LOEWS CORP - Quarter Report: 2019 June (Form 10-Q)

10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

ORM

10-Q

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

June 30, 2019

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From

Commission File Number

1-6541

LOEWS CORPORATION

(Exact name of registrant as specified in its charter)


Delaware				13-2646102
(State or other jurisdiction of				(I.R.S. Employer
incorporation or organization)				Identification No.)

667 Madison Avenue, New York, N.Y.

10065-8087

(Address of principal executive offices) (Zip Code)

(

212

)

521-2000

(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 $0.01 per share	L	New York 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 X		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 X		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 X		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 X

As of July 26,

2019

, there were

302,380,038

shares of the registrant’s common stock outstanding.

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INDEX


	Page No.

Part I. Financial Information

Item 1. Financial Statements (unaudited)

Consolidated Condensed Balance Sheets June 30, 2019 and December 31, 2018		3

Consolidated Condensed Statements of Income Three and six months ended June 30, 2019 and 2018		4

Consolidated Condensed Statements of Comprehensive Income (Loss) Three and six months ended June 30, 2019 and 2018		5

Consolidated Condensed Statements of Equity Three and six months ended June 30, 2019 and 2018		6

Consolidated Condensed Statements of Cash Flows Six months ended June 30, 2019 and 2018		8

Notes to Consolidated Condensed Financial Statements		9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		36

Item 3. Quantitative and Qualitative Disclosures about Market Risk		55

Item 4. Controls and Procedures		56

Part II. Other Information		56

Item 1. Legal Proceedings		56

Item 1A. Risk Factors		56

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		56

Item 6. Exhibits		57

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)


	June 30, 2019			December 31, 2018
(Dollar amounts in millions, except per share data)

Assets:
Investments:
Fixed maturities, amortized cost of $38,045 and $ 38,234	$	41,663		$	39,699
Equity securities, cost of $ 1,385 and $ 1,479		1,367			1,293
Limited partnership investments		2,036			2,424
Other invested assets, primarily mortgage loans		985			901
Short term investments		4,689			3,869
Total investments		50,740			48,186
Cash		440			405
Receivables		8,144			7,960
Property, plant and equipment		15,513			15,511
Goodwill		768			665
Deferred non-insurance warranty acquisition expenses		2,678			2,513
Deferred acquisition costs of insurance subsidiaries		681			633
Other assets		3,313			2,443
Total assets	$	82,277		$	78,316

Liabilities and Equity:
Insurance reserves:
Claim and claim adjustment expense	$	21,729		$	21,984
Future policy benefits		11,537			10,597
Unearned premiums		4,648			4,183
Total insurance reserves		37,914			36,764
Payable to brokers		576			42
Short term debt		87			17
Long term debt		11,456			11,359
Deferred income taxes		1,227			841
Deferred non-insurance warranty revenue		3,595			3,402
Other liabilities		5,028			4,505
Total liabilities		59,883			56,930

Commitments and contingent liabilities

Preferred stock, $ 0.10 par value:
Authorized – 100,000,000 shares
Common stock, $ 0.01 par value:
Authorized – 1,800,000,000 shares
Issued – 312,528,502 and 312,169,189 shares		3			3
Additional paid-in capital		3,612			3,627
Retained earnings		16,374			15,773
Accumulated other comprehensive income (loss)		3			(880	)
		19,992			18,523
Less treasury stock, at cost ( 9,930,431 and 100,000 shares)		(478	)		(5	)
Total shareholders’ equity		19,514			18,518
Noncontrolling interests		2,880			2,868
Total equity		22,394			21,386
Total liabilities and equity	$	82,277		$	78,316

See accompanying Notes to Consolidated Condensed Financial Statements.

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Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(In millions, except per share data)
Revenues:
Insurance premiums	$	1,824		$	1,815		$	3,627		$	3,600
Net investment income		551			551			1,208			1,057
Investment gains (losses):
Other-than-temporary impairment losses		(6	)					(20	)		(6	)
Other net investment gains (losses)		8			(3	)		53			12

Total investment gains (losses)		2			(3	)		33			6
Non-insurance warranty revenue		285			248			566			486
Operating revenues and other		961			979			1,946			2,022
Total		3,623			3,590			7,380			7,171

Expenses:
Insurance claims and policyholders’ benefits		1,352			1,327			2,709			2,666
Amortization of deferred acquisition costs		338			359			680			655
Non-insurance warranty expense		263			225			523			441
Operating expenses and other		1,231			1,229			2,380			2,413
Interest		164			143			305			284
Total		3,348			3,283			6,597			6,459
Income before income tax		275			307			783			712
Income tax expense		(50	)		(59	)		(162	)		(84	)
Net income		225			248			621			628
Amounts attributable to noncontrolling interests		24			(18	)		22			(105	)
Net income attributable to Loews Corporation	$	249		$	230		$	643		$	523

Basic net income per share	$	0.82		$	0.72		$	2.10		$	1.62

Diluted net income per share	$	0.82		$	0.72		$	2.09		$	1.61

Weighted average shares outstanding:
Shares of common stock		303.84			318.87			306.82			323.30
Dilutive potential shares of common stock		0.70			0.91			0.62			0.93
Total weighted average shares outstanding assuming dilution		304.54			319.78			307.44			324.23

See accompanying Notes to Consolidated Condensed Financial Statements.

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Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
(In millions)

Net income	$	225		$	248		$	621		$	628

Other comprehensive income (loss), after tax
Changes in:
Net unrealized gains (losses) on investments with other-than-temporary impairments					(1	)		4			(10	)
Net other unrealized gains (losses) on investments		436			(159	)		962			(588	)
Total unrealized gains (losses) on investments		436			(160	)		966			(598	)
Unrealized gains (losses) on cash flow hedges		(6	)		4			(12	)		14
Pension liability		7			9			15			19
Foreign currency translation		3			(52	)		20			(41	)

Other comprehensive income (loss)		440			(199	)		989			(606	)

Comprehensive income		665			49			1,610			22

Amounts attributable to noncontrolling interests		(23	)		2			(84	)		(41	)

Total comprehensive income (loss) attributable to Loews Corporation	$	642		$	51		$	1,526		$	(19	)

See accompanying Notes to Consolidated Condensed Financial Statements.

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Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY

(Unaudited)


				Loews Corporation Shareholders
												Accumulated			Common
						Additional						Other			Stock
				Common		Paid-in			Retained			Comprehensive			Held in			Noncontrolling
	Total			Stock		Capital			Earnings			Income (Loss)			Treasury			Interests
(In millions)

Balance, April 1, 2018	$	23,848		$	3	$	3,142		$	16,321		$	(417	)	$	(517	)	$	5,316
Net income		248								230									18
Other comprehensive loss		(199	)										(179	)					(20	)
Dividends paid ($0.0625 per share)		(42	)							(20	)								(22	)
Purchase of Boardwalk Pipeline common units		(1,715	)				661						(29	)					(2,347	)
Purchases of Loews treasury stock		(291	)													(291	)
Stock-based compensation		8					8
Other		1					(2	)		1									2
Balance, June 30, 2018	$	21,858		$	3	$	3,809		$	16,532		$	(625	)	$	(808	)	$	2,947

Balance, April 1, 2019	$	21,902		$	3	$	3,607		$	16,144		$	(390	)	$	(327	)	$	2,865
Net income		225								249									(24	)
Other comprehensive income		440											393						47
Dividends paid ($0.0625 per share)		(29	)							(19	)								(10	)
Purchases of Loews treasury stock		(151	)													(151	)
Purchases of subsidiary stock from noncontrolling interests		(2	)																(2	)
Stock-based compensation		7					6												1
Other		2					(1	)											3
Balance, June 30, 2019	$	22,394		$	3	$	3,612		$	16,374		$	3		$	(478	)	$	2,880

See accompanying Notes to Consolidated Condensed Financial Statements.

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Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY

(Unaudited)


				Loews Corporation Shareholders
												Accumulated			Common
						Additional						Other			Stock
				Common		Paid-in			Retained			Comprehensive			Held in			Noncontrolling
	Total			Stock		Capital			Earnings			Income (Loss)			Treasury			Interests
(In millions)
Balance, January 1, 2018, as reported	$	24,566		$	3	$	3,151		$	16,096		$	(26	)	$	(20	)	$	5,362
Cumulative effect adjustments from changes in accounting standards		(91	)							(43	)		(28	)					(20	)
Balance, January 1, 2018, as adjusted		24,475			3		3,151			16,053			(54	)		(20	)		5,342
Net income		628								523									105
Other comprehensive loss		(606	)										(542	)					(64	)
Dividends paid ($0.125 per share)		(140	)							(40	)								(100	)
Purchase of Boardwalk Pipeline common units		(1,715	)				661						(29	)					(2,347	)
Purchases of Loews treasury stock		(788	)													(788	)
Stock-based compensation		8					1												7
Other		(4	)				(4	)		(4	)								4
Balance, June 30, 2018	$	21,858		$	3	$	3,809		$	16,532		$	(625	)	$	(808	)	$	2,947
Balance, January 1, 2019	$	21,386		$	3	$	3,627		$	15,773		$	(880	)	$	(5	)	$	2,868
Net income		621								643									(22	)
Other comprehensive income		989											883						106
Dividends paid ($0.125 per share)		(116	)							(38	)								(78	)
Purchases of Loews treasury stock		(473	)													(473	)
Purchases of subsidiary stock from noncontrolling interests		(16	)																(16	)
Stock-based compensation		8					(13	)											21
Other		(5	)				(2	)		(4	)								1
Balance, June 30, 2019	$	22,394		$	3	$	3,612		$	16,374		$	3		$	(478	)	$	2,880

See accompanying Notes to Consolidated Condensed Financial Statements.

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Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)


Six Months Ended June 30	2019			2018
(In millions)
Operating Activities:

Net income	$	621		$	628
Adjustments to reconcile net income to net cash provided (used) by operating activities, net		604			494
Changes in operating assets and liabilities, net:
Receivables		(79	)		(507	)
Deferred acquisition costs		(47	)		(43	)
Insurance reserves		203			563
Other assets		(296	)		(151	)
Other liabilities		73			(115	)
Trading securities		(605	)		1,282
Net cash flow provided by operating activities		474			2,151

Investing Activities:

Purchases of fixed maturities		(4,896	)		(5,608	)
Proceeds from sales of fixed maturities		3,858			4,781
Proceeds from maturities of fixed maturities		1,374			1,306
Purchases of limited partnership investments		(139	)		(73	)
Proceeds from sales of limited partnership investments		559			94
Purchases of property, plant and equipment		(505	)		(480	)
Acquisitions		(256	)		(10	)
Dispositions		136			2
Change in short term investments		6			(1,104	)
Other, net		(93	)		(145	)
Net cash flow provided by investing activities		44			(1,237	)

Financing Activities:

Dividends paid		(38	)		(40	)
Dividends paid to noncontrolling interests		(78	)		(100	)
Purchases of Loews treasury stock		(478	)		(799	)
Purchases of subsidiary stock from noncontrolling interests		(16	)
Principal payments on debt		(1,394	)		(605	)
Issuance of debt		1,534			533
Other, net		(15	)		83
Net cash flow used by financing activities		(485	)		(928	)

Effect of foreign exchange rate on cash		2			(5	)

Net change in cash		35			(19	)
Cash, beginning of period		405			472
Cash, end of period	$	440		$	453

See accompanying Notes to Consolidated Condensed Financial Statements.

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Loews Corporation and Subsidiaries

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

Loews Corporation is a holding company. Its subsidiaries are engaged in the following lines of business: commercial property and casualty insurance (CNA Financial Corporation (“CNA”), an 89% owned subsidiary); the operation of offshore oil and gas drilling rigs (Diamond Offshore Drilling, Inc. (“Diamond Offshore”), a 53% owned subsidiary); transportation and storage of natural gas and natural gas liquids (Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”), a wholly owned subsidiary); the operation of a chain of hotels (Loews Hotels Holding Corporation (“Loews Hotels & Co”), a wholly owned subsidiary); and the manufacture of rigid plastic packaging solutions (Consolidated Container Company LLC (“Consolidated Container”), a 99% owned subsidiary). Unless the context otherwise requires, the terms “Company,” “Loews” and “Registrant” as used herein mean Loews Corporation excluding its subsidiaries and the term “Net income attributable to Loews Corporation” as used herein means Net income attributable to Loews Corporation shareholders.

In the opinion of management, the accompanying unaudited Consolidated Condensed Financial Statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s financial position as of June 30, 2019 and December 31, 2018 and results of operations, comprehensive income and changes in shareholders’ equity

for the three and six months ended June

2019

and

2018

and cash flows for the six months ended June

2019

and

2018

. Net income for the second quarter and first half of each of the years is not necessarily indicative of net income for that entire year. These Consolidated Condensed Financial Statements should be read in conjunction with the Consolidated Financial Statements in the Company’s Annual Report on Form

10-K

for the year ended December

2018

The Company presents basic and diluted net income per share on the Consolidated Condensed Statements of Income. Basic net income per share excludes dilution and is computed by dividing net income attributable to common stock by the weighted average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. There were no shares attributable to employee stock-based compensation awards excluded from the diluted weighted average shares outstanding amounts for the three and six months ended June 30, 2019 and 2018 because the effect would have been antidilutive.

Accounting changes

– In February of 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). Effective January 1, 2019, the updated guidance requires lessees to recognize lease assets and lease liabilities for most operating leases. The Company adopted the updated accounting guidance using the modified retrospective method. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. The Company utilized the package of practical expedients allowing the Company to not reassess whether any expired or existing contracts contain a lease, the classification for any expired or existing leases or the initial direct costs for any existing leases. The Company has also elected to apply an exemption for short term leases whereby leases with initial lease terms of one year or less are not recorded on the balance sheet.

For leases where we are a lessee we have elected to account for lease and non-lease components as a single lease component, except subsea equipment leases. For leases where we are a lessor we have elected to combine the lease and non-lease components of our offshore drilling contracts, if certain conditions are met, and account for the combined component in accordance with the accounting treatment for the predominant component of the contract.

At adoption, the cumulative effect adjustment increased Other assets and Other liabilities by $642 million reflecting operating lease right of use assets, lease liabilities and the derecognition of deferred rent related primarily to lease agreements for office space and machinery and equipment. Subsequent to the adoption of ASU

2016-02,

Other assets and Other liabilities were adjusted to $3.1 billion and $5.1 billion as of January 1, 2019, as compared to $2.4 billion and $4.5 billion as of December 31, 2018. See Note 6 for additional information on leases.

