Item 1. Financial Statements
Item 1. Financial Statements.
Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
June 30, 2020
December 31, 2019
(Dollar amounts in millions, except per share data)
Assets:
Investments:
Fixed maturities, amortized cost of $ 38,414 and $ 38,157 , less allowance for credit loss of $ 51 and $ 0
$
42,799
$
42,240
Equity securities, cost of $ 1,349 and $ 1,244
1,305
1,306
Limited partnership investments
1,742
2,004
Other invested assets, primarily mortgage loans, less allowance for credit loss of $ 20 and $ 0
1,125
1,072
Short term investments
4,515
4,628
Total investments
51,486
51,250
Cash
668
336
Receivables
8,431
7,675
Property, plant and equipment
10,475
15,568
Goodwill
764
767
Deferred non-insurance warranty acquisition expenses
2,916
2,840
Deferred acquisition costs of insurance subsidiaries
699
662
Other assets
3,000
3,145
Total assets
$
78,439
$
82,243
Liabilities and Equity:
Insurance reserves:
Claim and claim adjustment expense
$
22,270
$
21,720
Future policy benefits
12,596
12,311
Unearned premiums
4,996
4,583
Total insurance reserves
39,862
38,614
Payable to brokers
985
108
Short term debt
47
77
Long term debt
9,958
11,456
Deferred income taxes
875
1,168
Deferred non-insurance warranty revenue
3,852
3,779
Other liabilities
4,447
5,111
Total liabilities
60,026
60,313
Commitments and contingent liabilities
Preferred stock, $ 0.10 par value:
Authorized – 100,000,000 shares
Common stock, $ 0.01 par value:
Authorized – 1,800,000,000 shares
Issued – 291,393,899 and 291,210,222 shares
3
3
Additional paid-in capital
3,371
3,374
Retained earnings
14,316
15,823
Accumulated other comprehensive income (loss)
5
( 68
)
17,695
19,132
Less treasury stock, at cost ( 10,949,702 and 240,000 shares)
( 491
)
( 13
)
Total shareholders’ equity
17,204
19,119
Noncontrolling interests
1,209
2,811
Total equity
18,413
21,930
Total liabilities and equity
$
78,439
$
82,243
See accompanying Notes to Consolidated Condensed Financial Statements.
3
Index
Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2020
2019
2020
2019
(In millions, except per share data)
Revenues:
Insurance premiums
$
1,850
$
1,824
$
3,719
$
3,627
Net investment income
644
551
807
1,208
Investment gains (losses) (Note 2)
( 1,142
)
2
( 1,358
)
33
Non-insurance warranty revenue
308
285
609
566
Operating revenues and other
650
961
1,632
1,946
Total
2,310
3,623
5,409
7,380
Expenses:
Insurance claims and policyholders’ benefits
1,642
1,352
3,067
2,709
Amortization of deferred acquisition costs
342
338
686
680
Non-insurance warranty expense
285
263
566
523
Operating expenses and other
992
1,231
3,018
2,380
Interest
123
164
267
305
Total
3,384
3,348
7,604
6,597
Income (loss) before income tax
( 1,074
)
275
( 2,195
)
783
Income tax (expense) benefit
228
( 50
)
305
( 162
)
Net income (loss)
( 846
)
225
( 1,890
)
621
Amounts attributable to noncontrolling interests
11
24
423
22
Net income (loss) attributable to Loews Corporation
$
( 835
)
$
249
$
( 1,467
)
$
643
Basic net income (loss) per share
$
( 2.96
)
$
0.82
$
( 5.16
)
$
2.10
Diluted net income (loss) per share
$
( 2.96
)
$
0.82
$
( 5.16
)
$
2.09
Weighted average shares outstanding:
Shares of common stock
281.48
303.84
284.26
306.82
Dilutive potential shares of common stock
0.70
0.62
Total weighted average shares outstanding assuming dilution
281.48
304.54
284.26
307.44
See accompanying Notes to Consolidated Condensed Financial Statements.
4
Index
Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended
June 30,
Six Months Ended
June 30,
2020
2019
2020
2019
(In millions)
Net income (loss)
$
( 846
)
$
225
$
( 1,890
)
$
621
Other comprehensive income (loss), after tax
Changes in:
Net unrealized gains (losses) on investments with an allowance for credit losses
2
( 9
)
Net unrealized gains on other investments
1,191
436
147
966
Total unrealized gains on investments
1,193
436
138
966
Unrealized losses on cash flow hedges
( 6
)
( 19
)
( 12
)
Pension and postretirement benefits
6
7
20
15
Foreign currency translation
29
3
( 55
)
20
Other comprehensive income
1,228
440
84
989
Comprehensive income (loss)
382
665
( 1,806
)
1,610
Amounts attributable to noncontrolling interests
( 119
)
( 23
)
412
( 84
)
Total comprehensive income (loss) attributable to Loews Corporation
$
263
$
642
$
( 1,394
)
$
1,526
See accompanying Notes to Consolidated Condensed Financial Statements.
5
Index
Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF EQUITY
(Unaudited)
Loews Corporation Shareholders
Total
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Common
Stock
Held in
Treasury
Noncontrolling
Interests
(In millions)
Balance, April 1, 2019
$
21,902
$
3
$
3,607
$
16,144
$
( 390
)
$
( 327
)
$
2,865
Net income
225
249
( 24
)
Other comprehensive income
440
393
47
Dividends paid ($ 0.0625 per share)
( 29
)
( 19
)
( 10
)
Purchases of Loews Corporation treasury stock
( 151
)
( 151
)
Purchases of subsidiary stock from noncontrolling interests
( 2
)
( 2
)
Stock-based compensation
7
6
1
Other
2
( 1
)
3
Balance, June 30, 2019
$
22,394
$
3
$
3,612
$
16,374
$
3
$
( 478
)
$
2,880
Balance, April 1, 2020
$
19,178
$
3
$
3,347
$
15,167
$
( 1,093
)
$
( 458
)
$
2,212
Net loss
( 846
)
( 835
)
( 11
)
Other comprehensive income
1,228
1,098
130
Dividends paid ($ 0.0625 per share)
( 27
)
( 18
)
( 9
)
Deconsolidation of Diamond Offshore
( 1,087
)
( 1,087
)
Purchases of Loews Corporation treasury stock
( 33
)
( 33
)
Purchases of subsidiary stock from noncontrolling interests
( 19
)
5
( 24
)
Stock-based compensation
13
13
Other
6
6
2
( 2
)
Balance, June 30, 2020
$
18,413
$
3
$
3,371
$
14,316
$
5
$
( 491
)
$
1,209
See accompanying Notes to Consolidated Condensed Financial Statements.
6
Index
Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF EQUITY
(Unaudited)
Loews Corporation Shareholders
Total
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Common
Stock
Held in
Treasury
Noncontrolling
Interests
(In millions)
Balance, January 1, 2019
$
21,386
$
3
$
3,627
$
15,773
$
( 880
)
$
( 5
)
$
2,868
Net income
621
643
( 22
)
Other comprehensive income
989
883
106
Dividends paid ($ 0.125 per share)
( 116
)
( 38
)
( 78
)
Purchases of Loews Corporation treasury stock
( 473
)
( 473
)
Purchases of subsidiary stock from noncontrolling interests
( 16
)
( 16
)
Stock-based compensation
8
( 13
)
21
Other
( 5
)
( 2
)
( 4
)
1
Balance, June 30, 2019
$
22,394
$
3
$
3,612
$
16,374
$
3
$
( 478
)
$
2,880
Balance, December 31, 2019, as reported
$
21,930
$
3
$
3,374
$
15,823
$
( 68
)
$
( 13
)
$
2,811
Cumulative effect adjustment from change in accounting standards (Note 1)
( 5
)
( 5
)
Balance, January 1, 2020, as adjusted
21,925
3
3,374
15,818
( 68
)
( 13
)
2,811
Net loss
( 1,890
)
( 1,467
)
( 423
)
Other comprehensive income
84
73
11
Dividends paid ($ 0.125 per share)
( 114
)
( 36
)
( 78
)
Deconsolidation of Diamond Offshore
( 1,087
)
( 1,087
)
Purchases of Loews Corporation treasury stock
( 478
)
( 478
)
Purchases of subsidiary stock from noncontrolling interests
( 37
)
5
( 42
)
Stock-based compensation
9
( 9
)
18
Other
1
1
1
( 1
)
Balance, June 30, 2020
$
18,413
$
3
$
3,371
$
14,316
$
5
$
( 491
)
$
1,209
See accompanying Notes to Consolidated Condensed Financial Statements.
