CNA FINANCIAL CORP - Quarter Report: 2021 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


			☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021


			☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number 1-5823

CNA FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


Delaware						36-6169860
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


151 N. Franklin		60606
Chicago,	Illinois	(Zip Code)
(Address of principal executive offices)

(312) 822-5000

(Registrant's telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, Par value $2.50

"CNA"

New York Stock Exchange

Chicago Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 29, 2021, 271,352,510 shares of common stock were outstanding.


Item Number		Page Number
	PART I
1.	Condensed Consolidated Financial Statements:	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020 (Unaudited)	4
	Condensed Consolidated Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020	5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (Unaudited)	6
	Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2021 and 2020 (Unaudited)	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	42
3.	Quantitative and Qualitative Disclosures About Market Risk	63
4.	Controls and Procedures	63
	PART II
1.	Legal Proceedings	64
1A.	Risk Factors	64
2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
6.	Exhibits	68

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PART I

Item 1. Condensed Consolidated Financial Statements

CNA Financial Corporation

Condensed Consolidated Statements of Operations (Unaudited)


Periods ended June 30	Three Months				Six Months
(In millions, except per share data)	2021		2020		2021		2020
Revenues
Net earned premiums	$	2,035	$	1,850	$	3,997	$	3,719
Net investment income	591		534		1,095		863
Net investment gains (losses)	38		69		95		(147)
Non-insurance warranty revenue	359		308		697		609
Other revenues	6		5		11		13
Total revenues	3,029		2,766		5,895		5,057
Claims, Benefits and Expenses
Insurance claims and policyholders’ benefits	1,546		1,642		3,052		3,067
Amortization of deferred acquisition costs	357		342		716		686
Non-insurance warranty expense	332		285		643		566
Other operating expenses	303		284		587		583
Interest	29		31		57		62
Total claims, benefits and expenses	2,567		2,584		5,055		4,964
Income before income tax	462		182		840		93
Income tax expense	(94)		(31)		(160)		(3)
Net income	$	368	$	151	$	680	$	90

Basic earnings per share	$	1.35	$	0.56	$	2.50	$	0.33

Diluted earnings per share	$	1.35	$	0.55	$	2.49	$	0.33

Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	271.9		271.5		271.9		271.5
Diluted	272.8		272.0		272.9		272.3

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

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CNA Financial Corporation

Condensed Consolidated Statements of Comprehensive Income (Unaudited)


Periods ended June 30	Three Months				Six Months
(In millions)	2021		2020		2021		2020
Comprehensive Income
Net income	$	368	$	151	$	680	$	90
Other Comprehensive Income (Loss), net of tax
Changes in:
Net unrealized gains and losses on investments with an allowance for credit losses	—		2		—		(9)
Net unrealized gains and losses on other investments	300		1,191		(327)		147
Net unrealized gains and losses on investments	300		1,193		(327)		138
Foreign currency translation adjustment	12		24		14		(53)
Pension and postretirement benefits	10		7		19		18
Other comprehensive income (loss), net of tax	322		1,224		(294)		103
Total comprehensive income	$	690	$	1,375	$	386	$	193

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

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CNA Financial Corporation

Condensed Consolidated Balance Sheets


(In millions, except share data)	June 30, 2021 (Unaudited)		December 31, 2020
Assets
Investments:
Fixed maturity securities at fair value (amortized cost of $39,826 and $38,953, less allowance for credit loss of $45 and $40)	$	44,910	$	44,631
Equity securities at fair value (cost of $955 and $941)	1,033		992
Limited partnership investments	1,781		1,619
Other invested assets	70		76
Mortgage loans (less allowance for uncollectible receivables of $26 and $26)	1,006		1,068
Short term investments	1,465		1,907
Total investments	50,265		50,293
Cash	462		419
Reinsurance receivables (less allowance for uncollectible receivables of $22 and $21)	5,198		4,457
Insurance receivables (less allowance for uncollectible receivables of $34 and $33)	2,954		2,607
Accrued investment income	383		380
Deferred acquisition costs	721		708
Deferred income taxes	121		66
Property and equipment at cost (less accumulated depreciation of $252 and $231)	234		252
Goodwill	148		148
Deferred non-insurance warranty acquisition expense	3,305		3,068
Other assets	2,416		1,628
Total assets	$	66,207	$	64,026
Liabilities
Insurance reserves:
Claim and claim adjustment expenses	$	23,480	$	22,706
Unearned premiums	5,592		5,119
Future policy benefits	13,285		13,318
Long term debt	2,777		2,776
Deferred non-insurance warranty revenue	4,309		4,023
Other liabilities (includes $74 and $89 due to Loews Corporation)	4,096		3,377
Total liabilities	53,539		51,319
Commitments and contingencies (Notes C and F)
Stockholders' Equity
Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 271,349,927 and 271,391,603 shares outstanding)	683		683
Additional paid-in capital	2,201		2,211
Retained earnings	9,348		9,081
Accumulated other comprehensive income	509		803
Treasury stock (1,690,316 and 1,648,640 shares), at cost	(73)		(71)
Total stockholders’ equity	12,668		12,707
Total liabilities and stockholders' equity	$	66,207	$	64,026

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

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CNA Financial Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)


Six months ended June 30
(In millions)	2021		2020
Cash Flows from Operating Activities
Net income	$	680	$	90
Adjustments to reconcile net income to net cash flows provided by operating activities:
Deferred income tax expense (benefit)	27		(33)
Trading portfolio activity	19		15
Net investment (gains) losses	(95)		147
Equity method investees	(79)		68
Net amortization of investments	(41)		(32)
Depreciation and amortization	27		31
Changes in:
Receivables, net	(1,087)		(586)
Accrued investment income	(3)		11
Deferred acquisition costs	(12)		(41)
Insurance reserves	1,373		1,181
Other, net	(124)		(201)
Net cash flows provided by operating activities	685		650
Cash Flows from Investing Activities
Dispositions:
Fixed maturity securities - sales	1,846		3,773
Fixed maturity securities - maturities, calls and redemptions	2,104		1,622
Equity securities	193		230
Limited partnerships	124		257
Mortgage loans	69		25
Purchases:
Fixed maturity securities	(4,615)		(5,356)
Equity securities	(181)		(312)
Limited partnerships	(169)		(90)
Mortgage loans	(16)		(91)
Change in other investments	6		(2)
Change in short term investments	442		409
Purchases of property and equipment	(5)		(10)
Other, net	—		20
Net cash flows (used) provided by investing activities	(202)		475
Cash Flows from Financing Activities
Dividends paid to common stockholders	(414)		(750)
Purchase of treasury stock	(18)		(18)
Other, net	(9)		(8)
Net cash flows used by financing activities	(441)		(776)
Effect of foreign exchange rate changes on cash	1		(5)
Net change in cash	43		344
Cash, beginning of year	419		242
Cash, end of period	$	462	$	586

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

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CNA Financial Corporation

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)


Periods ended June 30	Three Months				Six Months
(In millions)	2021		2020		2021		2020
Common Stock
Balance, beginning of period	$	683	$	683	$	683	$	683
Balance, end of period	683		683		683		683
Additional Paid-in Capital
Balance, beginning of period	2,194		2,187		2,211		2,203
Stock-based compensation	7		9		(10)		(7)
Balance, end of period	2,201		2,196		2,201		2,196
Retained Earnings
Balance, beginning of period, as previously reported	9,084		8,634		9,081		9,348
Cumulative effect adjustments from changes in accounting guidance, net of tax	—		—		—		(5)
Balance, beginning of period, as adjusted	9,084		8,634		9,081		9,343
Dividends to common stockholders ($0.38, $0.37, $1.51 and $2.74 per share)	(104)		(102)		(413)		(750)
Net income	368		151		680		90
Balance, end of period	9,348		8,683		9,348		8,683
Accumulated Other Comprehensive Income
Balance, beginning of period	187		(1,070)		803		51
Other comprehensive income (loss)	322		1,224		(294)		103
Balance, end of period	509		154		509		154
Treasury Stock
Balance, beginning of period	(59)		(72)		(71)		(70)
Stock-based compensation	1		1		16		17
Purchase of treasury stock	(15)		—		(18)		(18)
Balance, end of period	(73)		(71)		(73)		(71)
Total stockholders' equity	$	12,668	$	11,645	$	12,668	$	11,645

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

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CNA Financial Corporation

Notes to Condensed Consolidated Financial Statements

Note A. General

Basis of Presentation

The Condensed Consolidated Financial Statements include the accounts of CNA Financial Corporation (CNAF) and its subsidiaries. Collectively, CNAF and its subsidiaries are referred to as CNA or the Company. Loews Corporation (Loews) owned approximately 89.6% of the outstanding common stock of CNAF as of June 30, 2021.

The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Intercompany amounts have been eliminated. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, including certain financial statement notes, is not required for interim reporting purposes and has been condensed or omitted. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in CNAF's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2020, including the summary of significant accounting policies in Note A. The preparation of Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.

The interim financial data as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 is unaudited. However, in the opinion of management, the interim data includes all adjustments, including normal recurring adjustments, necessary for a fair statement of the Company's results for the interim periods. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.

Accounting Standards Pending Adoption

In August 2018, the FASB issued ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The updated accounting guidance requires changes to the measurement and disclosure of long-duration contracts. The guidance requires entities to annually update cash flow assumptions, including morbidity and persistency, and update discount rate assumptions quarterly using an upper-medium grade fixed-income instrument yield. The effect of changes in cash flow assumptions will be recorded in the Company's results of operations and the effect of changes in discount rate assumptions will be recorded in Other comprehensive income. This guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. The guidance may be applied using either a modified retrospective transition method or a full retrospective transition method. The guidance requires restatement of prior periods presented. The Company plans to adopt on the effective date, using the modified retrospective transition method and is currently evaluating the effect the updated guidance will have on its financial statements, including the increased disclosure requirements. The annual updating of cash flow assumptions is expected to increase income statement volatility. While the requirements of the new guidance represent a material change from existing GAAP, the underlying economics of the business and related cash flows will be unchanged.

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Note B. Earnings (Loss) Per Share

Earnings (loss) per share is based on weighted average number of outstanding common shares. Basic earnings (loss) per share excludes the impact of dilutive securities and is computed by dividing Net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

For the three and six months ended June 30, 2021, approximately 952 thousand and 967 thousand potential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were included in the calculation of diluted earnings per share. For those same periods, approximately 1 thousand and 3 thousand potential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were not included in the calculation of diluted earnings per share because the effect would have been antidilutive.

For the three and six months ended June 30, 2020, approximately 445 thousand and 778 thousand potential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were included in the calculation of diluted earnings per share. For those same periods, approximately 915 thousand and 13 thousand potential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were not included in the calculation of diluted earnings per share because the effect would have been antidilutive.

The Company repurchased 377,615 and 435,376 shares of CNAF common stock at an aggregate cost of $18 million during each of the six months ended June 30, 2021 and 2020.

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Note C. Investments

The significant components of Net investment income are presented in the following table.


Periods ended June 30	Three Months				Six Months
(In millions)	2021		2020		2021		2020
Fixed maturity securities	$	425	$	430	$	853	$	868
Equity securities	20		50		49		6
Limited partnership investments	146		44		189		(26)
Mortgage loans	15		14		29		28
Short term investments	—		1		—		8
Trading portfolio	2		8		7		9
Other	(1)		2		1		2
Gross investment income	607		549		1,128		895
Investment expense	(16)		(15)		(33)		(32)
Net investment income	$	591	$	534	$	1,095	$	863

During the three and six months ended June 30, 2021, $9 million and $21 million of Net investment income was recognized due to the change in fair value of common stock still held as of June 30, 2021. During the three and six months ended June 30, 2020, $23 million and $10 million of Net investment income was recognized due to the change in fair value of common stock still held as of June 30, 2020.

Net investment gains (losses) are presented in the following table.


Periods ended June 30	Three Months				Six Months
(In millions)	2021		2020		2021		2020
Net investment gains (losses):
Fixed maturity securities:
Gross gains	$	51	$	102	$	109	$	131
Gross losses	(20)		(85)		(40)		(189)
Net investment gains (losses) on fixed maturity securities	31		17		69		(58)
Equity securities	17		63		19		(70)
Derivatives	(12)		(10)		5		(5)
Mortgage loans	—		—		—		(13)
Short term investments and other	2		(1)		2		(1)
Net investment gains (losses)	$	38	$	69	$	95	$	(147)

During the three and six months ended June 30, 2021, $15 million of gains were recognized in Net investment gains (losses) due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2021. During the three and six months ended June 30, 2020, $63 million of gains and $(70) million of losses were recognized in Net investment gains (losses) due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2020.

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The following tables present the activity related to the allowance on available-for-sale securities with credit impairments and purchased credit-deteriorated (PCD) assets. Accrued interest receivable on available-for-sale fixed maturity securities totaled $374 million, $371 million and $373 million as of June 30, 2021, December 31, 2020 and June 30, 2020 and is excluded from the estimate of expected credit losses and the amortized cost basis in the tables included within this Note.