Recently issued ASUs

– In June of

2016

, the FASB issued ASU

2016-

13,

“Financial Instruments – Credit Losses (Topic

326)

: Measurement of Credit Losses on Financial Instruments.” The updated accounting guidance requires changes to the recognition of credit losses on financial instruments not accounted for at fair value through net income. The guidance is effective for interim and annual periods beginning after December

2019

. The guidance will be applied using the modified retrospective method with a cumulative effect adjustment to beginning retained earnings. A prospective transition method is required for debt securities that have recognized an other-than-temporary

impairment prior to the effective date. The primary changes will be the use of the expected credit loss model for the

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mortgage loan portfolio, reinsurance and insurance receivables and other financing receivables and the use of the allowance method rather than the write-down method for credit losses within the available-for-sale fixed maturities portfolio. The expected credit loss model will require a financial asset to be presented at the ultimate net amount expected to be collected over the term of the asset. Under the allowance method for available-for-sale debt securities, the Company will record reversals of credit losses if the estimate of credit losses declines. The Company is currently evaluating the effect the guidance will have on its consolidated financial statements.

In August of 2018, the FASB issued ASU 2018-12, “Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts.” The updated accounting guidance requires changes to the measurement and disclosure of long-duration contracts. The guidance requires entities to update annually cash flow assumptions, including morbidity and persistency, and update quarterly discount rate assumptions using an upper-medium grade fixed-income instrument yield. The effect of changes in cash flow assumptions will be recorded in Net income and the effect of changes in discount rate assumptions will be recorded in Other comprehensive income (“OCI”).

This guidance is effective for interim and annual periods beginning after December 15, 2020; however, the FASB has proposed a one year deferral of the effective date. The guidance requires restatement of the prior periods presented and early adoption is permitted. The Company is currently evaluating the method and timing of adoption and the effect the updated guidance will have on its consolidated financial statements. The annual updating of cash flow assumptions is expected to increase income statement volatility. The quarterly change in the discount rate is expected to increase volatility in the Company’s Shareholders’ equity, but that will be somewhat mitigated because Shadow Adjustments are eliminated under the new guidance. See Note 3 for further information on Shadow Adjustments. While the requirements of the new guidance represent a material change from existing accounting guidance, the underlying economics of CNA’s business and related cash flows will be unchanged.

2. Acquisitions and Divestiture

Consolidated Container

During the first six months of 2019, Consolidated Container paid approximately $

260

million to complete three acquisitions of plastic packaging manufacturers located in the U.S. and Canada, including the acquisition on June 14, 2019 of Tri State Distribution, Inc., a retail pharmaceutical packaging solutions provider. Operating results for the three acquisitions from the acquisition dates through the end of the period are not significant. The preliminary allocation of the purchase prices for the three acquisitions resulted in the recognition of a

pproximately $

102

million of goodwill and approximately $

million

of intangible assets, primarily related to customer relationships, and are subject to change within the respective measurement periods. The acquisitions were funded

with approximately $

250

million of debt

financing proceeds at Consolidated Container, as discussed in Note 7, and available cash.

Loews Hotels & Co

Loews Hotels & Co sold an owned hotel for approximately $127 million in May of 2019.

3. Investments

Net investment income is as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(In millions)
Fixed maturity securities	$	455		$	444		$	910		$	890
Limited partnership investments		43			60			124			108
Short term investments		14			11			29			20
Equity securities		16			12			46			22
Income from trading portfolio (a)		29			23			110			20
Other		12			17			26			28
Total investment income		569			567			1,245			1,088
Investment expenses		(18	)		(16	)		(37	)		(31	)
Net investment income	$	551		$	551		$	1,208		$	1,057

(a)	Net unrealized gains (losses) related to changes in fair value on securities still held were $ 8 and $(4) for the three months ended June 30, 2019 and 2018 and $ 48 and $ (25 ) for the six months ended June 30, 2019 and 2018.

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Investment gains (losses) are as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(In millions)

Fixed maturity securities	$	(3	)	$	4		$	(9	)	$	22
Equity securities		11			(10	)		53			(25	)
Derivative instruments		(6	)		4			(11	)		9
Short term investments and other					(1	)
Investment gains (losses) (a)	$	2		$	(3	)	$	33		$	6

(a)

Gross investment gains on

available-for-sale

securities were $

and $

for the three months ended June 30, 2019 and 2018 and $

and $

106

for the six months ended June 30, 2019 and 2018. Gross investment losses on

available-for-sale

securities were $

and $

for the three months ended June 30, 2019 and 2018 and $

and $

or the six months ended June 30, 2019 and 2018.

During the three and six months ended June 30, 2019,

and $

of Net investment gains were recognized due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2019. During the three and six months ended June 30, 2018,

and $

of Net investment losses were recognized due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2018.

The components of other-than-temporary impairment (“OTTI”) losses recognized in earnings by asset type are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
(In millions)

Fixed maturity securities available-for-sale:
Corporate and other bonds	$	6			$	12	$	5
Asset-backed						8		1
Net OTTI losses recognized in earnings	$	6	$	-	$	20	$	6

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


June 30, 2019	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	19,654	$	1,880	$	44	$	21,490
States, municipalities and political subdivisions		9,196		1,507				10,703
Asset-backed:
Residential mortgage-backed		4,668		131		2		4,797	$	(24	)
Commercial mortgage-backed		2,032		93		4		2,121
Other asset-backed		1,865		40		7		1,898		(2	)
Total asset-backed		8,565		264		13		8,816		(26	)
U.S. Treasury and obligations of government-sponsored enterprises		118		5				123
Foreign government		480		17				497
Redeemable preferred stock		10						10
Fixed maturities available-for-sale		38,023		3,673		57		41,639		(26	)
Fixed maturities trading		22		2				24
Total fixed maturity securities	$	38,045	$	3,675	$	57	$	41,663	$	(26	)

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December 31, 2018	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)

Fixed maturity securities:
Corporate and other bonds	$	18,764	$	791	$	395	$	19,160
States, municipalities and political subdivisions		9,681		1,076		9		10,748
Asset-backed:
Residential mortgage-backed		4,815		68		57		4,826	$	(20	)
Commercial mortgage-backed		2,200		28		32		2,196
Other asset-backed		1,975		11		24		1,962
Total asset-backed		8,990		107		113		8,984		(20	)
U.S. Treasury and obligations of government- sponsored enterprises		156		3				159
Foreign government		480		5		4		481
Redeemable preferred stock		10						10
Fixed maturities available-for-sale		38,081		1,982		521		39,542		(20	)
Fixed maturities trading		153		4				157
Total fixed maturities	$	38,234	$	1,986	$	521	$	39,699	$	(20	)

The net unrealized gains on

available-for-sale

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 noncontrolling interests and any required Shadow Adjustments. To the extent that unrealized gains on fixed income securities supporting long term care products and structured settlements not funded by annuities would result in a premium deficiency if those gains were realized, a related increase in Insurance reserves is recorded, net of tax and noncontrolling interests, as a reduction of net unrealized gains through Other comprehensive income (“Shadow Adjustments”). As of June 30, 2019 and December 31, 2018, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $

1.6

billion and $964 million (after tax and noncontrolling interests).

The

available-for-sale

securities in a gross unrealized loss position are as follows:


	Less than 12 Months				12 Months or Longer				Total
June 30, 2019	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	776	$	22	$	498	$	22	$	1,274	$	44
States, municipalities and political subdivisions		19				2				21
Asset-backed:
Residential mortgage-backed		163				134		2		297		2
Commercial mortgage-backed		58		2		69		2		127		4
Other asset-backed		386		5		77		2		463		7
Total asset-backed		607		7		280		6		887		13
U.S. Treasury and obligations of government-sponsored enterprises						4				4
Foreign government		3				11				14
Total fixed maturity securities	$	1,405	$	29	$	795	$	28	$	2,200	$	57

December 31, 2018

Fixed maturity securities:
Corporate and other bonds	$	8,543	$	340	$	825	$	55	$	9,368	$	395
States, municipalities and political subdivisions		517		8		5		1		522		9
Asset-backed:
Residential mortgage-backed		1,932		23		1,119		34		3,051		57
Commercial mortgage-backed		728		10		397		22		1,125		32
Other asset-backed		834		21		125		3		959		24
Total asset-backed		3,494		54		1,641		59		5,135		113
U.S. Treasury and obligations of government-sponsored enterprises		21				19				40
Foreign government		114		2		124		2		238		4
Total fixed maturity securities	$	12,689	$	404	$	2,614	$	117	$	15,303	$	521

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Based on current facts and circumstances, the Company believes the unrealized losses presented in the June 30, 2019 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 OTTI losses to be recorded as of June 30, 2019.

The following table presents the activity related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held as of June 30, 2019 and 2018 for which a portion of an OTTI loss was recognized in OCI.


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(In millions)

Beginning balance of credit losses on fixed maturity securities	$	17		$	25		$	18		$	27
Reductions for securities sold during the period		(1	)		(4	)		(2	)		(6	)
Ending balance of credit losses on fixed maturity securities	$	16		$	21		$	16		$	21

Contractual Maturity

The following table presents

available-for-sale

fixed maturity securities by contractual maturity.


	June 30, 2019				December 31, 2018
	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value
(In millions)

Due in one year or less	$	1,018	$	1,032	$	1,350	$	1,359
Due after one year through five years		8,097		8,476		7,979		8,139
Due after five years through ten years		16,403		17,297		16,859		16,870
Due after ten years		12,505		14,834		11,893		13,174
Total	$	38,023	$	41,639	$	38,081	$	39,542

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.

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Derivative Financial Instruments

A summary of the aggregate contractual or notional amounts and gross estimated fair values related to derivative financial instruments follows. The contractual or notional amounts for derivatives are used to calculate the exchange of contractual payments under the agreements and may not be representative of the potential for gain or loss on these instruments. Gross estimated fair values of derivative positions are currently presented in Equity securities, Receivables and Payable to brokers on the Consolidated Condensed Balance Sheets.


	June 30, 2019							December 31, 2018
	Contractual/ Notional		Estimated Fair Value					Contractual/ Notional		Estimated Fair Value
	Amount		Asset		(Liability)			Amount		Asset		(Liability)
(In millions)

With hedge designation:

Interest rate swaps	$	540			$	(9	)	$	500	$	11

Without hedge designation:

Equity markets:
Options – purchased		303	$	5					213		18
– written		95				(3	)		239				$	(17	)
Futures – short
Commodity futures – long		11							32
Embedded derivative on funds withheld liability		172				(8	)		172		4

4. Fair Value

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

●

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

●

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

●

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

Prices may fall within Level 1, 2 or 3 depending upon the methodology and inputs used to estimate fair value for each specific security. In general, the Company seeks to price securities using third party pricing services. Securities not priced by pricing services are submitted to independent brokers for valuation and, if those are not available, internally developed pricing models are used to value assets using a methodology and inputs the Company believes market participants would use to value the assets. Prices obtained from third-party pricing services or brokers are not adjusted 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, (iv) detailed analysis, where the Company performs an independent analysis of the inputs and assumptions used to price individual securities and (v) pricing validation, where prices received are compared to prices independently estimated by the Company.

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

June 30, 2019	Level 1			Level 2			Level 3		Total
(In millions)

Fixed maturity securities:
Corporate bonds and other	$	152		$	21,630		$	338	$	22,120
States, municipalities and political subdivisions					10,703					10,703
Asset-backed					8,623			193		8,816
Fixed maturities available-for-sale		152			40,956			531		41,639
Fixed maturities trading					20			4		24
Total fixed maturities	$	152		$	40,976		$	535	$	41,663

Equity securities	$	715		$	629		$	23	$	1,367
Short term and other		3,469			1,123					4,592
Payable to brokers		(114	)		(9	)				(123	)

December 31, 2018

Fixed maturity securities:
Corporate bonds and other	$	196		$	19,392		$	222	$	19,810
States, municipalities and political subdivisions					10,748					10,748
Asset-backed					8,787			197		8,984
Fixed maturities available-for-sale		196			38,927			419		39,542
Fixed maturities trading					151			6		157
Total fixed maturities	$	196		$	39,078		$	425	$	39,699

Equity securities	$	704		$	570		$	19	$	1,293
Short term and other		2,647			1,111					3,758
Receivables					11					11
Payable to brokers		(23	)							(23	)

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The following tables present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2019 and 2018:


																									Unrealized
																									Gains
																									(Losses)
																						Unrealized			Recognized in
			Net Realized																			Gains			Other
			Investment Gains																			(Losses)			Comprehensive
			(Losses) and Net Change																			Recognized in			Income (Loss)
			in Unrealized Investment																			Net Income			on Level 3
			Gains (Losses)																			(Loss) on Level 3			Assets and
			Included in												Transfers		Transfers					Assets and			Liabilities
	Balance,		Net Income			Included in									into		out of			Balance,		Liabilities Held			Held at
2019	April 1		(Loss)			OCI		Purchases		Sales		Settlements			Level 3		Level 3			June 30		at June 30			June 30
(In millions)

Fixed maturity securities:
Corporate bonds and other	$	253				$	12	$	76			$	(2	)			$	(1	)	$	338				$	10
Asset-backed		184					4						(4	)	$	40		(31	)		193					5
Fixed maturities available-for-sale		437	$	-			16		76	$	-		(6	)		40		(32	)		531	$	-			15
Fixed maturities trading		5		(1	)																4		(1	)
Total fixed maturities	$	442	$	(1	)	$	16	$	76	$	-	$	(6	)	$	40	$	(32	)	$	535	$	(1	)	$	15

Equity securities	$	21						$	2											$	23

Table of Contents


																								Unrealized
																								Gains
			Net Realized																					(Losses)
			Investment Gains																					Recognized in
			(Losses) and Net Change																					Net Income
			in Unrealized Investment																					(Loss) on Level
			Gains (Losses)																					3 Assets and
			Included in														Transfers		Transfers					Liabilities
	Balance,		Net Income			Included in											into		out of			Balance,		Held at
2018	April 1		(Loss)			OCI			Purchases		Sales			Settlements			Level 3		Level 3			June 30		June 30
(In millions)