7
Index
Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30,
2020
2019
(In millions)
Operating Activities:
Net income (loss)
$
( 1,890
)
$
621
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities, net
2,430
604
Changes in operating assets and liabilities, net:
Receivables
( 574
)
( 79
)
Deferred acquisition costs
( 41
)
( 47
)
Insurance reserves
1,181
203
Other assets
( 280
)
( 296
)
Other liabilities
( 46
)
73
Trading securities
( 340
)
( 605
)
Net cash flow provided by operating activities
440
474
Investing Activities:
Purchases of fixed maturities
( 5,356
)
( 4,896
)
Proceeds from sales of fixed maturities
3,773
3,858
Proceeds from maturities of fixed maturities
1,622
1,374
Purchases of limited partnership investments
( 90
)
( 139
)
Proceeds from sales of limited partnership investments
259
559
Purchases of property, plant and equipment
( 440
)
( 505
)
Acquisitions
( 256
)
Dispositions
11
136
Deconsolidation of Diamond Offshore
( 483
)
Change in short term investments
526
6
Other, net
( 147
)
( 93
)
Net cash flow (used) provided by investing activities
( 325
)
44
Financing Activities:
Dividends paid
( 36
)
( 38
)
Dividends paid to noncontrolling interests
( 78
)
( 78
)
Purchases of Loews Corporation treasury stock
( 491
)
( 478
)
Purchases of subsidiary stock from noncontrolling interests
( 37
)
( 16
)
Principal payments on debt
( 465
)
( 1,394
)
Issuance of debt
1,342
1,534
Other, net
( 13
)
( 15
)
Net cash flow provided (used) by financing activities
222
( 485
)
Effect of foreign exchange rate on cash
( 5
)
2
Net change in cash
332
35
Cash, beginning of period
336
405
Cash, end of period
$
668
$
440
See accompanying Notes to Consolidated Condensed Financial Statements.
8
Index
Loews Corporation and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
Loews Corporation is a holding company. Its consolidated subsidiaries are engaged in the following lines of business: commercial property and casualty insurance (CNA Financial Corporation (“CNA”), a 89.6 % owned subsidiary); transportation and storage of natural gas and natural gas liquids (Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”), a wholly owned subsidiary); the operation of a chain of hotels (Loews Hotels Holding Corporation (“Loews Hotels & Co”), a wholly owned subsidiary); and the manufacture of rigid plastic packaging solutions (Altium Packaging LLC (“Altium Packaging”), a 99 % owned subsidiary). Unless the context otherwise requires, the term “Company” as used herein means Loews Corporation including its consolidated subsidiaries and the term “Net income (loss) attributable to Loews Corporation” as used herein means Net income (loss) attributable to Loews Corporation shareholders.
In the second quarter of 2020, Diamond Offshore Drilling, Inc. (“Diamond Offshore”) was deconsolidated from the Company’s consolidated financial statements. See Note 2 for further discussion.
In the opinion of management, the accompanying unaudited Consolidated Condensed Financial Statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s financial position as of June 30, 2020 and December 31, 2019 and results of operations, comprehensive income and changes in shareholders’ equity for the three and six months ended June 30, 2020 and 2019 and cash flows for the six months ended June 30, 2020 and 2019. Net income (loss) for the second quarter and first half of each of the years is not necessarily indicative of net income (loss) for that entire year. These Consolidated Condensed Financial Statements should be read in conjunction with the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
The Company presents basic and diluted net income (loss) per share on the Consolidated Condensed Statements of Operations. Basic net income (loss) per share excludes dilution and is computed by dividing net income (loss) attributable to common stock by the weighted average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. There were no shares attributable to employee stock-based compensation awards excluded from the diluted weighted average shares outstanding amounts for the three and six months ended June 30, 2020 and 2019 because the effect would have been antidilutive.
Accounting changes – In June of 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016 - 13, “Financial Instruments-Credit Losses (Topic 326) : Measurement of Credit Losses on Financial Instruments.” The updated accounting guidance requires changes to the recognition of credit losses on financial instruments not accounted for at fair value through net income. For financial assets measured at cost, the expected credit loss model requires immediate recognition of estimated credit losses over the life of the asset and presentation of the asset at the net amount expected to be collected. This new guidance applies to mortgage loan investments, reinsurance and insurance receivables and other financing and trade receivables. For available-for-sale fixed maturity securities carried at fair value, estimated credit losses will continue to be measured at the present value of expected cash flows, however, the other than temporary impairment (“OTTI”) concept has been eliminated. Under the previous guidance, estimated credit impairments resulted in a write down of amortized cost. Under the new guidance, estimated credit losses are recognized through an allowance and reversals of the allowance are permitted if the estimate of credit losses declines. For available-for-sale fixed maturity securities where there is an intent to sell, impairment will continue to result in a write down of amortized cost.
On January 1, 2020, the Company adopted the updated guidance using a modified retrospective method with a cumulative effect adjustment recorded to beginning Retained earnings. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. A prospective transition approach is required for available-for-sale fixed maturity securities that were purchased with credit deterioration (“PCD assets”) or have recognized an OTTI write down prior to the effective date. The cumulative effect of the accounting change resulted in a $ 5 million decrease in Retained earnings, after tax and noncontrolling interests.
The allowance for doubtful accounts for insurance, reinsurance and trade receivables was unchanged as a result of adopting the new guidance. At adoption, an allowance for credit losses of $ 6 million was established for available-for-sale fixed maturity securities that were PCD assets, with a corresponding increase to amortized cost, resulting in no adjustment to the carrying value of the securities. Below is a summary of the significant accounting policies impacted by the adoption of ASU 2016 - 13.
9
Index
The allowance for credit losses is a valuation account that is reported as a reduction of a financial asset’s cost basis and is measured on a pool basis when similar risk characteristics exist. The allowance is estimated using relevant available information from both internal and external sources. Historical credit loss experience provides the basis for the estimation of expected credit losses and adjustments may be made to reflect current conditions and reasonable and supportable forecasts. Adjustments to historical loss information are made for additional factors that come to the Company’s attention. This could include significant shifts in counterparty financial strength ratings, aging of past due receivables, amounts sent to collection agencies, or other underlying portfolio changes. Current and forecast economic conditions are considered, using a variety of economic metrics and forecast indices. The sensitivity of expected credit losses relative to changes to the forecast of economic conditions can vary by financial asset class. A reasonable and supportable forecast period is up to 24 months from the balance sheet date. After the forecast period, the Company reverts to historical credit experience. Collateral arrangements such as letters of credit and amounts held in beneficiary trusts to mitigate credit risk are considered in the estimate of the net amount expected to be collected.
A policy election has been made to present accrued interest balances separately from the amortized cost basis of assets, and a practical expedient has been elected to exclude the accrued interest from the tabular disclosures for mortgage loans and available-for-sale securities. An election has been made not to estimate an allowance for credit losses on accrued interest receivables. The accrual of interest income is discontinued and the asset is placed on nonaccrual status within 90 days of the interest becoming delinquent. Interest accrued but not received for assets on nonaccrual status is reversed through Net investment income. Interest received for assets that are on nonaccrual status is recognized as payment is received. The asset is returned to accrual status when the principal and interest amounts contractually due are brought current, and future payments are expected. Interest receivables are presented in Receivables on the Consolidated Condensed Balance Sheet.
See Notes 3 and 10 for more information on credit losses.
Recently issued ASUs – In August of 2018, the FASB issued ASU 2018 - 12, “Financial Services – Insurance (Topic 944) : Targeted Improvements to the Accounting for Long-Duration Contracts.” The updated accounting guidance requires changes to the measurement and disclosure of long-duration contracts. The guidance requires entities to update annually cash flow assumptions, including morbidity and persistency, and update quarterly discount rate assumptions using an upper-medium grade fixed-income instrument yield. The effect of changes in cash flow assumptions will be recorded in Net income and the effect of changes in discount rate assumptions will be recorded in Other comprehensive income (“OCI”). This guidance is effective for interim and annual periods beginning after December 15, 2021, however the FASB has proposed a one year deferral of the effective date. Early adoption is permitted. The Company may elect to apply the guidance using either a modified retrospective transition method or a full retrospective transition method. The guidance requires restatement of prior periods presented. The Company plans to use the modified retrospective transition method at adoption and is currently evaluating the effect the updated guidance will have on its consolidated financial statements, including increased disclosure requirements. The annual updating of cash flow assumptions is expected to increase income statement volatility. While the requirements of the new guidance represent a material change from existing accounting guidance, the underlying economics of the business and related cash flows will be unchanged.
2. Deconsolidation of Diamond Offshore
On April 26, 2020 (the “Filing Date”), Diamond Offshore and certain of its direct and indirect subsidiaries filed voluntary petitions in the United States Bankruptcy Court for the Southern District of Texas seeking relief under Chapter 11 of the United States Bankruptcy Code (the “Chapter 11 Filing”). As a result of Diamond Offshore’s Chapter 11 Filing and applicable U.S. generally accepted accounting principles, Loews Corporation no longer controls Diamond Offshore for accounting purposes and, therefore, Diamond Offshore was deconsolidated from its consolidated financial statements effective as of the Filing Date. See Note 14 for Diamond Offshore’s revenues and expenses through the Filing Date.
Through the Filing Date, Diamond Offshore’s results were included in Loews Corporation’s consolidated financial statements and Loews Corporation recognized in its earnings its proportionate share of Diamond Offshore’s losses through such date. The deconsolidation resulted in the recognition of a loss of $ 1.2 billion ($ 957 million after tax) during the three and six months ended June 30, 2020, which is reported within Investment gains (losses) on the Consolidated Condensed Statements of Operations. This loss represents the difference between the carrying value and the estimated fair value, which was immaterial, of Loews Corporation’s investment in equity securities of Diamond Offshore as of the Filing Date.
10
Index
3. Investments
Net investment income is as follows:
Three Months Ended
June 30,
Six Months Ended
June 30
2020
2019
2020
2019
(In millions)
Fixed maturity securities
$
430
$
455
$
868
$
910
Limited partnership investments
57
43
( 45
)
124
Short term investments
2
14
9
29
Equity securities
50
16
6
46
Income (loss) from trading portfolio (a)
107
29
( 22
)
110
Other
16
12
30
26
Total investment income
662
569
846
1,245
Investment expenses
( 18
)
( 18
)
( 39
)
( 37
)
Net investment income
$
644
$
551
$
807
$
1,208
(a)
Net unrealized gains (losses) related to changes in fair value on securities still held were $ 80 and $ 8 for the three months ended June 30, 2020 and 2019 and $ 7 and $ 48 for the six months ended June 30, 2020 and 2019 .
