrealized losses of available-for-sale corporate and other bonds in a gross unrealized loss position at March 31, 2020 across industry sectors and by rating distributions.

March 31, 2020

(In millions)

Corporate and other bonds:

Basic materials

Communications

Consumer, cyclical – other

Consumer, non-cyclical – other

Energy – oil & gas

Energy – pipelines

Entertainment

Financial - other

Financial - real estate/REITS

Transportation

Travel & related

Total corporate and other bonds

March 31, 2020

(In millions)

Corporate and other bonds:

Below investment grade

Total corporate and other bonds

The following tables present the estimated fair value and gross unrealized losses of available-for-sale commercial mortgage-backed securities in a gross unrealized loss position at March 31, 2020 by property type and by rating distributions.

March 31, 2020

(In millions)

Commercial mortgage-backed:

Conduits (multi-property, multi-borrower pools)

Single asset, single borrower

Total commercial mortgage-backed

March 31, 2020

(In millions)

Commercial mortgage-backed:

US Government, Government agencies and Government sponsored enterprises

Below investment grade

Total commercial mortgage-backed

The following tables present the estimated fair value and gross unrealized losses of available-for-sale other asset-backed securities in a gross unrealized loss position at March 31, 2020 by underlying collateral and by rating distributions.

March 31, 2020

(In millions)

Other asset-backed:

Collateralized Loan Obligations

Total other asset-backed

March 31, 2020

(In millions)

Other asset-backed:

Total other asset-backed

Based on current facts and circumstances, the Company believes the unrealized losses presented in the March 31, 2020 gross unrealized loss position tables above are not indicative of the ultimate collectability of the current amortized cost of the securities.

Rather, the Company believes the gross unrealized losses are attributable primarily to widening credit spreads over risk free rates beyond historic norms, as a result of market uncertainties stemming from the coronavirus disease 2019 (“COVID-19”) pandemic, as well as supply shocks in the energy sector coupled with demand shocks in multiple sectors from the COVID-19 pandemic, that originated during the first quarter of 2020.

Based on current facts and circumstances, the Company believes the unrealized losses presented in the June 30, 2020 securities in a gross unrealized loss position table above are not indicative of the ultimate collectability of the current amortized cost of the securities, but rather are attributable to changes in interest rates, credit spreads and other factors.

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

accordingly, the Company has determined that there are no additional impairment losses to be recorded as of March 31, 2020.

accordingly, the Company has determined that there are no additional impairment losses to be recorded as of June 30, 2020.

Contractual Maturity

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

March 31, 2020

June 30, 2020

December 31, 2019

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Mortgage loans are included in Other invested assets on the Consolidated Condensed Balance Sheets.

The historical loss rate applied to mortgage loans has been adjusted over the forecast period to reflect higher expected credit losses based on observable economic forecasts, which increased the allowance by $ 13 million for the period ended March 31, 2020.

The following table presents the amortized cost basis of mortgage loans for each credit quality indicator by year of origination:

Mortgage Loans Amortized Cost Basis by Origination Year (a)

As of March 31, 2020

As of June 30, 2020

(In millions)

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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 no loans that were past due or placed in nonaccrual status as of March 31, 2020.

No interest income was written off for the period ended March 31, 2020.

There were loans with an amortized cost of $ 22 million that were less than 90 days past due as of June 30, 2020, none of which were placed on nonaccrual status.

No interest income was written off for the six months ended June 30, 2020.

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 agreements and may not be representative of the potential for gain or loss on these instruments.

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

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

March 31, 2020

June 30, 2020

December 31, 2019

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Without hedge designation:

Equity markets:

Options – purchased

Equity Options – purchased

Interest rate swaps

Embedded derivative on funds withheld liability

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.

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.

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Prices obtained from third-party pricing services or brokers are not adjusted.

The Company performs control procedures over information obtained from pricing services and brokers to ensure prices received represent a reasonable estimate of fair value and to confirm representations regarding whether inputs are observable or unobservable.

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:

3 unchanged sentences

Treasury, government-sponsored enterprises, foreign governments and redeemable preferred stock.