Fixed maturity securities:
Corporate bonds and other	$	100				$	(1	)	$	2	$	(5	)	$	(2	)						$	94
States, municipalities and political subdivisions		1																					1
Asset-backed		279					(1	)		41					(6	)	$	13	$	(53	)		273
Fixed maturities available-for-sale		380	$	-			(2	)		43		(5	)		(8	)		13		(53	)		368	$	-
Fixed maturities trading		7																					7
Total fixed maturities	$	387	$	-		$	(2	)	$	43	$	(5	)	$	(8	)	$	13	$	(53	)	$	375	$	-

Equity securities	$	20	$	(1	)						$	(1	)									$	18	$	(1	)

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																									Unrealized
																									Gains
																									(Losses)
																						Unrealized			Recognized in
			Net Realized																			Gains (Losses)			Other
			Investment Gains																			Recognized in			Comprehensive
			(Losses) and Net Change																			Net Income			Income (Loss)
			in Unrealized Investment																			(Loss) on Level			on Level 3
			Gains (Losses)																			3 Assets and			Assets and
			Included in												Transfers		Transfers					Liabilities			Liabilities
	Balance,		Net Income			Included in									into		out of			Balance,		Held at			Held at
2019	January 1		(Loss)			OCI		Purchases		Sales		Settlements			Level 3		Level 3			June 30		June 30			June 30
(In millions)

Fixed maturity securities:
Corporate bonds and other	$	222				$	20	$	132			$	(4	)			$	(32	)	$	338				$	17
Asset-backed		197					7		20				(8	)	$	45		(68	)		193					8
Fixed maturities available-for-sale		419	$	-			27		152	$	-		(12	)		45		(100	)		531	$	-			25
Fixed maturities trading		6		(2	)																4		(2	)
Total fixed maturities	$	425	$	(2	)	$	27	$	152	$	-	$	(12	)	$	45	$	(100	)	$	535	$	(2	)	$	25

Equity securities	$	19	$	2				$	2											$	23	$	3

Table of Contents


																								Unrealized
																								Gains
			Net Realized																					(Losses)
			Investment Gains																					Recognized in
			(Losses) and Net Change																					Net Income
			in Unrealized Investment																					(Loss) on Level
			Gains (Losses)																					3 Assets and
			Included in														Transfers		Transfers					Liabilities
	Balance,		Net Income			Included in											into		out of			Balance,		Held at
2018	January 1		(Loss)			OCI			Purchases		Sales			Settlements			Level 3		Level 3			June 30		June 30
(In millions)

Fixed maturity securities:
Corporate bonds and other	$	98	$	(1	)	$	(1	)	$	2	$	(5	)	$	(4	)	$	5				$	94
States, municipalities and political subdivisions		1																					1
Asset-backed		335		7			(6	)		71		(72	)		(12	)		13	$	(63	)		273
Fixed maturities available-for-sale		434		6			(7	)		73		(77	)		(16	)		18		(63	)		368	$	-
Fixed maturities trading		4		3																			7		3
Total fixed maturities	$	438	$	9		$	(7	)	$	73	$	(77	)	$	(16	)	$	18	$	(63	)	$	375	$	3

Equity securities	$	22	$	(3	)						$	(1	)									$	18	$	(3	)

Net investment gains and losses are reported in Net income as follows:


Major Category of Assets and Liabilities		Consolidated Condensed Statements of Income Line Items

Fixed maturity securities available-for-sale		Investment gains (losses)
Fixed maturity securities trading		Net investment income
Equity securities		Investment gains (losses) and Net investment income
Other invested assets		Investment gains (losses) and Net investment income
Derivative financial instruments held in a trading portfolio		Net investment income
Derivative financial instruments, other		Investment gains (losses) and Operating revenues and other
Life settlement contracts		Operating revenues and other

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

Valuation Methodologies and Inputs

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

Fixed Maturity Securities

Level 1 securities include highly liquid 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 inputs that are not market observable.

Equity Securities

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

Derivative Financial Instruments

Exchange traded derivatives are valued using quoted market prices and are classified within Level 1 of the fair value hierarchy. Level 2 derivatives primarily include currency forwards valued using observable market forward rates.

Over-the-counter

derivatives, principally interest rate swaps, total return swaps, commodity swaps, equity warrants and options, are valued using inputs including broker/dealer quotes and are classified within Level 2 or Level 3 of the valuation hierarchy, depending on the amount of transparency as to whether these quotes are based on information that is observable in the marketplace.

Short Term and Other Invested Assets

Securities that are actively traded or have quoted prices are classified as Level 1. These securities include money market funds, treasury bills and exchange traded

open-end

funds valued using quoted market prices. Level 2 primarily includes commercial paper, for which all inputs are market observable. Fixed maturity securities purchased within one year of maturity are classified consistent with fixed maturity securities discussed above. Short term investments as presented in the tables above differ from the amounts presented in the Consolidated Condensed Balance Sheets because certain short term investments, such as time deposits, are not measured at fair value.

Table of Contents

Significant Unobservable Inputs

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

June 30, 2019

Estimated

Fair Value

Valuation

Techniques

Unobservable

Inputs

Range

(Weighted

Average)

(In millions)

Fixed maturity securities

381

Discounted cash flow

Credit spread

1% – 5% (2%

)

December 31, 2018

Fixed maturity securities

228

Discounted cash flow

Credit spread

% –

% (

)

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

Financial Assets and Liabilities Not Measured at Fair Value

The carrying amount, estimated fair value and the level of the fair value hierarchy of the Company’s financial assets and liabilities which are not measured at fair value on the Consolidated Condensed Balance Sheets are presented in the following tables. The carrying amounts and estimated fair values of short term debt and long term debt exclude capital lease obligations. The carrying amounts reported on the Consolidated Condensed Balance Sheets for cash and short term investments not carried at fair value and certain other assets and liabilities approximate fair value due to the short term nature of these items.


	Carrying		Estimated Fair Value
June 30, 2019	Amount		Level 1	Level 2		Level 3		Total
(In millions)

Assets:
Other invested assets, primarily mortgage loans	$	916				$	936	$	936

Liabilities:
Short term debt		85		$	8		76		84
Long term debt		11,443			10,909		555		11,464

December 31, 2018

Assets:
Other invested assets, primarily mortgage
loans	$	839				$	827	$	827

Liabilities:
Short term debt		15		$	14				14
Long term debt		11,345			10,111		653		10,764

The fair values of mortgage loans, included in Other invested assets, were based on the present value of the expected future cash flows discounted at the current interest rate for similar financial instruments, adjusted for specific loan risk.

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5. Claim and Claim Adjustment Expense Reserves

CNA’s 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. CNA’s reserve projections are based primarily on detailed analysis of the facts in each case, CNA’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 CNA’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 CNA’s results of operations and/or equity. CNA reported catastrophe losses, net of reinsurance, of $

million and $26 million for the three months ended June 30, 2019 and 2018 and $

million and $60 million for the six months ended June 30, 2019 and 2018. Net catastrophe losses in 2019 and 2018 related primarily to U.S. weather-related events.

Liability for Unpaid Claim and Claim Adjustment Expenses

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


Six Months Ended June 30	2019			2018
(In millions)

Reserves, beginning of year:
Gross	$	21,984		$	22,004
Ceded		4,019			3,934
Net reserves, beginning of year		17,965			18,070

Net incurred claim and claim adjustment expenses:
Provision for insured events of current year		2,615			2,552
Increase (decrease) in provision for insured events of prior years		(36	)		(112	)
Amortization of discount		98			92
Total net incurred (a)		2,677			2,532

Net payments attributable to:
Current year events		(315	)		(312	)
Prior year events		(2,519	)		(2,387	)
Total net payments		(2,834	)		(2,699	)

Foreign currency translation adjustment and other		55			(70	)

Net reserves, end of period		17,863			17,833
Ceded reserves, end of period		3,866			4,157
Gross reserves, end of period	$	21,729		$	21,990

(a)

Total net incurred above does not agree to Insurance claims and policyholders’ benefits as reflected on the Consolidated Condensed Statements of Income due to amounts related to retroactive reinsurance deferred gain accounting, uncollectible reinsurance and loss deductible receivables and benefit expenses related to future policy benefits, which are not reflected in the table above.

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Net Prior Year Development

Changes in estimates of claim and claim adjustment expense reserves net of reinsurance, for prior years are defined as net prior year loss reserve development. These changes can be favorable or unfavorable.

Favorable net prior year development of $31 million and $59 million was recorded for CNA’s commercial property and casualty operations (“Property & Casualty Operations”) for the three months ended June 30, 2019 and 2018 and $45 million and $98 million for the six months ended June 30, 2019 and 2018.

The following table and discussion present details of the net prior year claim and claim adjustment expense reserve development in CNA’s Property & Casualty Operations:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(In millions)

Medical professional liability	$	15		$	3		$	30		$	23
Other professional liability and management liability		(7	)		(34	)		(19	)		(68	)
Surety		(15	)		(15	)		(40	)		(30	)
Commercial auto		(3	)					(8	)		(1	)
General liability		13			26			(7	)		18
Workers’ compensation		(7	)		(6	)		(5	)		(12	)
Other		(27	)		(33	)		4			(28	)
Total pretax (favorable) unfavorable development	$	(31	)	$	(59	)	$	(45	)	$	(98	)

Three Months

2019

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

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

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

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

2018

Favorable development in other professional liability and management liability was primarily in professional liability errors and omissions (“E&O”) reflecting lower than expected claim frequency in accident years 2014 through 2016 and favorable severity for accident years 2012 and prior.

Favorable development in surety was driven by continued lower than expected loss emergence on accident years 2015 and prior.

Unfavorable development in general liability was driven by higher than expected claim severity in umbrella in accident years 2013 through 2015.

Favorable development in other was driven by lower than expected claim severity in property from catastrophes in accident year 2017.

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Six Months

2019

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

Favorable development in other professional liability and management liability was primarily due to lower than expected claim frequency and favorable outcomes on individual claims in accident years 2017 and prior related to financial institutions.

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

Favorable development in general liability was primarily due to lower than expected frequency on latent construction defect claims across multiple accident years. This was partially offset by unfavorable development due to higher than expected large loss experience in CNA’s excess and umbrella business in accident year 2017.

2018

Unfavorable development for medical professional liability was primarily due to higher than expected severity in accident years 2014 and 2017 in CNA’s hospitals business.

Favorable development in other professional liability and management liability was primarily due to lower than expected claim frequency for accident years 2013 through 2017 related to financial institutions. Additional favorable development was in professional liability E&O reflecting lower than expected claims frequency in accident years 2014 through 2016 and favorable severity for accident years 2012 and prior.

Favorable development for surety was due to continued lower than expected loss emergence for accident years 2015 and prior.

Unfavorable development in general liability was driven by higher than expected claim severity in umbrella in accident years 2013 through 2015.

Favorable development in other was driven by lower than expected claim severity in property from catastrophes in accident year 2017.

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

In 2010, Continental Casualty Company (“CCC”) together with several of CNA’s insurance subsidiaries completed a transaction with National Indemnity Company (“NICO”), a subsidiary of Berkshire Hathaway Inc., under which substantially all of CNA’s legacy A&EP liabilities were ceded to NICO through a loss portfolio transfer (“loss portfolio transfer” or “LPT”). At the effective date of the transaction, CNA 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 $4.0 billion. The $1.6 billion of claim and allocated claim adjustment expense reserves ceded to NICO was net of $1.2 billion of ceded claim and allocated claim adjustment expense reserves under existing third party reinsurance contracts. The NICO LPT aggregate reinsurance limit also covers credit risk on the existing third party reinsurance related to these liabilities. CNA paid NICO a reinsurance premium of $2.0 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, CNA 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 CNA 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 Consolidated Condensed Statements of Income.

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The following table presents the impact of the loss portfolio transfer on the Consolidated Condensed Statements of Income.


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(In millions)

Additional amounts ceded under LPT:
Net A&EP adverse development before consideration of LPT										$	113
Provision for uncollectible third-party reinsurance on A&EP											(16	)
Total additional amounts ceded under LPT	$	-		$	-		$	-			97
Retroactive reinsurance benefit recognized		(14	)		(15	)		(36	)		(72	)
Pretax impact of deferred retroactive reinsurance	$	(14	)	$	(15	)	$	(36	)	$	25

CNA intends to complete its annual A&EP reserve review in the fourth quarter of 2019 and maintain this timing for all future annual A&EP reserve reviews. CNA completed A&EP reserve reviews in both the first and fourth quarters of 2018. Based upon CNA’s 2018 first quarter A&EP reserve review, net unfavorable prior year development of $113 million was recognized before consideration of cessions to the LPT for the six months ended June 30, 2018. The 2018 unfavorable development was driven by higher than anticipated defense costs on direct asbestos and environmental accounts and paid losses on assumed reinsurance exposures. Additionally, in 2018, CNA released a portion of its provision for uncollectible third party reinsurance.

As of June 30, 2019 and December 31, 2018, the cumulative amounts ceded under the LPT were $

3.1

billion. The unrecognized deferred retroactive reinsurance benefit was $

338

million and $374 million as of June 30, 2019 and December 31, 2018 and is included within Other liabilities on the Consolidated Condensed Balance Sheets.

NICO established a collateral trust account as security for its obligations to CNA. The fair value of the collateral trust account was $

3.1

billion and $2.7 billion as of June 30, 2019 and December 31, 2018. 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 CNA’s A&EP claims.

6. Leases

The Company’s lease agreements primarily cover office facilities and machinery and equipment and expire at various dates. The Company’s leases are predominantly operating leases, which are included in Other assets and Other liabilities on the Consolidated Condensed Balance Sheet. The Company’s lease agreements do not contain significant residual value guarantees, restrictions or covenants.

Operating lease right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The discount rate used to determine the commencement date present value of lease payments is the interest rate implicit in the lease, or when that is not readily determinable, the Company utilizes its incremental borrowing rate. The Company’s operating lease right of use asset was $

623

million and the Company’s operating lease liability was $

702

million at June 30, 2019.

Operating lease cost was $

million and $

million, variable lease cost was $

million and $

million and short term lease cost was $

million and $

million for the three and six months ended June 30, 2019. Cash paid for amounts included in operating lease liabilities was $

million and $

million for the three and six months ended June 30, 2019.