Investment gains (losses) are as follows:
Three Months Ended
June 30,
Six Months Ended
June 30
2020
2019
2020
2019
(In millions)
Fixed maturity securities
$
17
$
( 3
)
$
( 58
)
$
( 9
)
Equity securities
63
11
( 70
)
53
Derivative instruments
( 10
)
( 6
)
( 5
)
( 11
)
Short term investments and other
( 1
)
( 14
)
Deconsolidation of Diamond Offshore (see Note 2)
( 1,211
)
( 1,211
)
Investment gains (losses) (a)
$
( 1,142
)
$
2
$
( 1,358
)
$
33
(a)
Gross investment gains on available-for-sale securities were $ 102 and $ 28 for the three months ended June 30, 2020 and 2019 and $ 131 and $ 64 for the six months ended June 30, 2020 and 2019 . Gross investment losses on available-for-sale securities were $ 85 and $ 31 for the three months ended June 30, 2020 and 2019 and $ 189 and $ 73 for the six months ended June 30, 2020 and 2019. During the three and six months ended June 30, 2020 , $ 63 of investment gains and $ 70 of investment losses were recognized due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2020. During the three and six months ended June 30, 2019, $ 11 and $ 53 of investment gains were recognized due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2019 .
The allowance for credit loss related to available-for-sale fixed maturity securities is the difference between the present value of cash flows expected to be collected and the amortized cost basis. All available evidence is considered when determining whether an investment requires a credit loss write-down or allowance to be recorded. Examples of such evidence may include the financial condition and near term prospects of the issuer, whether the issuer is current with interest and principal payments, credit ratings on the security or changes in ratings over time, general market conditions and industry, sector or other specific factors and whether it is likely that the amortized cost will be recovered through the collection of cash flows. Changes in the allowance are presented as a component of Investment gains (losses) on the Consolidated Condensed Statements of Operations.
11
Index
The following table presents the activity related to the allowance on available-for-sale securities with credit impairments and PCD assets. Accrued interest receivables on available-for-sale fixed maturity securities totaled $ 373 million and is excluded from the estimate of expected credit losses and the amortized cost basis in the tables within this Note.
Three months ended June 30 , 2020
Corporate and
Other Bonds
Asset-
backed
Total
(In millions)
Allowance for credit losses:
Balance as of April 1, 2020
$
49
$
-
$
49
Additions to the allowance for credit losses:
For securities for which credit losses were not previously recorded
10
12
22
For available-for-sale securities accounted for as PCD assets
1
1
Reductions to the allowance for credit losses:
Securities sold during the period (realized)
1
1
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period
( 20
)
( 20
)
Total allowance for credit losses
$
39
$
12
$
51
Six months ended June 30 , 2020
Allowance for credit losses:
Balance as of December 31, 2019
$
-
$
-
$
-
Additions to the allowance for credit losses:
Impact of adopting ASC 326
6
6
For securities for which credit losses were not previously recorded
58
12
70
For available-for-sale securities accounted for as PCD assets
2
2
Reductions to the allowance for credit losses:
Securities sold during the period (realized)
6
6
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis
1
1
Additional increases or (decrease) to the allowance for credit losses on securities that had an allowance recorded in a previous period
( 20
)
( 20
)
Total allowance for credit losses
$
39
$
12
$
51
The components of available-for-sale impairment losses recognized in earnings by asset type are presented in the following table. The table includes losses on securities with an intention to sell and changes in the allowance for credit losses on securities since acquisition date:
Three Months Ended
June 30,
Six Months Ended
June 30,
2020
2019
2020
2019
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds
$
( 1
)
$
6
$
90
$
12
Asset-backed
12
13
8
Impairment losses recognized in earnings
$
11
$
6
$
103
$
20
12
Index
The amortized cost and fair values of fixed maturity securities are as follows:
June 30, 2020
Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance
for Credit
Losses (a)
Estimated
Fair Value
(In millions)
Fixed maturity securities:
Corporate and other bonds
$
20,305
$
2,680
$
143
$
39
$
22,803
States, municipalities and political subdivisions
9,426
1,702
1
11,127
Asset-backed:
Residential mortgage-backed
3,617
169
2
3,784
Commercial mortgage-backed
2,151
70
93
12
2,116
Other asset-backed
1,940
52
33
1,959
Total asset-backed
7,708
291
128
12
7,859
U.S. Treasury and obligations of government-sponsored enterprises
491
7
498
Foreign government
457
26
483
Fixed maturities available-for-sale
38,387
4,706
272
51
42,770
Fixed maturities trading
27
2
29
Total fixed maturity securities
$
38,414
$
4,708
$
272
$
51
$
42,799
December 31, 2019
Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Unrealized
OTTI Losses
(Gains) (a)
Fixed maturity securities:
Corporate and other bonds
$
19,789
$
2,292
$
32
$
22,049
States, municipalities and political subdivisions
9,093
1,559
10,652
Asset-backed:
Residential mortgage-backed
4,387
133
1
4,519
$
( 17
)
Commercial mortgage-backed
2,265
86
5
2,346
1
Other asset-backed
1,925
41
4
1,962
( 3
)
Total asset-backed
8,577
260
10
8,827
( 19
)
U.S. Treasury and obligations of government-sponsored enterprises
146
1
2
145
Foreign government
491
14
1
504
Redeemable preferred stock
10
10
Fixed maturities available-for-sale
38,106
4,126
45
42,187
( 19
)
Fixed maturities trading
51
2
53
Total fixed maturities
$
38,157
$
4,128
$
45
$
42,240
$
( 19
)
(a)
On January 1, 2020, the Company adopted ASU 2016-13; see Note 1. The Unrealized OTTI Losses (Gains) column that tracked subsequent valuation changes on securities for which a credit loss had previously been recorded has been replaced with the Allowance for Credit Losses column. Prior period amounts were not adjusted for the adoption of this standard.
The net unrealized gains on available-for-sale investments included in the tables above are recorded as a component of Accumulated other comprehensive income (loss) (“AOCI”). When presented in AOCI, these amounts are net of tax and noncontrolling interests and any required Shadow Adjustments. To the extent that unrealized gains on fixed income securities supporting long term care products and structured settlements not funded by annuities would result in a premium deficiency if those gains were realized, a related increase in Insurance reserves is recorded, net of tax and noncontrolling interests, as a reduction of net unrealized gains through Other comprehensive income (loss) (“Shadow Adjustments”). As of June 30, 2020 and December 31, 2019, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $ 2.1 billion and $ 2.0 billion (after tax and noncontrolling interests).
13
Index
The available-for-sale securities in a gross unrealized loss position for which an allowance for credit losses has not been recorded are as follows:
Less than
12 Months
12 Months
or Longer
Total
June 30, 2020
Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
(In millions)
Fixed maturity securities:
Corporate and other bonds
$
2,095
$
137
$
56
$
6
$
2,151
$
143
States, municipalities and political subdivisions
94
1
94
1
Asset-backed:
Residential mortgage-backed
53
1
21
1
74
2
Commercial mortgage-backed
971
92
14
1
985
93
Other asset-backed
746
32
14
1
760
33
Total asset-backed
1,770
125
49
3
1,819
128
U.S. Treasury and obligations of government-sponsored enterprises
4
4
Foreign government
4
4
Total fixed maturity securities
$
3,967
$
263
$
105
$
9
$
4,072
$
272
December 31, 2019
Fixed maturity securities:
Corporate and other bonds
$
914
$
21
$
186
$
11
$
1,100
$
32
States, municipalities and political subdivisions
34
34
Asset-backed:
Residential mortgage-backed
249
1
30
279
1
Commercial mortgage-backed
381
3
20
2
401
5
Other asset-backed
449
3
33
1
482
4
Total asset-backed
1,079
7
83
3
1,162
10
U.S. Treasury and obligations of government-sponsored enterprises
62
2
2
64
2
Foreign government
59
1
1
60
1
Total fixed maturity securities
$
2,148
$
31
$
272
$
14
$
2,420
$
45
Based on current facts and circumstances, the Company believes the unrealized losses presented in the June 30, 2020 securities in a gross unrealized loss position table above are not indicative of the ultimate collectability of the current amortized cost of the securities, but rather are attributable to changes in interest rates, credit spreads and other factors. The Company has no current intent to sell securities with unrealized losses, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost; accordingly, the Company has determined that there are no additional impairment losses to be recorded as of June 30, 2020.
Contractual Maturity
The following table presents available-for-sale fixed maturity securities by contractual maturity.
June 30, 2020
December 31, 2019
Cost or
Amortized
Cost
Estimated
Fair
Value
Cost or
Amortized
Cost
Estimated
Fair
Value
(In millions)
Due in one year or less
$
1,472
$
1,469
$
1,334
$
1,356
Due after one year through five years
11,040
11,622
9,746
10,186
Due after five years through ten years
13,335
14,414
14,892
15,931
Due after ten years
12,540
15,265
12,134
14,714
Total
$
38,387
$
42,770
$
38,106
$
42,187
Actual maturities may differ from contractual maturities because certain securities may be called or prepaid. Securities not due at a single date are allocated based on weighted average life.
