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Item 2. Management’s Discussion and Analysis

2020-08-03 compared with 2020-05-04 · 379 added, 259 removed, 245 unchanged (72% of the section changed)

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

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with our Consolidated Condensed Financial Statements included under Item 1 of this Report, Risk Factors included under Part II, Item 1A of this Report, and the Consolidated Financial Statements, Risk Factors, and MD&A included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with our Consolidated Condensed Financial Statements included under Item 1 of this Report, Risk Factors included under Part II, Item 1A of this Report, Risk Factors included in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and the Consolidated Financial Statements, Risk Factors, and MD&A included in our Annual Report on Form 10-K for the year ended December 31, 2019.

This MD&A is comprised of the following sections:

2 unchanged sentences

CNA Financial

Diamond Offshore

Boardwalk Pipelines

Loews Hotels & Co

Diamond Offshore

Liquidity and Capital Resources

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Forward-Looking Statements

Loews Corporation is a holding company and has five reportable segments comprised of four individual operating subsidiaries, CNA Financial Corporation (“CNA”), Diamond Offshore Drilling, Inc.

(“Diamond Offshore”), Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”) and Loews Hotels Holding Corporation (“Loews Hotels & Co”);

and the Corporate segment, which is primarily comprised of Loews Corporation excluding its subsidiaries and the operations of Altium Packaging LLC (“Altium Packaging”).

Each of the operating subsidiaries is headed by a chief executive officer who is responsible for the operation of its business and has the duties and authority commensurate with that position.

Loews Corporation is a holding company and has five reportable segments comprised of three individual consolidated operating subsidiaries, CNA Financial Corporation (“CNA”), Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”) and Loews Hotels Holding Corporation (“Loews Hotels & Co”);

the Corporate segment and Diamond Offshore Drilling Inc.

(“Diamond Offshore”).

The Corporate segment is primarily comprised of Loews Corporation excluding its subsidiaries and the operations of Altium Packaging LLC (“Altium Packaging”).

Diamond Offshore was deconsolidated during the second quarter of 2020.

Each of the operating subsidiaries and Diamond Offshore are headed by a chief executive officer who is responsible for the operation of its business and has the duties and authority commensurate with that position.

On April 26, 2020 (the “Filing Date”), Diamond Offshore and certain of its direct and indirect subsidiaries filed voluntary petitions in the United States Bankruptcy Court for the Southern District of Texas seeking relief under Chapter 11 of the United States Bankruptcy Code (the “Chapter 11 Filing”).

As a result of the Chapter 11 Filing and applicable U.S.

generally accepted accounting principles, Loews Corporation no longer controls Diamond Offshore for accounting purposes, and therefore, Diamond Offshore was deconsolidated from its consolidated financial statements effective as of the Filing Date.

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

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Consolidated Financial Results

The following table summarizes net income (loss) attributable to Loews Corporation by segment and net income (loss) per share attributable to Loews Corporation for the three months ended March 31, 2020 and 2019:

Three Months Ended March 31

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

Three Months Ended

Six Months Ended

(In millions, except per share data)

CNA Financial

Diamond Offshore

Boardwalk Pipelines

Loews Hotels & Co

Diamond Offshore (a)

Net income (loss) attributable to Loews Corporation

Basic and diluted net income (loss) per common share

Net loss attributable to Loews Corporation for the three months ended March 31, 2020 was $632 million, or $2.20 per share, compared to net income of $394 million, or $1.27 per share in the comparable 2019 period.

Results for the three months ended March 31, 2020, after tax and noncontrolling interests, were substantially below the prior year period, caused primarily by (i) drilling rig impairment charges of $408 million from Diamond Offshore, (ii) a $363 million decline in net investment income from CNA and the Parent Company, (iii) net investment losses of $152 million from CNA, down from $21 million of net investment gains in the prior year period, and (iv) a $38 million decrease in results from Loews Hotels & Co.

The economic disruption of the coronavirus disease 2019 (“COVID-19”) pandemic and measures to mitigate the spread of the virus have significantly impacted our results.

The full impact of COVID-19 on our businesses will be dependent on the duration, scope and other responses to the pandemic.

Basic net income (loss) per share

Diluted net income (loss) per share

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

See Notes 2 and 14 of the Notes to the Consolidated Condensed Financial Statements included under Item 1.

Net loss attributable to Loews Corporation for the three months ended June 30, 2020 was $835 million, or $2.96 per share, compared to net income of $249 million, or $0.82 per share in the comparable 2019 period.

Net loss attributable to Loews Corporation for the six months ended June 30, 2020 was $1.5 billion, or $5.16 per share, compared to net income of $643 million, or $2.09 per share, in the comparable 2019 period.

The net loss for the three months ended June 30, 2020 was driven by (i) the investment loss of $957 million to write down the carrying value of our interest in Diamond Offshore as a result of its bankruptcy filing on April 26, 2020, (ii) significant catastrophe losses at CNA, and (iii) operating losses at Loews Hotels & Co.

These factors were partially offset by increased investment income at CNA and the parent company as well as investment gains at CNA.

The net loss for the six months ended June 30, 2020 was caused by (i) the investment loss from the write down of our Diamond Offshore carrying value discussed above, (ii) Diamond Offshore drilling rig impairment charges of $408 million in the first quarter of 2020, (iii) catastrophe losses at CNA, (iv) operating losses at Loews Hotels & Co, and (v) investment losses at CNA in 2020 as compared to gains in the first six months of 2019.

The economic disruption caused by the coronavirus disease 2019 (“COVID-19”) pandemic and measures to mitigate the spread of the virus significantly affected Loews’s results in the first half of 2020.

The full impact of COVID-19 on Loews and our businesses will be dependent on the pandemic’s duration and scope and economic policies and other responses to the pandemic.

CNA Financial

The following table summarizes the results of operations for CNA for the three months ended March 31, 2020 and 2019 as presented in Note 12 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report.

For further discussion of Net investment income and Net investment gains (losses), see the Investments section of this MD&A.

Three Months Ended March 31

The following table summarizes the results of operations for CNA for the three and six months ended June 30, 2020 and 2019 as presented in Note 14 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report.

For further discussion of Net investment income and Investment gains (losses), see the Investments section of this MD&A.

Three Months Ended

Six Months Ended

(In millions)

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Other operating expenses

Income (loss) before income tax

Income tax (expense) benefit

Net income (loss)

Income before income tax

Income tax expense

Amounts attributable to noncontrolling interests

Net income (loss) attributable to Loews Corporation

Net loss attributable to Loews Corporation was $55 million for the three months ended March 31, 2020 as compared with net income of $305 million in the 2019 period.

The decrease was due to lower net investment income driven by lower limited partnership and common stock returns and net investment losses in 2020 as compared with net investment gains in the prior year period.

These declines were precipitated by severe disruptions in the financial markets in March 2020 as a result of the COVID-19 pandemic and related containment measures.

The net investment losses were driven by unfavorable changes in the fair value of non-redeemable preferred stock and higher impairment losses on fixed maturity securities.

CNA’s underwriting results for the three months ended March 31, 2020 included a $15 million pretax ($11 million after tax and noncontrolling interests) loss related to COVID-19 comprised of claims activity included in catastrophe losses and an increase in CNA’s allowance for doubtful accounts of insurance receivables.

The impact COVID-19 had on CNA’s insurance underwriting results was more limited in the first quarter of 2020 than CNA anticipates occurring in the second and third quarters of 2020, and possibly thereafter, as the situation continues to evolve.

Currently, CNA believes the future impact on its underwriting results is likely to include declines in premium volume, driven by slower growth, especially for lines of business that are sensitive to rates of economic growth, as well as policy cancellations and refunds or return of premiums, as a result of decreased insured exposures for CNA’s current policyholders.

In addition, many of CNA’s customers, across a broad spectrum of industries, are likely to be impacted by lost business, which may affect CNA’s ability to collect amounts owed to it, increasing CNA’s expenses for credit losses for uncollectible premiums.

Lower premiums and higher expenses will result in an increase to CNA’s expense ratio.

Further, while loss frequency may decrease related to lower exposures in certain lines, CNA expects an overall increase in insurance claims reporting activity and related litigation due to both the pandemic and depressed economic conditions.

This includes increased frequency in claim submissions in lines that are implicated by the virus and the mitigating activities taken by CNA’s customers and governmental authorities in response to its spread.

These include workers’ compensation, healthcare, commercial property coverage, and directors’ and officers’ liability and employment practices liability lines.

In addition, CNA’s surety lines may experience increased losses, particularly in construction surety, where there is risk that contractors will be adversely impacted by general economic conditions.

The costs associated with claims handling and defense, as well as the payment of claims for covered exposures, will likely increase CNA’s loss ratio.

Refer to Part II, Item 1A, Risk Factors for further discussion.

Net income attributable to Loews Corporation

Three Months Ended June 30, 2020 Compared to 2019

Net income attributable to Loews Corporation was $135 million for the three months ended June 30, 2020 as compared with $249 million in the 2019 period.

The decrease was primarily due to net catastrophe losses of $301 million for the three months ended June 30, 2020 as compared to $38 million in the 2019 period and unfavorable net prior year loss reserve development.

Net catastrophe losses in 2020 include $182 million related to COVID-19, $61 million related to civil unrest and $58 million related primarily to severe weather-related events.

These results were partially offset by favorable net investment income driven by limited partnership and common stock returns, favorable non-catastrophe current accident year underwriting results and higher investment gains.

Investment gains were driven by the favorable change in fair value of non-redeemable preferred stock and higher gains on sales of fixed maturity securities.

The prior year period included a $15 million charge (after tax and noncontrolling interests) related to the early retirement of debt.

Six Months Ended June 30, 2020 Compared to 2019

Net income attributable to Loews Corporation was $80 million for the six months ended June 30, 2020 as compared with $554 million in the 2019 period.

The decrease was primarily due to net catastrophe losses of $376 million for the six months ended June 30, 2020 as compared to $96 million in the prior year period, lower net investment income and investment losses in the first six months of 2020 as compared with investment gains in the prior year period.

Net catastrophe losses in 2020 include $195 million related to COVID-19, $61 million related to civil unrest and $120 million related primarily to severe weather-related events.

Net investment income decreased driven by lower limited partnership and common stock returns and the investment losses were driven by the unfavorable change in fair value of non-redeemable preferred stock and higher impairment losses on fixed maturity securities.

Recent Developments

During the second quarter of 2020, CNA’s underwriting results were negatively impacted by COVID-19 and the related depressed economic conditions.

In many geographic locations, the virus’ spread continues to accelerate.

Areas where the virus has largely been brought under control continue to be at risk of a second wave.

Accordingly, it remains

the case that several months past the initial identification of the threat, all of the direct and indirect consequences and implications of COVID-19 are not yet known and may not emerge for some time.

Until the virus is brought under control, the timing of any economic recovery remains uncertain.

As a result, the impact to CNA’s results in the first and second quarters of 2020 may not be indicative of its impacts for the remainder of 2020 or thereafter.

See the Liquidity and Capital Resources and Investments sections of this MD&A and Risk Factors included under Part II, Item 1A of this Report for further discussion of the risks associated with COVID-19 and measures to mitigate the spread of the virus.

CNA experienced year-over-year growth in gross and net written premiums, excluding third party captives driven by rate increases across its property and casualty insurance lines of business.

Depressed economic conditions generally have had an unfavorable impact on premium exposures, including audit premium adjustments, policy endorsements and mid-term cancellations and adjustments.

This is particularly the case in CNA’s Commercial lines of business where shelter in place restrictions and reduced economic activity has caused businesses to reduce payroll or otherwise shutter operations.

As a result, CNA recorded a decrease in its estimated audit premiums during the second quarter of 2020 impacting its net earned premiums.

If general economic conditions do not improve in the latter half of 2020 or thereafter, CNA’s net written premiums and net earned premiums may continue to be unfavorably impacted as a result.

Net written premiums are also impacted by the terms and conditions and related cost of reinsurance programs.

In the second quarter of 2020, CNA renewed multiple property and casualty reinsurance treaties at higher costs as well as purchased additional coverage, which will have an unfavorable impact on CNA’s net earned premiums in future quarters.

Lower net earned premiums had an unfavorable impact on CNA’s expense ratio in the second quarter of 2020.

CNA’s expense ratio was also unfavorably impacted by an increase in its allowance for doubtful accounts for insurance receivables as certain customers, across a broad spectrum of industries and markets, have been impacted by lost business, affecting CNA’s ability to collect amounts owed to it.

These impacts could continue through the remainder of 2020, and possibly thereafter, as the situation continues to evolve.

While CNA’s losses incurred during the first six months of 2020 related to COVID-19 represent CNA’s best estimate of ultimate insurance losses resulting from events occurring in the first six months of 2020 due to the pandemic and the consequent economic crisis, given the unprecedented nature of this event, a high level of uncertainty exists as to the potential impact on insurance losses from these events or other events that might occur for the remainder of the year and thereafter.

The scope, duration and magnitude of the direct and indirect effects continue to rapidly evolve, and could materially impact CNA’s ultimate loss estimate, including in lines of business where losses have already been incurred as well as the potential for impacts in other lines unknown at this time.

Continued spread of the virus as well as additional or extended shelter in place restrictions and business closures, could cause CNA to experience additional COVID-19 related catastrophe losses in future quarters.

CNA has also experienced modest benefits in certain lines of business as a result of lower loss frequency from shelter in place restrictions.

Those benefits only apply to a portion of CNA’s portfolio, as its larger portfolios, including healthcare, construction and property coverages, have seen limited benefit.

In addition, the impact from lower frequency is mostly offset by higher severity in certain areas of the portfolio.

CNA’s Property & Casualty and Other Insurance Operations

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In assessing its insurance operations, CNA utilizes the core income (loss) financial measure.

Core income (loss) is calculated by excluding from net income (loss), net investment gains or losses and any cumulative effects of changes in accounting guidance.

Core income (loss) is calculated by excluding from net income (loss), investment gains or losses and any cumulative effects of changes in accounting guidance.

In addition, core income (loss) excludes the effects of noncontrolling interests.

The calculation of core income (loss) excludes net investment gains or losses because net investment gains or losses are generally driven by economic factors that are not necessarily reflective of CNA’s primary insurance operations.

The calculation of core income (loss) excludes investment gains or losses because investment gains or losses are generally driven by economic factors that are not necessarily reflective of CNA’s primary insurance operations.

Core income (loss) is deemed to be a non-GAAP financial measure and management believes this measure is useful for investors to evaluate its insurance operations.

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Renewal premium change represents the estimated change in average premium on policies that renew, including rate and exposure changes.

represents the average change in price on policies that renew excluding exposure change.

Rate represents the average change in price on policies that renew excluding exposure change.

For certain products within Small Business, where quantifiable, rate includes the influence of new business as well.

4 unchanged sentences

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

The following tables summarize the results of CNA’s Property & Casualty Operations for the three months ended March 31, 2020 and 2019:

Three Months Ended March 31, 2020

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

Three Months Ended June 30, 2020

International

1 unchanged sentence

Gross written premiums

Gross written premiums excluding third party captives

Gross written premiums excluding third

party captives

Net written premiums

1 unchanged sentence

Net investment income

Core income (loss)

Other performance metrics:

Loss and loss adjustment expense ratio

Loss ratio excluding catastrophes

and development

Effect of catastrophe impacts

Effect of development-related items

Expense ratio

1 unchanged sentence

Combined ratio

Combined ratio excluding catastrophes

and development

Renewal premium change

Three Months Ended March 31, 2019

Three Months Ended June 30, 2019

Gross written premiums

Gross written premiums excluding third party captives

Gross written premiums excluding third

party captives

Net written premiums

2 unchanged sentences

Other performance metrics:

Loss and loss adjustment expense ratio

Loss ratio excluding catastrophes

and development

Effect of catastrophe impacts

Effect of development-related items

Expense ratio

1 unchanged sentence

Combined ratio

Combined ratio excluding catastrophes

and development

Renewal premium change

Total gross written premiums increased $117 million for the three months ended March 31, 2020 as compared with the 2019 period.

Total net written premiums increased $57 million for the three months ended March 31, 2020 as compared with the 2019 period.

Gross written premiums, excluding third party captives, for Specialty increased $11 million for the three months ended March 31, 2020 as compared with the 2019 period, driven by strong rate.

Net written premiums for Specialty decreased $4 million for the three months ended March 31, 2020 as compared with the 2019 period driven by a higher level of ceded reinsurance.

The increase in net earned premiums for the three months ended March 31, 2020 was consistent with the trend in net written premiums in recent quarters for Specialty.

Gross written premiums for Commercial increased $121 million for the three months ended March 31, 2020 as compared with the 2019 period driven by higher new business and rate.

Net written premiums for Commercial increased $101 million for the three months ended March 31, 2020 as compared with the 2019 period.

The increase in net earned premiums was consistent with the trend in net written premiums for Commercial for the three months ended March 31, 2020.

Gross written premiums for International decreased $17 million for the three months ended March 31, 2020 as compared with the 2019 period driven by the continued impact of the strategic exit from certain Lloyd’s business classes offset by growth in Canada.

Net written premiums for International decreased $40 million for the three months ended March 31, 2020 as compared with the 2019 period.

The decrease in net earned premiums was consistent with the trend in net written premiums for International for the three months ended March 31, 2020.

Core income decreased $192 million for the three months ended March 31, 2020 as compared with the 2019 period due to lower net investment income driven by limited partnership and common stock returns partially offset by improved current accident year underwriting results.

Net catastrophe losses were $75 million for the three months ended March 31, 2020 as compared with $58 million in the 2019 period.

Net catastrophe losses for the three months ended March 31, 2020 included $13 million related to COVID-19, which is being tracked as a separate catastrophe event.

For the three months ended March 31, 2020 and 2019, Specialty had net catastrophe losses of $8 million, which included $6 million related to the COVID-19 pandemic, and $12 million, Commercial had net catastrophe losses of $57 million, which included $5 million related to the COVID-19 pandemic, and $40 million and International had net catastrophe losses of $10 million, which included $2 million related to the COVID-19 pandemic, and $6 million.

Favorable net prior year loss reserve development of $15 million and $14 million was recorded for the three months ended March 31, 2020 and 2019.

For the three months ended March 31, 2020 and 2019, Specialty recorded favorable net prior year loss reserve development of $11 million and $20 million and Commercial recorded favorable net prior year loss reserve development of $4 million and $8 million.

For the three months ended March 31, 2020, International recorded no net prior year loss reserve development as compared with unfavorable net prior year loss reserve development of $14 million in the 2019 period.

Six Months Ended June 30, 2020

International

(In millions, except %)

Gross written premiums

Gross written premiums excluding third

party captives

Net written premiums

Net earned premiums

Net investment income

Core income (loss)

Other performance metrics:

Loss ratio excluding catastrophes

and development

Effect of catastrophe impacts

Effect of development-related items

Expense ratio

Dividend ratio

Combined ratio

Combined ratio excluding catastrophes

and development

Renewal premium change

Six Months Ended June 30, 2019

Gross written premiums

Gross written premiums excluding third

party captives

Net written premiums

Net earned premiums

Net investment income

Other performance metrics:

Loss ratio excluding catastrophes

and development

Effect of catastrophe impacts

Effect of development-related items

Expense ratio

Dividend ratio

Combined ratio

Combined ratio excluding catastrophes

and development

Renewal premium change

Three Months Ended June 30, 2020 Compared to 2019

Total gross written premiums increased $130 million for the three months ended June 30, 2020 as compared with the 2019 period.

Total net written premiums increased $56 million for the three months ended June 30, 2020 as compared with the 2019 period.

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

ended June 30, 2020 as compared with the 2019 period driven by strong rate.

Net written premiums for Specialty increased $29 million for the three months ended June 30, 2020 as compared with the 2019 period.

The increase in net earned premiums for the three months ended June 30, 2020 was consistent with the trend in net written premiums in recent quarters for Specialty.

Gross written premiums for Commercial increased $102 million for the three months ended June 30, 2020 as compared with the 2019 period driven by strong rate and higher new business.

Net written premiums for Commercial increased $37 million for the three months ended June 30, 2020 as compared with the 2019 period.

The increase in net earned premiums for the three months ended June 30, 2020 was consistent with the trend in net written premiums partially offset by a reduction in the estimated audit premiums as a result of the economic slowdown arising from COVID-19 for Commercial.

Gross written premiums for International decreased $10 million for the three months ended June 30, 2020 as compared with the 2019 period.

Excluding the effect of foreign currency exchange rates, gross written premiums decreased $3 million driven by the continued impact of the strategic exit from certain Lloyd’s business classes, offset by growth in Europe and Canada.

Net written premiums decreased $10 million for the three months ended June 30, 2020 as compared with the 2019 period.

Excluding the effect of foreign currency exchange rates, net written premiums decreased $6 million for the three months ended June 30, 2020 as compared with the 2019 period.

The decrease in net earned premiums for the three months ended June 30, 2020 was consistent with the trend in net written premiums in recent quarters for International.

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

Net catastrophe losses were $301 million for the three months ended June 30, 2020 as compared with $38 million in the 2019 period.

Net catastrophe losses for the three months ended June 30, 2020 included $182 million related to COVID-19, $61 million related to civil unrest and $58 million related primarily to severe weather-related events.

Specialty net catastrophe losses of $105 million for the three months ended June 30, 2020 included $103 million related to the COVID-19 pandemic.

Specialty net catastrophe losses were $1 million for the three months ended June 30, 2019.

Commercial net catastrophe losses of $151 million for the three months ended June 30, 2020 included $43 million related to the COVID-19 pandemic, $61 million related to civil unrest and $47 million related primarily to severe weather-related events.

Commercial net catastrophe losses were $37 million for the three months ended June 30, 2019.

International net catastrophe losses of $45 million for the three months ended June 30, 2020 included $36 million related to the COVID-19 pandemic.

International net catastrophe losses were $1 million for the three months ended June 30, 2019.

The COVID-19 losses in the second quarter of 2020 follow a detailed review and analysis of existing and potential exposures in light of current information, and represent CNA’s best estimate of its ultimate insurance losses and loss adjustment expenses, including defense costs resulting from the pandemic and the consequent economic crisis.

The losses were substantially driven by healthcare professional liability with additional impacts from workers’ compensation, management liability, commercial property, trade credit and surety.

Due to the recent timing of the event, emergence pattern of claims and long tail nature of certain exposures the losses are substantially classified as incurred but not reported (“IBNR”) reserves.

The COVID-19 catastrophe losses do not include the benefits of lower current accident year losses associated with lower loss frequency in certain lines of business as a result of shelter in place restrictions.

Those benefits are modest and are partially offset by the impact of a reduction in the estimated audit premiums and an increase in the credit allowance for premiums receivables resulting from the depressed economic conditions.

Unfavorable net prior year loss reserve development of $22 million and favorable net prior year loss reserve development of $31 million was recorded for the three months ended June 30, 2020 and 2019.

For the three months ended June 30, 2020 and 2019, Specialty recorded favorable net prior year loss reserve development of $20 million and $18 million and Commercial recorded unfavorable net prior year loss reserve development of $45 million as compared with favorable net prior year loss reserve development of $12 million.

For the three months ended June 30, 2020, International recorded favorable net prior year loss reserve development of $3 million as compared with $1 million in the 2019 period.

Further information on net prior year loss reserve development is included in Note 6 of the Notes to Consolidated Condensed Financial Statements included under Item 1.

Specialty’s combined ratio improved 1.0 point for the three months ended March 31, 2020 as compared with the 2019 period.

The loss ratio improved 0.2 points driven by improved current accident year underwriting results largely offset by lower favorable net prior year loss reserve development in the current period.

The expense ratio improved 0.8 points for the three months ended March 31, 2020 as compared with the 2019 period driven by higher net earned premiums.

Commercial’s combined ratio increased 0.6 points for the three months ended March 31, 2020 as compared to the 2019 period.

The loss ratio increased 1.2 points driven by higher net catastrophe losses partially offset by lower claim handling expenses.

The expense ratio for the three months ended March 31, 2020 improved 0.6 points as compared with the 2019 period driven by higher net earned premiums.

International’s combined ratio improved 2.0 points for the three months ended March 31, 2020 as compared with the 2019 period.

The loss ratio improved 0.3 points driven by the absence of unfavorable net prior year loss reserve development in the current period partially offset by lower current accident year underwriting results.

The expense ratio improved 1.7 points for the three months ended March 31, 2020 as compared with the 2019 period driven by lower acquisition expenses and employee costs.

Specialty’s combined ratio increased 13.5 points for the three months ended June 30, 2020 as compared with the 2019 period.

The loss ratio increased 14.6 points driven by higher net catastrophe losses, or 15.0 points of the loss ratio, for the three months ended June 30, 2020.

The expense ratio improved 1.1 points for the three months ended

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

Commercial’s combined ratio increased 18.8 points for the three months ended June 30, 2020 as compared to the 2019 period.

The loss ratio increased 17.5 points driven by higher net catastrophe losses and unfavorable net prior year loss reserve development.

The combined ratio excluding catastrophes and development improved 1.4 points for the three months ended June 30, 2020 as compared with the 2019 period which reflects a 0.7 point net benefit related to COVID-19 from lower loss frequency as a result of shelter in place restrictions and an adverse impact from a reduction in estimated audit premiums.

These items decreased the loss ratio by 1.8 points and increased the expense ratio by 1.1 points.

Excluding the impacts of COVID-19, the combined ratio excluding catastrophes and development improved 0.7 points due to the loss ratio.

International’s combined ratio increased 17.8 points for the three months ended June 30, 2020 as compared with the 2019 period.

The loss ratio increased 18.4 points driven by higher net catastrophe losses, or 19.9 points of the loss ratio, for the three months ended June 30, 2020.

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

Six Months Ended June 30, 2020 Compared to 2019

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

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

Gross written premiums, excluding third party captives, for Specialty increased $67 million for the six months ended June 30, 2020 as compared with the 2019 period driven by strong rate.

Net written premiums for Specialty increased $25 million for the six months ended June 30, 2020 as compared with the 2019 period.

The increase in net earned premiums for the six months ended June 30, 2020 was consistent with the trend in net written premiums in recent quarters for Specialty.

Gross written premiums for Commercial increased $223 million for the six months ended June 30, 2020 as compared with the 2019 period driven by strong rate and higher new business.

Net written premiums for Commercial increased $138 million for the six months ended June 30, 2020 as compared with the 2019 period.

The increase in net earned premiums for the six months ended June 30, 2019 was consistent with the trend in net written premiums partially offset by a reduction in the estimated audit premiums as a result of the economic slowdown arising from COVID-19 for Commercial.

Gross written premiums for International decreased $27 million for the six months ended June 30, 2020 as compared with the 2019 period.

Excluding the effect of foreign currency exchange rates, gross written premiums decreased $18 million driven by the continued impact of the strategic exit from certain Lloyd’s business classes, offset by growth in Canada and Europe.

Net written premiums decreased $50 million for the six months ended June 30, 2020 as compared with the 2019 period.

Excluding the effect of foreign currency exchange rates, net written premiums decreased $42 million for the six months ended June 30, 2020 as compared with the 2019 period.

The decrease in net earned premiums for the six months ended June 30, 2020 was consistent with the trend in net written premiums in recent quarters for International.

Core income decreased $394 million for the six months ended June 30, 2020 as compared with the 2019 period due to higher net catastrophe losses, lower net investment income driven by limited partnership and common stock returns and unfavorable net prior year loss reserve development in the current year period including a $50 million charge for mass tort exposures primarily due to New York reviver statute-related claims.

Net catastrophe losses were $376 million for the six months ended June 30, 2020 as compared with $96 million in the 2019 period.

Net catastrophe losses for the six months ended June 30, 2020 included $195 million related to COVID-19, $61 million related to civil unrest and $120 million related primarily to severe weather-related events.

Specialty net catastrophe losses of $113 million for the six months ended June 30, 2020 included $109 million related to the COVID-19 pandemic.

Specialty net catastrophe losses were $13 million for the six months ended June 30, 2019.

Commercial net catastrophe losses of $208 million for the six months ended June 30, 2020 included $48 million related to the COVID-19 pandemic, $61 million related to civil unrest and $99 million related primarily to severe weather-related events.

Commercial net catastrophe losses were $77 million for the six months ended June 30, 2019.