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The table below presents the future minimum lease payments to be made under

non-cancelable

operating leases as of December 31, 2018:


Year Ended December 31
(In millions)

2019	$	75
2020		79
2021		79
2022		68
2023		57
Thereafter		344
Total	$	702

The table below presents the maturities of lease liabilities:


	Operating
As of June 30, 2019	Leases
(In millions)

2019 (a)	$	53
2020		111
2021		108
2022		97
2023		86
Thereafter		421
Total		876
Less: discount		174
Total lease liabilities	$	702

(a)	For the six-month period beginning July 1, 2019.

The table below presents the weighted average remaining lease term for operating leases and weighted average discount rate used in calculating the operating lease asset and liability.


As of June 30, 2019

Weighted average remaining lease term	9.6	Years
Weighted average discount rate	4.7	%

7. Debt

CNA Financial

In May of 2019, CNA completed a public offering of $500 million aggregate principal amount of its 3.9% senior notes due

May 1, 2029

and used the net proceeds to redeem the entire $500 million outstanding aggregate principal balance of its 5.9% senior notes due

August 15, 2020

The redemption of the $500 million senior notes resulted in a loss of $21 million ($15 million after tax and noncontrolling interests) and is included in Interest expense on the Consolidated Condensed Statements of Income for the three and six months ended June 30, 2019.

Boardwalk Pipelines

In May of 2019, Boardwalk Pipelines completed a public offering of $500 million aggregate principal amount of its 4.8% senior notes due

May 3, 2029

and plans to use the proceeds to retire the outstanding $350 million aggregate principal amount of its 5.8% senior notes due in

2019

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

Consolidated Container

In June of 2019, Consolidated Container entered into a credit agreement providing for a $250 million term loan in conjunction with the acquisitions discussed in Note 2.

The term loan is a variable rate facility which bears interest at a floating rate equal to the

London Interbank Offered Rate (“LIBOR”) plus an applicable margin of

3.5

and matures on

June 14, 2026

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8. Shareholders’ Equity

Accumulated other comprehensive income (loss)

The tables below present the changes in AOCI by component for the three and six months ended June 30, 2018 and 2019:


																Total
																Accumulated
	OTTI			Unrealized									Foreign			Other
	Gains			Gains (Losses)			Cash Flow			Pension			Currency			Comprehensive
	(Losses)			on Investments			Hedges			Liability			Translation			Income (Loss)
(In millions)

Balance, April 1, 2018	$	18		$	386		$	10		$	(753	)	$	(78	)	$	(417	)
Other comprehensive income (loss) before reclassifications, after tax of $1, $45, $0, $0 and $0		(1	)		(156	)		4						(52	)		(205	)
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $0, $1, $0, $(2) and $0					(3	)					9						6
Other comprehensive income (loss)		(1	)		(159	)		4			9			(52	)		(199	)
Amounts attributable to noncontrolling interests					17						(2	)		5			20
Purchase of Boardwalk Pipelines common units								(1	)		(28	)					(29	)
Balance, June 30, 2018	$	17		$	244		$	13		$	(774	)	$	(125	)	$	(625	)

Balance, April 1, 2019	$	18		$	527		$	(1	)	$	(786	)	$	(148	)	$	(390	)
Other comprehensive income (loss) before reclassifications, after tax of $ (1) , $( 114) , $ 2 , $ 0 and $ 0		(1	)		434			(6	)					3			430
Reclassification of losses from accumulated other comprehensive income, after tax of $ 0 , $ 0 , $ 0 , $( 3) and $ 0		1			2						7						10
Other comprehensive income (loss)		—			436			(6	)		7			3			440
Amounts attributable to noncontrolling interests					(46	)					(1	)					(47	)
Balance, June 30, 2019	$	18		$	917		$	(7	)	$	(780	)	$	(145	)	$	3

Amounts reclassified from AOCI shown above are reported in Net income as follows:


Major Category of AOCI		Affected Line Item

OTTI gains (losses)		Investment gains (losses)
Unrealized gains (losses) on investments		Investment gains (losses)
Cash flow hedges		Operating revenues and other and Operating expenses and other
Pension liability		Operating expenses and other

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																Total
																Accumulated
	OTTI			Unrealized									Foreign			Other
	Gains			Gains (Losses)			Cash Flow			Pension			Currency			Comprehensive
	(Losses)			on Investments			Hedges			Liability			Translation			Income (Loss)
(In millions)

Balance, January 1, 2018, as reported	$	22		$	673		$	-		$	(633	)	$	(88	)	$	(26	)
Cumulative effect adjustment from changes in accounting standards, after tax of $0, $8, $0, $0 and $0		4			98						(130	)					(28	)
Balance, January 1, 2018, as adjusted		26			771			-			(763	)		(88	)		(54	)
Other comprehensive income (loss) before reclassifications, after tax of $3, $150, $(2), $0 and $0		(11	)		(570	)		12						(41	)		(610	)
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $0, $5, $0, $(5) and $0		1			(18	)		2			19						4
Other comprehensive income (loss)		(10	)		(588	)		14			19			(41	)		(606	)
Amounts attributable to noncontrolling interests		1			61						(2	)		4			64
Purchase of Boardwalk Pipelines common units								(1	)		(28	)					(29	)
Balance, June 30, 2018	$	17		$	244		$	13		$	(774	)	$	(125	)	$	(625	)
Balance, January 1, 2019	$	14		$	57		$	5		$	(793	)	$	(163	)	$	(880	)
Other comprehensive income (loss) before reclassifications, after tax of $(2), $( 254) , $ 4 , $ 0 and $ 0		3			955			(12	)		(1	)		20			965
Re classification of losses from accumulated other comprehensive incom e, after tax of $ 0 , $ (1) , $ 0 , $ (5) and $ 0		1			7						16						24
Other comprehensive income (loss)		4			962			(12	)		15			20			989
Amounts attributable to noncontrolling interests					(102	)					(2	)		(2	)		(106	)
Balance, June 30, 2019	$	18		$	917		$	(7	)	$	(780	)	$	(145	)	$	3

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Treasury Stock

The Company repurchased

9.8

million and

15.6

million shares of Loews common stock at an aggregate cost of $

473

million and $

788

million during the six months ended June 30, 2019 and 2018.

9. Revenue from Contracts with Customers

Disaggregation of revenues

–

Revenue from contracts with customers, other than insurance premiums, is reported as

Non-insurance

warranty revenue and within Operating revenues and other on the Consolidated Condensed Statements of Income. The following table presents revenues from contracts with customers disaggregated by revenue type along with the reportable segment and a reconciliation to Operating revenues and other as reported in Note 13:


		Three Months Ended				Six Months Ended
	June 30,					June 30,
		2019		2018		2019		2018
(In millions)

Non-insurance warranty services – CNA Financial		$	285	$	248	$	566	$	486
Contract drilling – Diamond Offshore			216		268		450		564
Transportation and storage of natural gas and NGLs and other services – Boardwalk Pipelines			321		281		660		612
Lodging and related services – Loews Hotels & Co			185		200		365		383
Rigid plastic packaging and recycled resin – Corporate			223		216		437		429
Total revenues from contracts with customers			945		965		1,912		1,988
Other revenues			16		14		34		34
Operating revenues and other		$	961	$	979	$	1,946	$	2,022

Receivables from contracts with customers

– As of June 30, 2019 and December 31, 2018, receivables from contracts with customers were approximately $

400

million and $

434

million and are included within Receivables on the Consolidated Condensed Balance Sheets.

Deferred revenue

– As of June 30, 2019 and December 31, 2018, deferred revenue resulting from contracts with customers was approximately $

3.7

billion and $

3.5

billion and is primarily related to Deferred

non-insurance

warranty revenue as reported on the Consolidated Condensed Balance Sheets. Approximately $

533

million and $

473

million of revenues recognized during the six months ended June 30, 2019 and 2018 were included in deferred revenue as of December 31, 2018 and 2017.

Performance obligations

– As of June 30, 2019, approximately $13.1 billion of estimated operating revenues is expected to be recognized in the future related to outstanding performance obligations. The balance relates primarily to revenues for transportation and storage of natural gas and NGLs at Boardwalk Pipelines and

non-insurance

warranty services at CNA. Approximately $1.1 billion will be recognized during the remaining six months of 2019, $2.0 billion in 2020 and the remainder in following years. The actual timing of recognition may vary due to factors outside of the Company’s control. The Company has elected to exclude variable consideration related entirely to wholly unsatisfied performance obligations and contracts where revenue is recognized based upon the right to invoice the customer. Therefore, the estimated operating revenues exclude contract drilling dayrate revenue at Diamond Offshore and interruptible service contract revenue at Boardwalk Pipelines.

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10. Benefit Plans

The Company and its subsidiaries have several

non-contributory

defined benefit plans and postretirement benefit plans covering eligible employees and retirees.

The following table presents the components of net periodic (benefit) cost for the plans:


	Pension Benefits
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
(In millions)

Service cost	$	1		$	2		$	3		$	4
Interest cost		30			28			59			55
Expected return on plan assets		(40	)		(45	)		(80	)		(90	)
Amortization of unrecognized net loss		12			10			23			21
Settlement charge		2			3			2			7
Net periodic (benefit) cost	$	5		$	(2	)	$	7		$	(3	)

	Other Postretirement Benefits
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
(In millions)

Interest cost							$	1		$	1
Expected return on plan assets	$	(1	)	$	(1	)		(2	)		(2	)
Amortization of unrecognized prior service benefit											(1	)
Net periodic benefit	$	(1	)	$	(1	)	$	(1	)	$	(2	)

11. Legal Proceedings

On May 25, 2018, plaintiffs Tsemach Mishal and Paul Berger (on behalf of themselves and the purported class, “Plaintiffs”) initiated a purported class action in the Court of Chancery of the State of Delaware (the “Court”) against the following defendants: Boardwalk Pipelines, Boardwalk GP, LP (“General Partner”), Boardwalk GP, LLC and Boardwalk Pipelines Holding Corp. (“BPHC”) (together, “Defendants”), regarding the potential exercise by the General Partner of its right to purchase all of the issued and outstanding common units representing limited partnership interests in Boardwalk Pipelines not already owned by the General Partner or its affiliates.

On June

25,

2018, Plaintiffs and Defendants entered into a Stipulation and Agreement of Compromise and Settlement, subject to the approval of the Court (the “Proposed Settlement”). Under the terms of the Proposed Settlement, the lawsuit would be dismissed, and related claims against the Defendants would be released by the Plaintiffs, if BPHC, the sole member of the General Partner, elected to cause the General Partner to exercise its right to purchase the issued and outstanding common units of Boardwalk Pipelines pursuant to Boardwalk

Pipelines’

Third Amended and Restated Agreement of Limited Partnership, as amended (“Limited Partnership Agreement”), within a period specified by the Proposed Settlement. On June

29, 2018, the General Partner elected to exercise its right to purchase all of the issued and outstanding common units representing limited partnership interests in Boardwalk Pipelines not already owned by the General Partner or its affiliates pursuant to the Limited Partnership Agreement within the period specified by the Proposed Settlement. The transaction was completed on July 18, 2018.

On September 28, 2018, the Court denied approval of the Proposed Settlement. On February 11, 2019, a substitute verified class action complaint was filed in this proceeding, among other things, naming the Company as a defendant. In July of 2019, the Court held a hearing on the motion to dismiss and has taken the issue under advisement.

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The Company and its subsidiaries are from time to time parties to other litigation arising in the ordinary course of business. While it is difficult to predict the outcome or effect of any such litigation, management does not believe that the outcome of any such pending litigation will materially affect the Company’s results of operations or equity.

12. Commitments and Contingencies

CNA Guarantees

In the course of selling business entities and assets to third parties, CNA indemnified purchasers for certain losses, some of which are not limited by a contractual monetary amount. As of June 30, 2019, CNA had outstanding unlimited indemnifications that included tax liabilities arising prior to a purchaser’s ownership of an entity or asset, defects in title at the time of sale, employee claims arising prior to closing and in some cases losses arising from certain litigation and undisclosed liabilities. Certain provisions of the indemnification agreements survive indefinitely while others survive until the applicable statutes of limitation expire, or until the agreed upon contract terms expire.

CNA also provided guarantees, if the primary obligor fails to perform, to holders of structured settlement annuities provided by a previously owned subsidiary. As of June 30, 2019, the potential amount of future payments CNA could be required to pay under these guarantees was approximately $1.7 billion, which will be paid over the lifetime of the annuitants. CNA does not believe any payment is likely under these guarantees, as CNA is the beneficiary of a trust that must be maintained at a level that approximates the discounted reserves for these annuities.

13. Segments

The Company has

five

reportable segments comprised of

four

individual operating subsidiaries, CNA, Diamond Offshore, Boardwalk Pipelines and Loews Hotels & Co; and the Corporate segment, which includes operations of Consolidated Container. Each of the operating subsidiaries is headed by a chief executive officer who is responsible for the operation of its business and has the duties and authority commensurate with that position. For additional disclosures regarding the composition of the Company’s segments, see Note 20 of the Consolidated Financial Statements in the Company’s Annual Report on Form

10-K

for the year ended December 31, 2018.

The following tables present the reportable segments of the Company and their contribution to the Consolidated Condensed Statements of Income. Amounts presented will not necessarily be the same as those in the individual financial statements of the Company’s subsidiaries due to adjustments for purchase accounting, income taxes and noncontrolling interests.