14
Index
Mortgage Loans
The allowance for expected credit losses on mortgage loans is developed by assessing the credit quality of pools of mortgage loans in good standing using debt service coverage ratios (“DSCR”) and loan-to-value (“LTV”) ratios. The DSCR compares a property’s net operating income to its debt service payments, including principal and interest. The LTV ratio compares the current unpaid principal balance of the loan to the estimated fair value of the underlying property collateralizing the loan. The pools developed to measure the credit loss allowance use increments of DSCR and LTV to draw distinctions between risk levels. Changes in the allowance for mortgage loans are presented as a component of Investment gains (losses) on the Consolidated Condensed Statements of Operations. Mortgage loans are included in Other invested assets on the Consolidated Condensed Balance Sheets.
The following table presents the amortized cost basis of mortgage loans for each credit quality indicator by year of origination:
Mortgage Loans Amortized Cost Basis by Origination Year (a)
As of June 30, 2020
2020
2019
2018
2017
2016
Prior
Total
(In millions)
DSCR ≥1.6x
LTV less than 55%
$
60
$
33
$
19
$
100
$
41
$
129
$
382
LTV 55% to 65%
32
29
41
4
106
LTV greater than 65%
5
5
DSCR 1.2x - 1.6x
LTV less than 55%
32
10
13
16
125
196
LTV 55% to 65%
83
32
32
147
LTV greater than 65%
19
74
93
DSCR ≤1.2x
LTV less than 55%
2
11
9
22
LTV 55% to 65%
14
14
28
LTV greater than 65%
22
37
24
83
Total
$
79
$
297
$
115
$
223
$
85
$
263
$
1,062
(a)
The values in the table above reflect DSCR on a standardized amortization period and LTV based on the most recent appraised values trended forward using changes in a commercial real estate price index.
There were loans with an amortized cost of $ 22 million that were less than 90 days past due as of June 30, 2020, none of which were placed on nonaccrual status. No interest income was written off for the six months ended June 30, 2020.
15
Index
Derivative Financial Instruments
A summary of the aggregate contractual or notional amounts and gross estimated fair values related to derivative financial instruments follows. The contractual or notional amounts for derivatives are used to calculate the exchange of contractual payments under related agreements and may not be representative of the potential for gain or loss on these instruments. Gross estimated fair values of derivative positions are currently presented in Equity securities, Receivables and Payable to brokers on the Consolidated Condensed Balance Sheets.
June 30, 2020
December 31, 2019
Contractual/
Notional
Estimated Fair Value
Contractual/
Notional
Estimated Fair Value
Amount
Asset
(Liability)
Amount
Asset
(Liability)
(In millions)
With hedge designation:
Interest rate swaps
$
675
$
( 29
)
$
715
$
( 8
)
Without hedge designation:
Equity Options – purchased
57
$
1
– written
100
( 1
)
Interest rate swaps
80
( 4
)
Embedded derivative on funds withheld liability
197
( 12
)
182
( 7
)
Investment Commitments
As part of the overall investment strategy, investments are made in various assets which require future purchase, sale or funding commitments. These investments are recorded once funded, and the related commitments may include future capital calls from various third-party limited partnerships, signed and accepted mortgage loan applications and obligations related to privately placed debt securities. As of June 30, 2020, commitments to purchase or fund were approximately $ 1.2 billion and to sell were approximately $ 50 million under the terms of these investments.
4. Fair Value
Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable:
●
Level 1 – Quoted prices for identical instruments in active markets.
●
Level 2 – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
●
Level 3 – Valuations derived from valuation techniques in which one or more significant inputs are not observable.
Prices may fall within Level 1, 2 or 3 depending upon the methodology and inputs used to estimate fair value for each specific security. In general, the Company seeks to price securities using third party pricing services. Securities not priced by pricing services are submitted to independent brokers for valuation and, if those are not available, internally developed pricing models are used to value assets using a methodology and inputs the Company believes market participants would use to value the assets. Prices obtained from third-party pricing services or brokers are not adjusted.
Control procedures are performed over information obtained from pricing services and brokers to ensure prices received represent a reasonable estimate of fair value and to confirm representations regarding whether inputs are observable or unobservable. Procedures may include: (i) the review of pricing service methodologies or broker pricing qualifications, (ii) back-testing, where past fair value estimates are compared to actual transactions executed in the market on similar dates, (iii) exception reporting, where period-over-period changes in price are reviewed and challenged with the pricing service or broker based on exception criteria and (iv) detailed analysis, where the Company performs an independent analysis of the inputs and assumptions used to price individual securities.
16
Index
Assets and liabilities measured at fair value on a recurring basis are summarized in the following tables. Corporate bonds and other includes obligations of the U.S. Treasury, government-sponsored enterprises, foreign governments and redeemable preferred stock.
June 30, 2020
Level 1
Level 2
Level 3
Total
(In millions)
Fixed maturity securities:
Corporate bonds and other
$
519
$
22,710
$
555
$
23,784
States, municipalities and political subdivisions
11,127
11,127
Asset-backed
7,637
222
7,859
Fixed maturities available-for-sale
519
41,474
777
42,770
Fixed maturities trading
25
4
29
Total fixed maturities
$
519
$
41,499
$
781
$
42,799
Equity securities
$
642
$
636
$
27
$
1,305
Short term and other
4,349
60
4,409
Payable to brokers
( 46
)
( 33
)
( 79
)
December 31, 2019
Fixed maturity securities:
Corporate bonds and other
$
175
$
22,065
$
468
$
22,708
States, municipalities and political subdivisions
10,652
10,652
Asset-backed
8,662
165
8,827
Fixed maturities available-for-sale
175
41,379
633
42,187
Fixed maturities trading
49
4
53
Total fixed maturities
$
175
$
41,428
$
637
$
42,240
Equity securities
$
629
$
658
$
19
$
1,306
Short term and other
3,138
1,383
4,521
Receivables
2
2
Payable to brokers
( 18
)
( 10
)
( 28
)
17
Index
The following tables present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2020 and 2019:
Net Realized
Investment Gains
(Losses) and Net Change
in Unrealized Investment
Gains (Losses)
Unrealized
Gains
(Losses)
Recognized in
Net Income
(Loss) on Level
3 Assets and
Unrealized
Gains
(Losses)
Recognized in
Other
Comprehensive
Income (Loss)
on Level 3
Assets and
2020
Balance,
April 1
Included in
Net Income
(Loss)
Included in
OCI
Purchases
Sales
Settlements
Transfers
into
Level 3
Transfers
out of
Level 3
Balance,
June 30
Liabilities
Held at
June 30
Liabilities
Held at
June 30
(In millions)
Fixed maturity securities:
Corporate bonds and other
$
496
$
59
$
4
$
( 4
)
$
555
$
58
Asset-backed
197
18
35
$
( 9
)
( 5
)
$
( 14
)
222
18
Fixed maturities available-for-sale
693
$
-
77
39
( 9
)
( 9
)
$
-
( 14
)
777
$
-
76
Fixed maturities trading
3
1
4
1
Total fixed maturities
$
696
$
1
$
77
$
39
$
( 9
)
$
( 9
)
$
-
$
( 14
)
$
781
$
1
$
76
Equity securities
$
16
$
( 4
)
$
15
$
27
$
( 4
)
18
Index
Net Realized
Investment Gains
(Losses) and Net Change
in Unrealized Investment
Gains (Losses)
Unrealized
Gains
(Losses)
Recognized in
Net Income
(Loss) on Level
3 Assets and
Unrealized
Gains
(Losses)
Recognized in
Other
Comprehensive
Income (Loss)
on Level 3
Assets and
2019
Balance,
April 1
Included in
Net Income
(Loss)
Included in
OCI
Purchases
Sales
Settlements
Transfers
into
Level 3
Transfers
out of
Level 3
Balance,
June 30
Liabilities
Held at
June 30
Liabilities
Held at
June 30
(In millions)
Fixed maturity securities:
Corporate bonds and other
$
253
$
12
$
76
$
( 2
)
$
( 1
)
$
338
$
10
Asset-backed
184
4
( 4
)
$
40
( 31
)
193
5
Fixed maturities available-for-sale
437
$
-
16
76
$
-
( 6
)
40
( 32
)
531
$
-
15
Fixed maturities trading
5
( 1
)
4
( 1
)
Total fixed maturities
$
442
$
( 1
)
$
16
$
76
$
-
$
( 6
)
$
40
$
( 32
)
$
535
$
( 1
)
$
15
Equity securities
$
21
$
2
$
23
19
Index
Net Realized
Investment Gains
(Losses) and Net Change
in Unrealized Investment
Gains (Losses)
Unrealized
Gains
(Losses)
Recognized in
Net Income
(Loss) on Level
3 Assets and
Unrealized
Gains
(Losses)
Recognized in
Other
Comprehensive
Income (Loss)
on Level 3
Assets and
2020
Balance,
January 1
Included in
Net Income
(Loss)
Included in
OCI
Purchases
Sales
Settlements
Transfers
into
Level 3
Transfers
out of
Level 3
Balance,
June 30
Liabilities
Held at
June 30
Liabilities
Held at
June 30
(In millions)
Fixed maturity securities:
Corporate bonds and other
$
468
$
22
$
71
$
( 6
)
$
555
$
24
Asset-backed
165
10
80
$
( 9
)
( 9
)
$
( 15
)
222
10
Fixed maturities available-for-sale
633
$
-
32
151
( 9
)
( 15
)
$
-
( 15
)
777
$
-
34
Fixed maturities trading
4
4
Total fixed maturities
$
637
$
-
$
32
$
151
$
( 9
)
$
( 15
)
$
-
$
( 15
)
$
781
$
-
$
34
Equity securities
$
19
$
( 7
)
$
15
$
27
$
( 7
)
20
Index
Net Realized
Investment Gains
(Losses) and Net Change
in Unrealized Investment
Gains (Losses)
Unrealized
Gains
(Losses)
Recognized in
Net Income
(Loss) on Level
3 Assets and
Unrealized
Gains
(Losses)
Recognized in
Other
Comprehensive
Income (Loss)
on Level 3
Assets and
2019
Balance,
January 1
Included in
Net Income
(Loss)
Included in
OCI
Purchases
Sales
Settlements
Transfers
into
Level 3
Transfers
out of
Level 3
Balance,
June 30
Liabilities
Held at
June 30
Liabilities
Held at
June 30
(In millions)
Fixed maturity securities:
Corporate bonds and other
$
222
$
20
$
132
$
( 4
)
$
( 32
)
$
338
$
17
Asset-backed
197
7
20
( 8
)
$
45
( 68
)
193
8
Fixed maturities available-for-sale
419
$
-
27
152
$
-
( 12
)
45
( 100
)
531
$
-
25
Fixed maturities trading
6
( 2
)
4
( 2
)
Total fixed maturities
$
425
$
( 2
)
$
27
$
152
$
-
$
( 12
)
$
45
$
( 100
)
$
535
$
( 2
)
$
25
Equity securities
$
19
$
2
$
2
$
23
$
3
Net investment gains and losses are reported in Net income (loss) as follows:
Major Category of Assets and Liabilities
Consolidated Condensed Statements of Operations Line Items
Fixed maturity securities available-for-sale
Investment gains (losses)
Fixed maturity securities trading
Net investment income
Equity securities
Investment gains (losses) and Net investment income
Other invested assets
Investment gains (losses) and Net investment income
Derivative financial instruments held in a trading portfolio
Net investment income
Derivative financial instruments, other
Investment gains (losses) and Operating revenues and other
21
Index
Securities may be transferred in or out of levels within the fair value hierarchy based on the availability of observable market information and quoted prices used to determine the fair value of the security. The availability of observable market information and quoted prices varies based on market conditions and trading volume.
