What changed in this filing

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Item 1. Financial Statements

2020-11-02 compared with 2020-08-03 · 168 added, 107 removed, 845 unchanged (25% of the section changed)

2 unchanged sentences

CONSOLIDATED CONDENSED BALANCE SHEETS

June 30, 2020

September 30, 2020

December 31, 2019

39 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In millions, except per share data)

13 unchanged sentences

Net income (loss) attributable to Loews Corporation

Basic net income (loss) per share

Diluted net income (loss) per share

Basic and diluted net income (loss) per share

Weighted average shares outstanding:

6 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In millions)

4 unchanged sentences

Total unrealized gains on investments

Unrealized losses on cash flow hedges

Unrealized gains (losses) on cash flow hedges

Pension and postretirement benefits

12 unchanged sentences

(In millions)

Balance, April 1, 2019

Balance, July 1, 2019

Other comprehensive income

3 unchanged sentences

Stock-based compensation

Balance, June 30, 2019

Balance, April 1, 2020

Balance, September 30, 2019

Balance, July 1, 2020

Other comprehensive income

Dividends paid ($ 0.0625 per share)

Deconsolidation of Diamond Offshore

Purchases of Loews Corporation treasury stock

Purchases of subsidiary stock from noncontrolling interests

Stock-based compensation

Balance, June 30, 2020

Balance, September 30, 2020

See accompanying Notes to Consolidated Condensed Financial Statements.

12 unchanged sentences

Stock-based compensation

Balance, June 30, 2019

Balance, September 30, 2019

Balance, December 31, 2019, as reported

7 unchanged sentences

Stock-based compensation

Balance, June 30, 2020

Balance, September 30, 2020

See accompanying Notes to Consolidated Condensed Financial Statements.

1 unchanged sentence

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

(In millions)

17 unchanged sentences

Change in short term investments

Net cash flow (used) provided by investing activities

Net cash flow used by investing activities

Financing Activities:

24 unchanged sentences

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.

In the opinion of management, the accompanying unaudited Consolidated Condensed Financial Statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s financial position as of September 30, 2020 and December 31, 2019 and results of operations, comprehensive income and changes in shareholders’ equity for the three and nine months ended September 30, 2020 and 2019 and cash flows for the nine months ended September 30, 2020 and 2019.

Net income (loss) for the third quarter and first nine months 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.

2 unchanged sentences

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

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.

For the three months ended September 30, 2020 there were 0.4 million shares attributable to employee stock-based compensation awards excluded from the diluted weighted average shares outstanding amounts because the effect would have been antidilutive.

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

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

35 unchanged sentences

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.

This guidance is effective for interim and annual periods beginning after December 15, 2021, however the FASB has approved a one year deferral of the effective date.

Early adoption is permitted.

10 unchanged sentences

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.

The deconsolidation resulted in the recognition of a loss of $ 1.2 billion ($ 957 million after tax) during the nine months ended September 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.

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

(In millions)

3 unchanged sentences

Equity securities

Income (loss) from trading portfolio (a)

Income from trading portfolio (a)

Total investment income

1 unchanged sentence

Net investment income

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 .

Net unrealized gains (losses) related to changes in fair value on securities still held were $ 11 and $ 17 for the three months ended September 30, 2020 and 2019 and $ 13 and $ 55 for the nine months ended September 30, 2020 and 2019 .

Investment gains (losses) are as follows:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

(In millions)

5 unchanged sentences

Investment gains (losses) (a)

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

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

During the three and six months ended June 30, 2020 , $ 63 of investment gains and $ 70 of investment losses were recognized due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2020.

During the three and six months ended June 30, 2019, $ 11 and $ 53 of investment gains were recognized due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2019 .

Gross investment gains on available-for-sale securities were $ 44 and $ 34 for the three months ended September 30, 2020 and 2019 and $ 175 and $ 98 for the nine months ended September 30, 2020 and 2019 .

Gross investment losses on available-for-sale securities were $ 18 and $ 31 for the three months ended September 30, 2020 and 2019 and $ 207 and $ 104 for the nine months ended September 30, 2020 and 2019.

During the three and nine months ended September 30, 2020 , $ 25 of investment gains and $ 44 of investment losses were recognized due to the change in fair value of non-redeemable preferred stock still held as of September 30, 2020.

During the three and nine months ended September 30, 2019, $ 7 and $ 60 of investment gains were recognized due to the change in fair value of non-redeemable preferred stock still held as of September 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.

2 unchanged sentences

Changes in the allowance are presented as a component of Investment gains (losses) on the Consolidated Condensed Statements of Operations.

The following table presents the activity related to the allowance on available-for-sale securities with credit impairments and PCD assets.