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

Three Months Ended June 30, 2019	CNA Financial			Diamond Offshore			Boardwalk Pipelines			Loews Hotels & Co			Corporate			Total
(In millions)

Revenues:

Insurance premiums	$	1,824														$	1,824
Net investment income		515		$	2					$	1		$	33			551
Investment gains		2															2
Non-insurance warranty revenue		285															285
Operating revenues and other		4			222		$	327			185			223			961
Total		2,630			224			327			186			256			3,623

Expenses:

Insurance claims and policyholders’ benefits		1,352															1,352
Amortization of deferred acquisition costs		338															338
Non-insurance warranty expense		263															263
Operating expenses and other		279			335			209			163			245			1,231
Interest		55			31			46			5			27			164
Total		2,287			366			255			168			272			3,348
Income (loss) before income tax		343			(142	)		72			18			(16	)		275
Income tax (expense) benefit		(64	)		36			(19	)		(6	)		3			(50	)
Net income (loss)		279			(106	)		53			12			(13	)		225
Amounts attributable to noncontrolling interests		(30	)		54												24
Net income (loss) attributable to Loews Corporation	$	249		$	(52	)	$	53		$	12		$	(13	)	$	249

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Three Months Ended June 30, 2018	CNA Financial			Diamond Offshore			Boardwalk Pipelines			Loews Hotels & Co			Corporate			Total
(In millions)

Revenues:

Insurance premiums	$	1,815														$	1,815
Net investment income		506		$	2					$	1		$	42			551
Investment losses		(3	)														(3	)
Non-insurance warranty revenue		248															248
Operating revenues and other		8			269		$	285			200			217			979
Total		2,574			271			285			201			259			3,590

Expenses:

Insurance claims and policyholders’ benefits		1,327															1,327
Amortization of deferred acquisition costs		359															359
Non-insurance warranty expense		225															225
Operating expenses and other		299			320			203			169			238			1,229
Interest		35			30			43			8			27			143
Total		2,245			350			246			177			265			3,283
Income (loss) before income tax		329			(79	)		39			24			(6	)		307
Income tax (expense) benefit		(60	)		10			(2	)		(7	)					(59	)
Net income (loss)		269			(69	)		37			17			(6	)		248
Amounts attributable to noncontrolling interests		(29	)		32			(21	)								(18	)
Net income (loss) attributable to Loews Corporation	$	240		$	(37	)	$	16		$	17		$	(6	)	$	230

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Six Months Ended June 30, 2019	CNA Financial			Diamond Offshore			Boardwalk Pipelines			Loews Hotels & Co			Corporate			Total
(In millions)

Revenues:

Insurance premiums	$	3,627														$	3,627
Net investment income		1,086		$	4					$	1		$	117			1,208
Investment gains		33															33
Non-insurance warranty revenue		566															566
Operating revenues and other		13			456		$	673			365			439			1,946
Total		5,325			460			673			366			556			7,380

Expenses:

Insurance claims and policyholders’ benefits		2,709															2,709
Amortization of deferred acquisition costs		680															680
Non-insurance warranty expense		523															523
Operating expenses and other		563			618			404			319			476			2,380
Interest		89			61			91			10			54			305
Total		4,564			679			495			329			530			6,597
Income (loss) before income tax		761			(219	)		178			37			26			783
Income tax (expense) benefit		(141	)		42			(46	)		(12	)		(5	)		(162	)
Net income (loss)		620			(177	)		132			25			21			621
Amounts attributable to noncontrolling interests		(66	)		88												22
Net income (loss) attributable to Loews Corporation	$	554		$	(89	)	$	132		$	25		$	21		$	643

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Six Months Ended June 30, 2018	CNA Financial			Diamond Offshore			Boardwalk Pipelines			Loews Hotels & Co			Corporate			Total
(In millions)

Revenues:

Insurance premiums	$	3,600														$	3,600
Net investment income		996		$	4					$	1		$	56			1,057
Investment gains		6															6
Non-insurance warranty revenue		486															486
Operating revenues and other		21			566		$	622			383			430			2,022
Total		5,109			570			622			384			486			7,171
Expenses:

Insurance claims and policyholders’ benefits		2,666															2,666
Amortization of deferred acquisition costs		655															655
Non-insurance warranty expense		441															441
Operating expenses and other		601			616			401			325			470			2,413
Interest		70			58			87			15			54			284
Total		4,433			674			488			340			524			6,459
Income (loss) before income tax		676			(104	)		134			44			(38	)		712
Income tax (expense) benefit		(115	)		54			(14	)		(14	)		5			(84	)
Net income (loss)		561			(50	)		120			30			(33	)		628
Amounts attributable to noncontrolling interests		(60	)		23			(68	)								(105	)
Net income (loss) attributable to Loews Corporation	$	501		$	(27	)	$	52		$	30		$	(33	)	$	523

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with our Consolidated Condensed Financial Statements included under Item 1 of this Report, Risk Factors included under Part II, Item 1A of this Report, Risk Factors included in our Quarterly Report on Form

10-Q

for the quarter ended March 31, 2019 and the Consolidated Financial Statements, Risk Factors, and MD&A included in our Annual Report on Form

10-K

for the year ended December 31, 2018. This MD&A is comprised of the following sections:


	Page No.
Overview		36
Results of Operations		37
Consolidated Financial Results		37
CNA Financial		38
Diamond Offshore		44
Boardwalk Pipelines		46
Loews Hotels & Co		48
Corporate		48
Liquidity and Capital Resources		49
Parent Company		49
Subsidiaries		50
Investments		51
Critical Accounting Estimates		55
Accounting Standards Update		55
Forward-Looking Statements		55

OVERVIEW

We are a holding company and have five reportable segments comprised of four individual operating subsidiaries, CNA Financial Corporation (“CNA”), Diamond Offshore Drilling, Inc. (“Diamond Offshore”), Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”) and Loews Hotels Holding Corporation (“Loews Hotels & Co”); and the Corporate segment. The operations of Consolidated Container Company LLC (“Consolidated Container”) are included in the Corporate segment. Each of our operating subsidiaries is headed by a chief executive officer who is responsible for the operation of its business and has the duties and authority commensurate with that position.

We rely upon our invested cash balances and distributions from our subsidiaries to generate the funds necessary to meet our obligations and to declare and pay any dividends to our shareholders. The ability of our subsidiaries to pay dividends is subject to, among other things, the availability of sufficient earnings and funds in such subsidiaries, applicable state laws, including in the case of the insurance subsidiaries of CNA, laws and rules governing the payment of dividends by regulated insurance companies (see Note 14 of the Consolidated Financial Statements in our Annual Report on Form

10-K

for the year ended December 31, 2018) and compliance with covenants in their respective loan agreements. Claims of creditors of our subsidiaries will generally have priority as to the assets of such subsidiaries over our claims and those of our creditors and shareholders.

Unless the context otherwise requires, references in this Report to “Loews Corporation,” “the Company,” “Parent Company,” “we,” “our,” “us” or like terms refer to the business of Loews Corporation excluding its subsidiaries.

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RESULTS OF OPERATIONS

Consolidated Financial Results

The following table summarizes net income (loss) attributable to Loews Corporation by segment and net income per share attributable to Loews Corporation for the three and six months ended June 30, 2019 and 2018:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(In millions, except per share data)

CNA Financial	$	249		$	240		$	554		$	501
Diamond Offshore		(52	)		(37	)		(89	)		(27	)
Boardwalk Pipelines		53			16			132			52
Loews Hotels & Co		12			17			25			30
Corporate		(13	)		(6	)		21			(33	)
Net income attributable to Loews Corporation	$	249		$	230		$	643		$	523


Basic net income per share	$	0.82		$	0.72		$	2.10		$	1.62


Diluted net income per share	$	0.82		$	0.72		$	2.09		$	1.61

Net income attributable to Loews Corporation for the three months ended June 30, 2019 was $249 million, or $0.82 per share, compared to $230 million, or $0.72 per share in the comparable 2018 period. Net income attributable to Loews Corporation for the six months ended June 30, 2019 was $643 million, or $2.09 per share, compared to $523 million, or $1.61 per share in the comparable 2018 period.

Net income for the three months ended June 30, 2019 increased as compared with the prior year period due to higher earnings at CNA and Boardwalk Pipelines partially offset by lower results at Diamond Offshore and less Parent Company net investment income. Net income for the six months ended June 30, 2019 increased as compared with the prior year period due to higher earnings at CNA and Boardwalk Pipelines as well as higher Parent Company net investment income, partially offset by lower results at Diamond Offshore.

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CNA Financial

The following table summarizes the results of operations for CNA for the three and six months ended June 30, 2019 and 2018 as presented in Note 13 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report. For further discussion of Net investment income and Net investment gains (losses), see the Investments section of this MD&A.


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(In millions)

Revenues:
Insurance premiums	$	1,824		$	1,815		$	3,627		$	3,600
Net investment income		515			506			1,086			996
Investment gains (losses)		2			(3	)		33			6
Non-insurance warranty revenue		285			248			566			486
Other revenues		4			8			13			21
Total		2,630			2,574			5,325			5,109
Expenses:
Insurance claims and policyholders’ benefits		1,352			1,327			2,709			2,666
Amortization of deferred acquisition costs		338			359			680			655
Non-insurance warranty expense		263			225			523			441
Other operating expenses		279			299			563			601
Interest		55			35			89			70
Total		2,287			2,245			4,564			4,433
Income before income tax		343			329			761			676
Income tax expense		(64	)		(60	)		(141	)		(115	)
Net income		279			269			620			561
Amounts attributable to noncontrolling interests		(30	)		(29	)		(66	)		(60	)
Net income attributable to Loews Corporation	$	249		$	240		$	554		$	501

Three Months Ended June 30, 2019 Compared to 2018

Net income attributable to Loews Corporation increased $9 million for the three months ended June 30, 2019 as compared with the 2018 period. Net income increased due to favorable persistency in the long term care business and the absence of costs incurred in 2018 associated with the transition to a new IT infrastructure service provider. These increases were partially offset by lower favorable net prior year loss reserve development and a $15 million charge (after tax and noncontrolling interests) related to the early retirement of debt.

Six Months Ended June 30, 2019 Compared to 2018

Net income attributable to Loews Corporation increased $53 million for the six months ended June 30, 2019 as compared with the 2018 period. Net income increased due to higher net investment income driven by limited partnership and common stock returns and higher net investment gains, partially offset by lower underwriting income reflecting higher catastrophe losses and lower favorable net prior year loss reserve development, as well as the charge for the early retirement of debt as discussed above. In addition, there was adverse prior year reserve development recorded for the six months ended June 30, 2018 under the 2010 asbestos and environmental pollution (“A&EP”) loss portfolio transfer as further discussed in Note 5 of the Notes to Consolidated Condensed Financial Statements included under Item 1. Earnings in 2019 also benefited from favorable persistency in the long term care business.

CNA’s Property & Casualty and Other Insurance Operations

CNA’s commercial property and casualty insurance operations (“Property & Casualty Operations”) include its Specialty, Commercial and International lines of business. CNA’s Other Insurance Operations outside of Property & Casualty Operations include its long term care business that is in

run-off,

certain corporate expenses, including interest on CNA’s corporate debt, and certain property and casualty businesses in

run-off,

including CNA Re and A&EP. CNA’s products and services are primarily marketed through independent agents, brokers and managing general underwriters to a wide variety of customers, including small, medium and large businesses, insurance companies, associations, professionals and other groups. We believe the presentation of CNA as one reportable segment is appropriate in accordance with applicable accounting standards on segment reporting. However, for purposes of this

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discussion and analysis of the results of operations, we provide greater detail with respect to CNA’s Property & Casualty Operations and Other Insurance Operations to enhance the reader’s understanding and to provide further transparency into key drivers of CNA’s financial results.

In assessing CNA’s insurance operations, the Company utilizes the core income (loss) financial measure. Core income (loss) is calculated by excluding from net income (loss) (i) net investment gains or losses, (ii) income or loss from discontinued operations, (iii) any cumulative effects of changes in accounting guidance and (iv) deferred tax asset and liability remeasurement as a result of an enacted U.S. federal tax rate change. In addition, core income (loss) excludes the effects of noncontrolling interests. The calculation of core income (loss) excludes net investment gains or losses because net investment gains or losses are generally driven by economic factors that are not necessarily consistent with key drivers of underwriting performance, and are therefore not considered an indication of trends in insurance operations. Core income (loss) is deemed to be a

non-GAAP

financial measure and management believes this measure is useful to investors as management uses this measure to assess financial performance.

Property & Casualty Operations

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

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The following tables summarize the results of CNA’s Property & Casualty Operations for the three and six months ended June 30, 2019 and 2018:


Three Months Ended June 30, 2019	Specialty			Commercial			International			Total
(In millions, except %)

Net written premiums	$	713		$	912		$	249		$	1,874
Net earned premiums		688			763			243			1,694
Net investment income		134			154			15			303
Core income		161			120			17			298

Other performance metrics:
Loss and loss adjustment expense ratio		57.4	%		66.5	%		60.2	%		61.9	%
Expense ratio		33.1			32.6			37.3			33.4
Dividend ratio		0.2			0.6						0.4
Combined ratio		90.7	%		99.7	%		97.5	%		95.7	%


Rate		4	%		3	%		7	%		4	%
Renewal premium change		5			5			8			5
Retention		88			85			67			83
New business	$	97		$	186		$	75		$	358

Three Months Ended June 30, 2018

Net written premiums	$	688		$	810		$	271		$	1,769
Net earned premiums		683			753			248			1,684
Net investment income		130			157			15			302
Core income (loss)		183			143			(7	)		319

Other performance metrics:
Loss and loss adjustment expense ratio		54.6	%		62.4	%		66.8	%		59.9	%
Expense ratio		32.0			33.5			37.9			33.5
Dividend ratio		0.2			0.7						0.4
Combined ratio		86.8	%		96.6	%		104.7	%		93.8	%


Rate		2	%		1	%		3	%		1	%
Renewal premium change		5			4			5			4
Retention		83			86			77			83
New business	$	93		$	157		$	82		$	332

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Six Months Ended June 30, 2019	Specialty			Commercial			International			Total
(In millions, except %)

Net written premiums	$	1,411		$	1,761		$	508		$	3,680
Net earned premiums		1,349			1,526			493			3,368
Net investment income		289			344			30			663
Core income		330			259			23			612

Other performance metrics:
Loss and loss adjustment expense ratio		58.3	%		66.7	%		62.5	%		62.7	%
Expense ratio		33.0			33.2			37.2			33.7
Dividend ratio		0.2			0.6						0.4
Combined ratio		91.5	%		100.5	%		99.7	%		96.8	%


Rate		4	%		2	%		6	%		3	%
Renewal premium change		4			4			3			4
Retention		89			85			67			83
New business	$	183		$	350		$	155		$	688

Six Months Ended June 30, 2018

Net written premiums	$	1,374		$	1,642		$	566		$	3,582
Net earned premiums		1,355			1,496			484			3,335
Net investment income		252			306			29			587
Core income		354			276			16			646

Other performance metrics:
Loss and loss adjustment expense ratio		55.4	%		62.7	%		63.7	%		59.9	%
Expense ratio		31.6			33.4			37.1			33.2
Dividend ratio		0.2			0.7						0.4
Combined ratio		87.2	%		96.8	%		100.8	%		93.5	%


Rate		2	%		1	%		3	%		2	%
Renewal premium change		5			5			5			5
Retention		84			85			81			84
New business	$	173		$	339		$	175		$	687

Three Months Ended June 30, 2019 Compared to 2018

Total net written premiums increased $105 million for the three months ended June 30, 2019 as compared with the 2018 period. Net written premiums for Commercial increased $102 million for the three months ended June 30, 2019 as compared with the 2018 period driven by higher new business and favorable rate. The increase in net earned premiums was consistent with the trend in net written premiums in recent quarters for Commercial for the three months ended June 30, 2019. Net written premiums for Specialty increased $25 million for the three months ended June 30, 2019 as compared with the same period in 2018 driven by higher new business, strong retention and favorable rate. The increase in net earned premiums was consistent with the trend in net written premiums in recent quarters for Specialty for the three months ended June 30, 2019. Net written premiums for International decreased $22 million for the three months ended June 30, 2019 as compared with the 2018 period. Excluding the effect of foreign currency exchange rates, net written premiums decreased $11 million, or 4%, for the three months ended June 30, 2019 as compared with the 2018 period driven by the strategic exit from certain Hardy business classes in the fourth quarter of 2018. The decrease in net earned premiums was consistent with the trend in net written premiums in recent quarters for International for the three months ended June 30, 2019.