March 31, 2020

June 30, 2020

(In millions)

18 unchanged sentences

Payable to brokers

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 months ended March 31, 2020 and 2019:

Net Realized Investment

Gains (Losses) and Net

Change in Unrealized

Investment Gains (Losses)

Investment Gains

(Losses) and Net Change

in Unrealized Investment

Gains (Losses)

Recognized in

3 unchanged sentences

Income (Loss)

Net Income (Loss)

(In millions)

5 unchanged sentences

Equity securities

Net Realized Investment

Gains (Losses) and Net

Change in Unrealized

Investment Gains (Losses)

Investment Gains

(Losses) and Net Change

in Unrealized Investment

Gains (Losses)

Recognized in

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Equity securities

Investment Gains

(Losses) and Net Change

in Unrealized Investment

Gains (Losses)

Recognized in

(Loss) on Level

Recognized in

Comprehensive

Income (Loss)

(In millions)

Fixed maturity securities:

Corporate bonds and other

Fixed maturities available-for-sale

Fixed maturities trading

Total fixed maturities

Equity securities

Investment Gains

(Losses) and Net Change

in Unrealized Investment

Gains (Losses)

Recognized in

(Loss) on Level

Recognized in

Comprehensive

Income (Loss)

(In millions)

Fixed maturity securities:

Corporate bonds and other

Fixed maturities available-for-sale

Fixed maturities trading

Total fixed maturities

Equity securities

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

44 unchanged sentences

The weighted average rate is calculated based on fair value.

March 31, 2020

June 30, 2020

(In millions)

14 unchanged sentences

Estimated Fair Value

March 31, 2020

June 30, 2020

(In millions)

6 unchanged sentences

Long term debt

The fair values of mortgage loans, included in Other invested assets, were based on the present value of the expected future cash flows discounted at the current interest rate for similar financial instruments, adjusted for specific loan risk.

Property, Plant and Equipment

1 unchanged sentence

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.

As of March 31, 2020, five drilling rigs that had indicators of impairment were evaluated.

Based on the assumptions and analysis at that time, it was determined that the carrying value of four of these rigs was impaired.

During the first quarter of 2020, five 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 four of these rigs were impaired.

The fair values of these rigs were estimated using an income approach, whereby the fair value of each rig was estimated based on a calculation of the rig’s future net cash flows.

1 unchanged sentence

These fair value estimates were representative of Level 3 fair value measurements due to the significant level of estimation involved and the lack of transparency as to the inputs used.

An aggregate asset impairment charge of $ 774 million ( $ 408 million after tax and noncontrolling interests) was recorded for the three months ended March 31, 2020 and is reported within Operating expenses and other on the Consolidated Condensed Statements of Operations.

Diamond Offshore evaluates its property and equipment for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

If market fundamentals in the offshore oil and gas industry deteriorate further or a market recovery is further delayed, Diamond Offshore may be required to recognize additional impairment losses in future periods.

An aggregate asset impairment charge of $ 774 million ( $ 408 million after tax and noncontrolling interests) was recorded for the six months ended June 30, 2020 and is reported within Operating expenses and other on the Consolidated Condensed Statements of Operations.

Claim and Claim Adjustment Expense Reserves

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

The Company reported catastrophe losses, net of reinsurance, of $ 75 million and $ 58 million for the three months ended March 31, 2020 and 2019.

Net catastrophe losses for the three months ended March 31, 2020 included $ 13 million related to the COVID-19 pandemic, with the remaining $ 62 million related primarily to U.S.

weather related events.

Net catastrophe losses for the three months ended March 31, 2019 related primarily to U.S.

The Company reported catastrophe losses, net of reinsurance, of $ 301 million and $ 38 million for the three months ended June 30, 2020 and 2019 and $ 376 million and $ 96 million for the six months ended June 30, 2020 and 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 related primarily to U.S.

weather-related events.

1 unchanged sentence

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.

Three Months Ended March 31

Six Months Ended June 30

(In millions)

18 unchanged sentences

These changes can be favorable or unfavorable.

Favorable net prior year development of $ 15 million and $ 14 million was recorded for commercial property and casualty operations (“Property & Casualty Operations”) for the three months ended March 31, 2020 and 2019.

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”) for the three months ended June 30, 2020 and 2019 and unfavorable net prior year development of $ 7 million and favorable net prior year development of $ 45 million was recorded for the six months ended June 30, 2020 and 2019.

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

Three Months Ended March 31

Three Months Ended

Six Months Ended

(In millions)

6 unchanged sentences

Total pretax (favorable) unfavorable development

Unfavorable development in medical professional liability was primarily due to unfavorable outcomes on specific claims in accident years 2015 and 2016 in the aging services business.

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.

Unfavorable development in medical professional liability was primarily due to unfavorable outcomes on individual claims and higher than expected severity emergence in accident year 2017 in CNA’s dentists business.

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

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

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

Unfavorable development in medical professional liability was primarily due to higher than expected severity in accident year 2013 in the allied healthcare business.

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.

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.

Unfavorable development in medical professional liability was primarily due to 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.

This was partially offset by unfavorable development in management liability in accident year 2014 due to large claim activity.

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

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

Unfavorable development in property and other coverages was primarily due to higher than expected frequency and large loss activity in accident year 2018 in the marine business and higher than expected claims in Hardy for 2018 accident year catastrophes in property, energy and marine.

Asbestos and 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 $ 14 million and $ 22 million for the three months ended March 31, 2020 and 2019.

As of March 31, 2020 and December 31, 2019, the cumulative amounts ceded under the LPT were $ 3.2 billion.

The unrecognized deferred retroactive reinsurance benefit was $ 378 million and $ 392 million as of March 31, 2020 and December 31, 2019 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 $ 20 million and $ 14 million for the three months ended June 30, 2020 and 2019 and $ 34 million and $ 36 million for the six months ended June 30, 2020 and 2019.

As of June 30, 2020 and December 31, 2019, the cumulative amounts ceded under the LPT were $ 3.2 billion.

The unrecognized deferred retroactive reinsurance benefit was $ 358 million and $ 392 million as of June 30, 2020 and December 31, 2019 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 $ 2.7 billion and $ 3.7 billion as of March 31, 2020 and December 31, 2019.

The decrease in the fair value of the trust was driven by overall declines in equity markets.

As of March 31, 2020, the fair market value of the trust represented more than 150% of the gross LPT reserves.

The fair value of the collateral trust account was $ 3.3 billion and $ 3.7 billion as of June 30, 2020 and December 31, 2019.

In addition, Berkshire Hathaway Inc.

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

In May of 2020, Loews Corporation 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.

Shareholders’ Equity

Accumulated other comprehensive income (loss)

The tables below present the changes in AOCI by component for the three months ended March 31, 2019 and 2020:

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

Net Unrealized

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(In millions)

Balance, April 1, 2019 (a)

Other comprehensive income (loss) before reclassifications, after tax of $( 1 ), $( 114 ), $ 2 , $ 0 and $ 0

Reclassification of losses from accumulated other comprehensive income, after tax of $ 0 , $ 0 , $ 0 , $( 3 ) and $ 0

Other comprehensive income (loss)

Amounts attributable to noncontrolling interests

Balance, June 30, 2019

Net Unrealized

Gains (Losses)

on Investments

Allowance for

Credit Losses

Net Unrealized

Gains (Losses)

Postretirement

Comprehensive

Income (Loss)

( In millions)

Balance, April 1, 2020

Other comprehensive income (loss) before reclassifications, after tax of $ 0 , $( 321 ), $ 2 , $ 0 and $ 0

Reclassification of (income) losses from accumulated other comprehensive income, after tax of $ ( 1 ) , $ 4 , $ ( 1 ) , $ ( 2 ) and $ 0

Other comprehensive income

Amounts attributable to noncontrolling interests

Balance, June 30, 2020

Net Unrealized

Gains (Losses)

on Investments

Net Unrealized

Gains (Losses)

Postretirement

Comprehensive

Income (Loss)

(In millions)

Balance, January 1, 2019 (a)

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Amounts attributable to noncontrolling interests

Balance, March 31, 2019

Balance, June 30, 2019

Net Unrealized

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Amounts attributable to noncontrolling interests

Balance, March 31, 2020

Balance, June 30, 2020

On January 1, 2020, the Company adopted ASU 2016-13;

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Treasury Stock

Loews Corporation repurchased 9.7 million and 6.8 million shares of its common stock at an aggregate cost of $ 445 million and $ 322 million during the three months ended March 31, 2020 and 2019.

Loews Corporation repurchased 10.7 million and 9.8 million shares of its common stock at an aggregate cost of $ 478 million and $ 473 million during the six months ended June 30, 2020 and 2019 .

Revenue from Contracts with Customers

Disaggregation of revenues – Revenue from contracts with customers, other than insurance premiums, is reported as Non-insurance warranty revenue and within Operating revenues and other on the Consolidated Condensed Statements of Operations.The following table presents revenues from contracts with customers disaggregated by revenue type along with the reportable segment and a reconciliation to Operating revenues and other as reported in Note 12:

Three Months Ended March 31

The following table presents revenues from contracts with customers disaggregated by revenue type along with the reportable segment and a reconciliation to Operating revenues and other as reported in Note 14:

Three Months Ended

Six Months Ended

(In millions)

Non-insurance warranty – CNA Financial

Contract drilling – Diamond Offshore

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

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Rigid plastic packaging and recycled resin – Corporate

Contract drilling – Diamond Offshore (a)

Total revenues from contracts with customers

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Operating revenues and other

Receivables from contracts with customers – As of March 31, 2020 and December 31, 2019, receivables from contracts with customers were approximately $ 486 million and $ 458 million and are included within Receivables on the Consolidated Condensed Balance Sheets.

Deferred revenue – As of March 31, 2020 and December 31, 2019, deferred revenue resulting from contracts with customers was approximately $ 4.0 billion and $ 3.9 billion and is reported as Deferred non-insurance warranty revenue and within Other liabilities on the Consolidated Condensed Balance Sheets.

Approximately $ 297 million and $ 285 million of revenues recognized during the three months ended March 31, 2020 and 2019 were included in deferred revenue as of December 31, 2019 and 2018.

Performance obligations – As of March 31, 2020, approximately $ 12.9 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 natural gas liquids and hydrocarbons (“NGLs”) and non-insurance warranty services.

Approximately $ 1.4 billion will be recognized during the remaining nine months of 2020, $ 2.1 billion in 2021 and the remainder in following years.

Revenues presented for Diamond Offshore reflect the periods prior to the deconsolidation.

See Notes 2 and 14 for further discussion.

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

Deferred revenue – As of June 30, 2020 and December 31, 2019, deferred revenue resulting from contracts with customers was approximately $ 3.9 billion and is reported as Deferred non-insurance warranty revenue and within Other liabilities on the Consolidated Condensed Balance Sheets.

Approximately $ 574 million and $ 533 million of revenues recognized during the six months ended June 30, 2020 and 2019 were included in deferred revenue as of December 31, 2019 and 2018.

Performance obligations – As of June 30, 2020, approximately $ 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 transportation and storage of natural gas and natural gas liquids and hydrocarbons (“NGLs”) services and non-insurance warranty revenue.

Approximately $ 1.2 billion will be recognized during the remaining six months of 2020, $ 2.1 billion in 2021 and the remainder in following years.

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

Expected Credit Losses – Reinsurance and Insurance Receivables

As of March 31, 2020, an allowance for doubtful accounts of $ 23 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.

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;

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

As of March 31, 2020

As of June 30, 2020

(In millions)

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Voluntary reinsurance receivables within the B- to B++ rating distribution are primarily due from captive reinsurers and backed by collateral arrangements.

As of March 31, 2020, an allowance for doubtful accounts of $ 30 million for insurance receivables has been established using a loss rate methodology to determine expected credit losses for premium receivables.

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.

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Pension Benefits

Postretirement Benefits

Three Months Ended March 31

Three Months Ended

Six Months Ended

(In millions)

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Amortization of unrecognized net loss

Amortization of unrecognized prior service cost

Settlement charge

Net periodic (benefit) cost

What changed 10-Q

Item 1. Financial Statements