The following tables present 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 $ 390 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

Three months ended September 30 , 2020

Corporate and

1 unchanged sentence

Allowance for credit losses:

Balance as of April 1, 2020

Balance as of July 1, 2020

Additions to the allowance for credit losses:

5 unchanged sentences

Total allowance for credit losses

Six months ended June 30 , 2020

Nine months ended September 30 , 2020

Allowance for credit losses:

12 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In millions)

3 unchanged sentences

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

June 30, 2020

September 30, 2020

(In millions)

33 unchanged sentences

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).

As of September 30, 2020 and December 31, 2019, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $ 2.3 billion and $ 2.0 billion (after tax and noncontrolling interests).

The available-for-sale securities in a gross unrealized loss position for which an allowance for credit losses has not been recorded are as follows:

June 30, 2020

September 30, 2020

(In millions)

22 unchanged sentences

Total fixed maturity securities

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.

Based on current facts and circumstances, the Company believes the unrealized losses presented in the September 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.

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

Contractual Maturity

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

June 30, 2020

September 30, 2020

December 31, 2019

15 unchanged sentences

Mortgage Loans Amortized Cost Basis by Origination Year (a)

As of June 30, 2020

As of September 30, 2020

(In millions)

10 unchanged sentences

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.

Derivative Financial Instruments

2 unchanged sentences

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

September 30, 2020

December 31, 2019

10 unchanged sentences

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.

As of September 30, 2020, commitments to purchase or fund were approximately $ 1.2 billion and to sell were approximately $ 55 million under the terms of these investments.

Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

15 unchanged sentences

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

June 30, 2020

September 30, 2020

(In millions)

9 unchanged sentences

December 31, 2019

(In millions)

Fixed maturity securities:

7 unchanged sentences

Payable to brokers

The following tables present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2020 and 2019:

Investment Gains

10 unchanged sentences

Corporate bonds and other

States, municipalities and political subdivisions

Fixed maturities available-for-sale

30 unchanged sentences

Corporate bonds and other

States, municipalities and political subdivisions

Fixed maturities available-for-sale

64 unchanged sentences

The weighted average rate is calculated based on fair value.

June 30, 2020

September 30, 2020

(In millions)

14 unchanged sentences

Estimated Fair Value

June 30, 2020

September 30, 2020

(In millions)

9 unchanged sentences

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.

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.

2 unchanged sentences

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.

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

Claim and Claim Adjustment Expense Reserves

11 unchanged sentences

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.

The Company reported catastrophe losses, net of reinsurance, of $ 160 million and $ 32 million for the three months ended September 30, 2020 and 2019 and $ 536 million and $ 128 million for the nine months ended September 30, 2020 and 2019.

Net catastrophe losses for the three months ended September 30, 2020 were driven by severe weather-related events, primarily Hurricanes Laura, Isaias and Sally and the Midwest derecho.

Net catastrophe losses for the nine months ended September 30, 2020 included $ 273 million primarily related to severe weather-related events, $ 195 million related to the COVID-19 pandemic and $ 68 million related to civil unrest.

Net catastrophe losses in 2019 primarily related to U.S.

weather-related events.

1 unchanged sentence

The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves of Other Insurance Operations.

Six Months Ended June 30

Nine Months Ended September 30

(In millions)

18 unchanged sentences

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.

Favorable net prior year development of $ 15 million and unfavorable net prior year development of $ 16 million was recorded for commercial property and casualty operations (“Property & Casualty Operations”) for the three months ended September 30, 2020 and 2019 and favorable net prior year development of $ 8 million and $ 29 million was recorded for the nine months ended September 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

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In millions)

6 unchanged sentences

Total pretax (favorable) unfavorable development

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 medical professional liability was primarily due to higher than expected frequency of large losses in recent accident years and unfavorable development on a latent claim for an older accident year.

Favorable development in surety was due to lower than expected frequency and lack of systemic activity for accident years 2019 and prior.

Unfavorable development in general liability was primarily due to increased bodily injury severities in accident years 2012 through 2016 and higher than expected frequency and severity in CNA’s umbrella business in accident years 2015 through 2019.

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

Unfavorable development in property and other was primarily due to higher than expected large loss activity in accident year 2019 in CNA’s middle market, national accounts and marine business units.

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

Favorable development in surety was due to lower than expected frequency for accident years 2015 and 2016.

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

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

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

Unfavorable development in medical professional liability was primarily due to higher than expected indemnity severity in accident years 2016 through 2018 in CNA’s aging services business.

Favorable development in other professional liability and management liability was due to lower than expected large claim losses in recent accident years in CNA’s public company directors and officers liability (“D&O”) business.

Favorable development in surety was due to lower than expected frequency for accident years 2015 through 2018.

Favorable development in commercial auto was primarily due to a decline in bodily injury frequency in accident year 2018 and continued lower than expected severity across accident years 2013 through 2016.

Unfavorable development in general liability was primarily due to higher than expected emergence in mass tort exposures related to accident years 2009 and prior, 2015 and 2016.

Unfavorable development in other was primarily due to higher than expected severity in aging services related to auto liability coverages.

Unfavorable development in medical professional liability was primarily due to higher than expected frequency of large losses in recent accident years, unfavorable development on a latent claim for an older accident year and unfavorable outcomes on specific claims in accident years 2015 and 2016 in CNA’s aging services business.

Favorable development in surety was due to lower than expected frequency and lack of systemic activity for accident years 2019 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, increased bodily injury severities in accident years 2012 through 2016 and higher than expected frequency and severity in CNA’s umbrella business in accident years 2015 through 2019.

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

Unfavorable development in property and other was primarily due to higher than expected large loss activity in

accident year 2019 in CNA’s middle market, national accounts and marine business units.

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

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

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

Favorable development in surety was due to lower than expected frequency for accident years 2018 and prior.

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

Unfavorable development in other was primarily due to higher than expected severity in aging services related to auto liability coverages and higher than expected claims in Hardy on 2018 accident year catastrophes in property partially offset by favorable development in casualty, driven by lower than expected large losses and claim severity in accident years 2014 and prior in Hardy and Europe.

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

10 unchanged sentences

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.

The impact of the LPT on the Consolidated Condensed Statements of Operations was the recognition of a retroactive reinsurance benefit of $ 9 million and $ 7 million for the three months ended September 30, 2020 and 2019 and $ 43 million for the nine months ended September 30, 2020 and 2019.

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

The unrecognized deferred retroactive reinsurance benefit was $ 349 million and $ 392 million as of September 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.

The fair value of the collateral trust account was $ 3.5 billion and $ 3.7 billion as of September 30, 2020 and December 31, 2019.

In addition, Berkshire Hathaway Inc.

1 unchanged sentence

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.

Life & Group Policyholder Reserves

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

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

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

CNA maintains both claim and claim adjustment expense reserves as well as future policy benefit reserves for policyholder benefits for its long term care business.

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

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

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

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

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

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

CNA’s most recent annual claim experience studies were completed in the third quarter of 2020 and resulted in a $ 46 million pretax increase in claim and claim adjustment expense reserve estimates for structured settlement obligations primarily due to lower discount rate assumptions and mortality assumption changes and a $ 37 million pretax reduction in claim and claim adjustment expense reserves for long term care policies primarily due to lower claim severity than anticipated in the reserve estimates.

CNA’s 2019 annual claim experience studies were completed in the third quarter of 2019 and resulted in a $ 56 million pretax reduction in claim and claim adjustment expense reserves for long term care policies primarily due to lower claim severity than anticipated in the reserve estimates.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Periodically, management engages independent third parties to assess the appropriateness of its best estimate assumptions.

The most recent third party assessment, performed in 2019, validated the assumption setting process and confirmed the best estimate assumptions appropriately reflected the experience data at that time.

The GPV for the long term care future policy benefit reserves performed in the third quarter of 2020 and 2019 indicated a premium deficiency primarily driven by lower discount rate assumptions.

Recognition of the premium deficiency resulted in a $ 74 million and a $ 216 million pretax increase in policyholders’ benefits reflected in the Company’s results of operations for the three and nine months ended September 30, 2020 and 2019.

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.

In August of 2020, CNA completed a public offering of $ 500 million aggregate principal amount of its 2.1 % senior notes due August 15, 2030 and used the net proceeds to redeem the entire $ 400 million outstanding aggregate principal balance of its 5.8 % senior notes due August 15, 2021 and for general corporate purposes.

In August of 2020, Boardwalk Pipelines completed a public offering of $ 500 million aggregate principal amount of its 3.4 % senior notes due February 15, 2031 .

Boardwalk Pipelines intends to use the proceeds to retire the outstanding $ 440 million aggregate principal amount of its 4.5 % senior notes due 2021 in November of 2020, to fund growth capital expenditures and for general corporate purposes.

Initially, the proceeds were used to reduce outstanding borrowings under its revolving credit facility.

As of September 30, 2020, Boardwalk Pipelines had no outstanding borrowings under its revolving credit facility and had available the full borrowing capacity of $ 1.5 billion.

As of October 30, 2020, Boardwalk Pipelines had $ 80 million of outstanding borrowings under its revolving credit facility and had $ 1.4 billion of available borrowing capacity.

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:

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

Net Unrealized

8 unchanged sentences

(In millions)

Balance, April 1, 2019 (a)

Balance, July 1, 2019

Other comprehensive income (loss) before reclassifications, after tax of $ 0 , $( 11 ), $ 1 , $ 0 and $ 0

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

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

Other comprehensive income (loss)

Amounts attributable to noncontrolling interests

Balance, June 30, 2019

Balance, September 30, 2019

Net Unrealized

10 unchanged sentences

( In millions)

Balance, April 1, 2020

Balance, July 1, 2020

Other comprehensive income (loss) before reclassifications, after tax of $ 0 , $( 63 ), $ 0 , $ 0 and $ 0

2 unchanged sentences

Amounts attributable to noncontrolling interests

Balance, June 30, 2020

Balance, September 30, 2020

Net Unrealized

8 unchanged sentences

(In millions)

Balance, January 1, 2019 (a)

Balance, January 1, 2019

Other comprehensive income (loss) before reclassifications, after tax of $( 2 ), $( 265 ), $ 5 , $ 0 and $ 0

2 unchanged sentences

Amounts attributable to noncontrolling interests

Balance, June 30, 2019

Balance, September 30, 2019

Net Unrealized

12 unchanged sentences

Other comprehensive income (loss) before reclassifications, after tax of $ 13 , $( 97 ), $ 8 , $ 0 and $ 0

Reclassification of losses from accumulated other comprehensive income, after tax of $( 11 ), $( 2 ), $( 1 ), $( 5 ) and $ 0

Reclassification of (income) losses from accumulated other comprehensive income, after tax of $( 12 ), $ 5 , $( 1 ), $( 8 ) and $ 0

Other comprehensive income (loss)

Amounts attributable to noncontrolling interests

Balance, June 30, 2020

Balance, September 30, 2020

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

12 unchanged sentences

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 .

Loews Corporation repurchased 16.1 million and 13.2 million shares of its common stock at an aggregate cost of $ 673 million and $ 642 million during the nine months ended September 30, 2020 and 2019 .

Revenue from Contracts with Customers

2 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

(In millions)

9 unchanged sentences

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.

Receivables from contracts with customers – As of September 30, 2020 and December 31, 2019, receivables from contracts with customers were approximately $ 223 million and $ 458 million and are included within Receivables on the Consolidated Condensed Balance Sheets.

Deferred revenue – As of September 30, 2020 and December 31, 2019, deferred revenue resulting from contracts with customers was approximately $ 4.0 billion and $ 3.9 billion and is reported as Deferred non-insurance warranty revenue and within Other liabilities on the Consolidated Condensed Balance Sheets.

Approximately $ 839 million and $ 778 million of revenues recognized during the nine months ended September 30, 2020 and 2019 were included in deferred revenue as of December 31, 2019 and 2018.

Performance obligations – As of September 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.

Approximately $ 0.6 billion will be recognized during the remaining three months of 2020, $ 2.2 billion in 2021 and the remainder in following years.

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

Expected Credit Losses – Reinsurance and Insurance Receivables

As of 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.

As of September 30, 2020, an allowance for doubtful accounts of $ 24 million for reinsurance receivables has been established which relates to both amounts already billed on ceded paid losses as well as ceded reserves that will be billed when losses are paid in the future.

For assessing expected credit losses, reinsurance receivables are separated into two pools;

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

As of June 30, 2020

As of September 30, 2020

(In millions)

4 unchanged sentences

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.

As of September 30, 2020, an allowance for doubtful accounts of $ 32 million for insurance receivables has been established using a loss rate methodology to determine expected credit losses for premium receivables.

This methodology uses historical annual credit losses relative to gross premium written to develop a range of credit loss rates for each dollar of gross written premium underwritten.

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In millions)

4 unchanged sentences

Settlement charge

Curtailment gain

Net periodic (benefit) cost

1 unchanged sentence

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In millions)

1 unchanged sentence

Expected return on plan assets

Amortization of unrecognized net gain

Net periodic benefit

11 unchanged sentences

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.

In October of 2020, after completion of fact discovery, Plaintiffs filed an amended complaint.

In light of the amended complaint, Defendants have moved to vacate the trial date scheduled in January of 2021 and have also filed a motion to dismiss Plaintiffs’ new claims.

The Company is from time to time party to other litigation arising in the ordinary course of business.

3 unchanged sentences

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.

As of September 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.

9 unchanged sentences

Total assets by segment are presented in the following tables.

June 30, 2020

September 30, 2020

(In millions)

1 unchanged sentence

Statements of Operations by segment are presented in the following tables.

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

(In millions)

1 unchanged sentence

Net investment income

Investment gains (losses)

Investment gains

Non-insurance warranty revenue

9 unchanged sentences

Net income (loss) attributable to Loews Corporation

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

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

(In millions)

13 unchanged sentences

Net income (loss) attributable to Loews Corporation

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

(In millions)

13 unchanged sentences

Net income (loss) attributable to Loews Corporation

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

(In millions)

13 unchanged sentences

Net income (loss) attributable to Loews Corporation

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

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 1. Financial Statements