Core income decreased $21 million for the three months ended June 30, 2019 as compared with the 2018 period primarily due to higher net catastrophe losses and lower favorable net prior year loss reserve development.

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Net catastrophe losses were $38 million for the three months ended June 30, 2019 as compared with $26 million in the 2018 period. For the three months ended June 30, 2019 and 2018, Specialty had net catastrophe losses of $1 million and $3 million, Commercial had net catastrophe losses of $37 million and $19 million, and International had net catastrophe losses of less than $1 million and $4 million.

Favorable net prior year loss reserve development of $31 million and $59 million was recorded for the three months ended June 30, 2019 and 2018. For the three months ended June 30, 2019 and 2018, Specialty recorded favorable net prior year loss reserve development of $18 million and $44 million and Commercial recorded favorable net prior year loss reserve development of $12 million and $13 million. For the three months ended June 30, 2019 and 2018, International recorded favorable net prior year loss reserve development of $1 million and $2 million. Further information on net prior year loss reserve development is included in Note 5 of the Notes to Consolidated Condensed Financial Statements included under Item 1.

Specialty’s combined ratio increased 3.9 points for the three months ended June 30, 2019 as compared with the 2018 period. The loss ratio increased 2.8 points primarily due to lower favorable net prior year loss reserve development. The expense ratio increased 1.1 points for the three months ended June 30, 2019 as compared with the same period in 2018 driven by higher employee costs and acquisition expenses.

Commercial’s combined ratio increased 3.1 points for the three months ended June 30, 2019 as compared to the 2018 period. The loss ratio increased 4.1 points driven by higher net catastrophe losses and unfavorable retrospective premium development. The expense ratio for the three months ended June 30, 2019 improved 0.9 points as compared with the 2018 period driven by lower acquisition expenses.

International’s combined ratio improved 7.2 points for the three months ended June 30, 2019 as compared with the 2018 period. The loss ratio improved 6.6 points, primarily driven by a lower number of large property losses, mainly in Canada, and lower net catastrophe losses. The expense ratio improved 0.6 points for the three months ended June 30, 2019 as compared with the 2018 period driven by lower employee costs.

Six Months Ended June 30, 2019 Compared to 2018

Total net written premiums increased $98 million for the six months ended June 30, 2019 as compared with the 2018 period. Net written premiums for Commercial increased $119 million for the six months ended June 30, 2019 as compared with the 2018 period driven by higher new business partially offset by a higher level of ceded reinsurance. The increase in net earned premiums for Commercial for the six months ended June 30, 2019 was consistent with the trend in net written premiums in recent quarters. Net written premiums for Specialty increased $37 million for the six months ended June 30, 2019 as compared with the same period in 2018 driven by higher new business, strong retention and favorable rate. The decrease in net earned premiums for Specialty for the six months ended June 30, 2019 was consistent with the trend in net written premiums in recent quarters. Net written premiums for International decreased $58 million for the six months ended June 30, 2019 as compared with the 2018 period. Excluding the effect of foreign currency exchange rates, net written premiums decreased $34 million, or 6%, for the six months ended June 30, 2019 as compared with the 2018 period driven by the strategic exit from certain Hardy business classes in the fourth quarter of 2018. The increase in net earned premiums for International for the six months ended June 30, 2019 was consistent with the trend in net written premiums in recent quarters.

Core income decreased $34 million for the six months ended June 30, 2019 as compared with the 2018 period primarily due to unfavorable underwriting results, partially offset by higher net investment income driven by higher limited partnership and common stock returns.

Net catastrophe losses were $96 million for the six months ended June 30, 2019 as compared with $60 million in the 2018 period. For the six months ended June 30, 2019 and 2018, Specialty had net catastrophe losses of $13 million and $6 million, Commercial had net catastrophe losses of $77 million and $48 million and International had net catastrophe losses of $6 million in each year.

Favorable net prior year loss reserve development of $45 million and $98 million was recorded for the six months ended June 30, 2019 and 2018. For the six months ended June 30, 2019 and 2018, Specialty recorded favorable net prior year loss reserve development of $38 million and $74 million, Commercial recorded favorable net prior year loss reserve development of $20 million and $22 million and International recorded unfavorable net prior year loss reserve development of $13 million and favorable net prior year loss reserve development of $2 million. Further information on net prior year loss reserve development is included in Note 5 of the Notes to Consolidated Condensed Financial Statements included under Item 1.

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Specialty’s combined ratio increased 4.3 points for the six months ended June 30, 2019 as compared with the 2018 period. The loss ratio increased 2.9 points primarily due to lower favorable net prior year loss reserve development. The expense ratio increased 1.4 points for the six months ended June 30, 2019 as compared with the same period in 2018 driven by higher employee costs and acquisition expenses.

Commercial’s combined ratio increased 3.7 points for the six months ended June 30, 2019 as compared to the 2018 period. The loss ratio increased 4.0 points driven by the current accident year. The expense ratio for the six months ended June 30, 2019 improved 0.2 points as compared with the 2018 period.

International’s combined ratio improved 1.1 points for the six months ended June 30, 2019 as compared with the 2018 period. The loss ratio improved 1.2 points, driven by a lower number of large property losses mainly in Canada, partially offset by unfavorable net prior year loss reserve development in the current year period. The expense ratio was largely consistent for the six months ended June 30, 2019 as compared with the 2018 period.

Other Insurance Operations

The following table summarizes the results of CNA’s Other Insurance Operations for the three and six months ended June 30, 2019 and 2018:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019		2018
(In millions)

Net earned premiums	$	130		$	131		$	260	$	265
Net investment income		212			204			423		409
Core loss		(4	)		(49	)		-		(95	)

Three Months Ended June 30, 2019 Compared to 2018

Core loss was $4 million for the three months ended June 30, 2019, an improvement of $45 million as compared with the 2018 period. The 2018 period included

non-recurring

costs of $23 million associated with the transition to a new IT infrastructure service provider. Persistency within the long term care business for the three months ended June 30, 2019 continues to benefit from a higher than expected number of policyholders choosing to lapse coverage or reduce benefits in lieu of premium rate increases. The favorable persistency trend in the prior year period was offset when a significant number of policies converted to a fully

paid-up

status with modest future benefits following the termination of a large group account. The reserves associated with these converted policies were, on average, slightly higher than the previously recorded carried reserves, resulting in a negative financial impact for the three months ended June 30, 2018. Morbidity continues to trend in line with expectations.

Six Months Ended June 30, 2019 Compared to 2018

Core results improved $95 million for the six months ended June 30, 2019 as compared with the 2018 period. The drivers of core income for the six month period were generally consistent with the three month discussion above. In addition, the 2018 period included adverse net prior year reserve development for A&EP under the loss portfolio transfer, as further discussed in Note 5 of the Notes to Consolidated Condensed Financial Statements included under Item 1.

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Non-GAAP

Reconciliation of Core Income (Loss) to Net Income

The following table reconciles core income (loss) to net income attributable to Loews Corporation for the CNA segment for the three and six months ended June 30, 2019 and 2018:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(In millions)

Core income (loss):
Property & Casualty Operations	$	298		$	319		$	612		$	646
Other Insurance Operations		(4	)		(49	)					(95	)
Total core income		294			270			612			551
Investment gains (losses) (after tax)		1			(1	)		24			7
Consolidating adjustments including purchase accounting and noncontrolling interests		(46	)		(29	)		(82	)		(57	)
Net income attributable to Loews Corporation	$	249		$	240		$	554		$	501

Diamond Offshore

Overview

During the second quarter of 2019, the average price for Brent crude oil was in the high

$60-per-barrel

level and overall floater demand and offshore utilization increased marginally, with industry-wide floater utilization averaging near 66% at the end of June 2019, based on industry analyst reports. Within the floater rig class, the ultra-deepwater floaters remain the most distressed asset class, with industry-wide utilization reported at 63% at the end of the second quarter of 2019. In general, dayrates remain low compared to previous periods, as the increase in oil prices from earlier lows has not resulted in significantly higher dayrates. Industry analysts indicate that, based on historical data, utilization rates have had to increase to the 80%-range before pricing power has shifted to the drilling contractor from the customer. Some analysts believe that the offshore contract drilling market will recover over the next two years as additional offshore projects are expected to be sanctioned to replace oil and gas reserves and to meet predicted growing energy demand. However, many of these are expected to be greenfield, or new oil and gas development projects for which drilling does not typically commence until the second, third or fourth year of development. Capital investments in offshore projects will also compete with onshore shale in the U.S.

During the first half of 2019, the number of contract tenders for 2020 and 2021 floater project commencements increased, primarily for work in the North Sea and Australia markets. Industry analysts also predict that there will be additional opportunities in the West Africa market in the near term. Presently, many of these tenders have been limited to single-well jobs, with options for future wells. Although some geographic areas appear to be improving, other markets show little or no sign of recovery at this time.

From a supply perspective, industry analysts have reported that despite a decrease in the global supply of floater rigs over the past four years, the offshore contract drilling market remains oversupplied. Rig attrition has slowed, with only five floaters having been retired during 2019 as of the date of this report. However, recent mergers and acquisitions in the offshore drilling industry could result in additional rig retirements, as drillers assess and optimize their fleets. Industry analysts report that there are approximately 100 cold-stacked floaters, which could potentially be reactivated, but reactivation costs can be substantial and generally increase the longer a rig remains cold stacked. In addition, industry reports indicate that approximately 40 newbuild floaters remain on order with deliveries currently scheduled between 2019 and 2022, most of which have not yet been contracted for future work, and approximately 50 projected contracted floater rollovers are estimated to occur during the remainder of 2019. These factors provide for a continued, challenging offshore drilling market in the near term.

As a result of these challenges, Diamond Offshore and other offshore drillers are actively seeking ways to drive efficiency, reduce

non-productive

time on rigs and provide technical innovation to customers. New rig technology, automation and other operating and supply chain efficiencies are resulting in the faster drilling and completion of wells, leading to lower well costs for customers.

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Contract Drilling Backlog

Diamond Offshore’s contract drilling backlog was $2.0 billion as of July 1, 2019 (based on information available at that time) and January 1, 2019 (the date reported in our Annual Report on Form

10-K

for the year ended December 31, 2018). The contract drilling backlog by year as of July 1, 2019 is $0.5 billion in 2019 (for the

six-month

period beginning July 1, 2019), $0.8 billion in 2020 and an aggregate of $0.7 billion in 2021 through 2023. Contract drilling backlog as of July 1, 2019 excludes future gross margin commitments of $30 million for 2019, approximately $25 million for 2020 and an aggregate $75 million in 2021 through 2023, payable by a customer in the form of a guarantee of gross margin to be earned on future contracts or by direct payment at the end of each of the three respective periods, pursuant to terms of an existing contract.

Diamond Offshore’s contract drilling backlog includes only firm commitments (typically represented by signed contracts) and is calculated by multiplying the contracted operating dayrate by the firm contract period. Diamond Offshore’s calculation also assumes full utilization of its drilling equipment for the contract period (excluding scheduled shipyard and survey days); however, the amount of actual revenue earned and the actual periods during which revenues are earned will be different than the amounts and periods stated above due to various factors affecting utilization such as weather conditions and unscheduled repairs and maintenance. Contract drilling backlog excludes revenues for mobilization, demobilization, contract preparation and customer reimbursables. Changes in Diamond Offshore’s contract drilling backlog between periods are generally a function of the performance of work on term contracts, as well as the extension or modification of existing term contracts and the execution of additional contracts. In addition, under certain circumstances, Diamond Offshore’s customers may seek to terminate or renegotiate its contracts, which could adversely affect its reported backlog.

Results of Operations

The following table summarizes the results of operations for Diamond Offshore for the three and six months ended June 30, 2019 and 2018 as presented in Note 13 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(In millions)

Revenues:
Net investment income	$	2		$	2		$	4		$	4
Contract drilling revenues		207			265			434			553
Other revenues		15			4			22			13
Total		224			271			460			570
Expenses:
Contract drilling expenses		225			189			392			374
Other operating expenses
Impairment of assets					27						27
Other expenses		110			104			226			215
Interest		31			30			61			58
Total		366			350			679			674
Loss before income tax		(142	)		(79	)		(219	)		(104)
Income tax benefit		36			10			42			54
Amounts attributable to noncontrolling interests		54			32			88			23
Net loss attributable to Loews Corporation	$	(52	)	$	(37	)	$	(89	)		$ (27)

Three Months Ended June 30, 2019 Compared to 2018

Contract drilling revenue decreased $58 million for the three months ended June 30, 2019 as compared with the 2018 period, primarily due to lower average daily revenue earned and the effect of fewer revenue earning days, including the impact of downtime for rig maintenance. Contract drilling expense increased $36 million for the three months ended June 30, 2019 as compared with the 2018 period, primarily due to incremental amortization of previously deferred contract preparation and mobilization costs and increased costs for the current fleet for labor and other rig operating costs. These increases were partially offset by reduced costs for a rig which was sold in the second quarter of 2019.