(In millions)	Corporate and other bonds		Asset-backed		Total
Allowance for credit losses:
Balance as of April 1, 2021	$	27	$	16	$	43
Additions to the allowance for credit losses:
Securities for which credit losses were not previously recorded	—		—		—
Available-for-sale securities accounted for as PCD assets	—		4		4

Reductions to the allowance for credit losses:
Securities sold during the period (realized)	—		—		—
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis	—		—		—
Write-offs charged against the allowance	—		—		—
Recoveries of amounts previously written off	—		—		—

Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	(3)		1		(2)
Balance as of June 30, 2021	$	24	$	21	$	45



(In millions)	Corporate and other bonds		Asset-backed		Total
Allowance for credit losses:
Balance as of April 1, 2020	$	49	$	—	$	49
Additions to the allowance for credit losses:
For securities for which credit losses were not previously recorded	10		12		22
For available-for-sale securities accounted for as PCD assets	1		—		1

Reductions to the allowance for credit losses:
Securities sold during the period (realized)	1		—		1
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis	—		—		—
Write-offs charged against the allowance	—		—		—
Recoveries of amounts previously written off	—		—		—

Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	(20)		—		(20)
Balance as of June 30, 2020	$	39	$	12	$	51

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(In millions)	Corporate and other bonds		Asset-backed		Total
Allowance for credit losses:
Balance as of January 1, 2021	$	23	$	17	$	40
Additions to the allowance for credit losses:
Securities for which credit losses were not previously recorded	14		—		14
Available-for-sale securities accounted for as PCD assets	2		4		6

Reductions to the allowance for credit losses:
Securities sold during the period (realized)	6		—		6
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis	—		—		—
Write-offs charged against the allowance	—		—		—
Recoveries of amounts previously written off	—		—		—

Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	(9)		—		(9)
Balance as of June 30, 2021	$	24	$	21	$	45



(In millions)	Corporate and other bonds		Asset-backed		Total
Allowance for credit losses:
Balance as of January 1, 2020	$	—	$	—	$	—
Additions to the allowance for credit losses:
Impact of adopting ASC 326	6		—		6
For securities for which credit losses were not previously recorded	58		12		70
For available-for-sale securities accounted for as PCD assets	2		—		2

Reductions to the allowance for credit losses:
Securities sold during the period (realized)	6		—		6
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis	1		—		1
Write-offs charged against the allowance	—		—		—
Recoveries of amounts previously written off	—		—		—

Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	(20)		—		(20)
Balance as of June 30, 2020	$	39	$	12	$	51

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The components of available-for-sale impairment losses recognized in earnings by asset type are presented in the following table. The table includes losses on securities with an intention to sell and changes in the allowance for credit losses on securities since acquisition date.


Periods ended June 30	Three Months				Six Months
(In millions)	2021		2020		2021		2020
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	(2)	$	(1)	$	5	$	90
Asset-backed	1		12		—		13
Impairment losses (gains) recognized in earnings	$	(1)	$	11	$	5	$	103

The Company also recognized $13 million of losses on mortgage loans during the six months ended June 30, 2020 due to changes in expected credit losses. There were no losses recognized on mortgage loans during the three and six months ended June 30, 2021 or during the three months ended June 30, 2020.

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The following tables present a summary of fixed maturity securities.


June 30, 2021	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	21,291	$	3,153	$	35	$	24	$	24,385
States, municipalities and political subdivisions	10,125		1,743		2		—		11,866
Asset-backed:
Residential mortgage-backed	3,337		99		10		—		3,426
Commercial mortgage-backed	2,068		98		14		17		2,135
Other asset-backed	2,338		84		3		4		2,415
Total asset-backed	7,743		281		27		21		7,976
U.S. Treasury and obligations of government-sponsored enterprises	142		—		5		—		137
Foreign government	515		22		1		—		536
Total fixed maturity securities available-for-sale	39,816		5,199		70		45		44,900
Total fixed maturity securities trading	10		—		—		—		10
Total fixed maturity securities	$	39,826	$	5,199	$	70	$	45	$	44,910


December 31, 2020	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	20,792	$	3,578	$	22	$	23	$	24,325
States, municipalities and political subdivisions	9,729		1,863		—		—		11,592
Asset-backed:
Residential mortgage-backed	3,442		146		1		—		3,587
Commercial mortgage-backed	1,933		93		42		17		1,967
Other asset-backed	2,179		81		9		—		2,251
Total asset-backed	7,554		320		52		17		7,805
U.S. Treasury and obligations of government-sponsored enterprises	339		2		3		—		338
Foreign government	512		32		—		—		544
Total fixed maturity securities available-for-sale	38,926		5,795		77		40		44,604
Total fixed maturity securities trading	27		—		—		—		27
Total fixed maturity securities	$	38,953	$	5,795	$	77	$	40	$	44,631

The net unrealized gains on investments included in the tables above are recorded as a component of Accumulated other comprehensive income (AOCI). When presented in AOCI, these amounts are net of tax and any required Shadow Adjustments. To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group segment would result in a premium deficiency if realized, a related increase in Insurance reserves is recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments). As of June 30, 2021 and December 31, 2020, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $2,635 million and $2,773 million.

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The following tables present the estimated fair value and gross unrealized losses of fixed maturity securities in a gross unrealized loss position for which an allowance for credit loss has not been recorded, by the length of time in which the securities have continuously been in that position.


	Less than 12 Months				12 Months or Longer				Total
June 30, 2021	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	1,190	$	33	$	61	$	2	$	1,251	$	35
States, municipalities and political subdivisions	128		2		—		—		128		2
Asset-backed:
Residential mortgage-backed	932		10		10		—		942		10
Commercial mortgage-backed	153		2		206		12		359		14
Other asset-backed	255		2		74		1		329		3
Total asset-backed	1,340		14		290		13		1,630		27
U.S. Treasury and obligations of government-sponsored enterprises	80		5		—		—		80		5
Foreign government	48		1		—		—		48		1
Total	$	2,786	$	55	$	351	$	15	$	3,137	$	70


	Less than 12 Months				12 Months or Longer				Total
December 31, 2020	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	609	$	21	$	12	$	1	$	621	$	22
States, municipalities and political subdivisions	33		—		—		—		33		—
Asset-backed:
Residential mortgage-backed	71		1		11		—		82		1
Commercial mortgage-backed	533		40		28		2		561		42
Other asset-backed	344		9		13		—		357		9
Total asset-backed	948		50		52		2		1,000		52
U.S. Treasury and obligations of government-sponsored enterprises	63		3		—		—		63		3
Foreign government	13		—		—		—		13		—
Total	$	1,666	$	74	$	64	$	3	$	1,730	$	77

Based on current facts and circumstances, the Company believes the unrealized losses presented in the June 30, 2021 securities in a gross unrealized loss position table above are not indicative of the ultimate collectibility of the current amortized cost of the securities, but rather are attributable to changes in interest rates, credit spreads and other factors. The Company has no current intent to sell securities with unrealized losses, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost; accordingly, the Company has determined that there are no additional impairment losses to be recorded as of June 30, 2021.

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Contractual Maturity

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


	June 30, 2021				December 31, 2020
(In millions)	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,685	$	1,702	$	1,456	$	1,458
Due after one year through five years	10,723		11,479		12,304		13,098
Due after five years through ten years	13,775		15,012		12,319		13,878
Due after ten years	13,633		16,707		12,847		16,170
Total	$	39,816	$	44,900	$	38,926	$	44,604

Actual maturities may differ from contractual maturities because certain securities may be called or prepaid. Securities not due at a single date are allocated based on weighted average life.

Derivative Financial Instruments

The Company holds an embedded derivative on a funds withheld liability with a notional value of $274 million and $190 million and a fair value of $(13) million and $(19) million as of June 30, 2021 and December 31, 2020. The embedded derivative on the funds withheld liability is accounted for separately and reported with the funds withheld liability in Other liabilities on the Condensed Consolidated Balance Sheets.

Investment Commitments

As part of its overall investment strategy, the Company invests in various assets which require future purchase, sale or funding commitments. These investments are recorded once funded, and the related commitments may include future capital calls from various third-party limited partnerships, signed and accepted mortgage loan applications, and obligations related to private placement securities. As of June 30, 2021, the Company had commitments to purchase or fund approximately $1,330 million and sell approximately $95 million under the terms of these investments.

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Mortgage Loans

The following table presents the amortized cost basis of mortgage loans for each credit quality indicator by year of origination. The primary credit quality indicators utilized are debt service coverage ratios (DSCR) and loan-to-value ratios (LTV).


June 30, 2021	Mortgage Loans Amortized Cost Basis by Origination Year (1)
(In millions)	2021		2020		2019		2018		2017		Prior		Total
DSCR ≥1.6x
LTV less than 55%	$	—	$	89	$	33	$	50	$	113	$	183	$	468
LTV 55% to 65%	—		—		19		—		9		4		32
LTV greater than 65%	5		—		6		—		—		24		35
DSCR 1.2x - 1.6x
LTV less than 55%	—		—		16		—		5		71		92
LTV 55% to 65%	10		38		39		42		27		—		156
LTV greater than 65%	—		34		44		—		8		12		98
DSCR ≤1.2
LTV less than 55%	—		—		50		—		8		10		68
LTV 55% to 65%	—		—		47		—		—		—		47
LTV greater than 65%	—		—		29		—		—		7		36
Total	$	15	$	161	$	283	$	92	$	170	$	311	$	1,032

(1) The values in the table above reflect DSCR on a standardized amortization period and LTV based on the most recent appraised values trended forward using changes in a commercial real estate price index.

As of June 30, 2021, accrued interest receivable on mortgage loans totaled $4 million and is excluded from the amortized cost basis disclosed in the table above and the estimate of expected credit losses.

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Note D. Fair Value

Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable.

Level 1 - Quoted prices for identical instruments in active markets.

Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.

Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are not observable.

Prices may fall within Level 1, 2 or 3 depending upon the methodology and inputs used to estimate fair value for each specific security. In general, the Company seeks to price securities using third-party pricing services. Securities not priced by pricing services are submitted to independent brokers for valuation and, if those are not available, internally developed pricing models are used to value assets using a methodology and inputs the Company believes market participants would use to value the assets. Prices obtained from third-party pricing services or brokers are not adjusted by the Company.

The Company performs control procedures over information obtained from pricing services and brokers to ensure prices received represent a reasonable estimate of fair value and to confirm representations regarding whether inputs are observable or unobservable. Procedures may include i) the review of pricing service methodologies or broker pricing qualifications, ii) back-testing, where past fair value estimates are compared to actual transactions executed in the market on similar dates, iii) exception reporting, where period-over-period changes in price are reviewed and challenged with the pricing service or broker based on exception criteria, and iv) deep dives, where the Company performs an independent analysis of the inputs and assumptions used to price individual securities.

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Assets and Liabilities Measured at Fair Value

Assets and liabilities measured at fair value on a recurring basis are presented in the following tables. Corporate bonds and other includes obligations of the U.S. Treasury, government-sponsored enterprises, foreign governments and redeemable preferred stock.


June 30, 2021							Total Assets/Liabilities at Fair Value
(In millions)	Level 1		Level 2		Level 3
Assets
Fixed maturity securities:
Corporate bonds and other	$	158	$	24,027	$	883	$	25,068
States, municipalities and political subdivisions	—		11,809		57		11,866
Asset-backed	—		7,566		410		7,976
Total fixed maturity securities	158		43,402		1,350		44,910
Equity securities:
Common stock	198		—		16		214
Non-redeemable preferred stock	67		743		9		819
Total equity securities	265		743		25		1,033
Short term and other	1,310		26		—		1,336
Total assets	$	1,733	$	44,171	$	1,375	$	47,279
Liabilities
Other liabilities	$	—	$	14	$	—	$	14
Total liabilities	$	—	$	14	$	—	$	14


December 31, 2020							Total Assets/Liabilities at Fair Value
(In millions)	Level 1		Level 2		Level 3
Assets
Fixed maturity securities:
Corporate bonds and other	$	355	$	24,109	$	770	$	25,234
States, municipalities and political subdivisions	—		11,546		46		11,592
Asset-backed	—		7,497		308		7,805
Total fixed maturity securities	355		43,152		1,124		44,631
Equity securities:
Common stock	175		—		20		195
Non-redeemable preferred stock	68		722		7		797
Total equity securities	243		722		27		992
Short term and other	1,761		28		—		1,789
Total assets	$	2,359	$	43,902	$	1,151	$	47,412
Liabilities
Other liabilities	$	—	$	19	$	—	$	19
Total liabilities	$	—	$	19	$	—	$	19

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The tables below present a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).


Level 3 (In millions)	Corporate bonds and other		States, municipalities and political subdivisions		Asset-backed		Equity securities		Total
Balance as of April 1, 2021	$	767	$	44	$	315	$	29	$	1,155
Total realized and unrealized investment gains (losses):
Reported in Net investment gains (losses)	3		—		—		—		3
Reported in Net investment income	—		—		1		—		1
Reported in Other comprehensive income (loss)	16		2		4		—		22
Total realized and unrealized investment gains (losses)	19		2		5		—		26
Purchases	122		12		84		—		218
Sales	(3)		—		—		(4)		(7)
Settlements	(22)		(1)		(10)		—		(33)
Transfers into Level 3	—		—		21		—		21
Transfers out of Level 3	—		—		(5)		—		(5)
Balance as of June 30, 2021	$	883	$	57	$	410	$	25	$	1,375
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2021 recognized in Net income (loss) in the period	$	—	$	—	$	—	$	—	$	—
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2021 recognized in Other comprehensive income (loss) in the period	16		2		4		—		22


Level 3 (In millions)	Corporate bonds and other		States, municipalities and political subdivisions		Asset-backed		Equity securities		Total
Balance as of April 1, 2020	$	496	$	—	$	197	$	15	$	708
Total realized and unrealized investment gains (losses):
Reported in Net investment gains (losses)	—		—		—		(4)		(4)
Reported in Net investment income	—		—		—		—		—
Reported in Other comprehensive income (loss)	59		—		18		—		77
Total realized and unrealized investment gains (losses)	59		—		18		(4)		73
Purchases	4		—		35		—		39
Sales	—		—		(9)		—		(9)
Settlements	(4)		—		(5)		—		(9)
Transfers into Level 3	—		—		—		—		—
Transfers out of Level 3	—		—		(14)		—		(14)
Balance as of June 30, 2020	$	555	$	—	$	222	$	11	$	788
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2020 recognized in Net income (loss) in the period	$	—	$	—	$	—	$	(4)	$	(4)
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2020 recognized in Other comprehensive income (loss) in the period	58		—		18		—		76

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Level 3 (In millions)	Corporate bonds and other		States, municipalities and political subdivisions		Asset-backed		Equity securities		Total
Balance as of January 1, 2021	$	770	$	46	$	308	$	27	$	1,151
Total realized and unrealized investment gains (losses):
Reported in Net investment gains (losses)	(10)		—		—		1		(9)
Reported in Net investment income	—		—		3		1		4
Reported in Other comprehensive income (loss)	(24)		—		(5)		—		(29)
Total realized and unrealized investment gains (losses)	(34)		—		(2)		2		(34)
Purchases	164		12		114		—		290
Sales	(3)		—		—		(4)		(7)
Settlements	(24)		(1)		(27)		—		(52)
Transfers into Level 3	10		—		30		—		40
Transfers out of Level 3	—		—		(13)		—		(13)
Balance as of June 30, 2021	$	883	$	57	$	410	$	25	$	1,375
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2021 recognized in Net income (loss) in the period	$	—	$	—	$	—	$	2	$	2
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2021 recognized in Other comprehensive income (loss) in the period	(24)		—		(5)		—		(29)


Level 3 (In millions)	Corporate bonds and other		States, municipalities and political subdivisions		Asset-backed		Equity securities		Total
Balance as of January 1, 2020	$	468	$	—	$	165	$	18	$	651
Total realized and unrealized investment gains (losses):
Reported in Net investment gains (losses)	—		—		—		(4)		(4)
Reported in Net investment income	—		—		—		(3)		(3)
Reported in Other comprehensive income (loss)	22		—		10		—		32
Total realized and unrealized investment gains (losses)	22		—		10		(7)		25
Purchases	71		—		80		—		151
Sales	—		—		(9)		—		(9)
Settlements	(6)		—		(9)		—		(15)
Transfers into Level 3	—		—		—		—		—
Transfers out of Level 3	—		—		(15)		—		(15)
Balance as of June 30, 2020	$	555	$	—	$	222	$	11	$	788
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2020 recognized in Net income (loss) in the period	$	—	$	—	$	—	$	(7)	$	(7)
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2020 recognized in Other comprehensive income (loss) in the period	24		—		10		—		34

Securities may be transferred in or out of levels within the fair value hierarchy based on the availability of observable market information and quoted prices used to determine the fair value of the security. The availability of observable market information and quoted prices varies based on market conditions and trading volume.

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Valuation Methodologies and Inputs

The following section describes the valuation methodologies and relevant inputs used to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which the instruments are generally classified.

Fixed Maturity Securities

Level 1 securities include highly liquid government securities and exchange traded bonds, valued using quoted market prices. Level 2 securities include most other fixed maturity securities as the significant inputs are observable in the marketplace. All classes of Level 2 fixed maturity securities are valued using a methodology based on information generated by market transactions involving identical or comparable assets, a discounted cash flow methodology, or a combination of both when necessary. Common inputs for all classes of fixed maturity securities include prices from recently executed transactions of similar securities, marketplace quotes, benchmark yields, spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. Specifically for asset-backed securities, key inputs include prepayment and default projections based on past performance of the underlying collateral and current market data. Fixed maturity securities are primarily assigned to Level 3 in cases where broker/dealer quotes are significant inputs to the valuation and there is a lack of transparency as to whether these quotes are based on information that is observable in the marketplace. Level 3 securities also include private placement debt securities whose fair value is determined using internal models with some inputs that are not market observable.

Equity Securities

Level 1 equity securities include publicly traded securities valued using quoted market prices. Level 2 securities are primarily valued using pricing for similar securities, recently executed transactions and other pricing models utilizing market observable inputs. Level 3 securities are primarily priced using broker/dealer quotes and internal models with some inputs that are not market observable.

Short Term and Other Invested Assets

Securities that are actively traded or have quoted prices are classified as Level 1. These securities include money market funds and treasury bills. Level 2 primarily includes commercial paper, for which all inputs are market observable. Fixed maturity securities purchased within one year of maturity are classified consistent with fixed maturity securities discussed above. Short term investments as presented in the tables above differ from the amounts presented on the Condensed Consolidated Balance Sheets because certain short term investments, such as time deposits, are not measured at fair value.

As of June 30, 2021 and December 31, 2020, there were $65 million and $71 million of overseas deposits within Other invested assets, which can be redeemed at net asset value in 90 days or less. Overseas deposits are excluded from the fair value hierarchy because their fair value is recorded using the net asset value per share (or equivalent) practical expedient.

Derivative Financial Investments

The embedded derivative on funds withheld liability is valued using the change in fair value of the assets supporting the funds withheld liability, which are fixed maturity securities primarily valued with observable inputs.

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Significant Unobservable Inputs

The following tables present quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurements of Level 3 assets. Valuations for assets and liabilities not presented in the tables below are primarily based on broker/dealer quotes for which there is a lack of transparency as to inputs used to develop the valuations. The quantitative detail of these unobservable inputs is neither provided nor reasonably available to the Company. The weighted average rate is calculated based on fair value.

June 30, 2021

Estimated Fair Value
(In millions)

Valuation Technique(s)

Unobservable Input(s)

Range
(Weighted Average)

Fixed maturity securities

1,067

Discounted cash flow

Credit spread

1% - 8% (2%)

December 31, 2020

Estimated Fair Value
(In millions)

Valuation Technique(s)

Unobservable Input(s)

Range
(Weighted Average)

Fixed maturity securities

966

Discounted cash flow

Credit spread

1% - 8% (3%)

For fixed maturity securities, an increase to the credit spread assumptions would result in a lower fair value measurement.

Financial Assets and Liabilities Not Measured at Fair Value

The carrying amount and estimated fair value of the Company's financial assets and liabilities which are not measured at fair value on the Condensed Consolidated Balance Sheets are presented in the following tables.


June 30, 2021	Carrying Amount		Estimated Fair Value
(In millions)			Level 1		Level 2		Level 3		Total
Assets
Mortgage loans	$	1,006	$	—	$	—	$	1,079	$	1,079
Liabilities
Long term debt	$	2,777	$	—	$	3,043	$	—	$	3,043


December 31, 2020	Carrying Amount		Estimated Fair Value
(In millions)			Level 1		Level 2		Level 3		Total
Assets
Mortgage loans	$	1,068	$	—	$	—	$	1,151	$	1,151
Liabilities
Long term debt	$	2,776	$	—	$	3,148	$	—	$	3,148

The carrying amounts reported on the Condensed Consolidated Balance Sheets for Cash, Short term investments not carried at fair value, Accrued investment income and certain Other assets and Other liabilities approximate fair value due to the short term nature of these items. These assets and liabilities are not listed in the tables above.

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Note E. Claim and Claim Adjustment Expense Reserves

Property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including incurred but not reported (IBNR) claims as of the reporting date. The Company's reserve projections are based primarily on detailed analysis of the facts in each case, the Company's experience with similar cases and various historical development patterns. Consideration is given to historical patterns such as claim reserving trends and settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions and economic conditions, including inflation, and public attitudes. All of these factors can affect the estimation of claim and claim adjustment expense reserves.

Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process. Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve. Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can affect ultimate claim costs. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as workers' compensation, general liability and professional liability claims. Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined. There can be no assurance that the Company's ultimate cost for insurance losses will not exceed current estimates.

Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in our results of operations and/or equity. The Company reported catastrophe losses, net of reinsurance, of $54 million and $179 million for the three and six months ended June 30, 2021 related primarily to severe weather related events. The Company reported catastrophe losses, net of reinsurance, of $301 million and $376 million for the three and six months ended June 30, 2020. Net catastrophe losses for the three months ended June 30, 2020 included $182 million related to the COVID-19 pandemic, $61 million related to civil unrest and $58 million related primarily to severe weather related events. Net catastrophe losses for the six months ended June 30, 2020 included $195 million related to the COVID-19 pandemic, $61 million related to civil unrest, and $120 million related primarily to severe weather related events.

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Liability for Unpaid Claim and Claim Adjustment Expenses

The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves of the Life & Group segment.


For the six months ended June 30
(In millions)	2021		2020
Reserves, beginning of year:
Gross	$	22,706	$	21,720
Ceded	4,005		3,835
Net reserves, beginning of year	18,701		17,885
Reduction of net reserves due to Excess Workers' Compensation Loss Portfolio Transfer	(632)		—
Net incurred claim and claim adjustment expenses:
Provision for insured events of current year	2,930		2,899
Increase (decrease) in provision for insured events of prior years	(78)		19
Amortization of discount	95		98
Total net incurred (1)	2,947		3,016
Net payments attributable to:
Current year events	(317)		(256)
Prior year events	(1,949)		(2,342)
Total net payments	(2,266)		(2,598)
Foreign currency translation adjustment and other	(5)		(35)
Net reserves, end of period	18,745		18,268
Ceded reserves, end of period	4,735		4,002
Gross reserves, end of period	$	23,480	$	22,270

(1) Total net incurred above does not agree to Insurance claims and policyholders' benefits as reflected on the Condensed Consolidated Statements of Operations due to amounts related to retroactive reinsurance deferred gain accounting, the loss on the Excess Workers' Compensation Loss Portfolio Transfer, uncollectible reinsurance and benefit expenses related to future policy benefits, which are not reflected in the table above.

Net Prior Year Development

Changes in estimates of claim and claim adjustment expense reserves, net of reinsurance, for prior years are defined as net prior year loss reserve development (development). These changes can be favorable or unfavorable. The following table presents development recorded for the Specialty, Commercial, International and Corporate & Other segments.


Periods ended June 30	Three Months				Six Months
(In millions)	2021		2020		2021		2020
Pretax (favorable) unfavorable development:
Specialty	$	(10)	$	(20)	$	(25)	$	(31)
Commercial	—		(5)		—		(9)
International	(1)		(3)		(1)		(3)
Corporate & Other	40		50		40		50
Total pretax (favorable) unfavorable development	$	29	$	22	$	14	$	7

Unfavorable development of $40 million and $50 million was recorded within the Corporate & Other segment for the three and six months ended June 30, 2021 and 2020 due to higher than expected emergence in mass tort exposures in older accident years primarily related to abuse.

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Specialty

The following table presents further detail of the development recorded for the Specialty segment.


Periods ended June 30	Three Months				Six Months
(In millions)	2021		2020		2021		2020
Pretax (favorable) unfavorable development:
Medical Professional Liability	$	—	$	—	$	8	$	10
Other Professional Liability and Management Liability	10		(9)		10		(6)
Surety	(23)		—		(38)		(30)
Warranty	—		(3)		(8)		(3)
Other	3		(8)		3		(2)
Total pretax (favorable) unfavorable development	$	(10)	$	(20)	$	(25)	$	(31)

Three Months

2021

Unfavorable development in other professional liability and management liability was due to higher than expected claim severity and frequency in the Company’s cyber business in recent accident years.

Favorable development in surety was primarily due to lower than expected frequency and lack of systemic activity in recent accident years.

Six Months

2021

Favorable development in surety was primarily due to lower than expected frequency and lack of systemic activity in recent accident years.

2020

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

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

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Commercial

The following table presents further detail of the development recorded for the Commercial segment.


Periods ended June 30	Three Months				Six Months
(In millions)	2021		2020		2021		2020
Pretax (favorable) unfavorable development:
Commercial Auto	$	30	$	15	$	30	$	24
General Liability	—		—		—		—
Workers' Compensation	(42)		(61)		(42)		(74)
Property and Other	12		41		12		41
Total pretax (favorable) unfavorable development	$	—	$	(5)	$	—	$	(9)

Three Months

2021

Unfavorable development in commercial auto was due to higher than expected claim severity in the Company’s construction and middle market businesses in recent accident years.

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

Unfavorable development in property and other was primarily due to higher than expected large loss activity in the Company’s marine business in multiple accident years.

2020

Unfavorable development in commercial auto was due to unfavorable claim severity in the Company's middle market and construction businesses in accident years 2017 through 2019.

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

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

Six Months

2021

Unfavorable development in commercial auto was due to higher than expected claim severity in the Company’s construction and middle market businesses in recent accident years.

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

Unfavorable development in property and other was primarily due to higher than expected large loss activity in the Company’s marine business in multiple accident years.

2020

Unfavorable development in commercial auto was due to unfavorable claim severity in the Company's middle market and construction businesses in accident years 2017 through 2019.

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

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International

The following table presents further detail of the development recorded for the International segment.


Periods ended June 30	Three Months				Six Months
(In millions)	2021		2020		2021		2020
Pretax (favorable) unfavorable development:
Casualty	$	1	$	(6)	$	1	$	(6)
Property, Energy and Marine	(3)		1		(3)		1
Specialty	1		2		1		2
Total pretax (favorable) unfavorable development	$	(1)	$	(3)	$	(1)	$	(3)

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Asbestos & Environmental Pollution (A&EP) Reserves

In 2010, Continental Casualty Company (CCC) together with several of the Company’s insurance subsidiaries completed a transaction with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc., under which substantially all of the Company’s legacy A&EP liabilities were ceded to NICO through a Loss Portfolio Transfer (LPT). At the effective date of the transaction, the Company ceded approximately $1.6 billion of net A&EP claim and allocated claim adjustment expense reserves to NICO under a retroactive reinsurance agreement with an aggregate limit of $4 billion. The $1.6 billion of claim and allocated claim adjustment expense reserves ceded to NICO was net of $1.2 billion of ceded claim and allocated claim adjustment expense reserves under existing third-party reinsurance contracts. The NICO LPT aggregate reinsurance limit also covers credit risk on the existing third-party reinsurance related to these liabilities. The Company paid NICO a reinsurance premium of $2 billion and transferred to NICO billed third-party reinsurance receivables related to A&EP claims with a net book value of $215 million, resulting in total consideration of $2.2 billion.

In years subsequent to the effective date of the LPT, the Company recognized adverse prior year development on its A&EP reserves resulting in additional amounts ceded under the LPT. As a result, the cumulative amounts ceded under the LPT have exceeded the $2.2 billion consideration paid, resulting in the NICO LPT moving into a gain position, requiring retroactive reinsurance accounting. Under retroactive reinsurance accounting, this gain is deferred and only recognized in earnings in proportion to actual paid recoveries under the LPT. Over the life of the contract, there is no economic impact as long as any additional losses incurred are within the limit of the LPT. In a period in which the Company recognizes a change in the estimate of A&EP reserves that increases or decreases the amounts ceded under the LPT, the proportion of actual paid recoveries to total ceded losses is affected and the change in the deferred gain is recognized in earnings as if the revised estimate of ceded losses was available at the effective date of the LPT. The effect of the deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders' benefits on the Condensed Consolidated Statements of Operations.

The impact of the LPT on the Condensed Consolidated Statements of Operations was the recognition of a retroactive reinsurance benefit of $12 million and $20 million for the three months ended June 30, 2021 and 2020 and $22 million and $34 million for the six months ended June 30, 2021 and 2020. As of June 30, 2021 and December 31, 2020, the cumulative amounts ceded under the LPT were $3.3 billion. The unrecognized deferred retroactive reinsurance benefit was $376 million and $398 million as of June 30, 2021 and December 31, 2020 and is included within Other liabilities on the Condensed Consolidated Balance Sheets.

NICO established a collateral trust account as security for its obligations to the Company. The fair value of the collateral trust account was $2.9 billion as of June 30, 2021. In addition, Berkshire Hathaway Inc. guaranteed the payment obligations of NICO up to the aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement. NICO is responsible for claims handling and billing and collection from third-party reinsurers related to the majority of the Company’s A&EP claims.

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Excess Workers' Compensation LPT

On February 5, 2021, CCC completed a transaction with Cavello Bay Reinsurance Limited (Cavello), a subsidiary of Enstar Group Limited, under which certain legacy excess workers’ compensation (EWC) liabilities were ceded to Cavello. Under the terms of the transaction, based on reserves in place as of January 1, 2020, the Company ceded approximately $690 million of net EWC claim and allocated claim adjustment expense reserves to Cavello under an LPT with an aggregate limit of $1 billion. The Company paid Cavello a reinsurance premium of $697 million, less claims paid between January 1, 2020 and the closing date of the agreement of $64 million. After transaction costs, the Company recognized an after-tax loss of approximately $12 million in the Corporate & Other segment in the first quarter of 2021 related to the EWC LPT.

As of June 30, 2021, the cumulative amounts ceded under the EWC LPT were $690 million and the remaining amount available under the $1 billion aggregate limit was $310 million.

Cavello established a collateral trust account as security for its obligations to the Company, which will be maintained at 105% of outstanding reserves.

Credit Risk for Ceded Reserves

The majority of the Company’s outstanding voluntary reinsurance receivables are due from reinsurers with financial strength ratings of A- or higher. Receivables due from reinsurers with lower financial strength ratings are primarily due from captive reinsurers and are backed by collateral arrangements.

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Note F. Legal Proceedings, Contingencies and Guarantees

The Company is a party to various claims and litigation incidental to its business, which, based on the facts and circumstances currently known, are not material to the Company's results of operations or financial position.

Data Breach-related Contingency

As previously disclosed, the Company sustained a sophisticated cybersecurity attack in March 2021 involving ransomware. The Company’s investigation revealed that an unauthorized third party copied some personal information relating to certain current and former employees, contractor workers and their dependents and certain other persons, including some policyholders. In July 2021, we provided notifications to the impacted individuals and to regulators, in accordance with applicable law. The Company may be subject to subsequent investigations, fines or penalties, as well as other legal claims and actions, related to the foregoing. The likelihood is reasonably possible, but the amount of such fines, penalties or costs, if any, cannot be estimated at this time.

Guarantees

The Company has provided guarantees, if the primary obligor fails to perform, to holders of structured settlement annuities issued by a previously owned subsidiary. As of June 30, 2021, the potential amount of future payments the Company could be required to pay under these guarantees was approximately $1.6 billion, which will be paid over the lifetime of the annuitants. The Company does not believe any payment is likely under these guarantees, as the Company is the beneficiary of a trust that must be maintained at a level that approximates the discounted reserves for these annuities.

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Note G. Benefit Plans

The components of net periodic pension cost (benefit) are presented in the following table.


Periods ended June 30	Three Months				Six Months
(In millions)	2021		2020		2021		2020
Net periodic pension cost (benefit)
Interest cost on projected benefit obligation	$	16	$	20	$	31	$	40
Expected return on plan assets	(39)		(39)		(77)		(78)
Amortization of net actuarial (gain) loss	11		11		23		22
Settlement loss	1		1		1		2
Total net periodic pension cost (benefit)	$	(11)	$	(7)	$	(22)	$	(14)

For the three and six months ended June 30, 2021, the Company recognized $3 million and $6 million of non-service benefit in Insurance claims and policyholders' benefits and $8 million and $16 million of non-service benefit in Other operating expenses related to net periodic pension benefit. For the three and six months ended June 30, 2020, the Company recognized $2 million and $4 million of non-service benefit in Insurance claims and policyholders' benefits and $5 million and $10 million of non-service benefit in Other operating expenses related to net periodic pension benefit.

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Note H. Accumulated Other Comprehensive Income (Loss) by Component

The tables below display the changes in Accumulated other comprehensive income (loss) by component.


(In millions)	Net unrealized gains (losses) on investments with an allowance for credit losses		Net unrealized gains (losses) on other investments		Pension and postretirement benefits		Cumulative foreign currency translation adjustment		Total
Balance as of April 1, 2021	$	—	$	1,118	$	(839)	$	(92)	$	187
Other comprehensive income (loss) before reclassifications	1		323		—		12		336
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $—, $(7), $3, $— and $(4)	1		23		(10)		—		14
Other comprehensive income (loss) net of tax (expense) benefit of $—, $(75), $(3), $— and $(78)	—		300		10		12		322
Balance as of June 30, 2021	$	—	$	1,418	$	(829)	$	(80)	$	509


(In millions)	Net unrealized gains (losses) on investments with an allowance for credit losses		Net unrealized gains (losses) on other investments		Pension and postretirement benefits		Cumulative foreign currency translation adjustment		Total
Balance as of April 1, 2020	$	(11)	$	(19)	$	(822)	$	(218)	$	(1,070)
Other comprehensive income (loss) before reclassifications	(2)		1,209		(2)		24		1,229
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $1, $(4), $2, $— and $(1)	(4)		18		(9)		—		5
Other comprehensive income (loss) net of tax (expense) benefit of $(1), $(317), $(1), $— and $(319)	2		1,191		7		24		1,224
Balance as of June 30, 2020	$	(9)	$	1,172	$	(815)	$	(194)	$	154

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(In millions)	Net unrealized gains (losses) on investments with an allowance for credit losses		Net unrealized gains (losses) on other investments		Pension and postretirement benefits		Cumulative foreign currency translation adjustment		Total
Balance as of January 1, 2021	$	—	$	1,745	$	(848)	$	(94)	$	803
Other comprehensive income (loss) before reclassifications	(2)		(270)		—		14		(258)
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $1, $(15), $5, $— and $(9)	(2)		57		(19)		—		36
Other comprehensive income (loss) net of tax (expense) benefit of $—, $87, $(5), $— and $82	—		(327)		19		14		(294)
Balance as of June 30, 2021	$	—	$	1,418	$	(829)	$	(80)	$	509


(In millions)	Net unrealized gains (losses) on investments with an allowance for credit losses		Net unrealized gains (losses) on other investments		Pension and postretirement benefits		Cumulative foreign currency translation adjustment		Total
Balance as of January 1, 2020	$	—	$	1,025	$	(833)	$	(141)	$	51
Other comprehensive income (loss) before reclassifications	(50)		143		(1)		(53)		39
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $11, $2, $5, $— and $18	(41)		(4)		(19)		—		(64)
Other comprehensive income (loss) net of tax (expense) benefit of $2, $(36), $(4), $— and $(38)	(9)		147		18		(53)		103
Balance as of June 30, 2020	$	(9)	$	1,172	$	(815)	$	(194)	$	154

Amounts reclassified from Accumulated other comprehensive income (loss) shown above are reported in Net income (loss) as follows:


Component of AOCI						Consolidated Statements of Operations Line Item Affected by Reclassifications
Net unrealized gains (losses) on investments with an allowance for credit losses and Net unrealized gains (losses) on other investments						Net investment gains (losses)
Pension and postretirement benefits						Other operating expenses and Insurance claims and policyholders' benefits

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Note I. Business Segments

The Company's property and casualty commercial insurance operations are managed and reported in three business segments: Specialty, Commercial and International. These three segments are collectively referred to as Property & Casualty Operations. The Company's operations outside of Property & Casualty Operations are managed and reported in two segments: Life & Group and Corporate & Other.

Effective January 1, 2021, and in connection with the ceding of certain legacy reserves under a retroactive reinsurance agreement executed in February 2021, management changed the segment presentation of a legacy portfolio of excess workers’ compensation policies relating to business written in 2007 and prior. This business, which was previously reported as part of the Commercial business segment, is now reported as part of the Corporate & Other business segment. Further information on this retroactive reinsurance agreement is provided in Note E. In addition, a determination was made to change the segment presentation of certain legacy mass tort reserves. Similar to the aforementioned excess workers’ compensation legacy business, these legacy mass tort reserves were previously reported in the Commercial business segment and are now reported as part of the Corporate & Other business segment. These changes were made to better reflect the manner in which the Company is organized for purposes of making operating decisions and assessing performance. Prior period information has been conformed to the new segment presentation.

The accounting policies of the segments are the same as those described in Note A to the Consolidated Financial Statements within CNAF's Annual Report on Form 10-K for the year ended December 31, 2020. The Company manages most of its assets on a legal entity basis, while segment operations are generally conducted across legal entities. As such, only Insurance and Reinsurance receivables, Insurance reserves, Deferred acquisition costs, Goodwill and Deferred non-insurance warranty acquisition expense and revenue are readily identifiable for individual segments. Distinct investment portfolios are not maintained for every individual segment; accordingly, allocation of assets to each segment is not performed. Therefore, a significant portion of Net investment income and Net investment gains or losses are allocated primarily based on each segment's net carried insurance reserves, as adjusted. All significant intersegment income and expense have been eliminated. Income taxes have been allocated on the basis of the taxable income of the segments.

In the following tables, certain financial measures are presented to provide information used by management to monitor the Company's operating performance. Management utilizes these financial measures to monitor the Company's insurance operations and investment portfolio.

The performance of the Company's insurance operations is monitored by management through core income (loss), which is derived from certain income statement amounts. The Company's investment portfolio is monitored by management through analysis of various factors including unrealized gains and losses on securities, portfolio duration and exposure to market and credit risk.

Core income (loss) is calculated by excluding from net income (loss) the after-tax effects of net investment gains or losses and any cumulative effects of changes in accounting guidance. The calculation of core income (loss) excludes net investment gains or losses because net investment gains or losses are generally driven by economic factors that are not necessarily reflective of our primary operations.

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The Company's results of operations and selected balance sheet items by segment are presented in the following tables.


Three months ended June 30, 2021	Specialty		Commercial		International		Life & Group		Corporate & Other
(In millions)											Eliminations		Total
Operating revenues
Net earned premiums	$	762	$	881	$	266	$	126	$	—	$	—	$	2,035
Net investment income	134		174		14		265		4		—		591
Non-insurance warranty revenue	359		—		—		—		—		—		359
Other revenues	—		5		1		(1)		2		(1)		6
Total operating revenues	1,255		1,060		281		390		6		(1)		2,991
Claims, benefits and expenses
Net incurred claims and benefits	439		588		159		322		31		—		1,539
Policyholders’ dividends	1		6		—		—		—		—		7
Amortization of deferred acquisition costs	159		148		50		—		—		—		357
Non-insurance warranty expense	332		—		—		—		—		—		332
Other insurance related expenses	71		136		39		25		—		—		271
Other expenses	12		11		(3)		2		40		(1)		61
Total claims, benefits and expenses	1,014		889		245		349		71		(1)		2,567
Core income (loss) before income tax	241		171		36		41		(65)		—		424
Income tax (expense) benefit on core income (loss)	(53)		(34)		(10)		2		12		—		(83)
Core income (loss)	$	188	$	137	$	26	$	43	$	(53)	$	—	341
Net investment gains (losses)													38
Income tax (expense) benefit on net investment gains (losses)													(11)
Net investment gains (losses), after tax													27
Net income (loss)													$	368

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Three months ended June 30, 2020	Specialty		Commercial		International		Life & Group		Corporate & Other
(In millions)											Eliminations		Total
Operating revenues
Net earned premiums	$	705	$	795	$	224	$	126	$	—	$	—	$	1,850
Net investment income	133		161		14		206		20		—		534
Non-insurance warranty revenue	308		—		—		—		—		—		308
Other revenues	—		5		—		—		1		(1)		5
Total operating revenues	1,146		961		238		332		21		(1)		2,697
Claims, benefits and expenses
Net incurred claims and benefits	508		614		176		304		34		—		1,636
Policyholders’ dividends	1		5		—		—		—		—		6
Amortization of deferred acquisition costs	153		147		42		—		—		—		342
Non-insurance warranty expense	285		—		—		—		—		—		285
Other insurance related expenses	73		124		39		25		(1)		—		260
Other expenses	10		12		(2)		—		36		(1)		55
Total claims, benefits and expenses	1,030		902		255		329		69		(1)		2,584
Core income (loss) before income tax	116		59		(17)		3		(48)		—		113
Income tax (expense) benefit on core income (loss)	(26)		(10)		3		11		8		—		(14)
Core income (loss)	$	90	$	49	$	(14)	$	14	$	(40)	$	—	99
Net investment gains (losses)													69
Income tax (expense) benefit on net investment gains (losses)													(17)
Net investment gains (losses), after tax													52
Net income (loss)													$	151

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Six months ended June 30, 2021	Specialty		Commercial		International		Life & Group		Corporate & Other
(In millions)											Eliminations		Total
Operating revenues
Net earned premiums	$	1,497	$	1,736	$	518	$	246	$	—	$	—	$	3,997
Net investment income	251		322		28		484		10		—		1,095
Non-insurance warranty revenue	697		—		—		—		—		—		697
Other revenues	—		10		1		—		3		(3)		11
Total operating revenues	2,445		2,068		547		730		13		(3)		5,800
Claims, benefits and expenses
Net incurred claims and benefits	866		1,227		314		603		29		—		3,039
Policyholders’ dividends	2		11		—		—		—		—		13
Amortization of deferred acquisition costs	313		301		102		—		—		—		716
Non-insurance warranty expense	643		—		—		—		—		—		643
Other insurance related expenses	141		251		74		50		10		—		526
Other expenses	23		20		(8)		4		82		(3)		118
Total claims, benefits and expenses	1,988		1,810		482		657		121		(3)		5,055
Core income (loss) before income tax	457		258		65		73		(108)		—		745
Income tax (expense) benefit on core income (loss)	(99)		(52)		(15)		6		19		—		(141)
Core income (loss)	$	358	$	206	$	50	$	79	$	(89)	$	—	604
Net investment gains (losses)													95
Income tax (expense) benefit on net investment gains (losses)													(19)
Net investment gains (losses), after tax													76
Net income (loss)													$	680


June 30, 2021
(In millions)
Reinsurance receivables	$	1,084	$	814	$	339	$	414	$	2,569	$	—	$	5,220
Insurance receivables	1,108		1,509		365		6		—		—		2,988
Deferred acquisition costs	340		277		104		—		—		—		721
Goodwill	117		—		31		—		—		—		148
Deferred non-insurance warranty acquisition expense	3,305		—		—		—		—		—		3,305
Insurance reserves
Claim and claim adjustment expenses	6,178		8,533		2,225		3,754		2,790		—		23,480
Unearned premiums	2,767		2,086		616		123		—		—		5,592
Future policy benefits	—		—		—		13,285		—		—		13,285
Deferred non-insurance warranty revenue	4,309		—		—		—		—		—		4,309

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Six months ended June 30, 2020	Specialty		Commercial		International		Life & Group		Corporate & Other
(In millions)											Eliminations		Total
Operating revenues
Net earned premiums	$	1,390	$	1,613	$	463	$	253	$	—	$	—	$	3,719
Net investment income	189		203		29		414		28		—		863
Non-insurance warranty revenue	609		—		—		—		—		—		609
Other revenues	1		13		—		—		2		(3)		13
Total operating revenues	2,189		1,829		492		667		30		(3)		5,204
Claims, benefits and expenses
Net incurred claims and benefits	913		1,169		330		620		23		—		3,055
Policyholders’ dividends	2		10		—		—		—		—		12
Amortization of deferred acquisition costs	304		291		91		—		—		—		686
Non-insurance warranty expense	566		—		—		—		—		—		566
Other insurance related expenses	142		251		75		51		(1)		—		518
Other expenses	23		18		11		3		75		(3)		127
Total claims, benefits and expenses	1,950		1,739		507		674		97		(3)		4,964
Core income (loss) before income tax	239		90		(15)		(7)		(67)		—		240
Income tax (expense) benefit on core income (loss)	(53)		(18)		3		25		10		—		(33)
Core income (loss)	$	186	$	72	$	(12)	$	18	$	(57)	$	—	207
Net investment gains (losses)													(147)
Income tax (expense) benefit on net investment gains (losses)													30
Net investment gains (losses), after tax													(117)
Net income (loss)													$	90


December 31, 2020
(In millions)
Reinsurance receivables	$	886	$	848	$	302	$	390	$	2,052	$	—	$	4,478
Insurance receivables	1,052		1,254		328		4		2		—		2,640
Deferred acquisition costs	330		281		97		—		—		—		708
Goodwill	117		—		31		—		—		—		148
Deferred non-insurance warranty acquisition expense	3,068		—		—		—		—		—		3,068
Insurance reserves
Claim and claim adjustment expenses	5,748		8,250		2,091		3,743		2,874		—		22,706
Unearned premiums	2,635		1,824		546		114		—		—		5,119
Future policy benefits	—		—		—		13,318		—		—		13,318
Deferred non-insurance warranty revenue	4,023		—		—		—		—		—		4,023

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The following table presents operating revenues by line of business for each reportable segment.


Periods ended June 30	Three Months				Six Months
(In millions)	2021		2020		2021		2020
Specialty
Management & Professional Liability	$	693	$	645	$	1,360	$	1,213
Surety	155		153		297		291
Warranty & Alternative Risks	407		348		788		685
Specialty revenues	1,255		1,146		2,445		2,189
Commercial
Middle Market	381		355		756		690
Construction	324		275		633		525
Small Business	143		114		269		226
Other Commercial	212		217		410		388
Commercial revenues	1,060		961		2,068		1,829
International
Canada	87		68		166		141
Europe	115		94		226		186
Hardy	79		76		155		165
International revenues	281		238		547		492
Life & Group revenues	390		332		730		667
Corporate & Other revenues	6		21		13		30
Eliminations	(1)		(1)		(3)		(3)
Total operating revenues	2,991		2,697		5,800		5,204
Net investment gains (losses)	38		69		95		(147)
Total revenues	$	3,029	$	2,766	$	5,895	$	5,057

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Note J. Non-Insurance Revenues from Contracts with Customers

The Company had deferred non-insurance warranty revenue balances of $4.3 billion and $4.0 billion reported in Deferred non-insurance warranty revenue as of June 30, 2021 and December 31, 2020. For the three and six months ended June 30, 2021 and 2020, the Company recognized $0.3 billion and $0.6 billion of revenues that were included in the deferred revenue balance as of January 1, 2021 and 2020. For the three and six months ended June 30, 2021 and 2020, Non-insurance warranty revenue recognized from performance obligations related to prior periods due to a change in estimate was not material. The Company expects to recognize approximately $0.7 billion of the deferred revenue in the remainder of 2021, $1.1 billion in 2022, $0.9 billion in 2023 and $1.6 billion thereafter.

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Item 2. Management's Discussion and Analysis (MD&A) of Financial Condition and Results of Operations

OVERVIEW

The following discussion highlights significant factors affecting the Company. References to “we,” “our,” “us” or like terms refer to the business of CNA.

The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements included under Part I, Item 1 of this Form 10-Q, as well as the updates and additions to our Risk Factors disclosed under Part II, Item 1A of this Form 10-Q. The following discussion should also be read in conjunction with Item 1A Risk Factors and Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2020.

We utilize the core income (loss) financial measure to monitor our operations. Core income (loss) is calculated by excluding from net income (loss) the after-tax effects of net investment gains or losses and any cumulative effects of changes in accounting guidance. The calculation of core income (loss) excludes net investment gains or losses because net investment gains or losses are generally driven by economic factors that are not necessarily reflective of our primary operations. Management monitors core income (loss) for each business segment to assess segment performance. Presentation of consolidated core income (loss) is deemed to be a non-GAAP financial measure. See further discussion regarding how we manage our business in Note I to the Condensed Consolidated Financial Statements included under Part I, Item 1. For reconciliations of non-GAAP measures to the most comparable GAAP measures and other information, please refer herein and/or to CNA's most recent Annual Report on Form 10-K on file with the Securities and Exchange Commission.

In evaluating the results of our Specialty, Commercial and International segments, we utilize 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. The dividend ratio is the ratio of policyholders' dividends incurred to net earned premiums. 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 we also utilize renewal premium change, rate, retention and new business in evaluating operating trends. Renewal premium change represents the estimated change in average premium on policies that renew, including rate and exposure changes. Rate represents the average change in price on policies that renew excluding exposure change. For certain products within Small Business, where quantifiable, rate includes the influence of new business as well. Exposure represents the measure of risk used in the pricing of the insurance product. Retention represents the percentage of premium dollars renewed in comparison to the expiring premium dollars from policies available to renew. Renewal premium change, rate and retention presented for the prior year are updated to reflect subsequent activity on policies written in the period. New business represents premiums from policies written with new customers and additional policies written with existing customers. Gross written premiums, excluding third party captives, excludes business which is ceded to third party captives, including business related to large warranty programs.

Changes in estimates of claim and claim adjustment expense reserves, net of reinsurance, for prior years are defined as net prior year loss reserve development within this MD&A. These changes can be favorable or unfavorable. Net prior year loss reserve development does not include the effect of any related acquisition expenses. Further information on our reserves is provided in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

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CRITICAL ACCOUNTING ESTIMATES

The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the amount of revenues and expenses reported during the period. Actual results may differ from those estimates.

Our Condensed Consolidated Financial Statements and accompanying notes have been prepared in accordance with GAAP applied on a consistent basis. We continually evaluate the accounting policies and estimates used to prepare the Condensed Consolidated Financial Statements. In general, our estimates are based on historical experience, evaluation of current trends, information from third-party professionals and various other assumptions that are believed to be reasonable under the known facts and circumstances.

The accounting estimates discussed below are considered by us to be critical to an understanding of our Condensed Consolidated Financial Statements as their application places the most significant demands on our judgment:

•Insurance Reserves

•Long Term Care Reserves

•Reinsurance and Insurance Receivables

•Valuation of Investments and Impairment of Securities

•Income Taxes

Due to the inherent uncertainties involved with these types of judgments, actual results could differ significantly from our estimates and may have a material adverse impact on our results of operations, financial condition, equity, business, and insurer financial strength and corporate debt ratings. See the Critical Accounting Estimates section of our Management's Discussion and Analysis of Financial Condition and Results of Operations included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020 for further information.

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CATASTROPHES AND RELATED REINSURANCE

Various events can cause catastrophe losses. These events can be natural or man-made, including hurricanes, windstorms, earthquakes, hail, severe winter weather, fires, floods, riots, strikes, civil unrest, cyber attacks, pandemics and acts of terrorism that produce unusually large aggregate losses.

Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in our results of operations and/or equity. We generally seek to manage our exposure to catastrophes through the purchase of catastrophe reinsurance and have catastrophe reinsurance treaties that cover property and workers’ compensation losses. We conduct an ongoing review of our risk and catastrophe coverages and from time to time make changes as we deem appropriate. We utilize various reinsurance programs to mitigate catastrophe losses including excess-of-loss occurrence and aggregate treaties covering property and workers’ compensation, and the Terrorism Risk Insurance Program Reauthorization Act of 2019 (TRIPRA), as well as individual risk agreements that reinsure from losses from specific classes or lines of business. During the second quarter of 2021, we added a quota share treaty to our property reinsurance program, which covers policies written during the treaty term and in-force as of June 1, 2021. As a result of the coverage of in-force policies, net written premiums were reduced by $122 million during the quarter for the one-time catch-up under the treaty of unearned premium on policies previously written as of the June 1, 2021 treaty inception. This ceded premium will earn in future quarters consistent with the underlying gross policies. We also renewed our excess-of-loss property catastrophe reinsurance as described below.

Group North American Property Treaty

We purchased corporate catastrophe excess-of-loss treaty reinsurance covering our U.S. states and territories and Canadian property exposures underwritten in our North American and European companies. Exposures underwritten through Hardy are excluded. The treaty has a term of June 1, 2021 to June 1, 2022 and provides coverage for the accumulation of covered losses from catastrophe occurrences above our per occurrence retention of $190 million up to $900 million for all losses other than earthquakes. Earthquakes are covered up to $1.0 billion. Losses stemming from terrorism events are covered unless they are due to a nuclear, biological or chemical attack. All layers of the treaty provide for one full reinstatement.

See the Catastrophes and Related Reinsurance section of our Management's Discussion and Analysis of Financial Condition and Results of Operations included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020 for further information.

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CONSOLIDATED OPERATIONS

Results of Operations

The following table includes the consolidated results of our operations including our financial measure, core income (loss). For more detailed components of our business operations and a discussion of the core income (loss) financial measure, see the Segment Results section within this MD&A. For further discussion of Net investment income and Net investment gains or losses, see the Investments section of this MD&A.


Periods ended June 30	Three Months				Six Months
(In millions)	2021		2020		2021		2020
Operating Revenues
Net earned premiums	$	2,035	$	1,850	$	3,997	$	3,719
Net investment income	591		534		1,095		863
Non-insurance warranty revenue	359		308		697		609
Other revenues	6		5		11		13
Total operating revenues	2,991		2,697		5,800		5,204
Claims, Benefits and Expenses
Net incurred claims and benefits	1,539		1,636		3,039		3,055
Policyholders' dividends	7		6		13		12
Amortization of deferred acquisition costs	357		342		716		686
Non-insurance warranty expense	332		285		643		566
Other insurance related expenses	271		260		526		518
Other expenses	61		55		118		127
Total claims, benefits and expenses	2,567		2,584		5,055		4,964
Core income before income tax	424		113		745		240
Income tax expense on core income	(83)		(14)		(141)		(33)
Core income	341		99		604		207
Net investment gains (losses)	38		69		95		(147)
Income tax (expense) benefit on net investment gains (losses)	(11)		(17)		(19)		30
Net investment gains (losses), after tax	27		52		76		(117)
Net income	$	368	$	151	$	680	$	90

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Three Month Comparison

Core income increased $242 million for the three months ended June 30, 2021 as compared with the same period in 2020. Core income for our Property & Casualty Operations increased $226 million primarily due to lower net catastrophe losses and improved non-catastrophe current accident year underwriting results. Core income for our Life & Group segment increased $29 million while core loss for our Corporate & Other segment increased $13 million.

Net catastrophe losses were $54 million and $301 million for the three months ended June 30, 2021 and 2020. Catastrophe losses for the three months ended June 30, 2021 related primarily to severe weather related events. Catastrophe losses for the three months ended June 30, 2020 include $182 million related to COVID-19, $61 million related to civil unrest and $58 million related primarily to severe weather related events. Unfavorable net prior year loss reserve development of $29 million and $22 million was recorded for the three months ended June 30, 2021 and 2020 related to our Specialty, Commercial, International and Corporate & Other segments. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

Six Month Comparison

Core income increased $397 million for the six months ended June 30, 2021 as compared with the same period in 2020. Core income for our Property & Casualty Operations increased $368 million primarily due to improved current accident year underwriting results and higher net investment income driven by limited partnership and common stock returns. Core income for our Life & Group segment increased $61 million while core loss for our Corporate & Other segment increased $32 million.

Net catastrophe losses were $179 million and $376 million for the six months ended June 30, 2021 and 2020. Catastrophe losses for the six months ended June 30, 2021 related primarily to severe weather related events. Catastrophe losses for the six months ended June 30, 2020 include $195 million related to COVID-19, $61 million related to civil unrest and $120 million related primarily to severe weather related events. Unfavorable net prior year loss reserve development of $14 million and $7 million was recorded for the six months ended June 30, 2021 and 2020 related to our Specialty, Commercial, International and Corporate & Other segments. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

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SEGMENT RESULTS

The following discusses the results of operations for our business segments. Our property and casualty commercial insurance operations are managed and reported in three business segments: Specialty, Commercial and International, which we refer to collectively as Property & Casualty Operations. Our operations outside of Property & Casualty Operations are managed and reported in two segments: Life & Group and Corporate & Other.

Effective January 1, 2021, we changed the segment presentation of a legacy portfolio of excess workers’ compensation policies and certain legacy mass tort reserves. These businesses were previously reported in the Commercial business segment and are now reported as part of the Corporate & Other business segment. Prior period information has been conformed to the new segment presentation. See Note I to the Condensed Consolidated Financial Statements included under Part I, Item 1 for more information on the changes to our business segments.

Recent Developments

As previously disclosed, we sustained a sophisticated cybersecurity attack in March 2021 involving ransomware that caused a network disruption and impacted certain of our systems. As a result, our written premium production, most notably in Commercial, was impacted by lower levels of retention and new business during the three months ended June 30, 2021. We have also incurred additional expenses within our Corporate Segment related to the cybersecurity attack and expect these expenses may continue. While we do not believe that the March 2021 cybersecurity attack will have a material impact on our business, results of operations or financial condition, no assurances can be given at this time as we continue to assess the full impact from the incident, including costs, expenses and insurance coverage.

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Specialty

The following table details the results of operations for Specialty.


Periods ended June 30	Three Months						Six Months
(In millions, except ratios, rate, renewal premium change and retention)	2021			2020			2021			2020
Gross written premiums	$	1,903		$	1,762		$	3,697		$	3,476
Gross written premiums excluding third party captives	897			811			1,713			1,552
Net written premiums	786			742			1,528			1,436
Net earned premiums	762			705			1,497			1,390
Net investment income	134			133			251			189
Core income	188			90			358			186

Other performance metrics:
Loss ratio excluding catastrophes and development	59.0		%	59.9		%	59.2		%	59.7		%
Effect of catastrophe impacts	—			15.0			0.3			8.2
Effect of development-related items	(1.3)			(2.9)			(1.6)			(2.3)
Loss ratio	57.7			72.0			57.9			65.6
Expense ratio	30.0			32.0			30.2			32.1
Dividend ratio	0.2			0.2			0.2			0.2
Combined ratio	87.9		%	104.2		%	88.3		%	97.9		%
Combined ratio excluding catastrophes and development	89.2		%	92.1		%	89.6		%	92.0		%

Rate	11		%	12		%	11		%	11		%
Renewal premium change	10			13			10			12
Retention	85			86			86			85
New business	$	121		$	96		$	224		$	170

Three Month Comparison

Gross written premiums, excluding third party captives, for Specialty increased $86 million for the three months ended June 30, 2021 as compared with the same period in 2020 driven by higher new business and strong rate. Net written premiums for Specialty increased $44 million for the three months ended June 30, 2021 as compared with the same period in 2020. The increase in net earned premiums was consistent with the trend in net written premiums.

Core income increased $98 million for the three months ended June 30, 2021 as compared with the same period in 2020 primarily due to lower net catastrophe losses and improved non-catastrophe current accident year underwriting results.

The combined ratio of 87.9% improved 16.3 points for the three months ended June 30, 2021 as compared with the same period in 2020 due to a 14.3 point improvement in the loss ratio and a 2.0 point improvement in the expense ratio. The improvement in the loss ratio was driven by lower net catastrophe losses and improved non-catastrophe current accident year underwriting results. Net catastrophe losses were $1 million, which had a minimal impact on the loss ratio, for the three months ended June 30, 2021, as compared with $105 million, or 15.0 points of the loss ratio, for the three months ended June 30, 2020. The improvement in the expense ratio was driven by a favorable acquisition ratio and higher net earned premiums.

Favorable net prior year loss reserve development of $10 million and $20 million was recorded for the three months ended June 30, 2021 and 2020. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

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Six Month Comparison

Gross written premiums, excluding third party captives, for Specialty increased $161 million for the six months ended June 30, 2021 as compared with the same period in 2020 driven by higher new business and strong rate. Net written premiums for Specialty increased $92 million for the six months ended June 30, 2021 as compared with the same period in 2020. The increase in net earned premiums was consistent with the trend in net written premiums.

Core income increased $172 million for the six months ended June 30, 2021 as compared with the same period in 2020 due to lower net catastrophe losses, higher net investment income driven by limited partnership and common stock returns and improved non-catastrophe current accident year underwriting results.

The combined ratio of 88.3% improved 9.6 points for the six months ended June 30, 2021 as compared with the same period in 2020 due to a 7.7 point improvement in the loss ratio and a 1.9 point improvement in the expense ratio. The improvement in the loss ratio was primarily due to lower net catastrophe losses and improved non-catastrophe current accident year underwriting results. Net catastrophe losses were $6 million, or 0.3 points of the loss ratio, for the six months ended June 30, 2021, as compared with $113 million, or 8.2 points of the loss ratio, for the six months ended June 30, 2020. The improvement in the expense ratio was driven by higher net earned premiums and a favorable acquisition ratio.

Favorable net prior year loss reserve development of $25 million and $31 million was recorded for the six months ended June 30, 2021 and 2020. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

The following table summarizes the gross and net carried reserves for Specialty.


(In millions)	June 30, 2021		December 31, 2020
Gross case reserves	$	1,526	$	1,567
Gross IBNR reserves	4,652		4,181
Total gross carried claim and claim adjustment expense reserves	$	6,178	$	5,748
Net case reserves	$	1,360	$	1,410
Net IBNR reserves	3,762		3,488
Total net carried claim and claim adjustment expense reserves	$	5,122	$	4,898

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Commercial

The following table details the results of operations for Commercial.


Periods ended June 30	Three Months						Six Months
(In millions, except ratios, rate, renewal premium change and retention)	2021			2020			2021			2020
Gross written premiums	$	1,161		$	1,126		$	2,274		$	2,188
Gross written premiums excluding third party captives	1,060			1,044			2,171			2,103
Net written premiums	831			949			1,791			1,899
Net earned premiums	881			795			1,736			1,613
Net investment income	174			161			322			203
Core income	137			49			206			72

Other performance metrics:
Loss ratio excluding catastrophes and development	60.1		%	58.7		%	60.4		%	59.7		%
Effect of catastrophe impacts	5.8			19.0			9.6			12.8
Effect of development-related items	0.8			(0.3)			0.7			(0.1)
Loss ratio	66.7			77.4			70.7			72.4
Expense ratio	32.3			33.9			31.8			33.6
Dividend ratio	0.6			0.6			0.6			0.6
Combined ratio	99.6		%	111.9		%	103.1		%	106.6		%
Combined ratio excluding catastrophes and development	93.0		%	93.2		%	92.8		%	93.9		%

Rate	8		%	10		%	9		%	9		%
Renewal premium change	10			9			9			9
Retention	81			84			82			85
New business	$	201		$	198		$	412		$	396

Three Month Comparison

Gross written premiums for Commercial increased $35 million for the three months ended June 30, 2021 as compared with the same period in 2020 driven by new business and rate. Net written premiums for Commercial decreased $118 million for the three months ended June 30, 2021 as compared with the same period in 2020 driven by the impact of the June 1, 2021 written premium catch-up resulting from the addition of the quota share treaty to our property reinsurance program. For further discussion of our reinsurance programs, see the Catastrophes and Related Reinsurance section of this MD&A. Excluding the impact of the June 1, 2021 written premium catch-up, net written premiums decreased $6 million for the three months ended June 30, 2021 as compared with the same period in 2020. Written premiums were also impacted by lower levels of retention and new business during the period related to the network disruption and impact to certain of our systems from the March 2021 cybersecurity attack. Net earned premiums for Commercial increased $86 million for the three months ended June 30, 2021 as compared with the same period in 2020. The increase in net earned premiums was partially impacted by a reduction in estimated audit premiums related to COVID-19 in the second quarter of 2020.

Core income increased $88 million for the three months ended June 30, 2021 as compared with the same period in 2020 primarily due to lower net catastrophe losses and improved non-catastrophe current accident year underwriting results.

The combined ratio of 99.6% improved 12.3 points for the three months ended June 30, 2021 as compared with the same period in 2020. The loss ratio improved 10.7 points driven by lower net catastrophe losses. Net catastrophe losses were $51 million, or 5.8 points of the loss ratio, for the three months ended June 30, 2021, as compared with $151 million, or 19.0 points of the loss ratio, for the three months ended June 30, 2020. The combined ratio excluding catastrophes and development of 93.0% improved 0.2 points for the three months ended June 30, 2021 as compared with the same period in 2020, reflecting a 1.6 point improvement in the expense ratio largely offset by a 1.4 point increase in the loss ratio excluding catastrophes and development.

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The improvement in the expense ratio was primarily due to higher net earned premiums. The increase in the loss ratio excluding catastrophes and development was driven by lower loss frequency as a result of shelter in place restrictions in the second quarter of 2020.

There was no net prior year loss reserve development recorded for the three months ended June 30, 2021 as compared with favorable net prior year loss reserve development of $5 million for the three months ended June 30, 2020. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

Six Month Comparison

Gross written premiums for Commercial increased $86 million for the six months ended June 30, 2021 as compared with the same period in 2020 driven by higher new business and rate. Net written premiums for Commercial decreased $108 million for the six months ended June 30, 2021 as compared with the same period in 2020 driven by the impact of the June 1, 2021 written premium catch-up resulting from the addition of the quota share treaty to our property reinsurance program. Excluding the impact of the June 1, 2021 written premium catch-up, net written premiums increased $4 million for the six months ended June 30, 2021 as compared with the same period in 2020. Net earned premiums for Commercial increased $123 million for the six months ended June 30, 2021 as compared with the same period in 2020. The increase in net earned premiums was partially impacted by a reduction in estimated audit premiums related to COVID-19 in the second quarter of 2020.

Core income increased $134 million for the six months ended June 30, 2021 as compared with the same period in 2020 primarily due to higher net investment income driven by limited partnership and common stock returns and improved current accident year underwriting results.

The combined ratio of 103.1% improved 3.5 points for the six months ended June 30, 2021 as compared with the same period in 2020 due to a 1.8 point improvement in the expense ratio and a 1.7 point improvement in the loss ratio. The improvement in the expense ratio was primarily due to higher net earned premiums and a favorable acquisition ratio. The improvement in the loss ratio was driven by lower net catastrophe losses. Net catastrophe losses were $166 million, or 9.6 points of the loss ratio, for the six months ended June 30, 2021, as compared with $208 million, or 12.8 points of the loss ratio, for the six months ended June 30, 2020.

There was no net prior year loss reserve development recorded for the six months ended June 30, 2021 as compared with favorable net prior year loss reserve development of $9 million for the six months ended June 30, 2020. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

The following table summarizes the gross and net carried reserves for Commercial.


(In millions)	June 30, 2021		December 31, 2020
Gross case reserves	$	3,249	$	3,215
Gross IBNR reserves	5,284		5,035
Total gross carried claim and claim adjustment expense reserves	$	8,533	$	8,250
Net case reserves	$	2,935	$	2,885
Net IBNR reserves	4,871		4,590
Total net carried claim and claim adjustment expense reserves	$	7,806	$	7,475

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International

The following table details the results of operations for International.


Periods ended June 30	Three Months						Six Months
(In millions, except ratios, rate, renewal premium change and retention)	2021			2020			2021			2020
Gross written premiums	$	339		$	277		$	682		$	584
Net written premiums	292			239			527			458
Net earned premiums	266			224			518			463
Net investment income	14			14			28			29
Core income (loss)	26			(14)			50			(12)

Other performance metrics:
Loss ratio excluding catastrophes and development	59.0		%	59.9		%	59.3		%	60.1		%
Effect of catastrophe impacts	0.8			19.9			1.4			11.9
Effect of development-related items	(0.3)			(1.2)			(0.2)			(0.7)
Loss ratio	59.5			78.6			60.5			71.3
Expense ratio	33.5			36.7			33.9			36.1
Combined ratio	93.0		%	115.3		%	94.4		%	107.4		%
Combined ratio excluding catastrophes and development	92.5		%	96.6		%	93.2		%	96.2		%

Rate	13		%	15		%	13		%	12		%
Renewal premium change	14			10			13			9
Retention	77			74			75			72
New business	$	71		$	62		$	150		$	130

Three Month Comparison

Gross written premiums for International increased $62 million for the three months ended June 30, 2021 as compared with the same period in 2020. Excluding the effect of foreign currency exchange rates, gross written premiums increased $37 million driven by higher new business and rate. Net written premiums for International increased $53 million for the three months ended June 30, 2021 as compared with the same period in 2020. Excluding the effects of foreign currency exchange rates, net written premiums increased $31 million for the three months ended June 30, 2021 as compared with the same period in 2020. The increase in net earned premiums was consistent with the trend in net written premiums.

Core results improved $40 million for the three months ended June 30, 2021 as compared with the same period in 2020 driven by lower net catastrophe losses and improved non-catastrophe current accident year underwriting results.

The combined ratio of 93.0% improved 22.3 points for the three months ended June 30, 2021 as compared with the same period in 2020 due to a 19.1 point improvement in the loss ratio and a 3.2 point improvement in the expense ratio. The improvement in the loss ratio was driven by lower net catastrophe losses and improved non-catastrophe current accident year underwriting results. Net catastrophe losses were $2 million, or 0.8 points of the loss ratio, for the three months ended June 30, 2021, as compared with $45 million, or 19.9 points of the loss ratio, for the three months ended June 30, 2020. The improvement in the expense ratio was driven by higher net earned premiums and lower acquisition costs.

Favorable net prior year loss reserve development of $1 million and $3 million was recorded for the three months ended June 30, 2021 and 2020. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

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Six Month Comparison

Gross written premiums for International increased $98 million for the six months ended June 30, 2021 as compared with the same period in 2020. Excluding the effect of foreign currency exchange rates, gross written premiums increased $57 million driven by higher new business and rate. Net written premiums for International increased $69 million for the six months ended June 30, 2021 as compared with the same period in 2020. Excluding the effects of foreign currency exchange rates, net written premiums increased $34 million for the six months ended June 30, 2021 as compared with the same period in 2020. The increase in net earned premiums was consistent with the trend in net written premiums.

Core results improved $62 million for the six months ended June 30, 2021 as compared with the same period in 2020 driven by lower net catastrophe losses and improved non-catastrophe current accident year underwriting results.

The combined ratio of 94.4% improved 13.0 points for the six months ended June 30, 2021 as compared with the same period in 2020 due to a 10.8 point improvement in the loss ratio and a 2.2 point improvement in the expense ratio. The improvement in the loss ratio was driven by lower net catastrophe losses and improved non-catastrophe current accident year underwriting results. Net catastrophe losses were $7 million, or 1.4 points of the loss ratio, for the six months ended June 30, 2021, as compared with $55 million, or 11.9 points of the loss ratio, for the six months ended June 30, 2020. The improvement in the expense ratio was driven by lower acquisition costs and higher net earned premiums.

Favorable net prior year loss reserve development of $1 million and $3 million was recorded for the six months ended June 30, 2021 and 2020. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

The following table summarizes the gross and net carried reserves for International.


(In millions)	June 30, 2021		December 31, 2020
Gross case reserves	$	881	$	892
Gross IBNR reserves	1,344		1,199
Total gross carried claim and claim adjustment expense reserves	$	2,225	$	2,091
Net case reserves	$	765	$	777
Net IBNR reserves	1,141		1,045
Total net carried claim and claim adjustment expense reserves	$	1,906	$	1,822

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Life & Group

The following table summarizes the results of operations for Life & Group.


Periods ended June 30	Three Months				Six Months
(In millions)	2021		2020		2021		2020
Net earned premiums	$	126	$	126	$	246	$	253
Net investment income	265		206		484		414
Core income (loss) before income tax	41		3		73		(7)
Income tax benefit on core loss	2		11		6		25
Core income	43		14		79		18

Three Month Comparison

Core income improved $29 million for the three months ended June 30, 2021 as compared with the same period in 2020 due to higher net investment income driven by returns in the limited partnership portfolio and better than expected morbidity in the long term care business, partially offset by unfavorable persistency.

Six Month Comparison

Results for the six months ended June 30, 2021 were generally consistent with the three month summary above.

Corporate & Other

The following table summarizes the results of operations for the Corporate & Other segment, including intersegment eliminations.


Periods ended June 30	Three Months				Six Months
(In millions)	2021		2020		2021		2020
Net investment income	$	4	$	20	$	10	$	28
Interest expense	28		31		56		62
Core loss	(53)		(40)		(89)		(57)

Three Month Comparison

Core loss increased $13 million for the three months ended June 30, 2021 as compared with the same period in 2020 primarily driven by lower allocated net investment income. Core loss for the three months ended June 30, 2021 includes unfavorable net prior year loss reserve development related to legacy mass tort exposures of $40 million compared with $50 million for the three months ended June 30, 2020. Net prior year loss reserve development is further discussed in Note E to the Condensed Consolidated Financial Statements included under Part I, Item I. Core loss for the three months ended June 30, 2021 also includes additional expenses related to the March 2021 cybersecurity attack.

Six Month Comparison

Core loss increased $32 million for the six months ended June 30, 2021 as compared with the same period in 2020 driven by lower allocated net investment income, lower amortization of the deferred gain related to the A&EP LPT and the recognition of a $12 million after-tax loss resulting from the legacy excess workers' compensation (EWC) LPT. These results were partially offset by lower unfavorable net prior year loss reserve development on legacy mass tort exposures. The A&EP LPT, EWC LPT and net prior year loss reserve development are further discussed in Note E to the Condensed Consolidated Financial Statements included under Part I, Item I. Core loss for the six months ended June 30, 2021 also includes additional expenses related to the March 2021 cybersecurity attack.

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The following table summarizes the gross and net carried reserves for Corporate & Other.


(In millions)	June 30, 2021		December 31, 2020
Gross case reserves	$	1,601	$	1,614
Gross IBNR reserves	1,189		1,260
Total gross carried claim and claim adjustment expense reserves	$	2,790	$	2,874
Net case reserves	$	134	$	560
Net IBNR reserves	146		331
Total net carried claim and claim adjustment expense reserves	$	280	$	891

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INVESTMENTS

Net Investment Income

The significant components of Net investment income are presented in the following table. Fixed income securities, as presented, include both fixed maturity securities and non-redeemable preferred stock.


Periods ended June 30	Three Months						Six Months
(In millions)	2021			2020			2021			2020
Fixed income securities:
Taxable fixed income securities	$	356		$	360		$	715		$	731
Tax-exempt fixed income securities	79			80			159			158
Total fixed income securities	435			440			874			889
Limited partnership and common stock investments	156			84			217			(41)
Other, net of investment expense	—			10			4			15
Net investment income	$	591		$	534		$	1,095		$	863

Effective income yield for the fixed income securities portfolio	4.3		%	4.6		%	4.4		%	4.6		%
Limited partnership and common stock return	8.3		%	5.0		%	12.1		%	(2.3)		%

Net investment income increased $57 million and $232 million for the three and six months ended June 30, 2021 as compared with the same periods in 2020 driven by limited partnership and common stock returns.

Net Investment Gains (Losses)

The components of Net investment gains (losses) are presented in the following table.


Periods ended June 30	Three Months				Six Months
(In millions)	2021		2020		2021		2020
Fixed maturity securities:
Corporate and other bonds	$	43	$	(40)	$	79	$	(119)
States, municipalities and political subdivisions	—		33		(1)		33
Asset-backed	(12)		24		(9)		28
Total fixed maturity securities	31		17		69		(58)
Non-redeemable preferred stock	17		63		19		(70)
Short term and other	(10)		(11)		7		(6)
Mortgage loans	—		—		—		(13)
Net investment gains (losses)	38		69		95		(147)
Income tax (expense) benefit on net investment gains (losses)	(11)		(17)		(19)		30
Net investment gains (losses), after tax	$	27	$	52	$	76	$	(117)

Net investment gains (losses) decreased $31 million for the three months ended June 30, 2021 as compared with the same period in 2020. The decrease was driven by the less favorable change in fair value of non-redeemable preferred stock partially offset by lower impairment losses.

Net investment gains (losses) increased $242 million for the six months ended June 30, 2021 as compared with the same period in 2020. The increase was driven by lower impairment losses and the favorable change in fair value of non-redeemable preferred stock.

Further information on our investment gains and losses is set forth in Note C to the Condensed Consolidated Financial Statements included under Part 1, Item 1.

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Portfolio Quality

The following table presents the estimated fair value and net unrealized gains (losses) of our fixed maturity securities by rating distribution.


	June 30, 2021				December 31, 2020
(In millions)	Estimated Fair Value		Net Unrealized Gains (Losses)		Estimated Fair Value		Net Unrealized Gains (Losses)
U.S. Government, Government agencies and Government-sponsored enterprises	$	3,162	$	59	$	3,672	$	117
AAA	3,866		408		3,627		454
AA	7,458		920		7,159		1,012
A	9,440		1,219		9,543		1,390
BBB	18,558		2,376		18,007		2,596
Non-investment grade	2,426		147		2,623		149
Total	$	44,910	$	5,129	$	44,631	$	5,718

As of June 30, 2021 and December 31, 2020, 2% and 1% of our fixed maturity portfolio was rated internally. AAA rated securities included $1.9 billion and $1.8 billion of pre-refunded municipal bonds as of June 30, 2021 and December 31, 2020.

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


	June 30, 2021
(In millions)	Estimated Fair Value		Gross Unrealized Losses
U.S. Government, Government agencies and Government-sponsored enterprises	$	937	$	15
AAA	171		1
AA	291		6
A	726		14
BBB	685		22
Non-investment grade	327		12
Total	$	3,137	$	70

The following table presents the maturity profile for these available-for-sale fixed maturity securities. Securities not due to mature on a single date are allocated based on weighted average life.


	June 30, 2021
(In millions)	Estimated Fair Value		Gross Unrealized Losses
Due in one year or less	$	151	$	5
Due after one year through five years	515		17
Due after five years through ten years	1,800		30
Due after ten years	671		18
Total	$	3,137	$	70

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Duration

A primary objective in the management of the investment portfolio is to optimize return relative to the corresponding liabilities and respective liquidity needs. Our 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. We also continually monitor exposure to issuers of securities held and broader industry sector exposures and may from time to time adjust such exposures based on our views of a specific issuer or industry sector.

A further consideration in the management of the investment portfolio is the characteristics of the corresponding liabilities and the ability to align the duration of the portfolio to those liabilities and to meet future liquidity needs, minimize interest rate risk and maintain a level of income sufficient to support the underlying insurance liabilities. For portfolios where future liability cash flows are determinable and typically long term in nature, we segregate investments for asset/liability management purposes. The segregated investments support the long term care and structured settlement liabilities in the Life & Group segment.

The effective durations of fixed income securities and short term investments are presented in the following table. Amounts presented are net of payable and receivable amounts for securities purchased and sold, but not yet settled.


	June 30, 2021			December 31, 2020
(In millions)	Estimated Fair Value		Effective Duration (In years)	Estimated Fair Value		Effective Duration (In years)
Investments supporting Life & Group	$	18,551	9.3	$	18,518	9.2
Other investments	28,540		4.9	28,839		4.5
Total	$	47,091	6.6	$	47,357	6.3

The investment portfolio is periodically analyzed for changes in duration and related price risk. Certain securities have duration characteristics that are variable based on market interest rates, credit spreads and other factors that may drive variability in the amount and timing of cash flows. Additionally, we periodically review the sensitivity of the portfolio to the level of foreign exchange rates and other factors that contribute to market price changes. A summary of these risks and specific analysis on changes is included in the Quantitative and Qualitative Disclosures About Market Risk included under Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2020.

Short Term Investments

The carrying value of the components of the Short term investments are presented in the following table.


(In millions)	June 30, 2021		December 31, 2020
Short term investments:
U.S. Treasury securities	$	1,228	$	1,702
Other	237		205
Total short term investments	$	1,465	$	1,907

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LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Our primary operating cash flow sources are premiums and investment income. Our primary operating cash flow uses are payments for claims, policy benefits and operating expenses, including interest expense on corporate debt. Additionally, cash may be paid or received for income taxes.

For the six months ended June 30, 2021, net cash provided by operating activities was $685 million as compared with $650 million for the same period in 2020. The increase in cash provided by operating activities was driven by lower net claim payments and an increase in premiums collected, largely offset by the payment of the EWC LPT premium. The EWC LPT is further discussed in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

Cash flows from investing activities include the purchase and disposition of financial instruments, excluding those held as trading, and may include the purchase and sale of businesses, equipment and other assets not generally held for resale.

Net cash used by investing activities was $202 million for the six months ended June 30, 2021, as compared with net cash provided of $475 million for the same period in 2020. Net cash used or provided by investing activities is primarily driven by cash available from operations and other factors, such as financing activities.

Cash flows from financing activities may include proceeds from the issuance of debt and equity securities, and outflows for stockholder dividends, repayment of debt and purchases of treasury stock.

For the six months ended June 30, 2021, net cash used by financing activities was $441 million as compared with $776 million for the same period in 2020. Financing activities for the periods presented include:

•During the six months ended June 30, 2021, we paid dividends of $414 million and repurchased 377,615 shares of our common stock at an aggregate cost of $18 million.

•During the six months ended June 30, 2020, we paid dividends of $750 million and repurchased 435,376 shares of our common stock at an aggregate cost of $18 million.

Common Stock Dividends

Cash dividends of $1.51 per share on our common stock, including a special cash dividend of $0.75 per share, were declared and paid during the six months ended June 30, 2021. On July 30, 2021, our Board of Directors declared a quarterly cash dividend of $0.38 per share, payable September 2, 2021 to stockholders of record on August 16, 2021. 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, business needs and regulatory constraints.

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Liquidity

We believe that our present cash flows from operating, investing and financing activities are sufficient to fund our current and expected working capital and debt obligation needs and we do not expect this to change in the near term. There are currently no amounts outstanding under our $250 million senior unsecured revolving credit facility and no borrowings outstanding through our membership in the Federal Home Loan Bank of Chicago (FHLBC).

Dividends from Continental Casualty Company (CCC) are subject to the insurance holding company laws of the State of Illinois, the domiciliary state of CCC. Under these laws, ordinary dividends, or dividends that do not require prior approval by the Illinois Department of Insurance (the Department), are determined based on the greater of the prior year's statutory net income or 10% of statutory surplus as of the end of the prior year, as well as timing and amount of dividends paid in the preceding twelve months. Additionally, ordinary dividends may only be paid from earned surplus, which is calculated by removing unrealized gains from unassigned surplus. As of June 30, 2021, CCC was in a positive earned surplus position. CCC paid dividends of $480 million and $815 million during the six months ended June 30, 2021 and 2020. 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.

We have an effective automatic shelf registration statement on file with the Securities and Exchange Commission under which we may publicly issue debt, equity or hybrid securities from time to time.

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ACCOUNTING STANDARDS UPDATE

For a discussion of Accounting Standards Updates, see Note A to the Condensed Consolidated Financial Statements included under Part 1, Item 1.

FORWARD-LOOKING STATEMENTS

This report contains a number of forward-looking statements which relate to anticipated future events rather than actual present conditions or historical events. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as “believes,” “expects,” “intends,” “anticipates,” “estimates” and similar expressions. Forward-looking statements in this report include any and all statements regarding expected developments in our insurance business, including losses and loss reserves (note that loss reserves for long term care, A&EP and other mass tort claims are more uncertain, and therefore more difficult to estimate than loss reserves respecting traditional property and casualty exposures); the impact of routine ongoing insurance reserve reviews we are conducting; our expectations concerning our revenues, earnings, expenses and investment activities; volatility in investment returns; and our proposed actions in response to trends in our business. Forward-looking statements, by their nature, are subject to a variety of inherent risks and uncertainties that could cause actual results to differ materially from the results projected in the forward-looking statement. We cannot control many of these risks and uncertainties. These risks and uncertainties include, but are not limited to, the following as well as those risks contained in the Risk Factors section of our 2020 Annual Report on Form 10-K and this report:

Company-Specific Factors

•the risks and uncertainties associated with our insurance reserves, as outlined in the Critical Accounting Estimates and the Reserves - Estimates and Uncertainties sections of our 2020 Annual Report on Form 10-K and this report, including the sufficiency of the reserves and the possibility for future increases, which would be reflected in the results of operations in the period that the need for such adjustment is determined;

•the risk that the other parties to the transaction in which, subject to certain limitations, we ceded our legacy A&EP liabilities will not fully perform their obligations to CNA, the uncertainty in estimating loss reserves for A&EP liabilities and the possible continued exposure of CNA to liabilities for A&EP claims that are not covered under the terms of the transaction;

•the performance of reinsurance companies under reinsurance contracts with us; and

•the risks and uncertainties associated with potential acquisitions and divestitures, including the consummation of such transactions, the successful integration of acquired operations and the potential for subsequent impairment of goodwill or intangible assets.

Industry and General Market Factors

•the COVID-19 pandemic, and actions seeking to mitigate the spread of the virus, have resulted in significant risk across our enterprise; economic uncertainty and depressed business conditions brought on by the crisis may materially and adversely impact our business operations and may lead to increased claim and litigation activity and unfavorable regulatory outcomes.

•the impact of competitive products, policies and pricing and the competitive environment in which we operate, including changes in our book of business;

•product and policy availability and demand and market responses, including the level of ability to obtain rate increases and decline or non-renew underpriced accounts, to achieve premium targets and profitability and to realize growth and retention estimates;

•general economic and business conditions, including recessionary conditions that may decrease the size and number of our insurance customers and create losses to our lines of business and inflationary pressures on medical care costs, construction costs and other economic sectors that increase the severity of claims;

•conditions in the capital and credit markets, including uncertainty and instability in these markets, as well as the overall economy, and their impact on the returns, types, liquidity and valuation of our investments;

•conditions in the capital and credit markets that may limit our ability to raise significant amounts of capital on favorable terms; and

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•the possibility of changes in our ratings by ratings agencies, including the inability to access certain markets or distribution channels and the required collateralization of future payment obligations as a result of such changes, and changes in rating agency policies and practices.

Regulatory and Legal Factors

•regulatory and legal initiatives and compliance with governmental regulations and other legal requirements, including with respect to cyber security protocols (which may be enhanced following completion of work relating to the sophisticated cyber incident sustained by the Company in March 2021 as discussed in Risk Factors, Part II, Item 1A of this report), legal inquiries by state authorities, judicial interpretations within the regulatory framework, including interpretation of policy provisions, decisions regarding coverage and theories of liability, legislative actions that increase claimant activity, including those revising applicability of statutes of limitations, trends in litigation and the outcome of any litigation involving us and rulings and changes in tax laws and regulations;

•regulatory limitations, impositions and restrictions upon us, including with respect to our ability to increase premium rates, and the effects of assessments and other surcharges for guaranty funds and second-injury funds, other mandatory pooling arrangements and future assessments levied on insurance companies;

•regulatory limitations and restrictions, including limitations upon our ability to receive dividends from our insurance subsidiaries, imposed by regulatory authorities, including regulatory capital adequacy standards; and

•regulatory and legal implications relating to the sophisticated cyber incident sustained by the Company in March 2021 that may arise.

Impact of Natural and Man-Made Disasters and Mass Tort Claims

•weather and other natural physical events, including the severity and frequency of storms, hail, snowfall and other winter conditions, natural disasters such as hurricanes and earthquakes, as well as climate change, including effects on global weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, wildfires, rain, hail and snow;

•regulatory requirements imposed by coastal state regulators in the wake of hurricanes or other natural disasters, including limitations on the ability to exit markets or to non-renew, cancel or change terms and conditions in policies, as well as mandatory assessments to fund any shortfalls arising from the inability of quasi-governmental insurers to pay claims;

•man-made disasters, including the possible occurrence of terrorist attacks, the unpredictability of the nature, targets, severity or frequency of such events, and the effect of the absence or insufficiency of applicable terrorism legislation on coverages;

•the occurrence of epidemics and pandemics; and

•mass tort claims, including those related to exposure to potentially harmful products or substances such as glyphosate, lead paint and opioids; and claims arising from changes that repeal or weaken tort reforms, such as those related to abuse reviver statutes.

Our forward-looking statements speak only as of the date of the filing of this Quarterly Report on Form 10-Q and we do not undertake any obligation to update or revise any forward-looking statement to reflect events or circumstances after the date of the statement, even if our expectations or any related events or circumstances change.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There were no material changes in our market risk components for the six months ended June 30, 2021. See the Quantitative and Qualitative Disclosures About Market Risk included in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2020 for further information. Additional information related to portfolio duration is discussed in the Investments section of our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part I, Item 2.

Item 4. Controls and Procedures

The Company maintains a system of disclosure controls and procedures which are designed to ensure that information required to be disclosed by the Company in reports that it files or submits to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including this report, is recorded, processed, summarized and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to the Company's management on a timely basis to allow decisions regarding required disclosure.

As of June 30, 2021, the Company's management, including the Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO), conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on this evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective as of June 30, 2021.

There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. Other Information

Item 1. Legal Proceedings

Information on our legal proceedings is set forth in Note F to the Condensed Consolidated Financial Statements included under Part I, Item 1.

Item 1A. Risk Factors

Our Annual Report on Form 10-K for the year ended December 31, 2020 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, include detailed discussions of certain material risk factors facing us. The information presented below describes updates and additions to and should be read in conjunction with the risk factors and information disclosed in our Form 10-K and restates in their entirety the risk factors contained in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.

Any significant interruption in the operation of our business functions, facilities and systems or our vendors' facilities and systems could result in a materially adverse effect on our operations.

Our business is highly dependent upon our ability to perform, in an efficient and uninterrupted manner, through our employees or vendor relationships, necessary business functions, such as internet support and 24-hour call centers, processing new and renewal business and processing and paying claims and other obligations.

Our, or our vendors’, facilities and systems could become unavailable, inoperable, or otherwise impaired from a variety of causes, including natural events, such as hurricanes, tornadoes, windstorms, earthquakes, severe winter weather and fires, or other events, such as explosions, terrorist attacks, computer security breaches or cyberattacks, riots, hazardous material releases, medical epidemics or pandemics, utility outages, interruptions of our data processing and storage systems or the systems of third-party vendors, or unavailability of communications facilities. An interruption of our system availability occurred in March 2021 as a result of a cybersecurity attack sustained by the Company. Please refer to the immediately following risk factor for further information regarding this incident. Likewise, we could experience a significant failure, interruption or corruption of one or more of our or our vendors’ information technology, telecommunications, or other systems for various reasons, including significant failures or interruptions that might occur as existing systems are replaced or upgraded. The shut-down or unavailability of one or more of our or our vendors' systems or facilities for these and other reasons could significantly impair our ability to perform critical business functions on a timely basis.

In addition, because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such service exceeds capacity or a third-party system fails or experiences an interruption. If sustained or repeated, such events could result in a deterioration of our ability to write and process new and renewal business, provide customer service, pay claims in a timely manner, or perform other necessary business functions, including the ability to issue financial statements in a timely manner.

The foregoing risks could also expose us to monetary and reputational damages. Potential exposures resulting from the March 2021 cybersecurity attack, described in the immediately following risk factor, as well as any future incidents may include substantially increased compliance costs, as well as increased costs relating to investments in computer system and security-related upgrades, with those costs potentially not recoverable under relevant insurance coverage. If our business continuity plans or system security do not sufficiently address these risks, they could have a material adverse effect on our business, results of operations and financial condition.

Based on the information currently known, we do not believe that the March 2021 cybersecurity attack will have a material impact on our business, results of operations or financial condition, but no assurances can be given as we continue to assess the full impact from the incident, including costs, expenses and insurance coverage. We may also be subject to future incidents that could have a material adverse effect on our business, results of operations or financial condition or may result in operational impairments and financial losses, as well as significant harm to our reputation.

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Any significant breach in our data security infrastructure could disrupt business, cause financial losses and damage our reputation, and insurance coverage may not be available for claims related to a breach.

A significant breach of our data security infrastructure may result from actions by our employees, vendors, third-party administrators, or unknown third parties or through cyber-attacks. The risk of a breach can exist whether software services are in our data centers or we use cloud-based software services.

Such a breach could affect our data framework or cause a failure to protect the personal information of our customers, claimants or employees, or sensitive and confidential information regarding our business and may result in operational impairments and financial losses, as well as significant harm to our reputation. The breach of confidential information also could give rise to legal liability and regulatory action under data protection and privacy laws, as well as evolving regulation in this regard. Any such breach of our data security infrastructure could have a material adverse effect on our business, results of operations and financial condition.

We sustained a sophisticated cybersecurity attack in March 2021 involving ransomware that caused a network disruption and impacted certain of our systems. Upon detection, we undertook steps to address the incident, including engaging a team of third-party forensic experts and notifying law enforcement and key regulators. We restored network systems and resumed normal operations. We are continuing to assess all actions that we will take to improve our existing systems.

Our investigation revealed that an unauthorized third party copied some personal information relating to certain current and former employees, contractor workers and their dependents and certain other persons, including some policyholders. In July 2021, we provided notifications to the impacted individuals and to regulators, in accordance with applicable law. Although we currently have no indication that the impacted data has been misused, or that CNA or its policyholder data was specifically targeted by the unauthorized third party, we may be subject to subsequent investigations, claims or actions in addition to other costs, fines, penalties, or other obligations related to impacted data, whether or not such data is misused. In addition, the misuse, or perceived misuse, of sensitive or confidential information regarding our business or policyholders could cause harm to our reputation and result in the loss of business with existing or potential customers, which could adversely impact our business, results of operations and financial condition.

Although we maintain cybersecurity insurance coverage insuring against costs resulting from cyber-attacks (including the March 2021 attack), it is possible losses may exceed the amount available under our coverage and/or our coverage policy may not cover all losses. Costs and expenses incurred and likely to be incurred by the Company in connection with the March 2021 attack include both direct and indirect costs and not all may be covered by our insurance coverage. In addition, potential disputes with our insurers about the availability of insurance coverage for claims relating to the March 2021 attack or any future incident could occur. Further, both as a result of the March 2021 attack and industry trends generally, the replenishment of the Company’s current policy through the end of the term, as well as future cybersecurity insurance coverage beyond the current term, may be difficult to obtain and will likely only be available at significantly higher cost.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Items 2 (a) and (b) are not applicable

Period

(a) Total number of shares purchased

(b) Average price paid per share

(d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (in millions)

May 1, 2021 - May 31, 2021

194,736

47.45

N/A

June 1, 2021 - June 30, 2021

116,879

47.77

N/A

Total

311,615

N/A

Item 6. Exhibits

See Exhibit Index.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		CNA Financial Corporation

Dated: August 2, 2021	By	/s/ Albert J. Miralles
		Albert J. Miralles Executive Vice President and Chief Financial Officer (Duly authorized officer and principal financial and accounting officer)

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EXHIBIT INDEX


Description of Exhibit			Exhibit Number
Certification of Chief Executive Officer			31.1

Certification of Chief Financial Officer			31.2

Written Statement of the Chief Executive Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)			32.1

Written Statement of the Chief Financial Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)			32.2

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document			101.INS

Inline XBRL Taxonomy Extension Schema			101.SCH

Inline XBRL Taxonomy Extension Calculation Linkbase			101.CAL

Inline XBRL Taxonomy Extension Definition Linkbase			101.DEF

Inline XBRL Taxonomy Label Linkbase			101.LAB

Inline XBRL Taxonomy Extension Presentation Linkbase			101.PRE

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)			104.1