Valuation Methodologies and Inputs
The following section describes the valuation methodologies and relevant inputs used to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which the instruments are generally classified.
Fixed Maturity Securities
Level 1 securities include highly liquid government securities and exchange traded bonds valued using quoted market prices. Level 2 securities include most other fixed maturity securities as the significant inputs are observable in the marketplace. All classes of Level 2 fixed maturity securities are valued using a methodology based on information generated by market transactions involving identical or comparable assets, a discounted cash flow methodology or a combination of both when necessary. Common inputs for all classes of fixed maturity securities include prices from recently executed transactions of similar securities, marketplace quotes, benchmark yields, spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. Specifically for asset-backed securities, key inputs include prepayment and default projections based on past performance of the underlying collateral and current market data. Fixed maturity securities are primarily assigned to Level 3 in cases where broker/dealer quotes are significant inputs to the valuation, and there is a lack of transparency as to whether these quotes are based on information that is observable in the marketplace. Level 3 securities also include private placement debt securities whose fair value is determined using internal models with some inputs that are not market observable.
Equity Securities
Level 1 securities include publicly traded securities valued using quoted market prices. Level 2 securities are primarily valued using pricing for similar securities, recently executed transactions and other pricing models utilizing market observable inputs. Level 3 securities are primarily priced using broker/dealer quotes and internal models with some inputs that are not market observable.
Derivative Financial Instruments
Equity options are valued using quoted market prices and are classified within Level 1 of the fair value hierarchy. Over-the-counter derivatives, principally interest rate swaps, currency forwards, total return swaps, commodity swaps, equity warrants and options, are valued using inputs including broker/dealer quotes and are classified within Level 2 or Level 3 of the valuation hierarchy, depending on the amount of transparency as to whether these quotes are based on information that is observable in the marketplace.
Short Term and Other Invested Assets
Securities that are actively traded or have quoted prices are classified as Level 1. These securities include money market funds, treasury bills and exchange traded open-end funds valued using quoted market prices. Level 2 primarily includes commercial paper, for which all inputs are market observable. Fixed maturity securities purchased within one year of maturity are classified consistent with fixed maturity securities discussed above. Short term investments as presented in the tables above differ from the amounts presented in the Consolidated Condensed Balance Sheets because certain short term investments, such as time deposits, are not measured at fair value.
22
Index
Significant Unobservable Inputs
The following tables present quantitative information about the significant unobservable inputs utilized in the fair value measurement of Level 3 assets. Valuations for assets and liabilities not presented in the tables below are primarily based on broker/dealer quotes for which there is a lack of transparency as to inputs used to develop the valuations. The quantitative detail of unobservable inputs from these broker quotes is neither provided nor reasonably available. The weighted average rate is calculated based on fair value.
June 30, 2020
Estimated
Fair Value
Valuation
Techniques
Unobservable
Inputs
Range
(Weighted
Average)
(In millions)
Fixed maturity securities
$
693
Discounted cash flow
Credit spread
1 % – 9 % ( 3 %)
December 31, 2019
Fixed maturity securities
$
525
Discounted cash flow
Credit spread
1 % – 6 % ( 2 %)
For fixed maturity securities, an increase to the credit spread assumptions would result in a lower fair value measurement.
Financial Assets and Liabilities Not Measured at Fair Value
The carrying amount, estimated fair value and the level of the fair value hierarchy of the financial assets and liabilities which are not measured at fair value on the Consolidated Condensed Balance Sheets are presented in the following tables. The carrying amounts and estimated fair values of short term debt and long term debt exclude finance lease obligations. The carrying amounts reported on the Consolidated Condensed Balance Sheets for cash and short term investments not carried at fair value and certain other assets and liabilities approximate fair value due to the short term nature of these items.
Carrying
Estimated Fair Value
June 30, 2020
Amount
Level 1
Level 2
Level 3
Total
(In millions)
Assets:
Other invested assets, primarily mortgage loans
$
1,042
$
1,104
$
1,104
Liabilities:
Short term debt
45
$
8
37
45
Long term debt
9,947
10,038
738
10,776
December 31, 2019
Assets:
Other invested assets, primarily mortgage loans
$
994
$
1,025
$
1,025
Liabilities:
Short term debt
75
$
9
66
75
Long term debt
11,443
10,884
626
11,510
23
Index
5. Property, Plant and Equipment
Asset Impairments
During the first quarter of 2020, the offshore drilling business climate experienced a significant adverse change, primarily as a result of the market impacts of the oil price war between Saudi Arabia and Russia and regulatory, market and commercial challenges arising as a result of the COVID-19 pandemic and efforts to mitigate the spread of the virus, both of which resulted in a dramatic decline in oil prices. During the first quarter of 2020, five drilling rigs that had indicators of impairment were evaluated. Based on the assumptions and analysis at that time, it was determined that the carrying values of four of these rigs were impaired. The fair values of these rigs were estimated using an income approach, whereby the fair value of each rig was estimated based on a calculation of the rig’s future net cash flows. These calculations utilized significant unobservable inputs, including management’s assumptions related to estimated dayrate revenue, rig utilization, estimated capital expenditures, repair and regulatory survey costs, as well as estimated proceeds that may be received on ultimate disposition of each rig. These fair value estimates were representative of Level 3 fair value measurements due to the significant level of estimation involved and the lack of transparency as to the inputs used. An aggregate asset impairment charge of $ 774 million ( $ 408 million after tax and noncontrolling interests) was recorded for the six months ended June 30, 2020 and is reported within Operating expenses and other on the Consolidated Condensed Statements of Operations.
6. Claim and Claim Adjustment Expense Reserves
Property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including incurred but not reported (“IBNR”) claims as of the reporting date. Reserve projections are based primarily on detailed analysis of the facts in each case, experience with similar cases and various historical development patterns. Consideration is given to historical patterns such as claim reserving trends and settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions and economic conditions, including inflation and public attitudes. All of these factors can affect the estimation of claim and claim adjustment expense reserves.
Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process. Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve. Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can affect ultimate claim costs. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as workers’ compensation, general liability and professional liability claims. Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined. There can be no assurance that the ultimate cost for insurance losses will not exceed current estimates.
Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in the Company’s results of operations and/or equity. The Company reported catastrophe losses, net of reinsurance, of $ 301 million and $ 38 million for the three months ended June 30, 2020 and 2019 and $ 376 million and $ 96 million for the six months ended June 30, 2020 and 2019. Net catastrophe losses for the three months ended June 30, 2020 included $ 182 million related to the COVID-19 pandemic, $ 61 million related to civil unrest and $ 58 million related primarily to severe weather-related events. Net catastrophe losses for the six months ended June 30, 2020 included $ 195 million related to the COVID-19 pandemic, $ 61 million related to civil unrest and $ 120 million related primarily to severe weather-related events. Net catastrophe losses in 2019 related primarily to U.S. weather-related events.
24
Index
Liability for Unpaid Claim and Claim Adjustment Expenses
The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves of Other Insurance Operations.
Six Months Ended June 30
2020
2019
(In millions)
Reserves, beginning of year:
Gross
$
21,720
$
21,984
Ceded
3,835
4,019
Net reserves, beginning of year
17,885
17,965
Net incurred claim and claim adjustment expenses:
Provision for insured events of current year
2,899
2,615
Increase (decrease) in provision for insured events of prior years
19
( 36
)
Amortization of discount
98
98
Total net incurred (a)
3,016
2,677
Net payments attributable to:
Current year events
( 256
)
( 315
)
Prior year events
( 2,342
)
( 2,519
)
Total net payments
( 2,598
)
( 2,834
)
Foreign currency translation adjustment and other
( 35
)
55
Net reserves, end of period
18,268
17,863
Ceded reserves, end of period
4,002
3,866
Gross reserves, end of period
$
22,270
$
21,729
(a)
Total net incurred above does not agree to Insurance claims and policyholders’ benefits as reflected on the Consolidated Condensed Statements of Operations due to amounts related to retroactive reinsurance deferred gain accounting, uncollectible reinsurance and benefit expenses related to future policy benefits, which are not reflected in the table above.
Net Prior Year Development
Changes in estimates of claim and claim adjustment expense reserves net of reinsurance, for prior years are defined as net prior year loss reserve development. These changes can be favorable or unfavorable.
Unfavorable net prior year development of $ 22 million and favorable net prior year development of $ 31 million was recorded for commercial property and casualty operations (“Property & Casualty Operations”) for the three months ended June 30, 2020 and 2019 and unfavorable net prior year development of $ 7 million and favorable net prior year development of $ 45 million was recorded for the six months ended June 30, 2020 and 2019.
The following table and discussion present details of the net prior year claim and claim adjustment expense reserve development in Property & Casualty Operations:
Three Months Ended
June 30,
Six Months Ended
June 30,
2020
2019
2020
2019
(In millions)
Medical professional liability
$
15
$
10
$
30
Other professional liability and management liability
$
( 9
)
( 7
)
( 6
)
( 19
)
Surety
( 15
)
( 30
)
( 40
)
Commercial auto
15
( 3
)
24
( 8
)
General liability
50
13
50
( 7
)
Workers’ compensation
( 61
)
( 7
)
( 74
)
( 5
)
Property and other
27
( 27
)
33
4
Total pretax (favorable) unfavorable development
$
22
$
( 31
)
$
7
$
( 45
)
25
Index
Three Months
2020
Unfavorable development in commercial auto was due to unfavorable claim severity in CNA’s middle market and construction business in accident years 2017 through 2019.
Unfavorable development in general liability was driven by higher than expected emergence in mass tort exposures, primarily due to New York reviver statute-related claims from accident years prior to 2010.
Favorable development in workers’ compensation was due to favorable medical trends driving lower than expected severity in multiple accident years.
Unfavorable development in property and other was primarily due to higher than expected large loss activity in accident year 2019 in CNA’s middle market, national accounts and marine business units.
2019
Unfavorable development in medical professional liability was primarily due to unfavorable outcomes on individual claims and higher than expected severity emergence in accident year 2017 in CNA’s dentists business.
Favorable development in surety was due to lower than expected frequency for accident years 2015 and 2016.
Unfavorable development in general liability was primarily due to higher than expected large loss experience in CNA’s excess and umbrella business in accident year 2017.
Favorable development in other was primarily due to continued lower than expected claim severity in property from catastrophes in accident year 2017.
Six Months
2020
Favorable development in surety was primarily due to lower than expected frequency for accident years 2017 and prior.
Unfavorable development in commercial auto was due to unfavorable claim severity in CNA’s middle market and construction business in accident years 2017 through 2019.
Unfavorable development in general liability was driven by higher than expected emergence in mass tort exposures, primarily due to New York reviver statute-related claims from accident years prior to 2010.
Favorable development in workers’ compensation was due to favorable medical trends driving lower than expected severity in multiple accident years.
Unfavorable development in property and other was primarily due to higher than expected large loss activity in
accident year 2019 in CNA’s middle market, national accounts and marine business units.
2019
Unfavorable development in medical professional liability was primarily due to higher than expected severity in accident year 2013 in CNA’s allied healthcare business, unfavorable outcomes on individual claims and higher than expected severity emergence in accident year 2017 in CNA’s dentists business.
Favorable development in other professional liability and management liability was primarily due to lower than expected claim frequency and favorable outcomes on individual claims in accident years 2017 and prior related to financial institutions.
Favorable development in surety was due to lower than expected frequency for accident years 2016 and prior.
26
Index
Asbestos and Environmental Pollution (“A&EP”) Reserves
In 2010, Continental Casualty Company (“CCC”) together with several insurance subsidiaries completed a transaction with National Indemnity Company (“NICO”), a subsidiary of Berkshire Hathaway Inc., under which substantially all of the legacy A&EP liabilities were ceded to NICO through a loss portfolio transfer (“loss portfolio transfer” or “LPT”). At the effective date of the transaction, approximately $ 1.6 billion of net A&EP claim and allocated claim adjustment expense reserves were ceded to NICO under a retroactive reinsurance agreement with an aggregate limit of $ 4.0 billion. The $1.6 billion of claim and allocated claim adjustment expense reserves ceded to NICO was net of $ 1.2 billion of ceded claim and allocated claim adjustment expense reserves under existing third party reinsurance contracts. The NICO LPT aggregate reinsurance limit also covers credit risk on the existing third party reinsurance related to these liabilities. NICO was paid a reinsurance premium of $ 2.0 billion and billed third party reinsurance receivables related to A&EP claims with a net book value of $ 215 million were transferred to NICO, resulting in total consideration of $ 2.2 billion.
In years subsequent to the effective date of the LPT, adverse prior year development on A&EP reserves was recognized resulting in additional amounts ceded under the LPT. As a result, the cumulative amounts ceded under the LPT have exceeded the $ 2.2 billion consideration paid, resulting in the NICO LPT moving into a gain position, requiring retroactive reinsurance accounting. Under retroactive reinsurance accounting, this gain is deferred and only recognized in earnings in proportion to actual paid recoveries under the LPT. Over the life of the contract, there is no economic impact as long as any additional losses incurred are within the limit of the LPT. In a period in which a change in the estimate of A&EP reserves is recognized that increases or decreases the amounts ceded under the LPT, the proportion of actual paid recoveries to total ceded losses is affected and the change in the deferred gain is recognized in earnings as if the revised estimate of ceded losses was available at the effective date of the LPT. The effect of the deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders’ benefits on the Consolidated Condensed Statements of Operations.
The impact of the LPT on the Consolidated Condensed Statements of Operations was the recognition of a retroactive reinsurance benefit of $ 20 million and $ 14 million for the three months ended June 30, 2020 and 2019 and $ 34 million and $ 36 million for the six months ended June 30, 2020 and 2019. As of June 30, 2020 and December 31, 2019, the cumulative amounts ceded under the LPT were $ 3.2 billion. The unrecognized deferred retroactive reinsurance benefit was $ 358 million and $ 392 million as of June 30, 2020 and December 31, 2019 and is included within Other liabilities on the Consolidated Condensed Balance Sheets.
NICO established a collateral trust account as security for its obligations under the LPT. The fair value of the collateral trust account was $ 3.3 billion and $ 3.7 billion as of June 30, 2020 and December 31, 2019. In addition, Berkshire Hathaway Inc. guaranteed the payment obligations of NICO up to the aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement. NICO is responsible for claims handling and billing and collection from third-party reinsurers related to the majority of the Company’s A&EP claims.
7. Debt
In May of 2020, Loews Corporation completed a public offering of $ 500 million aggregate principal amount of 3.2 % senior notes due May 15, 2030 . The proceeds of this offering are available for general corporate purposes.
27
Index
8. Shareholders’ Equity
Accumulated other comprehensive income (loss)
The tables below present the changes in AOCI by component for the three and six months ended June 30, 2019 and 2020:
Net Unrealized
Gains (Losses)
on Investments
with OTTI
Losses
Net Unrealized
Gains (Losses)
on Other
Investments
Unrealized
Gains (Losses)
on Cash Flow
Hedges
Pension and
Postretirement
Benefits
Foreign
Currency
Translation
Total
Accumulated
Other
Comprehensive
Income (Loss)
(In millions)
Balance, April 1, 2019 (a)
$
18
$
527
$
( 1
)
$
( 786
)
$
( 148
)
$
( 390
)
Other comprehensive income (loss) before reclassifications, after tax of $( 1 ), $( 114 ), $ 2 , $ 0 and $ 0
( 1
)
434
( 6
)
3
430
Reclassification of losses from accumulated other comprehensive income, after tax of $ 0 , $ 0 , $ 0 , $( 3 ) and $ 0
1
2
7
10
Other comprehensive income (loss)
-
436
( 6
)
7
3
440
Amounts attributable to noncontrolling interests
( 46
)
( 1
)
( 47
)
Balance, June 30, 2019
$
18
$
917
$
( 7
)
$
( 780
)
$
( 145
)
$
3
Net Unrealized
Gains (Losses)
on Investments
with an
Allowance for
Credit Losses
Net Unrealized
Gains (Losses)
on Other
Investments
Unrealized
Gains (Losses)
on Cash Flow
Hedges
Pension and
Postretirement
Benefits
Foreign
Currency
Translation
Total
Accumulated
Other
Comprehensive
Income (Loss)
( In millions)
Balance, April 1, 2020
$
( 10
)
$
( 15
)
$
( 25
)
$
( 842
)
$
( 201
)
$
( 1,093
)
Other comprehensive income (loss) before reclassifications, after tax of $ 0 , $( 321 ), $ 2 , $ 0 and $ 0
( 2
)
1,209
( 1
)
( 2
)
29
1,233
Reclassification of (income) losses from accumulated other comprehensive income, after tax of $ ( 1 ) , $ 4 , $ ( 1 ) , $ ( 2 ) and $ 0
4
( 18
)
1
8
( 5
)
Other comprehensive income
2
1,191
-
6
29
1,228
Amounts attributable to noncontrolling interests
( 126
)
( 1
)
( 3
)
( 130
)
Balance, June 30, 2020
$
( 8
)
$
1,050
$
( 25
)
$
( 837
)
$
( 175
)
$
5
28
Index
Net Unrealized
Gains (Losses)
on Investments
with OTTI
Losses
Net Unrealized
Gains (Losses)
on Other
Investments
Unrealized
Gains (Losses)
on Cash Flow
Hedges
Pension and
Postretirement
Benefits
Foreign
Currency
Translation
Total
Accumulated
Other
Comprehensive
Income (Loss)
(In millions)
Balance, January 1, 2019 (a)
$
14
$
57
$
5
$
( 793
)
$
( 163
)
$
( 880
)
Other comprehensive income (loss) before reclassifications, after tax of $( 2 ), $( 254 ), $ 4 , $ 0 and $ 0
3
955
( 12
)
( 1
)
20
965
Reclassification of losses from accumulated other comprehensive income, after tax of $ 0 , $ ( 1 ) , $ 0 , $ ( 5 ) and $ 0
1
7
16
24
Other comprehensive income (loss)
4
962
( 12
)
15
20
989
Amounts attributable to noncontrolling interests
( 102
)
( 2
)
( 2
)
( 106
)
Balance, June 30, 2019
$
18
$
917
$
( 7
)
$
( 780
)
$
( 145
)
$
3
Net Unrealized
Gains (Losses)
on Investments
with an
Allowance for
Credit Losses
Net Unrealized
Gains (Losses)
on Other
Investments
Unrealized
Gains (Losses)
on Cash Flow
Hedges
Pension and
Postretirement
Benefits
Foreign
Currency
Translation
Total
Accumulated
Other
Comprehensive
Income (Loss)
(In millions)
Balance, January 1, 2020 (a)
$
-
$
918
$
( 6
)
$
( 855
)
$
( 125
)
$
( 68
)
Other comprehensive income (loss) before reclassifications, after tax of $ 13 , $( 34 ), $ 8 , $ 0 and $ 0
( 50
)
143
( 20
)
( 1
)
( 55
)
17
Reclassification of losses from accumulated other comprehensive income, after tax of $( 11 ), $( 2 ), $( 1 ), $( 5 ) and $ 0
41
4
1
21
67
Other comprehensive income (loss)
( 9
)
147
( 19
)
20
( 55
)
84
Amounts attributable to noncontrolling interests
1
( 15
)
( 2
)
5
( 11
)
Balance, June 30, 2020
$
( 8
)
$
1,050
$
( 25
)
$
( 837
)
$
( 175
)
$
5
(a)
On January 1, 2020, the Company adopted ASU 2016-13; see Note 1. The Net Unrealized Gains (Losses) on Investments with OTTI Losses column that tracked the change in unrealized gains (losses) on investments with OTTI losses has been replaced with the Net Unrealized Gains (Losses) on Investments with an Allowance for Credit Losses column. The balance as of January 1, 2020 in the Net Unrealized Gains (Losses) on Investments with OTTI Losses column is now reported in the Net Unrealized Gains (Losses) on Other Investments column. Prior period amounts were not adjusted for the adoption of this standard.
Amounts reclassified from AOCI shown above are reported in Net income (loss) as follows:
Major Category of AOCI
Affected Line Item
Net unrealized gains (losses) on investments with an allowance for credit losses, Net unrealized gains (losses) on investments with OTTI losses and Net unrealized gains (losses) on other investments
Investment gains (losses)
Unrealized gains (losses) on cash flow hedges
Operating revenues and other, Interest expense and Operating expenses and other
Pension and postretirement benefits
Operating expenses and other
29
Index
Treasury Stock
Loews Corporation repurchased 10.7 million and 9.8 million shares of its common stock at an aggregate cost of $ 478 million and $ 473 million during the six months ended June 30, 2020 and 2019 .
9. Revenue from Contracts with Customers
Disaggregation of revenues – Revenue from contracts with customers, other than insurance premiums, is reported as Non-insurance warranty revenue and within Operating revenues and other on the Consolidated Condensed Statements of Operations. The following table presents revenues from contracts with customers disaggregated by revenue type along with the reportable segment and a reconciliation to Operating revenues and other as reported in Note 14:
Three Months Ended
June 30,
Six Months Ended
June 30
2020
2019
2020
2019
(In millions)
Non-insurance warranty – CNA Financial
$
308
$
285
$
609
$
566
Transportation and storage of natural gas and NGLs and other services – Boardwalk Pipelines
286
321
618
660
Lodging and related services – Loews Hotels & Co
16
185
158
365
Rigid plastic packaging and recycled resin – Corporate
244
223
500
437
Contract drilling – Diamond Offshore (a)
71
216
300
450
Total revenues from contracts with customers
617
945
1,576
1,912
Other revenues
33
16
56
34
Operating revenues and other
$
650
$
961
$
1,632
$
1,946
(a)
Revenues presented for Diamond Offshore reflect the periods prior to the deconsolidation. See Notes 2 and 14 for further discussion.
Receivables from contracts with customers – As of June 30, 2020 and December 31, 2019, receivables from contracts with customers were approximately $ 237 million and $ 458 million and are included within Receivables on the Consolidated Condensed Balance Sheets.
.
Deferred revenue – As of June 30, 2020 and December 31, 2019, deferred revenue resulting from contracts with customers was approximately $ 3.9 billion and is reported as Deferred non-insurance warranty revenue and within Other liabilities on the Consolidated Condensed Balance Sheets. Approximately $ 574 million and $ 533 million of revenues recognized during the six months ended June 30, 2020 and 2019 were included in deferred revenue as of December 31, 2019 and 2018.
Performance obligations – As of June 30, 2020, approximately $ 13.0 billion of estimated operating revenues is expected to be recognized in the future related to outstanding performance obligations. The balance relates primarily to transportation and storage of natural gas and natural gas liquids and hydrocarbons (“NGLs”) services and non-insurance warranty revenue. Approximately $ 1.2 billion will be recognized during the remaining six months of 2020, $ 2.1 billion in 2021 and the remainder in following years. The actual timing of recognition may vary due to factors outside of the Company’s control.
10. Expected Credit Losses – Reinsurance and Insurance Receivables
As of June 30, 2020, an allowance for doubtful accounts of $ 24 million for reinsurance receivables has been established which relates to both amounts already billed on ceded paid losses as well as ceded reserves that will be billed when losses are paid in the future. For assessing expected credit losses, reinsurance receivables are separated into two pools; voluntary reinsurance receivables and involuntary reinsurance exposures to mandatory pools. An allowance for involuntary pools has not been recorded as there is no perceived credit risk. The principal credit quality indicator used in the valuation of the allowance on voluntary reinsurance receivables is the financial strength rating of the reinsurer sourced from major rating agencies. If the reinsurer is unrated, an internal financial strength rating is assigned based on historical loss experience and assessment of the reinsurance counterparty risk profile, which generally corresponds with a B rating. Changes in the allowance are presented as a component of Insurance claims and policyholders’ benefits on the Consolidated Condensed Statements of Operations.
30
Index
The following table summarizes the outstanding amount of voluntary reinsurance receivables, gross of any collateral arrangements, by financial strength rating:
As of June 30, 2020
(In millions)
A- to A++
$
2,717
B- to B++
926
Insolvent
4
Total voluntary reinsurance outstanding balance (a)
$
3,647
(a)
Expected credit losses for legacy A&EP receivables are ceded to NICO and the reinsurance limit on the LPT has not been exhausted, therefore no allowance is recorded for these receivables and they are excluded from the table above. See Note 6 for more information on the LPT. Also excluded are receivables from involuntary pools.
Voluntary reinsurance receivables within the B- to B++ rating distribution are primarily due from captive reinsurers and backed by collateral arrangements.
As of June 30, 2020, an allowance for doubtful accounts of $ 33 million for insurance receivables has been established using a loss rate methodology to determine expected credit losses for premium receivables. This methodology uses historical annual credit losses relative to gross premium written to develop a range of credit loss rates for each dollar of gross written premium underwritten. The expected credit loss for loss sensitive business in good standing is calculated on a pool basis, using historical default rate data obtained from major rating agencies. Changes in the allowance are presented as a component of Operating expenses and other on the Consolidated Condensed Statements of Operations .
11. Benefit Plans
The Company has several non-contributory defined benefit plans and postretirement benefit plans covering eligible employees and retirees.
The following table presents the components of net periodic (benefit) cost for the plans:
Pension Benefits
Three Months Ended
June 30,
Six Months Ended
June 30,
2020
2019
2020
2019
(In millions)
Service cost
$
1
$
1
$
2
$
3
Interest cost
23
30
46
59
Expected return on plan assets
( 44
)
( 40
)
( 87
)
( 80
)
Amortization of unrecognized net loss
12
12
23
23
Amortization of unrecognized prior service cost
1
1
Settlement charge
3
2
7
2
Net periodic (benefit) cost
$
( 4
)
$
5
$
( 8
)
$
7
Other Postretirement Benefits
Three Months Ended
June 30,
Six Months Ended
June 30,
2020
2019
2020
2019
(In millions)
Interest cost
$
1
$
1
$
1
Expected return on plan assets
( 1
)
$
( 1
)
( 2
)
( 2
)
Net periodic benefit
$
-
$
( 1
)
$
( 1
)
$
( 1
)
31
Index
12. Legal Proceedings
On May 25, 2018, plaintiffs Tsemach Mishal and Paul Berger (on behalf of themselves and the purported class, “Plaintiffs”) initiated a purported class action in the Court of Chancery of the State of Delaware (the “Court”) against the following defendants: Boardwalk Pipelines, Boardwalk GP, LP (“General Partner”), Boardwalk GP, LLC and Boardwalk Pipelines Holding Corp. (“BPHC”) (together, “Defendants”), regarding the potential exercise by the General Partner of its right to purchase all of the issued and outstanding common units representing limited partnership interests in Boardwalk Pipelines not already owned by the General Partner or its affiliates.
On June 25, 2018, Plaintiffs and Defendants entered into a Stipulation and Agreement of Compromise and Settlement, subject to the approval of the Court (the “Proposed Settlement”). Under the terms of the Proposed Settlement, the lawsuit would be dismissed, and related claims against the Defendants would be released by the Plaintiffs, if BPHC, the sole member of the General Partner, elected to cause the General Partner to exercise its right to purchase the issued and outstanding common units of Boardwalk Pipelines pursuant to Boardwalk Pipelines’ Third Amended and Restated Agreement of Limited Partnership, as amended (“Limited Partnership Agreement”), within a period specified by the Proposed Settlement. On June 29, 2018, the General Partner elected to exercise its right to purchase all of the issued and outstanding common units representing limited partnership interests in Boardwalk Pipelines not already owned by the General Partner or its affiliates pursuant to the Limited Partnership Agreement within the period specified by the Proposed Settlement. The transaction was completed on July 18, 2018.
On September 28, 2018, the Court denied approval of the Proposed Settlement. On February 11, 2019, a substitute verified class action complaint was filed in this proceeding. The Defendants filed a motion to dismiss, which was heard by the Court in July of 2019. In October of 2019, the Court ruled on the motion and granted a partial dismissal, with certain aspects of the case proceeding to trial. The case has been set for trial in early 2021.
The Company is from time to time party to other litigation arising in the ordinary course of business. While it is difficult to predict the outcome or effect of any such litigation, management does not believe that the outcome of any such pending litigation will materially affect the Company’s results of operations or equity.
13. Commitments and Contingencies
CNA Guarantees
CNA has provided guarantees, if the primary obligor fails to perform, to holders of structured settlement annuities issued by a previously owned subsidiary. As of June 30, 2020, the potential amount of future payments CNA could be required to pay under these guarantees was approximately $ 1.7 billion, which will be paid over the lifetime of the annuitants. CNA does not believe any payment is likely under these guarantees, as CNA is the beneficiary of a trust that must be maintained at a level that approximates the discounted reserves for these annuities.
14. Segments
Loews Corporation has five reportable segments comprised of three individual consolidated operating subsidiaries, CNA, Boardwalk Pipelines and Loews Hotels & Co; the Corporate segment and Diamond Offshore. The Corporate segment is primarily comprised of Loews Corporation excluding its subsidiaries and the operations of Altium Packaging. Diamond Offshore was deconsolidated during the second quarter of 2020. See Note 2 for further information on the deconsolidation of Diamond Offshore. Each of the operating subsidiaries 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. For additional disclosures regarding the composition of Loews Corporation’s segments, see Note 20 of the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
The following tables present the reportable segments and their contribution to the Consolidated Condensed Financial Statements. Amounts presented will not necessarily be the same as those in the individual financial statements of the subsidiaries due to adjustments for purchase accounting, income taxes and noncontrolling interests.
32
Index
Total assets by segment are presented in the following tables.
June 30, 2020
CNA
Financial
Boardwalk
Pipelines
Loews
Hotels & Co
Corporate
Diamond
Offshore
Total
(In millions)
Total assets
$
62,055
$
9,321
$
1,697
$
5,366
$
-
$
78,439
December 31, 2019
Total assets
$
60,583
$
9,248
$
1,728
$
4,850
$
5,834
$
82,243
Statements of Operations by segment are presented in the following tables.
Three Months Ended June 30, 2020
CNA
Financial
Boardwalk
Pipelines
Loews
Hotels & Co
Corporate
Diamond
Offshore (a)
Total
(In millions)
Revenues:
Insurance premiums
$
1,850
$
1,850
Net investment income
534
$
110
644
Investment gains (losses)
69
( 1,211
)
( 1,142
)
Non-insurance warranty revenue
308
308
Operating revenues and other
5
$
296
$
34
244
$
71
650
Total
2,766
296
34
( 857
)
71
2,310
Expenses:
Insurance claims and policyholders’ benefits
1,642
1,642
Amortization of deferred acquisition costs
342
342
Non-insurance warranty expense
285
285
Operating expenses and other
283
210
123
260
116
992
Interest
31
41
8
32
11
123
Total
2,583
251
131
292
127
3,384
Income (loss) before income tax
183
45
( 97
)
( 1,149
)
( 56
)
( 1,074
)
Income tax (expense) benefit
( 32
)
( 11
)
25
241
5
228
Net income (loss)
151
34
( 72
)
( 908
)
( 51
)
( 846
)
Amounts attributable to noncontrolling interests
( 16
)
27
11
Net income (loss) attributable to Loews Corporation
$
135
$
34
$
( 72
)
$
( 908
)
$
( 24
)
$
( 835
)
(a)
Amounts presented for Diamond Offshore reflect the periods prior to the deconsolidation.
33
Index
Three Months Ended June 30, 2019
CNA
Financial
Boardwalk
Pipelines
Loews
Hotels & Co
Corporate
Diamond
Offshore (a)
Total
(In millions)
Revenues:
Insurance premiums
$
1,824
$
1,824
Net investment income
515
$
1
$
33
$
2
551
Investment gains
2
2
Non-insurance warranty revenue
285
285
Operating revenues and other
4
$
327
185
223
222
961
Total
2,630
327
186
256
224
3,623
Expenses:
Insurance claims and policyholders’ benefits
1,352
1,352
Amortization of deferred acquisition costs
338
338
Non-insurance warranty expense
263
263
Operating expenses and other
279
209
163
245
335
1,231
Interest
55
46
5
27
31
164
Total
2,287
255
168
272
366
3,348
Income (loss) before income tax
343
72
18
( 16
)
( 142
)
275
Income tax (expense) benefit
( 64
)
( 19
)
( 6
)
3
36
( 50
)
Net income (loss)
279
53
12
( 13
)
( 106
)
225
Amounts attributable to noncontrolling interests
( 30
)
54
24
Net income (loss) attributable to Loews Corporation
$
249
$
53
$
12
$
( 13
)
$
( 52
)
$
249
34
Index
Six Months Ended June 30, 2020
CNA
Financial
Boardwalk
Pipelines
Loews
Hotels & Co
Corporate
Diamond
Offshore (a)
Total
(In millions)
Revenues:
Insurance premiums
$
3,719
$
3,719
Net investment income (loss)
863
$
( 56
)
807
Investment losses
( 147
)
( 1,211
)
( 1,358
)
Non-insurance warranty revenue
609
609
Operating revenues and other
13
$
637
$
176
501
$
305
1,632
Total
5,057
637
176
( 766
)
305
5,409
Expenses:
Insurance claims and policyholders’ benefits
3,067
3,067
Amortization of deferred acquisition costs
686
686
Non-insurance warranty expense
566
566
Operating expenses and other
583
421
290
528
1,196
3,018
Interest
62
83
16
63
43
267
Total
4,964
504
306
591
1,239
7,604
Income (loss) before income tax
93
133
( 130
)
( 1,357
)
( 934
)
( 2,195
)
Income tax (expense) benefit
( 4
)
( 34
)
33
284
26
305
Net income (loss)
89
99
( 97
)
( 1,073
)
( 908
)
( 1,890
)
Amounts attributable to noncontrolling interests
( 9
)
432
423
Net income (loss) attributable to Loews Corporation
$
80
$
99
$
( 97
)
$
( 1,073
)
$
( 476
)
$
( 1,467
)
35
Index
Six Months Ended June 30, 2019
CNA
Financial
Boardwalk
Pipelines
Loews
Hotels & Co
Corporate
Diamond
Offshore (a)
Total
(In millions)
Revenues:
Insurance premiums
$
3,627
$
3,627
Net investment income
1,086
$
1
$
117
$
4
1,208
Investment gains
33
33
Non-insurance warranty revenue
566
566
Operating revenues and other
13
$
673
365
439
456
1,946
Total
5,325
673
366
556
460
7,380
Expenses:
Insurance claims and policyholders’ benefits
2,709
2,709
Amortization of deferred acquisition costs
680
680
Non-insurance warranty expense
523
523
Operating expenses and other
563
404
319
476
618
2,380
Interest
89
91
10
54
61
305
Total
4,564
495
329
530
679
6,597
Income (loss) before income tax
761
178
37
26
( 219
)
783
Income tax (expense) benefit
( 141
)
( 46
)
( 12
)
( 5
)
42
( 162
)
Net income (loss)
620
132
25
21
( 177
)
621
Amounts attributable to noncontrolling interests
( 66
)
88
22
Net income (loss) attributable to Loews Corporation
$
554
$
132
$
25
$
21
$
( 89
)
$
643
36
Index
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.