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Net loss attributable to Loews Corporation increased $15 million for the three months ended June 30, 2019 as compared with the 2018 period, reflecting lower margins from contract drilling services, primarily due to lower contract drilling revenues and higher depreciation expense due to capital expenditures since the latter part of 2018 and the completion of software implementation projects. These unfavorable impacts on results were partially offset by a net gain of $5 million (after tax and noncontrolling interests) on the disposition of assets, a favorable tax adjustment of $7 million (after noncontrolling interests) in 2019 related to an uncertain tax position recorded by Diamond Offshore in 2017 and the absence of an impairment charge of $12 million (after tax and noncontrolling interests) recorded in the second quarter of 2018.

Six Months Ended June 30, 2019 Compared to 2018

Contract drilling revenue decreased $119 million for the six months ended June 30, 2019 as compared with the 2018 period, primarily due to lower average daily revenue earned and the effect of fewer revenue earning days. Contract drilling expense increased $18 million for the six months ended June 30, 2019 as compared with the 2018 period, primarily due to incremental amortization of previously deferred contract preparation and mobilization costs and increased rig operating costs for the current fleet. These increases were partially offset by reduced costs for cold-stacked and previously owned rigs, including the sold rig, as well as lower costs for labor and fuel for the current fleet.

Net loss attributable to Loews Corporation increased $62 million for the six months ended June 30, 2019 as compared with the 2018 period, reflecting lower margins from contract drilling services, primarily due to lower contract drilling revenues as well as higher depreciation expense primarily due to recent capital expenditures and the completion of software implementation projects and a lower tax benefit as compared to the prior year period. These unfavorable impacts on results were partially offset by a net gain on the disposition of assets during the six months ended June 30, 2019 and the absence of an impairment charge recognized in the 2018 period.

Boardwalk Pipelines

Firm Agreements

A substantial portion of Boardwalk Pipelines’ transportation and storage capacity is contracted for under firm agreements. For the last twelve months ended June 30, 2019, approximately 88% of Boardwalk Pipelines’ revenues, excluding retained fuel, were derived from fixed fees under firm agreements. Boardwalk Pipelines expects to earn revenues of approximately $10.2 billion from fixed fees under committed firm agreements in place as of June 30, 2019, including agreements for transportation, storage and other services, over the remaining term of those agreements. This amount has increased by approximately $1.1 billion from the comparable amount at December 31, 2018, from contracts entered into during 2019. For Boardwalk Pipelines’ customers that are charged maximum tariff rates related to its Federal Energy Regulatory Commission regulated operating subsidiaries, the revenues expected to be earned from fixed fees under committed firm agreements reflect the current tariff rate for such services for the term of the agreements, however, the tariff rates may be subject to future adjustment. The estimated revenues from fixed fees under committed firm agreements may include estimated revenues that are anticipated under executed precedent transportation agreements for projects that are subject to regulatory approvals. The revenues expected to be earned from fixed fees under committed firm agreements do not include additional revenues Boardwalk Pipelines has recognized and may recognize under firm agreements based on actual utilization of the contracted pipeline or storage capacity, any expected revenues for periods after the expiration dates of the existing agreements, execution of precedent agreements associated with growth projects or other events that occurred or will occur subsequent to June 30, 2019.

Contract renewals

Each year a portion of Boardwalk Pipelines’ firm transportation and storage agreements expire. Demand for firm service is primarily based on market conditions which can vary across Boardwalk Pipelines’ pipeline systems. The amount of change in firm reservation fees under contract reflects the overall market trends, including the impact from Boardwalk Pipelines’ growth projects. Boardwalk Pipelines focuses its marketing efforts on enhancing the value of the capacity that is up for renewal and works with customers to match gas supplies from various basins to new and existing customers and markets, including aggregating supplies at key locations along its pipelines to provide

end-use

customers with attractive and diverse supply options. If the market perceives the value of Boardwalk Pipelines’ available capacity to be lower than its long-term view of the capacity, Boardwalk Pipelines may seek to shorten contract terms until market perception improves.

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Results of Operations

The following table summarizes the results of operations for Boardwalk Pipelines for the three and six months ended June 30, 2019 and 2018 as presented in Note 13 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(In millions)

Revenues:
Other revenue, primarily operating		$ 327			$ 285			$ 673			$ 622
Total		327			285			673			622
Expenses:
Operating		209			203			404			401
Interest		46			43			91			87
Total		255			246			495			488
Income before income tax		72			39			178			134
Income tax expense		(19	)		(2	)		(46	)		(14	)
Amounts attributable to noncontrolling interests					(21	)					(68	)
Net income attributable to Loews Corporation		$ 53			$ 16			$ 132			$ 52

Three Months Ended June 30, 2019 Compared to 2018

Total revenues increased $42 million for the three months ended June 30, 2019 as compared with the 2018 period. Excluding the net effect of items offset in fuel and transportation expense, primarily retained fuel, and net proceeds of approximately $26 million as a result of drawing on letters of credit due to a customer bankruptcy, operating revenues increased $16 million primarily driven by Boardwalk Pipelines’ recently completed growth projects, partially offset by contract restructuring and contract expirations that were recontracted at overall lower average rates.

Operating expenses increased $6 million for the three months ended June 30, 2019 as compared with the 2018 period. Excluding items offset in operating revenues, operating expenses increased $5 million as compared with the prior year period primarily due to higher depreciation expense and property taxes from an increased asset base from recently completed growth projects.

Net income attributable to Loews Corporation increased $37 million for the three months ended June 30, 2019 as compared with the 2018 period due to the changes discussed above and the impact of the Company now owning 100% of Boardwalk Pipelines.

Six Months Ended June 30, 2019 Compared to 2018

Total revenues increased $51 million for the six months ended June 30, 2019 as compared with the 2018 period. Excluding the net effect of items offset in fuel and transportation expense, primarily retained fuel, and net proceeds of approximately $26 million as a result of drawing on letters of credit due to a customer bankruptcy, operating revenues increased $29 million primarily driven by Boardwalk Pipelines’ recently completed growth projects, partially offset by contract restructuring and contract expirations that were recontracted at overall lower average rates.

Operating expenses increased $3 million for the six months ended June 30, 2019 as compared with the 2018 period. Excluding items offset in operating revenues, operating expenses increased $5 million as compared with the prior year period primarily due to higher depreciation expense and property taxes from an increased asset base from recently completed growth projects.

Net income attributable to Loews Corporation increased $80 million for the six months ended June 30, 2019 as compared with the 2018 period due to the changes discussed above and the impact of the Company now owning 100% of Boardwalk Pipelines.

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Loews Hotels & Co

The following table summarizes the results of operations for Loews Hotels & Co for the three and six months ended June 30, 2019 and 2018 as presented in Note 13 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(In millions)

Revenues:
Operating revenue		$ 159			$ 171			$ 310			$ 324
Revenues related to reimbursable expenses		27			30			56			60
Total		186			201			366			384
Expenses:
Operating		137			139			270			270
Reimbursable expenses		27			30			56			60
Depreciation		15			16			31			33
Equity income from joint ventures		(16	)		(16	)		(38	)		(38	)
Interest		5			8			10			15
Total		168			177			329			340
Income before income tax		18			24			37			44
Income tax expense		(6	)		(7	)		(12	)		(14	)
Net income attributable to Loews Corporation		$ 12			$ 17			$ 25			$ 30

Operating revenues decreased $12 million and $14 million for the three and six months ended June 30, 2019 as compared with the 2018 period primarily due to hotel renovations during the three and six months ended June 30, 2019 and the sale of two owned hotel properties, one of which occurred in the second quarter of 2019 and one of which occurred in the third quarter of 2018.

Operating expenses were mostly flat for the three and six months ended June 30, 2019 as compared with the 2018 periods as a result of the aforementioned sale of the two owned hotel properties, offset by asset impairment charges. Loews Hotels considers events or changes in circumstances that indicate the carrying amount of a long-lived asset may not be recoverable. Operating expenses include an impairment charge of $7 million in the second quarter of 2019 related to the

write-off

of previously capitalized costs due to the change in plans for an owned property and a $4 million impairment charge in the first quarter of 2019 related to the sale of an owned property.

Interest expense decreased $3 million and $5 million for the three and six months ended June 30, 2019 as compared with the 2018 period due to lower average debt balances, changes in effective interest rates as compared with the 2018 period and additional capitalized interest on development projects in progress.

Equity income from joint ventures for the three and six months ended June 30, 2019 was consistent with the 2018 period primarily due to the improved performance of several properties which was offset by

pre-opening

expenses for properties under development of $4 million and $6 million for the three and six months ended June 30, 2019.

Net income decreased $5 million for the three and six months ended June 30, 2019 as compared to the 2018 period due to the changes discussed above.

Corporate

Corporate operations consist primarily of investment income at the Parent Company, operating results of Consolidated Container, corporate interest expenses and other corporate administrative costs. Investment income includes earnings on cash and short term investments held at the Parent Company to meet current and future liquidity needs, as well as results of limited partnership investments and the Parent Company trading portfolio.

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The following table summarizes the results of operations for Corporate for the three and six months ended June 30, 2019 and 2018 as presented in Note 13 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(In millions)

Revenues:
Net investment income		$ 33			$ 42			$ 117			$ 56
Other revenues		223			217			439			430
Total		256			259			556			486
Expenses:
Operating and other		245			238			476			470
Interest		27			27			54			54
Total		272			265			530			524
Income (loss) before income tax		(16	)		(6	)		26			(38	)
Income tax (expense) benefit		3						(5	)		5
Net income (loss) attributable to Loews Corporation		$ (13	)		$ (6	)		$ 21			$ (33	)

Net investment income decreased $9 million for the three months ended June 30, 2019 as compared with the 2018 period primarily due to lower income from limited partnership investments as a result of lower invested balances, partially offset by improved performance of equity based investments in the Parent Company trading portfolio. Net investment income increased $61 million for the six months ended June 30, 2019 as compared with the 2018 period primarily due to improved performance of equity based investments in the Parent Company trading portfolio, partially offset by lower income from limited partnership investments.

Other revenues increased $6 million and $9 million for the three and six months ended June 30, 2019 as compared with the 2018 periods, reflecting an increase in Consolidated Container’s operations related to acquisitions in 2018 and 2019. Operating and other expenses increased $7 million and $6 million for the three and six months ended June 30, 2019 as compared with the 2018 periods, primarily due to acquisition related costs and higher operating personnel expenses at Consolidated Container, partially offset by lower corporate overhead expenses.

Net results decreased $7 million and improved $54 million for the three and six months ended June 30, 2019 as compared with the 2018 periods primarily due to the changes discussed above.

LIQUIDITY AND CAPITAL RESOURCES

Parent Company

Parent Company cash and investments, net of receivables and payables, totaled $3.5 billion at June 30, 2019 as compared to $3.1 billion at December 31, 2018. During the six months ended June 30, 2019, we received $706 million in dividends from our subsidiaries, including a special dividend from CNA of $485 million. Cash inflows also included $161 million from Loews Hotels & Co. Cash outflows included the payment of $478 million to fund treasury stock purchases and $38 million of cash dividends to our shareholders. As a holding company we depend on dividends from our subsidiaries and returns on our investment portfolio to fund our obligations. We also have an effective registration statement on file with the Securities and Exchange Commission (“SEC”) registering the future sale of an unlimited amount of our debt and equity securities. We are not responsible for the liabilities and obligations of our subsidiaries and there are no Parent Company guarantees.

As of July 26, 2019, there were 302,380,038 shares of Loews common stock outstanding. Depending on market and other conditions, we may purchase our shares and shares of our subsidiaries outstanding common stock in the open market or otherwise. During the six months ended June 30, 2019, we purchased 9.8 million shares of Loews common stock. As of August 2, 2019, we had purchased an additional 0.4 million shares of Loews common stock in 2019 at an aggregate cost of $23 million.

Future uses of our cash may include investing in our subsidiaries, new acquisitions, dividends and/or repurchases of our and our subsidiaries’ outstanding common stock. The declaration and payment of future dividends to holders of our common stock will be at the discretion of our Board of Directors and will depend on many factors, including our earnings, financial condition and business needs.

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Subsidiaries

CNA’s cash provided by operating activities was $514 million for the six months ended June 30, 2019 as compared with $354 million for the 2018 period. The increase in cash provided by operating activities was driven by a higher level of distributions on limited partnerships and lower income taxes paid. CNA believes that its present cash flows from operating, investing and financing activities are sufficient to fund its current and expected working capital and debt obligation needs.

CNA declared and paid dividends of $2.70 per share on its common stock, including a special dividend of $2.00 per share, during the six months ended June 30, 2019. On August 2, 2019, CNA’s Board of Directors declared a quarterly dividend of $0.35 per share on its common stock, payable September 5, 2019 to shareholders of record on August 19, 2019. CNA’s declaration and payment of future dividends is at the discretion of its Board of Directors and will depend on many factors, including CNA’s earnings, financial condition, business needs and regulatory constraints.

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

Dividends from the Continental Casualty Company (“CCC”), a subsidiary of CNA, 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 (“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 the 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, 2019, CCC was in a positive earned surplus position. The maximum allowable dividend CCC could pay during 2019 that would not be subject to the Department’s prior approval is approximately $1.4 billion, less dividends paid during the preceding twelve months measured at that point in time. CCC paid dividends of $256 million during the six months ended December 31, 2018 and $805 million during the six months ended June 30, 2019. As of June 30, 2019, CCC is able to pay approximately $322 million of dividends that would not be subject to prior approval of the Department. 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.

Diamond Offshore’s cash provided by operating activities for the six months ended June 30, 2019 decreased $134 million compared to the 2018 period, due to lower cash collected from the performance of contract drilling services and higher cash expenditures for interest and income tax payments, net of refunds, partially offset by a net decrease in cash expenditures related to contract drilling and general and administrative costs.

Diamond Offshore expects capital expenditures in 2019 to be approximately $360 million to $380 million for projects under its capital maintenance and replacement programs, including equipment upgrades for the

Ocean BlackHawk

Ocean BlackHornet

and

Ocean Courage

and other large shipyard projects. In addition, other specific projects for 2019 include approximately $110 million in capitalized costs associated with the reactivation and upgrade of the

Ocean Onyx

and approximately $20 million associated with the reactivation of the

Ocean Endeavor.

At June 30, 2019, Diamond Offshore has no significant purchase obligations, except for those related to its direct rig operations, which arise during the normal course of business.

As of July 26, 2019, Diamond Offshore had $1.2 billion available under its credit agreements.

Diamond Offshore will make periodic assessments of its capital spending programs based on industry conditions and will make adjustments if it determines they are required. Diamond Offshore, may, from time to time, issue debt or equity securities, or a combination thereof, to finance capital expenditures, the acquisition of assets and businesses or for general corporate purposes. Diamond Offshore has an effective shelf registration statement under which it may publicly issue debt, equity or hybrid securities from time to time. Diamond Offshore’s ability to access the capital markets by issuing debt or equity securities will be dependent on its results of operations, current financial condition, current credit ratings, current market conditions and other factors beyond its control.

Boardwalk Pipelines’ cash provided by operating activities increased $72 million for the six months ended June 30, 2019 compared to the 2018 period primarily due to the change in net income and the timing of receivables.

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For the six months ended June 30, 2019 and 2018, Boardwalk Pipelines’ capital expenditures were $168 million and $229 million, consisting of a combination of growth and maintenance capital. During the six months ended June 30, 2019, Boardwalk Pipelines purchased $12 million of natural gas to be used as base gas for its pipeline system.

As of June 30, 2019, Boardwalk Pipelines had no outstanding borrowings under its credit facility. Boardwalk Pipelines anticipates that its existing capital resources, including its revolving credit facility and cash flows from operating activities, will be adequate to fund its operations for 2019. Boardwalk Pipelines may seek to access the debt markets to fund some or all capital expenditures for growth projects, acquisitions or for general corporate purposes. Boardwalk Pipelines has an effective shelf registration statement under which it may publicly issue debt securities, warrants or rights from time to time.

Boardwalk Pipelines paid distributions of $51 million for the six months ended June 30, 2019 and 2018. The Company received distributions of $51 million and $26 million for the six months ended June 30, 2019 and 2018. The distributions received in 2019 reflect the Company owning 100% of Boardwalk Pipelines as compared to 51% in the 2018 period.

Consolidated Container paid approximately $260 million to complete three acquisitions of plastic packaging manufacturers located in the U.S. and Canada, funded with approximately $250 million of debt financing proceeds and available cash, see Notes 2 and 7 for further discussion.

INVESTMENTS

Investment activities of

non-insurance

subsidiaries primarily include investments in fixed income securities, including short term investments. The Parent Company portfolio also includes equity securities, including short sales and derivative instruments, and investments in limited partnerships. These types of investments generally present greater volatility, less liquidity and greater risk than fixed income investments and are included within Results of Operations – Corporate.

We enter into short sales and invest in certain derivative instruments that are used for asset and liability management activities, income enhancements to our portfolio management strategy and to benefit from anticipated future movements in the underlying markets. If such movements do not occur as anticipated, then significant losses may occur. Monitoring procedures include senior management review of daily reports of existing positions and valuation fluctuations to seek to ensure that open positions are consistent with our portfolio strategy.

Credit exposure associated with

non-performance

by counterparties to our derivative instruments is generally limited to the uncollateralized change in fair value of the derivative instruments recognized in the Consolidated Condensed Balance Sheets. We mitigate the risk of

non-performance

by monitoring the creditworthiness of counterparties and diversifying derivatives by using multiple counterparties. We occasionally require collateral from our derivative investment counterparties depending on the amount of the exposure and the credit rating of the counterparty.

Insurance

CNA maintains a large portfolio of fixed maturity and equity securities, including large amounts of corporate and government issued debt securities, residential and commercial mortgage-backed securities, and other asset-backed securities and investments in limited partnerships which pursue a variety of long and short investment strategies across a broad array of asset classes. CNA’s investment portfolio supports its obligation to pay future insurance claims and provides investment returns which are an important part of CNA’s overall profitability.

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Net Investment Income

The significant components of CNA’s net investment income are presented in the following table. Fixed income securities, as presented, include both fixed maturity securities and

non-redeemable

preferred stock.


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(In millions)

Fixed income securities:
Taxable fixed income securities		$ 385			$ 354			$ 768			$ 704
Tax-exempt fixed income securities		80			100			162			205
Total fixed income securities		465			454			930			909
Limited partnership and common stock investments		43			42			139			73
Other, net of investment expense		7			10			17			14
Pretax net investment income		$ 515			$ 506			$ 1,086			$ 996

Fixed income securities after tax and noncontrolling interests		$ 341			$ 335			$ 681			$ 672

Net investment income after tax and noncontrolling interests		$ 376			$ 372			$ 791			$ 734


Effective income yield for the fixed income securities portfolio, before tax		4.8	%		4.7	%		4.8	%		4.7	%
Effective income yield for the fixed income securities portfolio, after tax		3.9	%		3.9	%		3.9	%		3.9	%
Limited partnership and common stock return		2.1	%		1.8	%		6.8	%		3.0	%

Net investment income after tax and noncontrolling interests for the three months ended June 30, 2019 increased $4 million as compared with the 2018 period, driven by fixed income securities. Net investment income after tax and noncontrolling interests increased $57 million for the six months ended June 30, 2019 as compared with the 2018 period, driven by limited partnership and common stock returns.

Net Investment Gains (Losses)

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
(In millions)

Investment gains (losses):
Fixed maturity securities:
Corporate and other bonds		$ (7	)		$ 9			$ (7	)		$ 28
States, municipalities and political subdivisions		4			6			12			26
Asset-backed					(11	)		(14	)		(32)
Total fixed maturity securities		(3	)		4			(9	)		22
Non-redeemable preferred stock		11			(10	)		53			(25)
Short term and other		(6	)		3			(11	)		9
Total investment gains (losses)		2			(3	)		33			6
Income tax (expense) benefit		(1	)		2			(9	)		1
Amounts attributable to noncontrolling interests								(2	)		(1)
Net investment gains (losses) attributable to Loews Corporation		$ 1			$ (1	)		$ 22			$ 6

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Net investment gains (losses) after tax and noncontrolling interests increased $2 million for the three months ended June 30, 2019 as compared with the 2018 period. The increase was driven by the favorable change in fair value of

non-redeemable

preferred stock partially offset by higher OTTI losses recognized in earnings.

Net investment gains (losses) after tax and noncontrolling interests increased $16 million for the six months ended June 30, 2019 as compared with the 2018 period. The increase was driven by the favorable change in fair value of

non-redeemable

preferred stock, partially offset by lower net investment gains on sales of securities and higher OTTI losses recognized in earnings.

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

Portfolio Quality

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


	June 30, 2019				December 31, 2018
	Estimated Fair Value		Net Unrealized Gains (Losses)		Estimated Fair Value		Net Unrealized Gains (Losses)
(In millions)

U.S. Government, Government agencies and Government-sponsored enterprises		$ 4,336		$ 84		$ 4,334		$ (24)
AAA		3,014		338		3,027		245
AA		6,697		775		6,510		512
A		8,843		961		8,768		527
BBB		15,984		1,374		14,205		274
Non-investment grade		2,765		84		2,702		(73)
Total		$ 41,639		$ 3,616		$ 39,546		$ 1,461

As of June 30, 2019 and December 31, 2018, 1% of CNA’s fixed maturity portfolio was rated internally. AAA rated securities included $1.2 billion and $1.3 billion of

pre-refunded

municipal bonds as of June 30, 2019 and December 31, 2018.

The following table presents CNA’s

available-for-sale

fixed maturity securities in a gross unrealized loss position by ratings distribution:


June 30, 2019	Estimated Fair Value		Gross Unrealized Losses
(In millions)

U.S. Government, Government agencies and Government-sponsored enterprises		$ 256		$ 1
AAA		22		1
AA		52
A		526		8
BBB		591		18
Non-investment grade		753		29
Total		$ 2,200		$ 57

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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, 2019	Estimated Fair Value		Gross Unrealized Losses
(In millions)

Due in one year or less		$ 45		$ 1
Due after one year through five years		444		12
Due after five years through ten years		1,477		27
Due after ten years		234		17
Total		$ 2,200		$ 57

Duration

A primary objective in the management of CNA’s investment portfolio is to optimize return relative to the corresponding liabilities and respective liquidity needs. CNA’s views on the current interest rate environment, tax regulations, asset class valuations, specific security issuer and broader industry segment conditions as well as domestic and global economic conditions, are some of the factors that enter into an investment decision. CNA also continually monitors exposure to issuers of securities held and broader industry sector exposures and may from time to time adjust such exposures based on its views of a specific issuer or industry sector.

A further consideration in the management of CNA’s 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, CNA segregates investments for asset/liability management purposes. The segregated investments support the long term care and structured settlement liabilities in Other Insurance Operations.

The effective durations of CNA’s 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, 2019				December 31, 2018
	Estimated Fair Value		Effective Duration (Years)		Estimated Fair Value		Effective Duration (Years)
(In millions of dollars)

Investments supporting Other Insurance Operations	$	17,541		8.9	$	16,212		8.4
Other investments		26,253		4.1		25,428		4.4
Total	$	43,794		6.0	$	41,640		6.0

The investment portfolio is periodically analyzed for changes in duration and related price risk. Additionally, CNA periodically reviews 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, 2018.

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Short Term Investments

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


	June 30, 2019		December 31, 2018
(In millions )

Short term investments:
Commercial paper		$ 920		$ 705
U.S. Treasury securities		295		185
Other		304		396
Total short term investments		$ 1,519		$ 1,286

CRITICAL ACCOUNTING ESTIMATES

Certain accounting policies require us to make estimates and judgments that affect the amounts reflected in the Consolidated Condensed Financial Statements. Such estimates and judgments necessarily involve varying, and possibly significant, degrees of uncertainty. Accordingly, certain amounts currently recorded in the financial statements will likely be adjusted in the future based on new available information and changes in other facts and circumstances. See the Critical Accounting Estimates and the Insurance Reserves sections of our MD&A included under Item 7 of our Annual Report on Form

10-K

for the year ended December 31, 2018 for further information.

ACCOUNTING STANDARDS UPDATE

For a discussion of accounting standards updates that have been adopted or will be adopted in the future, please read Note 1 of the Notes to Consolidated Condensed Financial Statements included under Item 1.

FORWARD-LOOKING STATEMENTS

Investors are cautioned that certain statements contained in this Report as well as some statements in other SEC filings and periodic press releases and some oral statements made by us and our subsidiaries and our and their officials during presentations may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements include, without limitation, any statement that does not directly relate to any historical or current fact and may project, indicate or imply future results, events, performance or achievements. Such statements may contain the words “expect,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “will be,” “will continue,” “will likely result,” and similar expressions. In addition, any statement concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible actions taken by us or our subsidiaries are also forward-looking statements as defined by the Act. Forward-looking statements are based on current expectations and projections about future events and are inherently subject to a variety of risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those anticipated or projected.

Developments in any of the risks or uncertainties facing us or our subsidiaries, including those described under Part I, Item 1A, Risk Factors in our Annual Report on Form

10-K

for the year ended December 31, 2018, Part II, Item 1A, Risk Factors in our Quarterly Report on Form

10-Q

for the quarter ended March 31, 2019 and in our other filings with the SEC, could cause our results to differ materially from results that have been or may be anticipated or projected. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date they are made and we expressly disclaim any obligation or undertaking to update these statements to reflect any change in our expectations or beliefs or any change in events, conditions or circumstances on which any forward-looking statement is based.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

There were no material changes in our market risk components as of June 30, 2019. See 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, 2018 for further information. Additional information related to portfolio duration and market conditions is discussed in the Investments section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included under Part I, Item 2.

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Item 4. Controls and Procedures.

The Company maintains a system of disclosure controls and procedures (as defined in Rules

13a-15(e)

and

15d-15(e)

under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), which is designed to ensure that information required to be disclosed by the Company in reports that it files or submits under 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 by the Company under the Exchange Act is accumulated and communicated to the Company’s management on a timely basis to allow decisions regarding required disclosure.

The Company’s management, including the Company’s principal executive officer (“CEO”) and principal financial officer (“CFO”) conducted an evaluation of the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this Report and, based on that evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2019.

There were no changes in the Company’s internal control over financial reporting (as defined in Rules

13a-15(f)

and

15d-15(f)

under the Exchange Act) that occurred during the quarter ended June 30, 2019 that have materially affected or that are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Information on our legal proceedings is set forth in Note 11 to the Consolidated Condensed 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, 2018 and our Quarterly Report on Form

10-Q

for the quarter ended March 31, 2019 include a detailed discussion of certain risk factors facing the company. No updates or additions have been made to such risk factors as of June 30, 2019.

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

Items 2 (a) and (b) are inapplicable.

Period

(a) Total number

of shares

purchased

(b) Average

price paid per

part of publicly
announced plans or
programs

(d) Maximum number of shares
(or approximate dollar value)

of shares that may yet be
purchased under the plans or
programs (in millions)

April 1, 2019 -
April 30, 2019

1,210,073

49.40

N/A

May 1, 2019 -
May 31, 2019

1,731,211

50.88

N/A

June 1, 2019 -
June 30, 2019

59,880

53.22

N/A

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Item 6. Exhibits.


Description of Exhibit	Exhibit Number

Certification by the Chief Executive Officer of the Company pursuant to Rule 13a-14(a) and Rule 15d-14(a)		31.1	*

Certification by the Chief Financial Officer of the Company pursuant to Rule 13a-14(a) and Rule 15d-14(a)		31.2	*

Certification by the Chief Executive Officer of the Company pursuant to 18 U.S.C. Section 1350 (as adopted by Section 906 of the Sarbanes-Oxley Act of 2002)		32.1	*

Certification by the Chief Financial Officer of the Company 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	*

XBRL Taxonomy Extension Schema		101.SCH	*

XBRL Taxonomy Extension Calculation Linkbase		101.CAL	*

XBRL Taxonomy Extension Definition Linkbase		101.DEF	*

XBRL Taxonomy Label Linkbase		101.LAB	*

XBRL Taxonomy Extension Presentation Linkbase		101.PRE	*

*Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.


	LOEWS CORPORATION
	(Registrant)

Dated: August 5, 2019	By:	/s/ David B. Edelson
		DAVID B. EDELSON
		Senior Vice President and
		Chief Financial Officer
		(Duly authorized officer
		and principal financial
		officer)