International net catastrophe losses of $55 million for the six months ended June 30, 2020 included $38 million related

to the COVID-19 pandemic.

International net catastrophe losses were $6 million for the six months ended June 30, 2019.

Unfavorable net prior year loss reserve development of $7 million and favorable net prior year loss reserve development of $45 million was recorded for the six months ended June 30, 2020 and 2019.

For the six months ended June 30, 2020 and 2019, Specialty recorded favorable net prior year loss reserve development of $31 million and $38 million and Commercial recorded unfavorable net prior year loss reserve development of $41 million as compared with favorable net prior year loss reserve development of $20 million.

For the six months ended June 30, 2020, International recorded favorable net prior year loss reserve development of $3 million as compared with unfavorable net prior year loss reserve development of $13 million in the 2019 period.

Further information on net prior year loss reserve development is included in Note 6 of the Notes to Consolidated Condensed Financial Statements included under Item 1.

Specialty’s combined ratio increased 6.4 points for the six months ended June 30, 2020 as compared with the 2019 period.

The loss ratio increased 7.3 points due to higher net catastrophe losses, or 8.2 points of the loss ratio, for the six months ended June 30, 2020.

The expense ratio improved 0.9 points for the six months ended June 30, 2020 as compared with the 2019 period driven by lower underwriting expenses and higher net earned premiums.

Commercial’s combined ratio increased 9.6 points for the six months ended June 30, 2020 as compared to the 2019 period.

The loss ratio increased 9.2 points driven by higher net catastrophe losses and unfavorable net prior year loss reserve development.

The combined ratio excluding catastrophes and development improved 1.4 points for the six months ended June 30, 2020 as compared to the 2019 period which reflects a 0.3 point net benefit related to COVID-19 from lower loss frequency as a result of shelter in place restrictions and an adverse impact from a reduction in the estimated audit premiums.

These items decreased the loss ratio by 0.9 points and increased the expense ratio by 0.6 points.

Excluding the impacts of COVID-19, the combined ratio excluding catastrophes and development improved 1.1 points due to the loss ratio.

International’s combined ratio increased 7.7 points for the six months ended June 30, 2020 as compared with the 2019 period.

The loss ratio increased 8.8 points driven by higher net catastrophe losses, or 11.9 points of the loss ratio, for the six months ended June 30, 2020, partially offset by favorable net prior year loss reserve development in the current year period.

The expense ratio improved 1.1 points for the six months ended June 30, 2020 as compared with the 2019 period driven by lower acquisition and underwriting expenses.

Other Insurance Operations

The following table summarizes the results of CNA’s Other Insurance Operations for the three months ended March 31, 2020 and 2019:

Three Months Ended March 31

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

Three Months Ended

Six Months Ended

(In millions)

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Core income (loss)

Core results for the three months ended March 31, 2020 decreased $18 million as compared with the 2019 period.

The decrease in core results was driven by lower amortization of the deferred gain related to the A&EP loss portfolio transfer.

Due to the recognition of the active life reserve premium deficiency and resetting of actuarial assumptions in the third quarter of 2019, the operating results for the long term care business in 2020 now reflect the variance between actual experience and expected results contemplated in the Company’s best estimate of reserves.

Core income for the long term care business for the three months ended March 31, 2020 is in line with expectations.

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

The following table reconciles CNA’s core income (loss) to net income (loss) attributable to Loews Corporation for the three months ended March 31, 2020 and 2019:

Three Months Ended March 31

Three Months Ended June 30, 2020 Compared to 2019

Core income of $3 million for the three months ended June 30, 2020 was primarily driven by better than expected persistency in the long term care business.

Six Months Ended June 30, 2020 Compared to 2019

Core loss of $11 million for the six months ended June 30, 2020 was primarily due to interest expense on corporate debt partially offset by better than expected persistency in the long term care business and amortization of the deferred gain related to the A&EP loss portfolio transfer.

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

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

Three Months Ended

Six Months Ended

(In millions)

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Total core income

Investment gains (losses) (after tax)

Consolidating adjustments including noncontrolling interests

Net income (loss) attributable to Loews Corporation

Diamond Offshore

Bankruptcy Filing

On April 26, 2020, 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.

For further information, see Note 13 of the Notes to the Consolidated Condensed Financial Statements included under Item 1.

The protracted industry downturn affecting the offshore contract drilling industry sustained a further significant set-back, commencing in mid-March of 2020.

The COVID-19 outbreak and actions taken by businesses and governments in response to it have precipitated a lockdown in many parts of the world, leading to a dramatic fall in oil demand and economic activity.

In addition, amid the ongoing COVID-19 pandemic, the Organization of Petroleum Exporting Countries and other oil producing nations (“OPEC+”) were unable to reach an agreement on oil production quotas, at which point Saudi Arabia and Russia initiated efforts to aggressively increase production.

The combination of these events created the unprecedented dual impact of a global oil demand decline coupled with the risk of a substantial increase in supply.

While OPEC+ agreed in April to cut production, downward pressure on oil prices has remained and could continue for the foreseeable future.

As a result of this, crude oil prices have fallen to approximately $15 per barrel as of the date of this Report.

Consequently, due to the low commodity price and uncertain global demand, many exploration and production companies, including some of Diamond Offshore’s customers, have announced significant reductions in their 2020 capital spending programs.

Floater utilization, which was approximately 67% at the end of the first quarter, is expected to decrease significantly as some industry analysts report that contracting activity has come to a halt as new rig tenders are deferred or canceled.

Additionally, some rigs are being released early from drilling programs or are having their contracts terminated, while other programs have been paused in response to the need for COVID-19 containment.

Dayrates are also expected to decrease as customers seek lower rates on any new contracts awarded during these unprecedented times.

Global rig attrition is projected by industry analysts to increase as a market recovery is not expected in the near term.

During this time, drilling contractors may elect to forego upcoming special surveys of rigs rolling off contract with no future work, resulting in the cold stacking or ultimate retirement of a rig.

Historically, the longer a drilling rig remains cold stacked, the cost of reactivation increases and the likelihood of reactivation decreases.

During the first quarter of 2020, Diamond Offshore recognized an aggregate asset impairment charge of $774 million to write down four rigs to their estimated fair values.

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 charges in future periods.

Contract Drilling Backlog

Diamond Offshore’s contract drilling backlog was $1.4 billion and $1.6 billion as of April 1, 2020 (based on information available at that time) and January 1, 2020 (the date reported in our Annual Report on Form 10-K for the year ended December 31, 2019).

The contract drilling backlog by year as of April 1, 2020 is $521 million in 2020 (for the nine-month period beginning April 1, 2020), $493 million in 2021 and an aggregate of $379 million in 2022 and 2023.

Contract drilling backlog excludes future gross margin commitments of approximately $25 million for 2020 and an aggregate of approximately $75 million for the three year period ending December 31, 2023, payable by a customer in the form of a guarantee of gross margin to be earned on future contracts or by direct payment at the end of each of the two respective periods, pursuant to terms of an existing contract.

In April of 2020, Diamond Offshore received a purported notice of termination by a subsidiary of Beach Energy Limited (“Beach”) of its contract for the Ocean Onyx , which was scheduled to commence during the second quarter of 2020 and represents approximately $66 million of contract drilling backlog expected to have been earned in 2020 through 2021.

Diamond Offshore does not believe that Beach has a valid or lawful right to terminate the contract or that the purported notice of termination is effective, and intends to enforce its rights under the contract.

Contract drilling backlog includes only firm commitments (typically represented by signed contracts) and is calculated by multiplying the contracted operating dayrate by the firm contract period.

Diamond Offshore’s calculation also assumes full utilization of its drilling equipment for the contract period (excluding scheduled shipyard and survey days);

however, the amount of actual revenue to be earned and the actual periods during which revenues will be earned will be different than the amounts and periods stated above due to various factors affecting utilization such as the effects of COVID-19 and efforts to mitigate the spread of the virus, weather conditions and unscheduled repairs and maintenance.

Contract drilling backlog excludes revenues for mobilization, demobilization, contract preparation and customer reimbursables.

Changes in Diamond Offshore’s contract drilling backlog between periods are generally a function of the performance of work on term contracts, as well as the extension or modification of existing term contracts and the execution of additional contracts.

In addition, under certain circumstances, Diamond Offshore’s customers may seek to terminate or renegotiate its contracts, which could adversely affect its reported backlog.

Results of Operations

The following table summarizes the results of operations for Diamond Offshore for the three months ended March 31, 2020 and 2019 as presented in Note 12 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:

Three Months Ended March 31

(In millions)

Net investment income

Contract drilling revenues

Other revenues

Contract drilling expenses

Other operating expenses:

Impairment of assets

Other expenses

Loss before income tax

Income tax benefit

Amounts attributable to noncontrolling interests

Net loss attributable to Loews Corporation

Contract drilling revenues decreased $9 million for the three months ended March 31, 2020 as compared with the 2019 period, primarily due to lower average daily revenue earned, partially offset by the effect of incremental revenue earning days.

The decrease in average daily revenue is primarily due to the completion of a long term contract for a drilling rig in July of 2019, which was at a significantly higher dayrate than the rig’s current contract, partially offset by revenue recognized during the first quarter of 2020 related to the reimbursement of withholding taxes related to a rig in Brazil.

Revenue earning days increased primarily due to incremental revenue earning days for a rig which was reactivated for a new contract that commenced during the second quarter of 2019.

Contract drilling expenses increased $18 million for the three months ended March 31, 2020 as compared with the 2019 period, primarily due to higher costs for repairs and maintenance and other rig operating costs, primarily related to the reactivation of two rigs.

Net loss attributable to Loews Corporation increased $415 million for the three months ended March 31, 2020 as compared with the 2019 period, primarily due to an aggregate asset impairment charge of $408 million (after tax and noncontrolling interests) recognized in the first quarter of 2020 combined with lower margins from contract drilling services and higher depreciation expense primarily due to capital expenditures made during 2019.

These unfavorable impacts on results were partially offset by an incremental tax benefit recorded in relation to the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).

Investment gains (losses)

Consolidating adjustments including noncontrolling

Net income attributable to Loews Corporation

Boardwalk Pipelines

Current Events

During the first quarter of 2020, the world and the United States experienced the unprecedented impacts of the COVID-19 pandemic along with an excess supply of oil and natural gas.

The excess supply of energy products has led to a significant decrease in energy prices and the social distancing and other measures in response to COVID-19 have changed the way that Boardwalk Pipelines operates its pipelines and conducts its business.

Boardwalk Pipelines’ operations are considered essential critical infrastructure under current Cybersecurity and Infrastructure Security Agency guidelines, and it has taken measures to seek to ensure the safety of its employees and operations while maintaining uninterrupted service to its customers.

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

Boardwalk Pipelines’ business has not been significantly impacted by the recent change in commodity prices.

Some of its customers are directly impacted by changes in commodity prices, which can impact Boardwalk Pipelines’ ability to renew contracts at existing rates or capacities or impact the customers’ ability to make payment for the services Boardwalk Pipelines provides.

In 2020, the world and the United States experienced the unprecedented impacts of the COVID-19 pandemic and measures to mitigate the spread of COVID-19.

An excess supply of energy products has also led to a significant decrease in energy prices.

Boardwalk Pipelines’ operations are considered essential critical infrastructure under current Cybersecurity and Infrastructure Security Agency guidelines, and it has taken measures to ensure the safety of its employees and operations while maintaining uninterrupted service to its customers.

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

Boardwalk Pipelines’ business has not been significantly impacted by the recent volatility in commodity prices.

However, some of its customers are directly impacted by changes in commodity prices, which may impact Boardwalk Pipelines’ ability to renew contracts at existing terms or may impact the customers’ ability to make payment for the services Boardwalk Pipelines provides.

The COVID-19 pandemic and decreased energy prices could cause a disruption of the normal operations of many of Boardwalk Pipelines’ customers, including the temporary closure or reduction of plant operations or shut-in of production.

Should energy prices remain at current levels for a sustained period of time, or decline further, Boardwalk Pipelines could be exposed to increased credit risk or the increased risk of customers filing for bankruptcy protection.

While energy prices remain volatile, prices have somewhat improved from the level that they were during portions of the first and second quarters.

If energy prices remain at current levels for a sustained period of time or decline again, Boardwalk Pipelines could be exposed to increased credit risk or the increased risk of customers filing for bankruptcy protection.

During 2020, Boardwalk Pipelines has not had any significant customers declare bankruptcy.

Through the date of this Report, Boardwalk Pipelines has not experienced any significant operational disruptions and its pipeline throughput has remained stable.

For example, for the three months ended March 31, 2020, Boardwalk Pipelines transported approximately 801 trillion cubic feet of natural gas and approximately 23 million barrels of natural gas liquids and hydrocarbons (“NGLs”), an increase in excess of 10% from the comparable period in 2019 for each commodity.

Boardwalk Pipelines’ results of operations for the first quarter of 2020 have not been materially impacted as a result of the COVID-19 pandemic or the decline in energy prices.

For the six months ended June 30, 2020, Boardwalk Pipelines transported approximately 1.5 trillion cubic feet of natural gas and approximately 44.3 million barrels of natural gas liquids and hydrocarbons (“NGLs”), an increase in excess of 7% from the comparable period in 2019 for each commodity.

Boardwalk Pipelines’ results of operations for the second quarter of 2020 have not been materially impacted as a result of the COVID-19 pandemic or the volatility in energy prices.

Boardwalk Pipelines did not experience any significant changes in its workforce composition and was able to implement its business continuity plans with no significant impact to its ability to maintain its operations.

Boardwalk Pipelines continues to maintain strong physical and cybersecurity measures in order to both serve its operational needs with a remote workforce and keep its integrated pipeline and storage systems running to ensure that it provides reliable service to its customers.

Through the date of this Report, Boardwalk Pipelines’ balance sheet remains strong and it continues to have sufficient liquidity and it expects to continue to fund its operations through its operating cash flows.

Boardwalk Pipelines has $1.2 billion of available borrowing capacity under its revolving credit facility and does not have any debt maturities until February of 2021.

Boardwalk Pipelines has approximately $1.2 billion of available borrowing capacity under its revolving credit facility and does not have any debt maturities until February of 2021.

The safety of Boardwalk Pipelines’ employees and operations while providing uninterrupted service to its customers remains its primary focus.

Although it is difficult to reasonably determine the ongoing and future impacts of the COVID-19 pandemic and the decline in energy prices, an extended downturn in the economy and depressed energy prices could negatively affect Boardwalk Pipelines’ customers and their businesses and could in turn have a material adverse effect on Boardwalk Pipelines’ business.

Although it is difficult to reasonably determine the ongoing and future impacts of the COVID-19 pandemic and the volatility in energy prices, an extended downturn in the economy and depressed energy prices could negatively affect Boardwalk Pipelines’ customers and their businesses and could in turn have a material adverse effect on Boardwalk Pipelines’ business.

Firm Agreements

A substantial portion of Boardwalk Pipelines’ transportation and storage capacity is contracted for under firm agreements.

For the last twelve months ended March 31, 2020, approximately 90% of Boardwalk Pipelines’ revenues were derived from fixed fees under firm agreements.

Boardwalk Pipelines expects to earn revenues of approximately $9.4 billion from fixed fees under committed firm agreements in place as of March 31, 2020, including agreements for transportation, storage and other services, over the remaining term of those agreements.

For the three months ended March 31, 2020, Boardwalk Pipelines added approximately $370 million from the comparable amount at December 31, 2019, from contracts entered into during 2020.

For Boardwalk Pipelines’ customers that are charged maximum tariff rates related to its Federal Energy Regulatory Commission (“FERC”) regulated operating subsidiaries, the revenues expected to be earned from fixed fees under committed firm agreements reflect the current tariff rate for such services for the term of the agreements, however, the tariff rates may be subject to future adjustment.

For the twelve months ended June 30, 2020, approximately 90% of Boardwalk Pipelines’ revenues were derived from fixed fees under firm agreements.

Boardwalk Pipelines expects to earn revenues of approximately $9.3 billion from fixed fees under committed firm agreements in place as of June 30, 2020, including agreements for transportation, storage and other services, over the remaining term of those agreements.

For the six months ended June 30, 2020, Boardwalk Pipelines added approximately $502 million from the comparable amount at December 31, 2019, from contracts entered into during 2020.

For Boardwalk Pipelines’ customers that are charged its maximum applicable tariff rates related to its Federal Energy Regulatory Commission (“FERC”) regulated operating subsidiaries, the revenues expected to be earned from fixed fees under committed firm agreements reflect the current tariff rate for such services for the term of the agreements, however, the tariff rates may be subject to future adjustment.

The estimated revenues from fixed fees under committed firm agreements may also include estimated revenues that are anticipated under executed precedent transportation agreements for projects that are subject to regulatory approvals.

The revenues expected to be earned from fixed fees under committed firm agreements do not include additional revenues Boardwalk Pipelines has recognized and may recognize under firm agreements based on actual utilization of the contracted pipeline or storage capacity, any expected revenues for periods after the expiration dates of the existing agreements, execution of precedent agreements associated with growth projects or other events that occurred or will occur subsequent to March 31, 2020.

Contract Renewals

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Demand for firm service is primarily based on market conditions which can vary across Boardwalk Pipelines’ pipeline systems.

Through the date of this Report, while Boardwalk Pipelines has not seen a significant change in the demand for its services as a result of the COVID-19 pandemic or the decline in energy prices, if these conditions remain for an extended period of time, Boardwalk Pipelines could see a decline in the demand for its services.

While Boardwalk Pipelines has not seen a significant change in the demand for its services as a result of the COVID-19 pandemic or the volatility in energy prices, if these conditions remain for an extended period of time or re-occur, Boardwalk Pipelines could see a decline in the demand for its services.

Boardwalk Pipelines focuses its marketing efforts on enhancing the value of the capacity that is up for renewal and works with customers to match gas supplies from various basins to new and existing customers and markets, including aggregating supplies at key locations along its pipelines to provide end-use customers with attractive and diverse supply options.

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Results of Operations

The following table summarizes the results of operations for Boardwalk Pipelines for the three months ended March 31, 2020 and 2019 as presented in Note 12 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:

Three Months Ended March 31

The following table summarizes the results of operations for Boardwalk Pipelines for the three and six months ended June 30, 2020 and 2019 as presented in Note 14 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:

Three Months Ended

Six Months Ended

(In millions)

4 unchanged sentences

Net income attributable to Loews Corporation

Total revenues decreased $5 million for the three months ended March 31, 2020 as compared with the 2019 period.

Including the effect of items in fuel and transportation expense, operating revenues decreased $10 million driven by contract expirations that were recontracted at overall lower average rates, partially offset by revenues from recently completed growth projects.

Operating expenses increased $16 million for the three months ended March 31, 2020 as compared with the 2019 period.

Excluding items offset in operating revenues, operating expenses increased $11 million, primarily due to the timing of maintenance project expenses, an increased asset base from recently completed growth projects and the expiration of property tax abatements.

Interest expense decreased $3 million for the three months ended March 31, 2020 as compared with the 2019 period primarily due to lower interest rates from borrowings under the revolving credit facility.

Three Months Ended June 30, 2020 Compared to 2019

Total revenues decreased $31 million for the three months ended June 30, 2020 as compared with the 2019 period.

Including the effect of items in fuel and transportation expense and excluding net proceeds of approximately $26 million as a result of drawing on letters of credit due to a customer bankruptcy in 2019, operating revenues decreased $6 million driven by contract expirations that were recontracted at overall lower average rates, partially offset by revenues from recently completed growth projects and higher storage and parking and lending (“PAL”) revenues due to favorable market conditions.

Operating expenses were essentially flat for the three months ended June 30, 2020 as compared with the 2019 period.

Interest expense decreased $5 million for the three months ended June 30, 2020 as compared with the 2019 period primarily due to lower interest rates from borrowings under Boardwalk Pipelines’ revolving credit facility and higher capitalized interest.

Six Months Ended June 30, 2020 Compared to 2019

Total revenues decreased $36 million for the six months ended June 30, 2020 as compared with the 2019 period.

Including the effect of items in fuel and transportation expense and excluding the impact from the customer bankruptcy discussed above, operating revenues decreased $16 million driven by contract expirations that were recontracted at overall lower average rates, partially offset by revenues from recently completed growth projects and higher storage and PAL revenues due to favorable market conditions.

Operating expenses increased $17 million for the six months ended June 30, 2020 as compared with the 2019 period.

Excluding items offset in operating revenues, operating expenses increased $13 million, primarily due to an increased asset base from recently completed growth projects, higher litigation expenses and the expiration of property tax abatements.

Interest expense decreased $8 million for the six months ended June 30, 2020 as compared with the 2019 period primarily due to lower interest rates from borrowings under Boardwalk Pipelines’ revolving credit facility and higher capitalized interest and allowance for funds used during construction related to Boardwalk Pipelines’ capital projects.

Loews Hotels & Co

The following table summarizes the results of operations for Loews Hotels & Co for the three months ended March 31, 2020 and 2019 as presented in Note 12 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:

Three Months Ended March 31

The following table summarizes the results of operations for Loews Hotels & Co for the three and six months ended June 30, 2020 and 2019 as presented in Note 14 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:

Three Months Ended

Six Months Ended

(In millions)

Operating revenue

Gain on sale of hotel

Revenues related to reimbursable expenses

Operating and other:

Asset impairments

Reimbursable expenses

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Net income (loss) attributable to Loews Corporation

Due to the COVID-19 pandemic and efforts to mitigate the spread of the virus, twenty hotels owned and/or operated by Loews Hotels temporarily suspended operations in March of 2020, two hotels that completed construction have not opened and two additional hotels suspended operations in April of 2020.

Only three owned hotels and one managed hotel remain operational, but with limited occupancy.

While Loews Hotels has enacted significant measures to adjust the operating cost structure of each hotel during these suspensions of operations, deferred most capital expenses and reduced the operating costs of its management company fixed and other necessary costs to own and maintain each property are still being incurred.

The resumption of operations will vary by hotel property and will depend on numerous factors, some of which are outside Loews Hotels control.

After the resumption of operations, occupancy at hotel properties is expected to increase gradually as the travel behavior of potential hotel guests will also depend on numerous factors outside Loews Hotels control.

Reduced occupancy caused by the COVID-19 pandemic and mitigation efforts is the primary reason for the decrease in operating revenues of $42 million, the decrease in operating expenses of $17 million, and the decrease in equity income from joint ventures of $26 million for the three months ended March 31, 2020 as compared with the 2019 period.

In addition to the impact of the COVID-19 pandemic, the Loews San Francisco Hotel transitioned from an owned to a managed hotel during 2019 and that transition reduced operating revenues for the three months ended March 31, 2020 by $8 million as compared with the 2019 period.

Operating expenses for the first quarter of 2019 included a $3 million impairment related to an owned hotel property.

Pre-opening costs included in equity income from joint ventures increased $3 million for the three months ended March 31, 2020 compared with the 2019 period.

Interest expense for the first quarter of 2020 increased $3 million due primarily to the increase in debt balances and less capitalized interest related to recently completed hotel development projects as compared with the 2019 period.

Due to the COVID-19 pandemic and efforts to mitigate the spread of the virus, twenty hotels owned and/or operated by Loews Hotels & Co temporarily suspended operations in March of 2020, with two additional hotels suspending operations in April of 2020.

Of these twenty-two hotels, one resumed operations in May, twelve in June and five in July, with the operations of the remaining four hotels still temporarily suspended.

Only two owned hotels and two managed hotels did not suspend operations.

Additionally, two hotels completed construction prior to the pandemic;

one delayed opening until June, and the second is expected to open later this year.

However, all operational hotels are experiencing very limited occupancy.

Although Loews Hotels & Co has enacted significant measures to adjust the operating cost structure of each hotel during these suspensions and subsequent resumptions of operations, deferred most capital expenditures and reduced the operating costs of its management company, these measures could not offset the impact of significant lost revenues.

Loews Hotels & Co has therefore incurred significant operating losses since the start of the pandemic.

The resumption of operations for the remaining four hotels that continue to have suspended operations, as well as the potential for hotels which have resumed operations to re-suspend operations, will depend on numerous factors, many of which are outside Loews Hotels & Co’s control.

Although occupancy at operational hotel properties is expected to increase gradually, it is nonetheless highly dependent on the travel behavior of potential hotel guests, driven largely by factors outside Loews Hotels & Co’s control, including government capacity restrictions, travel restrictions and the duration and scope of the COVID-19 pandemic.

While the duration of the COVID-19 outbreak and related financial impact cannot be estimated at this time, Loews Hotels & Co expects its results of operations, financial condition and cash flows will be materially adversely affected throughout 2020, and likely thereafter.

The severity of the impact on Loews Hotels & Co will depend in large part on the duration of containment efforts, either mandated or voluntary, and the perceptions of health risks associated with COVID-19 related to business and leisure travel.

In addition, once the COVID-19 outbreak is mitigated or contained, whenever that may be, historical travel patterns, both domestic and international, may continue to be disrupted either on a temporary basis or with longer term effects.

These factors have contributed to impairment charges for the three months ended June 30, 2020, and may lead to additional impairment charges in future periods.

Reduced occupancy caused by the COVID-19 pandemic and mitigation efforts as well as related operating cost reduction measures are the primary reasons for the decrease in operating revenues of $150 million and $192 million and operating expenses of $80 million and $94 million for the three and six months ended June 30, 2020 as compared with the 2019 period.

Additionally, equity income from joint ventures decreased $41 million and $67 million for the three and six months ended June 30, 2020 as compared with the 2019 period driven primarily by the COVID-19 pandemic.

Loews Hotels & Co considers events or changes in circumstances that indicate the carrying amount of its assets may not be recoverable.

During the second quarter of 2020, Loews Hotels & Co recorded impairment charges of $20 million to reduce the carrying value of certain assets to their estimated fair value.

The three and six months ended June 30, 2019 include impairment charges of $7 million and $10 million.

Loews Hotels & Co recorded a gain of $13 million on the sale of an owned hotel in the second quarter of 2020.

Interest expense for the three and six months ended June 30, 2020 increased $3 million and $6 million primarily due to the increase in debt balances and less capitalized interest related to recently completed hotel development projects as compared with the 2019 period.

Corporate operations consist primarily of investment income at the Parent Company, operating results of Altium Packaging, Parent Company interest expense and other Parent Company administrative costs.

Investment income includes earnings on cash and short term investments held at the Parent Company to meet current and future liquidity needs, as well as results of limited partnership investments and the trading portfolio.

The following table summarizes the results of operations for Corporate for the three months ended March 31, 2020 and 2019 as presented in Note 12 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:

Three Months Ended March 31

The following table summarizes the results of operations for Corporate for the three and six months ended June 30, 2020 and 2019 as presented in Note 14 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:

Three Months Ended

Six Months Ended

(In millions)

Net investment income (loss)

Investment loss

Operating revenues and other

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Net income (loss) attributable to Loews Corporation

Net investment loss was $166 million for the three months ended March 31, 2020 as compared with income of $84 million in the 2019 period, primarily as a result of the significant decline in equity based investments in March 2020 in response to the COVID-19 pandemic and related containment measures.

Operating revenues and other include Altium Packaging revenues of $256 million and $214 million for the three months ended March 31, 2020 and 2019.

The increase of $42 million in the 2020 period as compared with the 2019 period, reflects an increase of $35 million related to acquisitions in 2019, higher volumes as a result of higher COVID-19 related demand for household chemicals, water and pharmaceuticals partially offset by the pass-through effect of lower year-over-year resin prices.

Net investment income for the Parent Company increased $77 million for the three months ended June 30, 2020 as compared with the 2019 period primarily due to improved performance of equity based investments in the Parent Company trading portfolio.

Net investment loss was $56 million for the six months ended June 30, 2020 as compared with net investment income of $117 million in the 2019 period as a result of the significant decline in equity based investments in response to the COVID-19 pandemic and related containment measures.

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

Operating revenues and other include Altium Packaging revenues of $244 million and $223 million for the three months ended June 30, 2020 and 2019 and $500 million and $437 million for the six months ended June 30, 2020 and 2019.

The increase of $21 million for the three months ended June 30, 2020 as compared with the 2019 period reflects an increase of $25 million related to acquisitions in 2019, partially offset by the pass-through effect of lower year-over-year resin prices and lower volumes.

The increase of $63 million for the six months ended June 30, 2020 as compared with the 2019 period reflects an increase of $60 million related to acquisitions in 2019 and higher volumes as a result of higher COVID-19 related demand in the first quarter of 2020 for household chemicals, water and beverage, partially offset by the pass-through effect of lower year-over-year resin prices.

Altium Packaging’s contracts generally provide for resin price changes to be passed through to its customers on a short-term lag, generally about one month.

When a pass-through occurs, revenues and expenses generally change by the same amount so that Altium Packaging’s gross margin returns to the same level as prior to the change in prices.

Operating and other expenses include Altium Packaging operating expenses of $246 million and $206 million for three months ended March 31, 2020 and 2019, which include depreciation and amortization expense.

The increase in Altium Packaging’s operating expenses of $40 million in the 2020 period as compared with the 2019 period is primarily due to an increase of $31 million related to acquisitions in 2019 and higher volumes in 2020.

Operating and other expenses include Altium Packaging operating expenses of $236 million and $222 million for the three months ended June 30, 2020 and 2019 and $482 million and $428 million for the six months ended June 30, 2020 and 2019, which include depreciation and amortization expense.

The increase in operating expenses of $14 million for the three months ended June 30, 2020 as compared with the 2019 period is primarily due to an increase of $24 million related to acquisitions in 2019, partially offset by lower resin prices and lower volumes.

The increase in operating expenses of $54 million for the six months ended June 30, 2020 as compared with the 2019 period is primarily due to acquisitions in 2019.

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

Diamond Offshore

Contract drilling revenues were $69 million and $207 million for the three months ended June 30, 2020 and 2019 and $287 million and $434 million for the six months ended June 30, 2020 and 2019.

Contract drilling expenses were $69 million and $225 million for the three months ended June 30, 2020 and 2019 and $254 million and $392 million for the six months ended June 30, 2020 and 2019.

Results for the three and six months ended June 30, 2020 noted above, and included in our Consolidated Condensed Financial Statements, reflect only the periods through the April 26, 2020 deconsolidation and also reflect lower average daily revenue earned as compared with the 2019 periods.

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

LIQUIDITY AND CAPITAL RESOURCES

Parent Company

Parent Company cash and investments, net of receivables and payables, totaled $3.1 billion at March 31, 2020 as compared to $3.3 billion at December 31, 2019.

During the three months ended March 31, 2020, we received $575 million in dividends from CNA, including a special dividend of $485 million.

Cash outflows during the three months ended March 31, 2020 included the payment of $458 million to fund treasury stock purchases, $18 million of cash dividends to our shareholders and $63 million of cash contributions to Loews Hotels & Co.

Parent Company cash and investments, net of receivables and payables, totaled $3.6 billion at June 30, 2020 as compared to $3.3 billion at December 31, 2019.

During the six months ended June 30, 2020, we received $665 million in dividends from CNA, including a special dividend of $485 million.

Cash outflows during the six months ended June 30, 2020 included the payment of $491 million to fund treasury stock purchases, $36 million of cash dividends to our shareholders, $87 million of cash contributions to Loews Hotels & Co and $19 million to purchase common shares of CNA.

Loews Corporation anticipates providing Loews Hotels & Co additional capital support during the remainder of 2020.

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We are not responsible for the liabilities and obligations of our subsidiaries and there are no Parent Company guarantees.

In May of 2020, we completed a public offering of $500 million aggregate principal amount of 3.2% senior notes due May 15, 2030.

The proceeds of this offering are available for general corporate purposes.

Depending on market and other conditions, we may purchase our shares and shares of our subsidiaries outstanding common stock in the open market or otherwise.

During the three months ended March 31, 2020, we purchased 9.7 million shares of Loews Corporation common stock.

During the six months ended June 30, 2020, we purchased 10.7 million shares of Loews Corporation common stock and 564,430 shares of CNA common stock.

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

The declaration and payment of future dividends to holders of our common stock will be at the discretion of our Board of Directors and will depend on many factors, including our earnings, financial condition and business needs.

Related to the COVID-19 pandemic and efforts to mitigate the spread of the virus, CNA cash flows may be adversely impacted by lower premium volumes, suspensions and cancellations of policies, return of premiums or premium refunds, and increased claim and defense cost payments in future quarters.

Related to the COVID-19 pandemic and efforts to mitigate the spread of the virus, CNA cash flows have been and may continue to be adversely impacted by lower premium volumes, suspensions and cancellations of policies, return of premiums or premium refunds, and increased claim and defense cost payments.

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

CNA’s cash provided by operating activities was $212 million for the three months ended March 31, 2020 and $287 million for the 2019 period.

The decrease in cash provided by operating activities was driven by higher net claim payments and a lower level of distributions from limited partnerships partially offset by an increase in premiums collected.

CNA paid dividends of $2.37 per share on its common stock, including a special dividend of $2.00 per share in the first quarter of 2020.

On May 1, 2020, CNA’s Board of Directors declared a quarterly dividend of $0.37 per share, payable June 4, 2020 to shareholders of record on May 18, 2020.

CNA’s cash provided by operating activities was $650 million for the six months ended June 30, 2020 and $514 million for the six months ended June 30, 2019.

The increase in cash provided by operating activities was driven by

lower net claim payments, an increase in premiums collected and lower income taxes paid, partially offset by a lower level of distributions from limited partnerships.

CNA paid dividends of $2.74 per share on its common stock, including a special dividend of $2.00 per share in the six months ended June 30, 2020.

On July 31, 2020, CNA’s Board of Directors declared a quarterly dividend of $0.37 per share, payable September 3, 2020 to shareholders of record on August 17, 2020.

CNA’s declaration and payment of future dividends is at the discretion of its Board of Directors and will depend on many factors, including CNA’s earnings, financial condition, business needs and regulatory constraints.

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Additionally, ordinary dividends may only be paid from earned surplus, which is calculated by removing unrealized gains from unassigned surplus.

As of March 31, 2020, CCC was in a positive earned surplus position.

The maximum allowable dividend CCC could pay during 2020 that would not be subject to the Department’s prior approval is $1,078 million, less dividends paid during the preceding 12 months measured at that point in time.

CCC paid dividends of $125 million during the three months ended June 30, 2019, $135 million during the three months ended September 30, 2019, $125 million during the three months ended December 31, 2019 and $670 million during the three months ended March 31, 2020.

As of March 31, 2020, CCC is able to pay approximately $23 million of dividends that would not be subject to prior approval of the Department.

As of June 30, 2020, CCC was in a positive earned surplus position.

CCC paid dividends of $815 million and $805 million during the six months ended June 30, 2020 and 2019.

The actual level of dividends paid in any year is determined after an assessment of available dividend capacity, holding company liquidity and cash needs as well as the impact the dividends will have on the statutory surplus of the applicable insurance company.

As a result of Diamond Offshore’s bankruptcy filing, Diamond Offshore is in default of its loan covenants with respect to its unsecured senior notes and revolving credit facility and no longer has access to borrowings under its revolving credit agreement.

However, any efforts by its creditors to enforce their rights in respect of the default are automatically stayed as a result of the bankruptcy filing, and its creditors’ rights of enforcement in respect of the debt instruments are subject to the applicable provisions of the United States Bankruptcy Code.

Boardwalk Pipelines’ cash provided by operating activities decreased $18 million for the three months ended March 31, 2020 compared to the 2019 period, primarily due to the change in net income and the timing of receivables and accrued liabilities.

For the three months ended March 31, 2020 and 2019, Boardwalk Pipelines’ capital expenditures were $101 million and $71 million, consisting of a combination of growth and maintenance capital.

As of March 31, 2020, Boardwalk Pipelines had $275 million of outstanding borrowings under its credit facility.

As of May 1, 2020, Boardwalk Pipelines had $275 million of outstanding borrowings and approximately $1.2 billion of available borrowing under its credit facility.

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

For the six months ended June 30, 2020 and 2019, Boardwalk Pipelines’ capital expenditures were $246 million and $180 million, consisting of a combination of growth and maintenance capital.

As of June 30, 2020, Boardwalk Pipelines had $215 million of outstanding borrowings under its credit facility.

As of July 31, 2020, Boardwalk Pipelines had $240 million of outstanding borrowings and approximately $1.2 billion of available borrowing capacity under its credit facility.

Boardwalk Pipelines anticipates that its existing capital resources, including its revolving credit facility and cash flows from operating activities, will be adequate to fund its operations and capital expenditures for 2020.

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Each of the loan agreements underlying these facilities contain a variety of financial and operational covenants.

To date, all lenders under the facilities have been notified if the hotel financed by the facility has temporarily suspended operations.

Additionally, Loews Hotels & Co has proactively requested certain lenders, where applicable, to (1) temporarily waive certain covenants to avoid both an event of default and/or further restriction

of the hotel’s cash balances through the establishment of lockboxes and other measures;

Loews Hotels & Co has proactively requested certain lenders, where applicable, to (1) temporarily waive certain covenants to avoid an event of default and/or further restriction of the hotel’s cash balances through the establishment of lockboxes and other measures;

(2) temporarily allow funds previously restricted directly or indirectly under the hotel’s underlying loan agreement for the renewal, replacement and addition of building improvements, furniture and fixtures to be used instead for hotel operations and maintenance;

(3) allow hotels under development to defer required completion and opening dates;

and/or (4) defer certain interest and/or principal payments while the hotels operations are temporarily suspended.

Where applicable, Loews Hotels & Co also continues to work with lenders on loans that are being reviewed for extension under the applicable loan agreements, even under current circumstances.

and/or (4) defer certain interest and/or principal payments while the hotels operations are temporarily suspended or significantly impacted by a decline in occupancy.

Loews Hotels & Co also continues to work with lenders on loans that are being reviewed for extension under the applicable loan agreements, even under current circumstances.

These discussions with lenders are ongoing and may require Loews Hotels & Co to make principal paydowns or provide guaranties of a subsidiary’s debt to otherwise avoid an event of default.

Through the date of this Report, there are no loans where a lender has notified Loews Hotels & Co of an event of default.

Additionally, due to temporary suspension of operations and resulting lost revenues in certain unconsolidated partnerships, Loews Hotels & Co has received capital call notices and provided additional funding to its joint venture entities in accordance with the underlying partnership agreements to cover fixed and other necessary costs.

Through April 30, 2020, approximately $25 million was funded to these joint ventures as capital contributions or loans in 2020.

Since January 1, 2020, Loews Hotels & Co received capital contributions of $74 million from Loews Corporation.

Additional funding from Loews Corporation during the remainder of 2020 will be needed and will depend on numerous factors, including when properties reopen and how quickly they recover to sustainable operating levels.

Investment activities of non-insurance subsidiaries primarily include investments in fixed income securities, including short term investments.

Additionally, due to temporary suspension of operations and lost revenues in certain joint venture entities, Loews Hotels & Co has received capital call notices in accordance with the underlying joint venture agreements to support the properties’ operations.

Through July 31, 2020, Loews Hotels & Co funded approximately $27 million to these joint ventures in 2020.

Through July 31, 2020, Loews Hotels & Co received capital contributions of $112 million from Loews Corporation.

Additional funding from Loews Corporation during the remainder of 2020 will be needed and will depend on numerous factors, including how quickly properties are able to return to sustainable operating levels.

Investment activities of non-insurance subsidiaries primarily consist of investments in fixed income securities, including short term investments.

The Parent Company portfolio also includes equity securities, including short sales and derivative instruments, and investments in limited partnerships.

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We occasionally require collateral from derivative investment counterparties depending on the amount of the exposure and the credit rating of the counterparty.

CNA maintains a large portfolio of fixed maturity and equity securities, including large amounts of corporate and government issued debt securities, residential and commercial mortgage-backed securities, and other asset-backed securities and investments in limited partnerships which pursue a variety of long and short investment strategies across a broad array of asset classes.

CNA maintains a large portfolio of fixed maturity and equity securities, including large amounts of corporate and government issued debt securities, residential and commercial mortgage-backed securities, other asset-backed securities and investments in limited partnerships which pursue a variety of long and short investment strategies across a broad array of asset classes.

CNA’s investment portfolio supports its obligation to pay future insurance claims and provides investment returns which are an important part of CNA’s overall profitability.

The financial market disruption in the first quarter of 2020 significantly impacted CNA’s investment portfolio during the period.

Losses from its limited partnership and common and preferred equity portfolios, as well as the recognition of impairment losses on certain fixed maturity holdings, have negatively impacted net income.

Additionally, the overall fair value of CNA’s available for sale fixed maturity portfolio has declined, primarily as a result of credit spread widening.

CNA currently expects some level of continued volatility in its investment portfolio as the situation continues to evolve.

The financial market disruption in the first quarter of 2020 significantly impacted CNA’s investment portfolio.

Losses from its limited partnership and common and preferred equity portfolios, as well as the recognition of impairment losses on certain fixed maturity holdings, negatively impacted net income for the three months ended March 31, 2020.

While financial markets have partially recovered during the second quarter of 2020, there could be continued volatility in its investment portfolio.

Net Investment Income

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Fixed income securities, as presented, include both fixed maturity securities and non-redeemable preferred stock.

Three Months Ended March 31

Three Months Ended

Six Months Ended

(In millions)

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Net investment income after tax and noncontrolling interests

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

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

Effective income yield for the fixed income securities

portfolio, before tax

Effective income yield for the fixed income securities

portfolio, after tax

Limited partnership and common stock return

Net investment income after tax and noncontrolling interests decreased $166 million for the three months ended March 31, 2020 as compared with the 2019 period.

The decrease was driven by limited partnership and common stock returns.

The limited partnership returns for the three months ended March 31, 2020 include limited partnerships representing 51% reporting on a current basis with no reporting lag and 49% reporting on a lag, primarily three months or less.

CNA’s pretax net investment income for the three months ended June 30, 2020 increased $19 million as compared with the 2019 period, driven by limited partnership and common stock returns offset by lower yields on the fixed income portfolio.

The limited partnership returns for the three months ended June 30, 2020 include limited partnerships representing 55% reporting on a current basis with no reporting lag and 45% reporting on a lag, primarily three months or less.

Limited partnerships reporting on a current basis include substantially all of CNA’s hedge funds.

Net Investment Gains (Losses)

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

Three Months Ended March 31

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

Investment Gains (Losses)

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

Three Months Ended

Six Months Ended

(In millions)

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Fixed maturity securities:

Corporate and other bonds, states, municipalities and political subdivisions

Corporate and other bonds

States, municipalities and political subdivisions

Total fixed maturity securities

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Amounts attributable to noncontrolling interests

Net investment gains (losses) attributable to Loews Corporation

Net investment results after tax and noncontrolling interests decreased $173 million for the three months ended March 31, 2020 as compared with the 2019 period.

The decrease was driven by the unfavorable change in fair value of non-redeemable preferred stock and higher impairment losses for the quarter.

Pretax impairment losses of $92 million were recognized in the current quarter, which includes $77 million related to the energy sector.

Investment gains (losses) attributable to Loews Corporation

CNA’s investment gains (losses) increased $67 million for the three months ended June 30, 2020 as compared with the 2019 period.

The increase was driven by the favorable change in fair value of non-redeemable preferred stock and higher net realized investment gains on sales of fixed maturity securities.

Pretax impairment losses of $11 million on available-for-sale securities were recognized in the current quarter.

CNA’s investment gains (losses) decreased $180 million for the six months ended June 30, 2020 as compared with the 2019 period.

The decrease was driven by higher impairment losses and the unfavorable change in fair value of non-redeemable preferred stock.

Pretax impairment losses of $103 million on available-for-sale securities and $13 million of credit losses on mortgage loans were recognized for the six months ended June 30, 2020.

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

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

March 31, 2020

June 30, 2020

December 31, 2019

(In millions)

Government, Government agencies and Government-sponsored enterprises

Government, Government agencies and

Government-sponsored enterprises

Non-investment grade

As of March 31, 2020 and December 31, 2019, 1% of CNA’s fixed maturity portfolio was rated internally.

AAA rated securities included $1.9 billion and $1.5 billion of pre-funded municipal bonds as of March 31, 2020 and December 31, 2019.

As of June 30, 2020 and December 31, 2019, 1% of CNA’s fixed maturity portfolio was rated internally.

AAA rated securities included $1.9 billion and $1.5 billion of pre-funded municipal bonds as of June 30, 2020 and December 31, 2019.

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

March 31, 2020

June 30, 2020

(In millions)

Government, Government agencies and Government-sponsored enterprises

Government, Government agencies and

Government-sponsored enterprises

Non-investment grade

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Securities not due to mature on a single date are allocated based on weighted average life:

March 31, 2020

June 30, 2020

(In millions)

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Due after ten years

The following table summarizes the available-for-sale corporate and other bonds across industry sectors:

March 31, 2020

(In millions)

Corporate and other bonds:

Basic materials

Communications

Consumer, cyclical – other

Consumer, non-cyclical – other

Energy – oil & gas

Energy – other

Energy – pipelines

Entertainment

Financial – other

Financial – real estate/REITS

Transportation

Travel & related

Total corporate and other bonds

A primary objective in the management of CNA’s investment portfolio is to optimize return relative to the corresponding liabilities and respective liquidity needs.

CNA’s views on the current interest rate environment, tax regulations, asset class valuations, specific security issuer and broader industry segment conditions as well as domestic and global economic conditions, are some of the factors that enter into an investment decision.

CNA’s views on the current interest rate environment, tax regulations, asset class valuations, specific security issuer and broader industry segment conditions as well as domestic

and global economic conditions, are some of the factors that enter into an investment decision.

CNA also continually monitors exposure to issuers of securities held and broader industry sector exposures and may from time to time adjust such exposures based on its views of a specific issuer or industry sector.

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Amounts presented are net of payable and receivable amounts for securities purchased and sold, but not yet settled.

March 31, 2020

June 30, 2020

December 31, 2019

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Other investments

The investment portfolio is periodically analyzed for changes in duration and related price risk.

CNA’s investment portfolio is periodically analyzed for changes in duration and related price risk.

Certain securities have duration characteristics that are variable based on market interest rates, credit spreads and other factors that may drive variability in the amount and timing of cash flows.

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Total short term investments

In addition to short term investments, CNA held $857 million and $242 million of Cash as of March 31, 2020 and December 31, 2019.

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

Treasury securities.

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

CRITICAL ACCOUNTING ESTIMATES

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Forward-looking statements are based on current expectations and projections about future events and are inherently subject to a variety of risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those anticipated or projected.

Developments in any of the risks or uncertainties facing us or our subsidiaries, including those described under Part II, Item 1A, Risk Factors of this Report and Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019 and in our other filings with the SEC, could cause our results to differ materially from results that have been or may be anticipated or projected.

Developments in any of the risks or uncertainties facing us or our subsidiaries, including those described under Part II, Item 1A, Risk Factors in this Report, Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019, Part II, Item 1A, Risk Factors in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and in our other filings with the SEC, could cause our results to differ materially from results that have been or may be anticipated or projected.

Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis