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Item 2. Management’s Discussion and Analysis

2020-11-02 compared with 2020-08-03 · 332 added, 277 removed, 347 unchanged (64% of the section changed)

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

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

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with our Consolidated Condensed Financial Statements included under Item 1 of this Report, Risk Factors included under Part II, Item 1A of this Report, Risk Factors included in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 and the Consolidated Financial Statements, Risk Factors, and MD&A included in our Annual Report on Form 10-K for the year ended December 31, 2019.

This MD&A is comprised of the following sections:

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Consolidated Financial Results

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

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In millions, except per share data)

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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

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

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

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

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

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

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

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

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

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

Net income attributable to Loews Corporation for the three months ended September 30, 2020 was $139 million, or $0.50 per share, compared to net income of $72 million, or $0.24 per share in the comparable 2019 period.

Net loss attributable to Loews Corporation for the nine months ended September 30, 2020 was $1.33 billion, or $4.70 per share, compared to net income of $715 million, or $2.34 per share, in the comparable 2019 period.

The increase in net income for the three months ended September 30, 2020 as compared to the 2019 period was driven by CNA.

Property and casualty underwriting income before catastrophe losses and prior year development rose, as CNA posted an underlying combined ratio of 92.6%, down from 94.6% in the prior year period.

CNA also benefited from higher net investment income, more net investment gains, and reduced net reserve charges in its Life & Group business.

Offsetting these improvements were increased net catastrophe losses primarily from severe weather-related events.

Additionally, Loews Hotels & Co reported a net loss for the three months ended September 30, 2020 due to the revenue impact of the COVID-19 pandemic, and Boardwalk Pipelines’ net income also declined compared to the prior year period.

The three months ended September 30, 2019 included a net loss from Diamond Offshore.

The net loss for the nine months ended September 30, 2020 was driven by six main factors:

(i) an investment loss caused by the write down of the carrying value of our interest in Diamond Offshore as a result of its bankruptcy filing on April 26, 2020;

(ii) drilling rig impairment charges at Diamond Offshore;

(iii) operating losses at Loews Hotels;

(iv) a reduction in CNA’s and the parent company’s net investment income;

(v) net investment losses at CNA as compared to net investment gains in 2019;

and (vi) lower property and casualty underwriting income at CNA caused mainly by higher catastrophe losses.

The economic disruption caused by the COVID-19 pandemic and measures to mitigate the spread of the virus have significantly affected Loews’s results in 2020.

The full impact of COVID-19 on Loews will depend on the duration of mandated and voluntary containment efforts, related economic policies, and other societal responses to the pandemic.

CNA Financial

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

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

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

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In millions)

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Net income attributable to Loews Corporation

Three Months Ended June 30, 2020 Compared to 2019

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

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

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

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

Three Months Ended September 30, 2020 Compared to 2019

Net income attributable to Loews Corporation increased $96 million for the three months ended September 30, 2020 as compared with the 2019 period.

The increase was primarily due to improved non-catastrophe current accident year underwriting results, higher net investment income driven by limited partnership returns, higher investment gains and favorable net prior year loss reserve development in the current year period.

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

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

Six Months Ended June 30, 2020 Compared to 2019

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

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

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

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

Results for the three months ended September 30, 2020 also included a $74 million charge ($52 million after tax and noncontrolling interests) related to recognition of a premium deficiency as a result of the third quarter 2020 gross premium valuation (“GPV”) in the long term care business as compared to a $216 million charge ($151 million after tax and noncontrolling interests) related to recognition of a premium deficiency as a result of the third quarter 2019 GPV .

These increases to net income were partially offset by net catastrophe losses of $160 million ($112 million after tax and noncontrolling interests) for the three months ended September 30, 2020 as compared to $32 million ($22 million after tax and noncontrolling interests) in the 2019 period.

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.

In addition, there was a $14 million charge (after tax and noncontrolling interests) related to the early retirement of debt for the three months ended September 30, 2020.

Nine Months Ended September 30, 2020 Compared to 2019

Net income attributable to Loews Corporation decreased $378 million for the nine months ended September 30, 2020 as compared with the 2019 period.

The decrease was primarily due to net catastrophe losses of $536 million ($377 million after tax and noncontrolling interests) for the nine months ended September 30, 2020 as compared to $128 million ($90 million after tax and noncontrolling interests) in the prior year period, lower net investment income and investment losses in the first nine months of 2020 as compared with investment gains in the prior year period.

Net catastrophe losses in the first nine months of 2020 include $273 million primarily related to severe weather-related events, $195 million related to COVID-19 and $68 million related to civil unrest.

The decrease in net investment income was driven by lower limited partnership and common stock returns and lower yields on the fixed income portfolio.

Investment losses were driven by higher impairment losses and the unfavorable change in fair value of non-

redeemable preferred stock, partially offset by higher gains on sales of fixed maturity securities.

These decreases were partially offset by a $74 million charge ($52 million after tax and noncontrolling interests) in the third quarter 2020 as compared to a $216 million charge ($151 million after tax and noncontrolling interests) in the third quarter 2019 related to recognition of a premium deficiency as a result of the GPV review.

Recent Developments

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

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

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

Accordingly, it remains

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

CNA’s underwriting results for the first nine months of 2020 were negatively impacted by COVID-19 and the related depressed economic conditions.

In many geographic locations, the virus continues to spread.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

However, depressed economic conditions generally have had an unfavorable impact on premium exposures, resulting in a decrease in CNA’s estimated audit premiums during the second quarter of 2020 and causing an unfavorable impact on its net earned premiums.

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

Lower net earned premiums have had and may continue to have an unfavorable impact on CNA’s expense ratio.

CNA’s expense ratio has also been unfavorably impacted by increases in its allowance for doubtful accounts for insurance receivables, more than offset by lower travel-related expenses.

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

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

The scope, duration and magnitude of the direct and indirect effects could continue to evolve through the remainder of 2020, and possibly thereafter, and could materially impact CNA’s ultimate loss estimate, including in lines of business where losses have already been incurred as well as the potential for impacts in other lines unknown at this time.

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

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

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CNA’s Other Insurance Operations outside of Property & Casualty Operations include its long term care business that is in run-off, certain corporate expenses, including interest on CNA’s corporate debt, and certain property and casualty businesses in run-off, including CNA Re and A&EP.

CNA’s products and services are primarily marketed through independent agents, brokers and managing general underwriters to a wide variety of customers, including small, medium and large businesses, insurance companies, associations, professionals and other groups.

We believe the presentation of CNA as one reportable segment is appropriate in accordance with applicable accounting standards on segment reporting.

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Property & Casualty Operations

In evaluating the results of Property & Casualty Operations, CNA utilizes the loss ratio, the expense ratio, the dividend ratio and the combined ratio.

In evaluating the results of Property & Casualty Operations, CNA utilizes the loss ratio, the loss ratio excluding catastrophes and development, the expense ratio, the dividend ratio, the combined ratio and the combined ratio excluding catastrophes and development.

These ratios are calculated using GAAP financial results.

The loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums.

The loss ratio excluding catastrophes and development excludes net catastrophes losses and changes in estimates of claim and claim adjustment expense reserves, net of reinsurance, for prior years from the loss ratio.

The expense ratio is the percentage of insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums.

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The combined ratio is the sum of the loss, expense and dividend ratios.

The combined ratio excluding catastrophes and development is the sum of the loss ratio excluding catastrophes and development, the expense ratio and the dividend ratio.

In addition, renewal premium change, rate, retention and new business are also utilized in evaluating operating trends.

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New business represents premiums from policies written with new customers and additional policies written with existing customers.

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

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

Three Months Ended June 30, 2020

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

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

Three Months Ended September 30, 2020

International

6 unchanged sentences

Net investment income

Core income (loss)

Other performance metrics:

6 unchanged sentences

Combined ratio

Combined ratio excluding catastrophes

and development

Combined ratio excluding catastrophes and development

Renewal premium change

Three Months Ended June 30, 2019

Three Months Ended September 30, 2019

International

Gross written premiums

4 unchanged sentences

Net investment income

Core income (loss)

Other performance metrics:

6 unchanged sentences

Combined ratio

Combined ratio excluding catastrophes

and development

Combined ratio excluding catastrophes and development

Renewal premium change

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

International

1 unchanged sentence

Gross written premiums

Gross written premiums excluding third

party captives

Gross written premiums excluding third party captives

Net written premiums

1 unchanged sentence

Net investment income

Core income (loss)

Other performance metrics:

6 unchanged sentences

Combined ratio

Combined ratio excluding catastrophes

and development

Combined ratio excluding catastrophes and development

Renewal premium change

Six Months Ended June 30, 2019

Nine Months Ended September 30, 2019

Gross written premiums

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Combined ratio

Combined ratio excluding catastrophes

and development

Combined ratio excluding catastrophes and development

Renewal premium change

Three Months Ended June 30, 2020 Compared to 2019

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Three Months Ended September 30, 2020 Compared to 2019

Total gross written premiums increased $156 million for the three months ended September 30, 2020 as compared with the 2019 period.

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

Gross written premiums, excluding third party captives, for Specialty increased $83 million for the three months ended September 30, 2020 as compared with the 2019 period driven by strong rate and higher new business.

Net written premiums for Specialty increased $63 million for the three months ended September 30, 2020 as compared with the 2019 period.

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

Gross written premiums for Commercial increased $55 million for the three months ended September 30, 2020 as compared with the 2019 period driven by strong rate.

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

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

Gross written premiums for International increased $12 million for the three months ended September 30, 2020 as compared with the 2019 period.

Excluding the effect of foreign currency exchange rates, gross written premiums increased $9 million driven by growth in Europe and Canada, partially offset by the continued impact of the strategic exit from certain Lloyd’s business classes.

Net written premiums increased $21 million for the three months ended September 30, 2020 as compared with the 2019 period.

Excluding the effect of foreign currency exchange rates, net written premiums increased $18 million for the three months ended September 30, 2020 as compared with the 2019 period.

Net earned premiums for the three months ended September 30, 2020 were consistent with the same period in 2019 for International.

Core income increased $6 million for the three months ended September 30, 2020 as compared with the 2019 period primarily due to improved non-catastrophe current accident year underwriting results, higher net investment income driven by limited partnership returns and favorable net prior year loss reserve development for the three months ended September 30, 2020 as compared with unfavorable net prior year loss reserve development in the 2019 period, largely offset by higher net catastrophe losses.

Net catastrophe losses were $160 million for the three months ended September 30, 2020 as compared with $32 million in the 2019 period and primarily related to severe weather-related events.

For the three months ended September 30, 2020 and 2019, Specialty had net catastrophe losses of $7 million and $3 million, Commercial had net catastrophe losses of $146 million and $25 million and International had net catastrophe losses of $7 million and $4 million.

Favorable net prior year loss reserve development of $15 million was recorded for the three months ended September 30, 2020 as compared with unfavorable net prior year loss reserve development of $16 million for the three months ended September 30, 2019.

For the three months ended September 30, 2020 and 2019, Specialty recorded favorable net prior year loss reserve development of $16 million and $20 million and Commercial recorded unfavorable net prior year loss reserve development of $1 million and $35 million.

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

Specialty’s combined ratio improved 0.3 points for the three months ended September 30, 2020 as compared with the 2019 period primarily due to a 1.3 point improvement in the expense ratio, largely offset by a 1.2 point increase in the loss ratio.

The expense ratio improvement was driven by lower underwriting expenses and higher net earned premiums.

The increase in the loss ratio was driven by lower favorable net prior year loss reserve development and higher net catastrophe losses.

Commercial’s combined ratio increased 9.9 points for the three months ended September 30, 2020 as compared with the 2019 period due to a 9.3 point increase in the loss ratio and a 0.6 point increase in the expense ratio.

The increase in the loss ratio was driven by higher net catastrophe losses, which were 17.0 points of the loss ratio for the three months ended September 30, 2020, as compared with 3.0 points of the loss ratio in the 2019 period, partially offset by lower unfavorable net prior year loss reserve development in the current year period.

The increase in the expense ratio was driven by higher acquisition expenses partially offset by higher net earned premiums.

International’s combined ratio improved 9.3 points for the three months ended September 30, 2020 as compared with the 2019 period due to a 6.2 point improvement in the loss ratio and a 3.1 point improvement in the expense ratio.

The improvement in the loss ratio was primarily due to improved non-catastrophe current accident year underwriting results driven by lower large losses, partially offset by higher net catastrophe losses.

The improvement in the expense ratio was driven by lower acquisition and underwriting expenses.

Nine Months Ended September 30, 2020 Compared to 2019

Total gross written premiums increased $403 million for the nine months ended September 30, 2020 as compared with the 2019 period.

Total net written premiums increased $226 million for the nine months ended September 30, 2020 as compared with the 2019 period.

Gross written premiums, excluding third party captives, for Specialty increased $150 million for the nine months ended September 30, 2020 as compared with the 2019 period driven by strong rate.

Net written premiums for Specialty increased $88 million for the nine months ended September 30, 2020 as compared with the 2019 period.

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

Gross written premiums for Commercial increased $278 million for the nine months ended September 30, 2020 as compared with the 2019 period driven by strong rate and higher new business.

Net written premiums for Commercial increased $167 million for the nine months ended September 30, 2020 as compared with the 2019 period.

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

Gross written premiums for International decreased $15 million for the nine months ended September 30, 2020 as compared with the 2019 period.

Excluding the effect of foreign currency exchange rates, gross written premiums decreased $10 million driven by the continued impact of the strategic exit from certain Lloyd’s business classes, partially offset by growth in Canada and Europe.

Net written premiums decreased $29 million for the nine months ended September 30, 2020 as compared with the 2019 period.

Excluding the effect of foreign currency exchange rates, net written premiums decreased $24 million for the nine months ended September 30, 2020 as compared with the 2019 period.

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

Core income decreased $388 million for the nine months ended September 30, 2020 as compared with the 2019 period primarily due to higher net catastrophe losses and lower net investment income driven by limited partnership and common stock returns.

Net catastrophe losses were $536 million for the nine months ended September 30, 2020 as compared with $128 million in the 2019 period.

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

Specialty net catastrophe losses of $120 million for the nine months ended September 30, 2020 included $109 million related to the COVID-19 pandemic and $11 million primarily related to severe weather-related events.

Specialty net catastrophe losses were $16 million for the nine months ended September 30, 2019.

Commercial net catastrophe losses of $354 million for the nine months ended September 30, 2020 included $240 million primarily related to severe weather-related events, $66 million related to civil unrest and $48 million related to the COVID-19 pandemic.

Commercial net catastrophe losses were $102 million for the nine months ended September 30, 2019.

International net catastrophe losses of $62 million for the nine months ended September 30, 2020 included $38 million related to the COVID-19 pandemic and $24 million primarily related to severe weather-related events.

International net catastrophe losses were $10 million for the nine months ended September 30, 2019.

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

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

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

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

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

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

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

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

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

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

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

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

The expense ratio improved 1.1 points for the three months ended

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

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

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

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

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

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

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

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

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

Six Months Ended June 30, 2020 Compared to 2019

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

to the COVID-19 pandemic.

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

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

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

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

Favorable net prior year loss reserve development of $8 million and $29 million was recorded for the nine months ended September 30, 2020 and 2019.

For the nine months ended September 30, 2020 and 2019, Specialty recorded favorable net prior year loss reserve development of $47 million and $58 million and Commercial recorded unfavorable net prior year loss reserve development of $42 million and $15 million.

For the nine months ended September 30, 2020, International recorded favorable net prior year loss reserve development of $3 million as compared with unfavorable net prior year loss reserve development of $14 million in the 2019 period.

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

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

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

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

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

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

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

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

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

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

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

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

Specialty’s combined ratio increased 4.1 points for the nine months ended September 30, 2020 as compared with the 2019 period primarily due to a 5.3 point increase in the loss ratio partially offset by a 1.1 point improvement in the expense ratio.

The increase in the loss ratio was primarily due to higher net catastrophe losses, which were 5.7 points of the loss ratio for the nine months ended September 30, 2020, as compared with 0.8 points of the loss ratio in the 2019 period.

The improvement in the expense ratio was driven by lower underwriting expenses and higher net earned premiums.

Commercial’s combined ratio increased 9.7 points for the nine months ended September 30, 2020 as compared with the 2019 period due to a 9.2 point increase in the loss ratio and a 0.5 point increase in the expense ratio.

The increase in the loss ratio was driven by higher net catastrophe losses, which were 14.3 points of the loss ratio for the nine months ended September 30, 2020, as compared with 4.3 point of the loss ratio in the 2019 period.

The increase in the expense ratio was driven by higher acquisition expenses partially offset by higher net earned premiums.

International’s combined ratio increased 2.0 points for the nine months ended September 30, 2020 as compared with the 2019 period due to a 3.9 point increase in the loss ratio, partially offset by a 1.9 point improvement in the expense ratio.

The increase in the loss ratio was driven by higher net catastrophe losses, which were 8.9 points of the loss ratio for the nine months ended September 30, 2020, as compared with 1.4 points of the loss ratio in the 2019 period, partially offset by favorable net prior year loss reserve development in the current year period.

The improvement in the expense ratio was driven by lower acquisition and underwriting expenses.

Other Insurance Operations

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

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

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In millions)

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Net investment income

Core income (loss)

Three Months Ended June 30, 2020 Compared to 2019

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

Six Months Ended June 30, 2020 Compared to 2019

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

Three Months Ended September 30, 2020 Compared to 2019

Core loss improved $85 million for the three months ended September 30, 2020 as compared with the 2019 period.

Core loss for the three months ended September 30, 2020 included a $59 million charge related to the recognition of an active life reserve premium deficiency for long term care policies primarily driven by actions taken on discount rate assumptions.

The normative risk free rate (the projection of the 10-year U.S.

Treasury rate in the long term) was lowered by 100 basis points to 2.75% and the time period to grade up to the normative rate was extended from 6 years to 10 years.

Core loss for the three months ended September 30, 2020 also included a $36 million increase in the structured settlement claim reserves and a $30 million reduction in long term care claim reserves, both resulting from the annual claim experience studies in the third quarter of 2020.

Excluding the impacts of the GPV and claim reserve reviews, core results were favorable, driven by better than expected morbidity in the long term care business.

During the third quarter of 2020, relative to expectations, CNA experienced lower new claim frequency, higher claim terminations and more favorable claim severity amid the effects of COVID-19.

Given the uncertainty of these trends CNA increased its IBNR reserves in anticipation of increased claim activity as the COVID-19 pandemic abates.

Core loss for the three months ended September 30, 2019 included a $170 million charge related to the recognition of an active life reserve premium deficiency, partially offset by a $44 million reduction in long term care claim reserves resulting from the annual claim experience study in the third quarter of 2019.

Nine Months Ended September 30, 2020 Compared to 2019

Core loss improved $74 million for the nine months ended September 30, 2020 as compared with the 2019 period.

The drivers of the core loss decrease were generally consistent with the three month discussion above.

Life & Group Policyholder Reserves

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

See the Insurance Reserves section of our MD&A included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019 for further information on the reserving process.

The September 30, 2020 GPV indicated a premium deficiency of $74 million and future policy benefit reserves were increased accordingly.

As a result, the long term care active life reserves carried as of September 30, 2020 represent CNA’s best estimate assumptions at that date with no margin for adverse deviation.

A summary of the changes in the GPV results is presented in the table below:

(In millions)

Long term care active life reserve - change in estimated reserve margin

September 30, 2019 estimated margin

Changes in underlying discount rate assumptions

Changes in underlying morbidity assumptions

Changes in underlying persistency assumptions

Changes in underlying premium rate action assumptions

Changes in underlying expense and other assumptions

September 30, 2020 Premium Deficiency

The premium deficiency was primarily driven by changes in discount rate assumptions due to lower expected reinvestment rates, contemplating both near-term market indications and long-term normative assumptions.

This unfavorable driver was significantly offset by higher than previously estimated rate increases on active rate increase programs, new planned rate increase filings and favorable changes to the underlying persistency and morbidity assumptions.

CNA’s projections do not indicate a pattern of expected profits in earlier future years followed by expected losses in later future years.

As such, CNA will not establish additional future policy benefit reserves for profits followed by losses in periods where the long term care business generates core income.

The need for these additional future policy benefit reserves will be re-evaluated in connection with the next GPV, which is expected to be completed in the third quarter of 2021.

The table below summarizes the estimated pretax impact on CNA’s results of operations from various hypothetical revisions to its active life reserve assumptions.

The annual GPV process involves updating all assumptions to management’s then current best estimate, and historically all significant assumptions have been revised each year.

In the hypothetical revisions table below, CNA has assumed that revisions to such assumptions would occur in each policy type, age and duration within each policy group and would occur absent any changes, mitigating or otherwise, in the other assumptions.

Although such hypothetical revisions are not currently required or anticipated, CNA believes they could occur based on past variances in experience and its expectations of the ranges of future experience that could reasonably occur.

Any actual adjustment would be dependent on the specific policies affected and, therefore, may differ from the estimates summarized below.

September 30, 2020

Estimated Reduction to Pretax Income

(In millions)

Hypothetical revisions

2.5% increase in morbidity

5% increase in morbidity

5% decrease in active life mortality and lapse

10% decrease in active life mortality and lapse

Discount rates:

25 basis point decline in new money interest rates

50 basis point decline in new money interest rates

Premium rate actions:

25% decrease in anticipated future premium rate increases

50% decrease in anticipated future premium rate increases

The following table summarizes policyholder reserves for CNA’s long term care operations:

September 30, 2020

Claim and claim adjustment

policy benefits

(In millions)

Long term care

Structured settlement annuities

Shadow adjustments (a)

Ceded reserves (b)

Total gross reserves

December 31, 2019

Long term care

Structured settlement annuities

Shadow adjustments (a)

Ceded reserves (b)

Total gross reserves

To the extent that unrealized gains on fixed income securities supporting long term care products and annuity contracts would result in a premium deficiency if those gains were realized, an increase in Insurance reserves is recorded, after tax and noncontrolling interests, as a reduction of net unrealized gains through Other comprehensive income (loss) (“Shadow Adjustments”).

Ceded reserves relate to claim or policy reserves fully reinsured in connection with a sale or exit from the underlying business.

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

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

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

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In millions)

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Investment gains (losses)

Consolidating adjustments including noncontrolling

Consolidating adjustments including noncontrolling interests

Net income attributable to Loews Corporation

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Current Events

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In the third quarter of 2020, the COVID-19 pandemic and measures to mitigate the spread of COVID-19 continued to impact the world and the United States.

An excess supply of energy products has also led to disruptions in the energy sector and volatility in energy prices during 2020.

Boardwalk Pipelines’ operations are considered essential critical infrastructure under current Cybersecurity and Infrastructure Security Agency guidelines and the impacts from COVID-19 and the volatile energy prices have not been significant to Boardwalk Pipelines’ business, though some of its customers have been and continue to be directly impacted by COVID-19 and the volatility in commodity prices.

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

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

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

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

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

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

Boardwalk Pipelines expects to earn revenues of approximately $9.2 billion from fixed fees under committed firm agreements in place as of September 30, 2020, including agreements for transportation, storage and other services, over the remaining term of those agreements.

For the nine months ended September 30, 2020, Boardwalk Pipelines added approximately $643 million from the comparable amount at December 31, 2019, from contracts entered into during 2020.

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

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

The revenues expected to be earned from fixed fees under committed firm agreements do not include additional revenues Boardwalk Pipelines has recognized and may recognize under firm agreements based on actual utilization of the contracted pipeline or storage capacity, any expected revenues for periods after the expiration dates of the existing agreements, execution of precedent agreements associated with growth projects or other events that occurred or will occur subsequent to June 30, 2020.

Contract Renewals

Each year a portion of Boardwalk Pipelines’ firm transportation and storage agreements expire.

The rates Boardwalk Pipelines is able to charge customers are heavily influenced by market trends (both short and longer term), including the available supply, geographical location of natural gas production, the competition between producing basins, competition with other pipelines for supply and markets, the demand for gas by end-users such as power plants, petrochemical facilities and liquefied natural gas export facilities and the price differentials between the gas supplies and the market demand for the gas (basis differentials).

petrochemical facilities and liquefied natural gas export facilities and the price differentials between the gas supplies and the market demand for the gas (basis differentials).

Boardwalk Pipelines’ storage rates are additionally impacted by natural gas price differentials between time periods, such as winter to summer (time period price spreads), and the volatility in time period price spreads.

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

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

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

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

4 unchanged sentences

Results of Operations

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

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

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In millions)

4 unchanged sentences

Net income attributable to Loews Corporation

Three Months Ended June 30, 2020 Compared to 2019

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

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

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

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

Six Months Ended June 30, 2020 Compared to 2019

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

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

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

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

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

Three Months Ended September 30, 2020 Compared to 2019

Total revenues decreased $7 million for the three months ended September 30, 2020 as compared with the 2019 period driven by contract expirations that were recontracted at overall lower average rates and lower utilization-related revenues, partially offset by revenues from recently completed growth projects and higher storage and parking and lending (“PAL”) revenues due to favorable market conditions.

Operating expenses increased $7 million for the three months ended September 30, 2020 as compared with the 2019 period primarily due to an increased asset base from recently completed growth projects and the expiration of property tax abatements, partially offset by the timing of maintenance projects and lower employee-related costs.

Nine Months Ended September 30, 2020 Compared to 2019

Total revenues decreased $43 million for the nine months ended September 30, 2020 as compared with the 2019 period.

Including the effect of items in fuel and transportation expense and excluding net proceeds of approximately $24 million as a result of drawing on letters of credit due to a customer bankruptcy in the 2019 period, operating revenues decreased $24 million driven by contract expirations that were recontracted at overall lower average rates, partially offset by revenues from recently completed growth projects and higher storage and PAL revenues due to favorable market conditions.

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

Excluding items offset in operating revenues, operating expenses increased $14 million, primarily due to an increased asset base from recently completed growth projects and the expiration of property tax abatements.

Interest expense decreased $9 million for the nine months ended September 30, 2020 as compared with the 2019 period primarily due to lower average interest rates and lower average outstanding debt.

Loews Hotels & Co

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

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

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In millions)

Operating revenue

Gain on sale of hotel

Gain on sale of assets

Revenues related to reimbursable expenses

7 unchanged sentences

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

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

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

Of these twenty-two hotels, five were not operational as of September 30, 2020.

Additionally, two hotels completed construction prior to the pandemic;

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

However, all operational hotels are experiencing very limited occupancy.

one delayed opening until June of 2020, and the opening date of the second continues to be evaluated.

However, occupancy rates at the operational hotels remain lower than those from the prior year, or even occupancy rates prior to March of 2020.

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

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

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

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

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

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

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

While the duration of the COVID-19 outbreak and related financial impact cannot be estimated at this time, Loews Hotels & Co’s results of operations,

financial condition and cash flows will be materially adversely affected for the remainder of 2020, and likely thereafter.

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

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

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

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

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

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

Reduced occupancy and average daily rates caused by the COVID-19 pandemic and resulting mitigation efforts and operating cost reduction measures are the primary reasons for the decrease in operating revenues of $105 million and $297 million and operating expenses of $60 million and $153 million for the three and nine months ended September 30, 2020 as compared with the 2019 periods.

Additionally, equity income from joint ventures decreased $33 million and $100 million for the three and nine months ended September 30, 2020 as compared with the 2019 periods driven primarily by the COVID-19 pandemic.

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

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

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

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

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

For the three and nine months ended September 30, 2020, Loews Hotels & Co recorded impairment charges of $10 million and $30 million to reduce the carrying value of certain assets to their estimated fair value.

The nine months ended September 30, 2019 includes impairment charges of $11 million.

Loews Hotels & Co recorded gains on the sale of assets of $24 million and $37 million for the three and nine months ended September 30, 2020 related to sales of an office building in the third quarter and an owned hotel in the second quarter .

Interest expense for the three and nine months ended September 30, 2020 increased $2 million and $8 million primarily due to the increase in debt balances and less capitalized interest related to recently completed hotel development projects as compared with the 2019 periods.

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

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

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

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

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In millions)

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Net income (loss) attributable to Loews Corporation

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

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

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

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

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

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

Net investment income for the Parent Company decreased $13 million for the three months ended September 30, 2020 as compared with the 2019 period primarily due to decreased earnings from short term investments and lower results from equity based investments in the Parent Company trading portfolio.

Net investment loss was $33 million for the nine months ended September 30, 2020 as compared with net investment income of $153 million in the 2019 period as a result of the significant decline in equity based investments in response to the COVID-19 pandemic and related containment measures.

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

Operating revenues and other include Altium Packaging revenues of $253 million and $252 million for the three months ended September 30, 2020 and 2019 and $753 million and $689 million for the nine months ended September 30, 2020 and 2019.

The increase of $1 million for the three months ended September 30, 2020 as compared with the 2019 period reflects higher volumes, largely offset by the pass-through effect of lower year-over-year resin prices.

The increase of $64 million for the nine months ended September 30, 2020 as compared with the 2019 period reflects an increase of $60 million related to acquisitions in 2019 and higher volumes as a result of higher COVID-19 related demand for household chemicals, water and beverage, partially offset by the pass-through effect of lower year-over-year resin prices.

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

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

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

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

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

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

Operating and other expenses include Altium Packaging operating expenses of $247 million for the three months ended September 30, 2020 and 2019 and $729 million and $675 million for the nine months ended September 30, 2020 and 2019, which include depreciation and amortization expense.

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

Corporate Operating and other expenses were $28 million and $17 million for the three months ended September 30, 2020 and 2019 and $81 million and $65 million for the nine months ended September 30, 2020 and 2019.

The increases of $11 million and $16 million for the three and nine months ended September 30, 2020 as compared with the 2019 periods are primarily due to legal and other corporate overhead expenses.

Interest expenses increased $2 million for the three months ended September 30, 2020 as compared with the 2019 period due to the May of 2020 issuance of the Parent Company’s $500 million aggregate principal amount of 3.2% senior notes due May 15, 2030.

Interest expenses increased $11 million for the nine months ended September 30, 2020 as compared with the 2019 period due to the issuance by the Parent Company mentioned above and incremental borrowings by Altium Packaging to fund its 2019 acquisitions.

Diamond Offshore

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

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

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

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

Contract drilling revenues were $287 million and $676 million for the nine months ended September 30, 2020 and 2019.

Contract drilling expenses were $254 million and $594 million for the nine months ended September 30, 2020 and 2019.

Results for the nine months ended September 30, 2020 included in our Consolidated Condensed Financial Statements reflect only the period through the April 26, 2020 deconsolidation and also reflect lower average daily revenue earned as compared with the 2019 period.

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

LIQUIDITY AND CAPITAL RESOURCES

Parent Company

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

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

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

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

Parent Company cash and investments, net of receivables and payables, totaled $3.5 billion at September 30, 2020 as compared to $3.3 billion at December 31, 2019.

During the nine months ended September 30, 2020, we received $755 million in dividends from CNA, including a special dividend of $485 million.

Cash outflows during the nine months ended September 30, 2020 included the payment of $678 million to fund treasury stock purchases, $53 million of cash dividends to our shareholders, $123 million of cash contributions to Loews Hotels & Co and $19 million to purchase common shares of CNA.

As a holding company we depend on dividends from our subsidiaries and returns on our investment portfolio to fund our obligations.

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

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

During the nine months ended September 30, 2020, we purchased 16.1 million shares of Loews Corporation common stock and 564,430 shares of CNA common stock.

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

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

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

Related to the COVID-19 pandemic and efforts to mitigate the spread of the virus, as the situation continues to evolve through the remainder of 2020, and possibly thereafter, uncertainty exists as to the potential impacts on CNA’s cash flows.

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

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

The increase in cash provided by operating activities was driven by

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

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

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

CNA’s cash provided by operating activities was $1.4 billion for the nine months ended September 30, 2020 and $980 million for the nine months ended September 30, 2019.

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

CNA paid dividends of $3.11 per share on its common stock, including a special dividend of $2.00 per share in the nine months ended September 30, 2020.

On October 30, 2020, CNA’s Board of Directors declared a quarterly dividend of $0.37 per share, payable December 3, 2020 to shareholders of record on November 16, 2020.

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

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.

CNA has an effective shelf registration statement under which it may publicly issue debt, equity or hybrid securities from time to time.

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

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

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

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

CCC paid dividends of $855 million and $940 million during the nine months ended September 30, 2020 and 2019.

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

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

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

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

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

Boardwalk Pipelines’ cash provided by operating activities decreased $35 million for the nine months ended September 30, 2020 compared to the 2019 period, primarily due to the change in net income and the timing of receivables and accrued liabilities.

For the nine months ended September 30, 2020 and 2019, Boardwalk Pipelines’ capital expenditures were $351 million and $276 million, consisting primarily of a combination of growth and maintenance capital.

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, which utilized the remaining capacity under Boardwalk Pipelines’ shelf registration statement.

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.

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

Boardwalk Pipelines has an effective shelf registration statement under which it may publicly issue debt securities, warrants or rights from time to time.

On November 19, 2020, Boardwalk Pipelines will pay a distribution of $102 million to the Company.

Certain of the hotels wholly or partially owned by Loews Hotels & Co are financed by debt facilities, with a number of different lenders.

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

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

As a result of the impacts of COVID-19, Loews Hotels & Co has proactively requested certain lenders, where applicable, to (1) temporarily waive certain covenants to avoid an event of default and/or further restriction of the hotel’s cash balances through the establishment of lockboxes and other measures;

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

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

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

Loews Hotels & Co also continues to work with lenders on loans that are being reviewed for extension.

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

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

Through the date of this Report, Loews Hotels & Co is not in default on any of its loans.

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

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

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

Through October 30, 2020, Loews Hotels & Co funded approximately $35 million to these joint ventures in 2020.

Through October 30, 2020, Loews Hotels & Co received capital contributions of $127 million from Loews Corporation.

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

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

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

While financial markets have broadly recovered during the second and third quarters of 2020, CNA’s net investment income and net investment gains (losses) are lower for the nine months ended September 30, 2020 as compared with the 2019 period.

There could be continued volatility in CNA’s investment portfolio.

Net Investment Income

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In millions)

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Net investment income after tax and noncontrolling interests

Effective income yield for the fixed income securities

portfolio, before tax

Effective income yield for the fixed income securities

portfolio, after tax

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

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

Limited partnership and common stock return

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

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

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

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

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

CNA’s pretax net investment income decreased $193 million for the nine months ended September 30, 2020 as compared with the 2019 period, driven by limited partnership and common stock returns and lower yields in the fixed income portfolio.

Investment Gains (Losses)

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

(In millions)

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Investment gains (losses) attributable to Loews Corporation

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

CNA’s investment gains (losses) increased $38 million for the three months ended September 30, 2020 as compared with the 2019 period.

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

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

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

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

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

Pretax impairment losses of $5 million on available-for-sale securities and $3 million of credit losses on mortgage loans were recognized in the current quarter.

CNA’s investment gains (losses) decreased $142 million for the nine months ended September 30, 2020 as compared with the 2019 period.

The decrease was driven by higher impairment losses and the unfavorable change in fair value of non-redeemable preferred stock partially offset by higher net realized investment gains on sales of fixed maturity securities.

Pretax impairment losses of $108 million on available-for-sale securities and $16 million of credit losses on mortgage loans were recognized for the nine months ended September 30, 2020.

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

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

June 30, 2020

September 30, 2020

December 31, 2019

(In millions)

Government, Government agencies and

Government-sponsored enterprises

Government, Government agencies and Government-sponsored enterprises

Non-investment grade

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

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

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

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

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

June 30, 2020

September 30, 2020

(In millions)

Government, Government agencies and

Government-sponsored enterprises

Government, Government agencies and Government-sponsored enterprises

Non-investment grade

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

June 30, 2020

September 30, 2020

(In millions)

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

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

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

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

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

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

June 30, 2020

September 30, 2020

December 31, 2019

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The carrying value of the components of CNA’s Short term investments are presented in the following table:

September 30,

(In millions )

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Total short term investments

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

During 2020, CNA shifted its commercial paper holdings to U.S.

Treasury securities.

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

In addition to short term investments, CNA held $442 million and $242 million of cash as of September 30, 2020 and December 31, 2019.

CRITICAL ACCOUNTING ESTIMATES

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Investors are cautioned that certain statements contained in this Report as well as in other SEC filings and periodic press releases and certain oral statements made by us and our subsidiaries and our and their officials during presentations may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”).

Forward-looking statements include, without limitation, any statement that does not directly relate to any historical or current fact and may project, indicate or imply future results, events, performance or achievements.

or achievements.

Such statements may contain the words “expect,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “will be,” “will continue,” “will likely result,” and similar expressions.

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

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

Developments in any of the risks or uncertainties facing us or our subsidiaries, including those described under Part II, Item 1A, Risk Factors in this Report, Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2019, Part II, Item 1A, Risk Factors in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 and in our other filings with the SEC, could cause our results to differ materially from results that have been or may be anticipated or projected.

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis