Table	of	Contents

# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

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

# For	the	Fiscal	Year	Ended	December	31,	2009

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

Commission	File	Number	1-6541

# LOEWS	CORPORATION

(Exact	name	of	registrant	as	specified	in	its	charter)

Delaware

(State	or	other	jurisdiction	of

incorporation	or	organization)

(I.R.S.	Employer Identification	No.)

(Address	of	principal	executive	offices)	(Zip	Code)

(Registrant's	telephone	number,	including	area	code)

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

Title	of	each	class

Loews	Common	Stock,	par	value	$0.01	per	share

Name	of	each	exchange	on	which	registered

New	York	Stock	Exchange

Securities	registered	pursuant	to	Section	12(g)	of	the	Act:	None

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.				Yes		x				No		¨

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.				Yes		¨				No		x

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	and	posted	on	its	corporate	website,	if	any,	every	Interactive	Data	File	required	to	be submitted	and	posted	pursuant	to	Rule	405	of	Regulation	S-T	during	the	preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	submit	and post	such	files).				Yes		x				No		¨

Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	is	not	contained	herein,	and	will	not	be	contained,	to	the	best	of registrant's	knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K.		x.

Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer,	or	a	smaller	reporting	company.	See	the definitions	of	"large	accelerated	filer,"	"accelerated	filer"	and	"smaller	reporting	company"	in	Rule	12b-2	of	the	Exchange	Act.	(Check	one):

Large	accelerated	filer 	 x

Non-accelerated	filer 	 ¨

		 Accelerated	filer

		 Smaller	reporting	company

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

The	aggregate	market	value	of	voting	and	non-voting	common	equity	held	by	non-affiliates	as	of	the	last	business	day	of	the	registrant's	most	recently	completed second	fiscal	quarter	was	approximately	$8,943,000,000.

# Documents	Incorporated	by	Reference:

Portions	of	the	Registrant's	definitive	proxy	statement	intended	to	be	filed	by	Registrant	with	the	Commission	prior	to	April	30,	2010	are	incorporated	by reference	into	Part	III	of	this	Report.

# INDEX	TO	ANNUAL	REPORT	ON

# FORM	10-K	FILED	WITH	THE

|  | LOEWS	CORPORATION<br>INDEX	TO	ANNUAL	REPORT	ON<br>FORM	10-K	FILED	WITH	THE<br>SECURITIES	AND	EXCHANGE	COMMISSION<br>For	the	Year	Ended	December	31,	2009 |  |
| :--- | :--- | :--- |
| Item\nNo. | PART\tI | Page\nNo. |
| 1 | Business | 3 |
|  | CNA\tFinancial\tCorporation | 3 |
|  | Diamond\tOffshore\tDrilling,\tInc. | 8 |
|  | HighMount\tExploration\t&amp;\tProduction\tLLC | 11 |
|  | Boardwalk\tPipeline\tPartners,\tLP | 16 |
|  | Loews\tHotels\tHolding\tCorporation | 19 |
|  | Available\tInformation | 21 |
| 1A | Risk\tFactors | 21 |
| 1B | Unresolved\tStaff\tComments | 49 |
| 2 | Properties | 49 |
| 3 | Legal\tProceedings | 49 |
| 4 | Submission\tof\tMatters\tto\ta\tVote\tof\tSecurity\tHolders | 50 |
|  | Executive\tOfficers\tof\tthe\tRegistrant | 50 |
|  | PART\tII |  |
| 5 | Market\tfor\tthe\tRegistrant's\tCommon\tEquity,\tRelated\tStockholder\tMatters\tand\tIssuer |  |
|  | Purchases\tof\tEquity\tSecurities | 50 |
|  | Management's\tReport\ton\tInternal\tControl\tOver\tFinancial\tReporting | 53 |
|  | Reports\tof\tIndependent\tRegistered\tPublic\tAccounting\tFirm | 54 |
| 6 | Selected\tFinancial\tData | 56 |
| 7 |  | 57 |
|  | Management's\tDiscussion\tand\tAnalysis\tof\tFinancial\tCondition\tand\tResults\tof\tOperations |  |
| 7A | Quantitative\tand\tQualitative\tDisclosures\tabout\tMarket\tRisk | 106 |
| 8 | Financial\tStatements\tand\tSupplementary\tData | 111 |
| 9 | Changes\tin\tand\tDisagreements\twith\tAccountants\ton\tAccounting\tand\tFinancial\tDisclosure | 197 |
| 9A | Controls\tand\tProcedures | 197 |
| 9B | Other\tInformation | 197 |
|  | PART\tIII |  |
|  | Certain\tinformation\tcalled\tfor\tby\tPart\tIII\t(Items\t10,\t11,\t12,\t13\tand\t14)\thas\tbeen\tomitted\tas\tRegistrant\tintends\tto\tfile\twith\tthe\tSecurities\tand |  |
|  | PART\tIV |  |
| 15 | Exhibits\tand\tFinancial\tStatement\tSchedules | 198 |

# PART	III

Certain	information	called	for	by	Part	III	(Items	10,	11,	12,	13	and	14)	has	been	omitted	as	Registrant	intends	to	file	with	the	Securities	and Exchange	Commission	not	later	than	120	days	after	the	close	of	its	fiscal	year	a	definitive	Proxy	Statement	pursuant	to	Regulation	14A.

# PART	IV

# PART	I

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

# Item	1.	Business.

We	are	a	holding	company.	Our	subsidiaries	are	engaged	in	the	following	lines	of	business:

•commercial	property	and	casualty	insurance	(CNA	Financial	Corporation,	a	90%	owned	subsidiary);

•operation	of	offshore	oil	and	gas	drilling	rigs	(Diamond	Offshore	Drilling,	Inc.,	a	50.4%	owned	subsidiary);

•exploration,	production	and	marketing	of	natural	gas	and	natural	gas	liquids	(HighMount	Exploration	&	Production	LLC,	a	wholly	owned	subsidiary);

•operation	of	interstate	natural	gas	transmission	pipeline	systems	(Boardwalk	Pipeline	Partners,	LP,	a	67%	owned	subsidiary);	and

•operation	of	hotels	(Loews	Hotels	Holding	Corporation,	a	wholly	owned	subsidiary).

Please	read	information	relating	to	our	major	business	segments	from	which	we	derive	revenue	and	income	contained	in	Note	22	of	the	Notes	to	Consolidated Financial	Statements,	included	under	Item	8.

# CNA	FINANCIAL	CORPORATION

CNA	Financial	Corporation	(together	with	its	subsidiaries,	"CNA")	was	incorporated	in	1967	and	is	an	insurance	holding	company.	CNA's	property	and	casualty insurance	operations	are	conducted	by	Continental	Casualty	Company	("CCC"),	incorporated	in	1897,	and	The	Continental	Insurance	Company	("CIC"),	organized	in 1853,	and	its	affiliates.	CIC	became	a	subsidiary	of	CNA	in	1995	as	a	result	of	the	acquisition	of	The	Continental	Corporation	("Continental").	CNA	accounted	for 60.0%,	58.9%	and	69.1%	of	our	consolidated	total	revenue	for	the	years	ended	December	31,	2009,	2008	and	2007.

CNA's	core	businesses	serves	a	wide	variety	of	customers,	including	small,	medium	and	large	businesses,	associations,	professionals	and	groups	with	a	broad range	of	insurance	and	risk	management	products	and	services.

CNA's	 insurance	products	primarily	 include	commercial	property	and	casualty	coverages.	CNA's	services	 include	risk	management, information	services, warranty	and	claims	administration.	CNA's	products	and	services	are	marketed	through	independent	agents,	brokers	and	managing	general	agents.

CNA's	core	business,	commercial	property	and	casualty	insurance	operations,	is	reported	in	two	business	segments:	CNA	Specialty	and	CNA	Commercial. CNA's	 non-core	 operations	 are	 managed	 in	 two	 business	 segments:	 Life	 &	 Group	 Non-Core	 and	 Other	 Insurance.	 Each	 segment	 is	 managed	 separately	 due	 to differences	in	their	product	lines	and	markets.

CNA's	property	and	casualty	field	structure	consists	of	41	branch	locations	across	the	country	organized	into	6	zones.	The	centralized	processing	operation	for small	and	middle-market	customers,	located	in	Maitland,	Florida,	handles	policy	processing,	billing	and	collection	activities,	and	also	acts	as	a	call	center	to	optimize customer	service.	The	claims	structure	consists	of	a	centralized	claim	center	designed	to	efficiently	handle	the	high	volume	of	low	severity	claims	including	property damage,	liability,	and	workers'	compensation	medical	only	claims,	and	14	principal	claim	office	locations	around	the	country	handling	the	more	complex	claims.

# CNA	Specialty

CNA	Specialty	provides	professional	liability	and	other	coverages	through	property	and	casualty	products	and	services,	both	domestically	and	abroad,	through	a network	of	brokers,	managing	general	underwriters	and	independent

# CNA	Financial	Corporation	–	(Continued)

agencies.	 CNA	 Specialty	 provides	 solutions	 for	 managing	 the	 risks	 of	 its	 clients,	 including	 architects,	 lawyers,	 accountants,	 healthcare	 professionals, financial intermediaries	and	public	and	private	companies.	Product	offerings	also	include	surety	and	fidelity	bonds	and	vehicle	warranty	services.

# CNA	Specialty	includes	the	following	business	groups:

Professional	&	Management	Liability:		Professional	&	Management	liability	provides	management	and	professional	liability	insurance	and	risk	management services	 and	 other	 specialized	 property	 and	 casualty	 coverages,	 primarily	 in	 the	 United	 States.	 This	 group	 provides	 professional	 liability	 coverages	 to	 various professional	firms,	including	architects,	realtors,	small	and	mid-sized	accounting	firms,	law	firms	and	technology	firms.	Professional	&	Management	Liability	also provides	Directors	and	Officers	("D&O"),	employment	practices,	fiduciary	and	fidelity	coverages.	Specific	areas	of	focus	include	small	and	mid-size	firms	as	well	as privately	held	firms	and	not-for-profit	organizations,	where	tailored	products	for	this	client	segment	are	offered.	Products	within	Professional	&	Management	Liability are	distributed	through	brokers,	agents	and	managing	general	underwriters.

Professional	 &	 Management	 Liability,	 through	 CNA	 HealthPro,	 also	 offers	 insurance	 products	 to	 serve	 the	 healthcare	 delivery	 system.	 Products	 include professional	liability	and	associated	standard	property	and	casualty	coverages,	and	are	distributed	on	a	national	basis	through	brokers,	agents	and	managing	general underwriters.	Key	customer	segments	include	long	term	care	facilities,	allied	healthcare	providers,	life	sciences,	dental	professionals	and	mid-size	and	large	healthcare facilities.

International:		International	provides	similar	management	and	professional	liability	insurance	and	other	specialized	property	and	casualty	coverages	in	Canada and	Europe.

Surety:		Surety	consists	primarily	of	CNA	Surety	Corporation	("CNA	Surety")	and	its	insurance	subsidiaries	and	offers	small,	medium	and	large	contract	and commercial	 surety	 bonds.	 CNA	 Surety	 provides	 surety	 and	 fidelity	 bonds	 in	 all	 50	 states	 through	 a	 combined	 network	 of	 independent	 agencies.	 CNA	 owns approximately	62%	of	CNA	Surety.

Warranty	and	Alternative	Risks:		 Warranty	and	Alternative	Risks	provides	extended	service	contracts	and	related	products	that	protect	individuals	from	the financial	burden	associated	with	mechanical	breakdown	and	other	related	losses,	primarily	for	vehicles	and	portable	electronic	communication	devices.	These	products are	distributed	through	and	administered	by	CNA's	wholly	owned	subsidiary,	CNA	National	Warranty	Corporation,	or	through	a	third	party	administrator.

# CNA	Commercial

CNA	Commercial	works	with	an	independent	agency	distribution	system	and	a	network	of	brokers	to	market	a	broad	range	of	property	and	casualty	insurance products	and	services	to	small,	middle-market	and	large	businesses	and	organizations.	Property	products	include	standard	and	excess	property	coverages,	as	well	as marine	coverage,	and	boiler	and	machinery.	Casualty	products	 include	standard	casualty	 insurance	products	such	as	workers'	compensation,	general	and	product liability,	commercial	auto	and	umbrella	coverages.	Most	insurance	programs	are	provided	on	a	guaranteed	cost	basis;	however,	CNA	also	offers	specialized	loss- sensitive	insurance	programs	to	those	customers	viewed	as	higher	risk	and	less	predictable	in	exposure.

These	property	and	casualty	products	are	offered	as	part	of	CNA's	Commercial,	Business	and	International	insurance	groups.	CNA's	Business	insurance	group serves	its	smaller	commercial	accounts	and	the	Commercial	insurance	group	serves	CNA's	middle	markets	and	its	larger	risks.	In	addition,	CNA	Commercial	provides total	risk	management	services	relating	to	claim	and	information	services	to	the	large	commercial	insurance	marketplace,	through	a	wholly	owned	subsidiary,	CNA ClaimPlus,	Inc.,	a	third	party	administrator.	The	International	insurance	group	primarily	consists	of	the	commercial	product	lines	of	CNA's	operations	in	Europe, Canada,	Latin	America	and	Hawaii.

Also	 included	 in	 CNA	 Commercial is	CNA	 Select	 Risk	 ("Select	 Risk"),	 which includes	 CNA's	 excess	 and	 surplus	 lines	 coverages.	 Select	 Risk	 provides specialized	insurance	for	selected	commercial	risks	on	both	an	individual	customer	and	program	basis.	Customers	insured	by	Select	Risk	are	generally	viewed	as	higher risk	and	less	predictable	in	exposure	than	those	covered	by	standard	insurance	markets.	Select	Risk's	products	are	distributed	throughout	the	United	States	through specialist	producers,	program	agents	and	brokers.

# Life	&	Group	Non-Core

The	Life	&	Group	Non-Core	segment	primarily	includes	the	results	of	the	life	and	group	lines	of	business	that	are	in	run-off.	CNA	continues	to	service	its	existing individual	long	term	care	commitments,	its	payout	annuity	business	and	its	pension	deposit	business.	CNA	also	retains	a	block	of	group	reinsurance	and	life	settlement contracts.	These	businesses	are	being	managed	as	a	run-off	operation.	CNA's	group	long	term	care	business,	while	considered	non-core,	continues	to	be	actively marketed.	During	2008,	CNA	exited	the	indexed	group	annuity	portion	of	its	pension	deposit	business.

# Other	Insurance

Other	Insurance	includes	certain	CNA	corporate	expenses,	including	interest	on	CNA	corporate	debt,	and	the	results	of	certain	property	and	casualty	business primarily	in	run-off,	including	CNA	Re.	This	segment	also	includes	the	results	related	to	the	centralized	adjusting	and	settlement	of	asbestos	and	environmental	pollution ("A&E")	claims.

Please	read	Item	7,	"Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	by	Business	Segment	–	CNA	Financial"	for information	with	respect	to	each	segment.

The	following	table	displays	the	distribution	of	CNA's	direct	written	premiums	by	geographic	concentration.

| Year	Ended	December	31 | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| California | 9.1% | 9.2% | 9.5% |
| New\tYork | 6.8 | 6.9 | 7.0 |
| Texas | 6.6 | 6.2 | 6.1 |
| Florida | 6.2 | 6.5 | 7.5 |
| Illinois | 3.8 | 3.8 | 3.8 |
| New\tJersey | 3.7 | 3.8 | 3.7 |
| Missouri | 3.6 | 3.1 | 2.9 |
| Pennsylvania | 3.2 | 3.3 | 3.4 |
| All\tother\tstates,\tcountries\tor\tpolitical\tsubdivisions\t(a) | 57.0 | 57.2 | 56.1 |
|  | \t\t 100.0% | 100.0% | 100.0% |

(a) No	other	individual	state,	country	or	political	subdivision	accounts	for	more	than	3.0%	of	direct	written	premiums.

Approximately	7.0%,	7.4%	and	6.9%	of	CNA's	direct	written	premiums	were	derived	from	outside	of	the	United	States	for	the	years	ended	December	31,	2009, 2008	and	2007.	Premiums	from	any	individual	foreign	country	were	not	significant.

# Property	and	Casualty	Claim	and	Claim	Adjustment	Expenses

The	following	loss	reserve	development	table	illustrates	the	change	over	time	of	reserves	established	for	property	and	casualty	claim	and	claim	adjustment expenses	at	the	end	of	the	preceding	ten	calendar	years	for	CNA's	property	and	casualty	insurance	companies.	The	table	excludes	CNA's	life	subsidiaries,	and	as	such, the	carried	reserves	will	not	agree	to	the	Consolidated	Financial	Statements	included	under	Item	8.	The	first	section	shows	the	reserves	as	originally	reported	at	the	end of	the	stated	year.	The	second	section,	reading	down,	shows	the	cumulative	amounts	paid	as	of	the	end	of	successive	years	with	respect	to	the	originally	reported	reserve liability.	The	third	section,	reading	down,	shows	re-estimates	of	the	originally	recorded	reserves	as	of	the	end	of	each	successive	year,	which	is	the	result	of	CNA's property	and	casualty	insurance	subsidiaries'	expanded	awareness	of	additional	facts	and	circumstances	that	pertain	to	the	unsettled	claims.	The	last	section	compares	the latest	re-estimated	reserves	to	the	reserves	originally	established,	and	indicates	whether	the	original	reserves	were	adequate	or	inadequate	to	cover	the	estimated	costs	of unsettled	claims.

The	loss	reserve	development	table	is	cumulative	and,	therefore,	ending	balances	should	not	be	added	since	the	amount	at	the	end	of	each	calendar	year	includes activity	for	both	the	current	and	prior	years.	The	development	amounts	in	the	table	below	include	the	impact	of	commutations,	but	exclude	the	impact	of	the	provision for	uncollectible	reinsurance.

| Year	Ended	December	31<br>(In	millions	of	dollars) | 1999(a) | 2000 | 2001(b) | 2002(c) | 2003 | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Originally\treported\tgross\treserves\tfor\tunpaid\tclaim\tand\tclaim |  |  |  |  |  |  |  |  |  |  |  |
| adjustment\texpenses | 26,850 | 26,510 | 29,649 | 25,719 | \t 31,284 | \t 31,204 | \t 30,694 | \t 29,459 | \t 28,415 | \t 27,475 | 26,712 |
| Originally\treported\tceded\trecoverable | 6,091 | 7,333 | 11,703 | 10,490 | \t 13,847 | \t 13,682 | \t 10,438 | 8,078 | 6,945 | 6,213 | 5,524 |
| Originally\treported\tnet\treserves\tfor\tunpaid\tclaim\tand\tclaim\tadjustment\nexpenses | 20,759 | 19,177 | 17,946 | 15,229 | \t 17,437 | \t 17,522 | \t 20,256 | \t 21,381 | \t 21,470 | \t 21,262 | 21,188 |
| Cumulative\tnet\tpaid\tas\tof: |  |  |  |  |  |  |  |  |  |  |  |
| One\tyear\tlater | 6,547 | 7,686 | 5,981 | 5,373 | 4,382 | 2,651 | 3,442 | 4,436 | 4,308 | 3,930 | - |
| Two\tyears\tlater | 11,937 | 11,992 | 10,355 | 8,768 | 6,104 | 4,963 | 7,022 | 7,676 | 7,127 | - | - |
| Three\tyears\tlater | 15,256 | 15,291 | 12,954 | 9,747 | 7,780 | 7,825 | 9,620 | 9,822 | - | - | - |
| Four\tyears\tlater | 18,151 | 17,333 | 13,244 | 10,870 | \t 10,085 | 9,914 | \t 11,289 | - | - | - | - |
| Five\tyears\tlater | 19,686 | 17,775 | 13,922 | 12,814 | \t 11,834 | \t 11,261 | - | - | - | - | - |
| Six\tyears\tlater | 20,206 | 18,970 | 15,493 | 14,320 | \t 12,988 | - | - | - | - | - | - |
| Seven\tyears\tlater | 21,231 | 20,297 | 16,769 | 15,291 | - | - | - | - | - | - | - |
| Eight\tyears\tlater | 22,373 | 21,382 | 17,668 | - | - | - | - | - | - | - | - |
| Nine\tyears\tlater | 23,276 | 22,187 | - | - | - | - | - | - | - | - | - |
| Ten\tyears\tlater | 23,992 | - | - | - | - | - | - | - | - | - | - |
| Net\treserves\tre-estimated\tas\tof: |  |  |  |  |  |  |  |  |  |  |  |
| End\tof\tinitial\tyear | 20,759 | 19,177 | 17,946 | 15,229 | \t 17,437 | \t 17,522 | \t 20,256 | \t 21,381 | \t 21,470 | \t 21,262 | 21,188 |
| One\tyear\tlater | 21,163 | 21,502 | 17,980 | 17,650 | \t 17,671 | \t 18,513 | \t 20,588 | \t 21,601 | \t 21,463 | \t 21,021 | - |
| Two\tyears\tlater | 23,217 | 21,555 | 20,533 | 18,248 | \t 19,120 | \t 19,044 | \t 20,975 | \t 21,706 | \t 21,259 | - | - |
| Three\tyears\tlater | 23,081 | 24,058 | 21,109 | 19,814 | \t 19,760 | \t 19,631 | \t 21,408 | \t 21,609 | - | - | - |
| Four\tyears\tlater | 25,590 | 24,587 | 22,547 | 20,384 | \t 20,425 | \t 20,212 | \t 21,432 | - | - | - | - |
| Five\tyears\tlater | 26,000 | 25,594 | 22,983 | 21,076 | \t 21,060 | \t 20,301 | - | - | - | - | - |
| Six\tyears\tlater | 26,625 | 26,023 | 23,603 | 21,769 | \t 21,217 | - | - | - | - | - | - |
| Seven\tyears\tlater | 27,009 | 26,585 | 24,267 | 21,974 | - | - | - | - | - | - | - |
| Eight\tyears\tlater | 27,541 | 27,207 | 24,548 | - | - | - | - | - | - | - | - |
| Nine\tyears\tlater | 28,035 | 27,510 | - | - | - | - | - | - | - | - | - |
| Ten\tyears\tlater | 28,352 | - | - | - | - | - | - | - | - | - | - |
| Total\tnet\t(deficiency)\tredundancy | (7,593) | (8,333) | (6,602) | (6,745) | (3,780) | (2,779) | (1,176) | (228) | 211 | 241 | - |
| Reconciliation\tto\tgross\tre-estimated\treserves: |  |  |  |  |  |  |  |  |  |  |  |
| Net\treserves\tre-estimated | 28,352 | 27,510 | 24,548 | 21,974 | \t 21,217 | \t 20,301 | \t 21,432 | \t 21,609 | \t 21,259 | \t 21,021 | - |
| Re-estimated\tceded\trecoverable | 10,511 | 11,277 | 16,756 | 16,107 | \t 14,468 | \t 13,349 | \t 10,727 | 8,444 | 7,113 | 6,101 | - |
| Total\tgross\tre-estimated\treserves | 38,863 | 38,787 | 41,304 | 38,081 | \t 35,685 | \t 33,650 | \t 32,159 | \t 30,053 | \t 28,372 | \t 27,122 | - |
| Total\tgross\t(deficiency)\tredundancy | $(12,013) | $(12,277) | $(11,655) | $(12,362) | $ (4,401) | $ (2,446) | $ (1,465) | $(594) | $43 | $353 | - |
| Net\t(deficiency)\tredundancy\trelated\tto: |  |  |  |  |  |  |  |  |  |  |  |
| Asbestos\tclaims | (1,655) | (1,590) | (818) | (827) | (177) | (123) | (113) | (112) | (107) | (79) | - |
| Environmental\tclaims | (691) | (635) | (288) | (282) | (209) | (209) | (159) | (159) | (159) | (76) | - |
| Total\tasbestos\tand\tenvironmental | (2,346) | (2,225) | (1,106) | (1,109) | (386) | (332) | (272) | (271) | (266) | (155) | - |
| Other\tclaims | (5,247) | (6,108) | (5,496) | (5,636) | (3,394) | (2,447) | (904) | 43 | 477 | 396 | - |
| Total\tnet\t(deficiency)\tredundancy | (7,593) | (8,333) | (6,602) | (6,745) | (3,780) | (2,779) | (1,176) | (228) | 211 | 241 | - |

(a) Ceded	recoverable	includes	reserves	transferred	under	retroactive	reinsurance	agreements	of	$784	as	of	December	31,	1999.

(b) Effective	January	1,	2001,	CNA	established	a	new	life	insurance	company,	CNA	Group	Life	Assurance	Company	("CNAGLA").	Further,	on	January	1,	2001	$1,055	of	reserves	were	transferred	from	CCC	to CNAGLA.

(c) Effective	October	31,	2002,	CNA	sold	CNA	Reinsurance	Company	Limited.	As	a	result	of	the	sale,	net	reserves	were	reduced	by	$1,316.

Please	read	information	relating	to	CNA's	property	and	casualty	claim	and	claim	adjustment	expense	reserves	and	reserve	development	set	forth	under	Item	7, Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations	("MD&A"),	and	in	Notes	1	and	9	of	the	Notes	to	Consolidated	Financial Statements,	included	under	Item	8.

# Investments

Please	read	Item	7,	MD&A	–	Investments	and	Notes	1,	3,	4	and	5	of	the	Notes	to	Consolidated	Financial	Statements,	included	under	Item	8.

# Other

Competition:		The	property	and	casualty	insurance	industry	is	highly	competitive	both	as	to	rate	and	service.	CNA	competes	with	stock	and	mutual	insurance companies,	reinsurance	companies	and	other	entities	for	both	producers	and	customers.	CNA	must	continuously	allocate	resources	to	refine	and	improve	its	insurance products	and	services.

Rates	among	insurers	vary	according	to	the	types	of	insurers	and	methods	of	operation.	CNA	competes	for	business	not	only	on	the	basis	of	rate,	but	also	on	the basis	of	availability	of	coverage	desired	by	customers,	ratings	and	quality	of	service,	including	claim	adjustment	services.

There	are	approximately	2,400	individual	companies	that	sell	property	and	casualty	insurance	in	the	United	States.	Based	on	2008	statutory	net	written	premiums, CNA	is	the	seventh	largest	commercial	insurance	writer	and	the	thirteenth	largest	property	and	casualty	insurance	organization	in	the	United	States.

Regulation:		The	insurance	industry	is	subject	to	comprehensive	and	detailed	regulation	and	supervision	throughout	the	United	States.	Each	state	has	established supervisory	agencies	with	broad	administrative	powers	relative	to	licensing	insurers	and	agents,	approving	policy	forms,	establishing	reserve	requirements,	prescribing the	form	and	content	of	statutory	financial	reports,	and	regulating	capital	adequacy	and	the	type,	quality	and	amount	of	investments	permitted.	Such	regulatory	powers also	extend	to	premium	rate	regulations,	which	require	that	rates	not	be	excessive,	inadequate	or	unfairly	discriminatory.	In	addition	to	regulation	of	dividends	by insurance	subsidiaries,	intercompany	transfers	of	assets	may	be	subject	to	prior	notice	or	approval	by	the	state	insurance	regulators,	depending	on	the	size	of	such transfers	and	payments	in	relation	to	the	financial	position	of	the	insurance	affiliates	making	the	transfer	or	payment.

Insurers	are	also	required	by	the	states	to	provide	coverage	to	insureds	who	would	not	otherwise	be	considered	eligible	by	the	insurers.	Each	state	dictates	the types	of	insurance	and	the	level	of	coverage	that	must	be	provided	to	such	involuntary	risks.	CNA's	share	of	these	involuntary	risks	is	mandatory	and	generally	a function	of	its	respective	share	of	the	voluntary	market	by	line	of	insurance	in	each	state.

Further,	insurance	companies	are	subject	to	state	guaranty	fund	and	other	insurance-related	assessments.	Guaranty	fund	assessments	are	levied	by	the	state departments	of	insurance	to	cover	claims	of	insolvent	insurers.	Other	insurance-related	assessments	are	generally	levied	by	state	agencies	to	fund	various	organizations including	disaster	relief	funds,	rating	bureaus,	insurance	departments,	and	workers'	compensation	second	injury	funds,	or	by	industry	organizations	that	assist	in	the statistical	analysis	and	ratemaking	process.

Reform	of	the	U.S.	tort	liability	system	is	another	issue	facing	the	insurance	industry.	Over	the	last	decade,	many	states	have	passed	some	type	of	tort	reform. Even	though	there	has	been	some	tort	reform	success,	new	causes	of	action	and	theories	of	damages	continue	to	be	proposed	in	state	court	actions	or	by	federal	or	state legislatures	that	continue	to	expand	liability	for	insurers	and	their	policyholders.	For	example,	some	state	legislatures	are	considering	legislation	addressing	direct	actions against	insurers	related	to	bad	faith	claims.	As	a	result	of	this	unpredictability	in	the	law,	insurance	underwriting	and	rating	are	expected	to	continue	to	be	difficult	in commercial	lines,	professional	liability	and	some	specialty	coverages.

								Although	the	federal	government	and	its	regulatory	agencies	do	not	directly	regulate	the	business	of	insurance,	federal	legislative	and	regulatory	initiatives	can impact	the	insurance	industry	in	a	variety	of	ways.	These	initiatives	and	legislation	include	tort	reform	proposals;	proposals	addressing	natural	catastrophe	exposures; terrorism	risk	mechanisms;	federal	financial	services	reform;	federal	regulation	of	insurance;	various	tax	proposals	affecting	insurance	companies;

and	possible	regulatory	limitations,	impositions	and	restrictions	arising	from	the	Emergency	Economic	Stabilization	Act	of	2008.

Properties:		The	333	S.	Wabash	Avenue	building,	located	in	Chicago,	Illinois	and	owned	by	CCC,	a	wholly	owned	subsidiary	of	CNA,	serves	as	the	home	office for	CNA	and	its	insurance	subsidiaries.	CNA	owns	or	leases	office	space	in	various	cities	throughout	the	United	States	and	in	other	countries.	The	following	table	sets forth	certain	information	with	respect	to	the	principal	office	buildings	owned	or	leased	by	CNA:

| Location | Size<br>(square	feet) | Principal	Usage |
| :--- | :--- | :--- |
| 333\tS.\tWabash\tAvenue | 803,728 | Principal\texecutive\toffices\tof\tCNA |
| Chicago,\tIllinois |  |  |
| 401\tPenn\tStreet | 171,318 | Property\tand\tcasualty\tinsurance\toffices |
| Reading,\tPennsylvania |  |  |
| 2405\tLucien\tWay | 121,959 | Property\tand\tcasualty\tinsurance\toffices |
| Maitland,\tFlorida |  |  |
| 40\tWall\tStreet | 107,927 | Property\tand\tcasualty\tinsurance\toffices |
| New\tYork,\tNew\tYork |  |  |
| 1100\tWard\tAvenue | 104,478 | Property\tand\tcasualty\tinsurance\toffices |
| Honolulu,\tHawaii |  |  |
| 101\tS.\tPhillips\tAvenue | 83,616 | Property\tand\tcasualty\tinsurance\toffices |
| Sioux\tFalls,\tSouth\tDakota |  |  |
| 600\tN.\tPearl\tStreet | 70,790 | Property\tand\tcasualty\tinsurance\toffices |
| Dallas,\tTexas |  |  |
| 675\tPlacentia\tAvenue | 63,538 | Property\tand\tcasualty\tinsurance\toffices |
| Brea,\tCalifornia |  |  |
| 1249\tS.\tRiver\tRoad | 56,100 | Property\tand\tcasualty\tinsurance\toffices |
| Cranbury,\tNew\tJersey |  |  |
| 4267\tMeridian\tParkway | 46,903 | Data\tcenter |

CNA	leases	its	office	space	described	above	except	for	the	Chicago,	Illinois	building,	the	Reading,	Pennsylvania	building,	and	the	Aurora,	Illinois	building,	which are	owned.

# DIAMOND	OFFSHORE	DRILLING,	INC.

Diamond	Offshore	Drilling,	Inc.	("Diamond	Offshore"),	is	engaged,	through	its	subsidiaries,	in	the	business	of	owning	and	operating	drilling	rigs	that	are	used	in the	drilling	of	offshore	oil	and	gas	wells	on	a	contract	basis	for	companies	engaged	in	exploration	and	production	of	hydrocarbons.	Diamond	Offshore	owns	47	offshore rigs.	Diamond	Offshore	accounted	for	25.9%,	26.3%	and	18.3%	of	our	consolidated	total	revenue	for	the	years	ended	December	31,	2009,	2008	and	2007.

Diamond	Offshore	owns	and	operates	32	semisubmersible	rigs,	consisting	of	13	high	specification	and	19	intermediate	rigs.	Semisubmersible	rigs	consist	of	an upper	working	and	living	deck	resting	on	vertical	columns	connected	to	lower	hull	members.	Such	rigs	operate	in	a	"semi-submerged"	position,	remaining	afloat,	off bottom,	 in	 a	 position	 in	 which	 the	 lower	 hull	 is	 approximately	 55	 feet	 to	 90	 feet	 below	 the	 water	 line	 and	 the	 upper	 deck	 protrudes	 well	 above	 the	 surface. Semisubmersible	rigs	are	typically	anchored	in	position	and	remain	stable	for	drilling	in	the	semi-submerged	floating	position	due	in	part	to	their	wave	transparency characteristics	at	the	water	line.	Semisubmersible	rigs	can	also	be	held	in	position	through	the	use	of	a	computer	controlled	thruster	("dynamic-positioning")	system	to maintain	the	rig's	position	over	a	drillsite.	Five	semisubmersible	rigs	in	Diamond	Offshore's	fleet	have	this	capability.

								Diamond	Offshore's	high	specification	semisubmersible	rigs	are	generally	capable	of	working	in	water	depths	of	4,000	feet	or	greater	or	in	harsh	environments	and have	other	advanced	features,	as	compared	to	intermediate	semisubmersible	rigs.	As	of	January	25,	2010,	seven	of	the	13	high	specification	semisubmersible	rigs, including	 the	 recently	 acquired	Ocean	Courage,	were	 located	 in	 the	U.S.	Gulf	of	Mexico	("GOM").	At	 that	date	Diamond	Offshore	had	 two	high	specification semisubmersible	rigs	operating	offshore	Brazil,	while	a	third	was	en	route	to	Brazil	from	the	GOM.	Of

# Diamond	Offshore	Drilling,	Inc.	–	(Continued)

Diamond	Offshore's	remaining	high	specification	semisubmersible	rigs,	one	was	located	offshore	each	of	Malaysia	and	Angola,	while	the	final	rig,	the	Ocean	Valor, was	completing	its	commissioning	in	Singapore.

Diamond	Offshore's	intermediate	semisubmersible	rigs	generally	work	in	maximum	water	depths	up	to	4,000	feet.	As	of	January	25,	2010,	Diamond	Offshore had	19	intermediate	semisubmersible	rigs	in	various	locations	around	the	world.	Seven	of	these	semisubmersible	rigs	were	operating	offshore	Brazil	and	an	eighth	unit was	en	route	to	Brazil;	three	were	located	in	the	North	Sea;	two	each	were	located	offshore	Australia	and	offshore	Mexico;	one	was	located	in	the	GOM	and	one offshore	Vietnam.	One	unit	was	en	route	to	the	Falkland	Islands,	and	the	final	intermediate	semisubmersible	rig,	the	Ocean	Bounty,	was	in	the	process	of	being	cold stacked	in	Malaysia.

Diamond	Offshore	has	one	high	specification	drillship,	the	Ocean	Clipper,	which	was	located	offshore	Brazil	as	of	January	25,	2010.	Drillships,	which	are typically	self-propelled,	are	positioned	over	a	drillsite	through	the	use	of	either	an	anchoring	system	or	a	dynamic-positioning	system	similar	to	those	used	on	certain semisubmersible	rigs.	Deepwater	drillships	compete	in	many	of	the	same	markets	as	do	high	specification	semisubmersible	rigs.

Diamond	Offshore	has	14	jack-up	drilling	rigs.	Jack-up	rigs	are	mobile,	self-elevating	drilling	platforms	equipped	with	legs	that	are	lowered	to	the	ocean	floor until	a	foundation	is	established	to	support	the	drilling	platform.	The	rig	hull	includes	the	drilling	rig,	jacking	system,	crew	quarters,	loading	and	unloading	facilities, storage	areas	for	bulk	and	liquid	materials,	heliport	and	other	related	equipment.	Diamond	Offshore's	jack-up	rigs	are	used	for	drilling	in	water	depths	from	20	feet	to 350	feet.	The	water	depth	limit	of	a	particular	rig	is	principally	determined	by	the	length	of	the	rig's	legs.	A	jack-up	rig	is	towed	to	the	drillsite	with	its	hull	riding	in	the sea,	as	a	vessel,	with	its	legs	retracted.	Once	over	a	drillsite,	the	legs	are	lowered	until	they	rest	on	the	seabed	and	jacking	continues	with	the	legs	penetrating	the	seabed until	resistance	is	sufficient	to	elevate	the	hull	above	the	surface	of	the	water.	After	completion	of	drilling	operations,	the	hull	is	lowered	until	it	rests	in	the	water	and then	the	legs	are	retracted	for	relocation	to	another	drillsite.

As	of	January	25,	2010,	six	of	Diamond	Offshore's	14	jack-up	rigs	were	located	in	the	GOM	and	a	seventh	rig,	the	Ocean	Scepter,	was	en	route	from	Uruguay	for a	six-well	drilling	program	in	the	GOM.	Four	of	those	rigs	are	independent-leg	cantilevered	units,	two	are	mat-supported	cantilevered	units,	and	one	is	a	mat-supported slot	unit.	Diamond	Offshore	cold-stacked	the	three	mat-supported	jack-up	rigs	located	in	the	GOM	during	the	second	quarter	of	2009	and	is	no	longer	actively	marketing these	drilling	units.	Of	Diamond	Offshore's	seven	remaining	jack-up	rigs,	all	of	which	are	independent-leg	cantilevered	units,	two	each	were	located	offshore	Egypt	and Mexico,	and	one	was	located	offshore	each	of	Indonesia,	Croatia	and	the	Joint	Petroleum	Development	Area	between	Australia	and	Timor	Leste.

Diamond	Offshore's	long-term	strategy	has	been	to	economically	upgrade	its	fleet	to	meet	customer	demand	for	advanced,	efficient,	high-tech	rigs,	particularly deepwater	semisubmersible	rigs,	in	order	to	maximize	the	utilization	of,	and	dayrates	earned	by,	the	rigs	in	its	fleet.	In	addition,	excluding	Diamond	Offshore's	two	new deepwater	floaters	acquired	in	2009,	it	has,	since	1995,	increased	the	number	of	its	rigs	capable	of	operating	in	3,500	feet	or	more	of	water	from	three	rigs	to	14	(11	of which	are	high	specification	units),	primarily	by	upgrading	its	existing	fleet.	Seven	of	these	upgrades	were	to	Diamond	Offshore's	Victory-class	semisubmersible	rigs, the	design	of	which	is	well-suited	for	significant	upgrade	projects.	Diamond	Offshore	has	two	additional	Victory-class	intermediate	semisubmersible	rigs	that	could potentially	be	upgraded	at	some	time	in	the	future.	During	2009,	Diamond	Offshore	acquired	two	newbuild	deepwater,	semisubmersible,	dynamically	positioned drilling	rigs,	the	Ocean	Courage	(June	2009)	and	the	Ocean	Valor	(September	2009).	The	Ocean	Courage	is	completing	its	commissioning	and	preparing	for	its	first contract	in	the	GOM,	which	is	expected	to	begin	in	the	first	quarter	of	2010.	Commissioning	of	the	Ocean	Valor	is	expected	to	be	completed	in	Singapore	in	the	first quarter	of	2010.

Markets:		The	principal	markets	for	Diamond	Offshore's	contract	drilling	services	are	the	following:

•the	Gulf	of	Mexico,	including	the	U.S.	and	Mexico;

•South	America,	principally	in	Brazil;

•Europe,	principally	in	the	United	Kingdom,	or	U.K.,	and	Norway;

•the	Mediterranean	Basin,	including	Egypt;

•	 Africa,	currently	in	Angola;

•	 Australia	and	Asia,	including	Malaysia,	Indonesia	and	Vietnam;	and

•the	Middle	East,	including	Kuwait,	Qatar	and	Saudi	Arabia.

Diamond	Offshore	actively	markets	its	rigs	worldwide.	From	time	to	time	Diamond	Offshore's	fleet	operates	in	various	other	markets	throughout	the	world	as	the market	demands.

Diamond	Offshore	believes	its	presence	in	multiple	markets	is	valuable	in	many	respects.	For	example,	Diamond	Offshore	believes	that	its	experience	with	safety and	other	regulatory	matters	in	the	U.K.	has	been	beneficial	in	Australia	and	other	international	areas	in	which	Diamond	Offshore	operates,	while	production	experience it	has	gained	through	Brazilian	and	North	Sea	operations	has	potential	application	worldwide.	Additionally,	Diamond	Offshore	believes	its	performance	for	a	customer in	one	market	segment	or	area	enables	it	to	better	understand	that	customer's	needs	and	better	serve	that	customer	in	different	market	segments	or	other	geographic locations.

Diamond	Offshore's	contracts	to	provide	offshore	drilling	services	vary	in	their	terms	and	provisions.	Diamond	Offshore	typically	obtains	its	contracts	through competitive	bidding,	although	it	is	not	unusual	for	Diamond	Offshore	to	be	awarded	drilling	contracts	without	competitive	bidding.	Drilling	contracts	generally	provide for	a	basic	drilling	rate	on	a	fixed	dayrate	basis	regardless	of	whether	or	not	such	drilling	results	in	a	productive	well.	Drilling	contracts	may	also	provide	for	lower	rates during	periods	when	the	rig	is	being	moved	or	when	drilling	operations	are	interrupted	or	restricted	by	equipment	breakdowns,	adverse	weather	conditions	or	other conditions	beyond	the	control	of	Diamond	Offshore.	Under	dayrate	contracts,	Diamond	Offshore	generally	pays	operating	expenses	of	the	rig,	including	wages	and	the cost	of	incidental	supplies.	Historically,	dayrate	contracts	have	accounted	for	the	majority	of	Diamond	Offshore's	revenues.	In	addition,	from	time	to	time,	Diamond Offshore's	dayrate	contracts	may	also	provide	for	the	ability	to	earn	an	incentive	bonus	from	its	customer	based	upon	performance.

A	dayrate	drilling	contract	generally	extends	over	a	period	of	time	covering	either	the	drilling	of	a	single	well	or	a	group	of	wells,	which	Diamond	Offshore	refers to	as	a	well-to-well	contract,	or	a	fixed	term,	which	Diamond	Offshore	refers	to	as	a	term	contract,	and	may	be	terminated	by	the	customer	in	the	event	the	drilling	unit	is destroyed	or	lost	or	if	drilling	operations	are	suspended	for	an	extended	period	of	time	as	a	result	of	a	breakdown	of	equipment	or,	in	some	cases,	due	to	other	events beyond	the	control	of	either	party	to	the	contract.	In	addition,	certain	of	Diamond	Offshore's	contracts	permit	the	customer	to	terminate	the	contract	early	by	giving notice,	and	in	most	circumstances	may	require	the	payment	of	an	early	termination	fee	by	the	customer.	The	contract	term	in	many	instances	may	also	be	extended	by the	customer	exercising	options	for	the	drilling	of	additional	wells	or	for	an	additional	length	of	time,	generally	at	competitive	market	rates	and	mutually	agreeable terms	at	the	time	of	the	extension.

Customers: 	 Diamond	 Offshore	 provides	 offshore	 drilling	 services	 to	 a	 customer	 base	 that	 includes	 major	 and	 independent	 oil	 and	 gas	 companies	 and government-owned	oil	companies.	During	2009,	Diamond	Offshore	performed	services	for	47	different	customers	and	for	49	different	customers	each	during	2008	and 2007.	During	2009,	2008	and	2007,	one	of	Diamond	Offshore's	two	customers	in	Brazil,	Petróleo	Brasileiro	S.A.,	or	Petrobras,	(a	Brazilian	multinational	energy company	that	is	majority-owned	by	the	Brazilian	government)	accounted	for	15%,	13%	and	9%	of	Diamond	Offshore's	annual	total	consolidated	revenues.	No	other customer	accounted	for	10%	or	more	of	Diamond	Offshore's	annual	total	consolidated	revenues	during	2009	and	2008,	nor	did	any	single	customer	account	for	10%	or more	of	Diamond	Offshore's	annual	total	consolidated	revenues	during	2007.

Brazil	is	the	most	active	floater	market	in	the	world	today.	The	greatest	concentration	of	Diamond	Offshore's	operating	assets	outside	the	United	States	is offshore	Brazil,	where	12	rigs	in	its	fleet	are	either	currently	working	or	contracted	to	work	during	2010.	Diamond	Offshore's	contract	backlog	attributable	to	its expected	operations	offshore	Brazil	is	$1.1	billion,	$1.1	billion	and	$867.0	million	for	the	years	2010,	2011	and	2012,	and	$1.2	billion	in	the	aggregate	for	the	years 2013	to	2016.	Please	see	MD&A	under	Item	7	for	additional	information.

Competition:		The	offshore	contract	drilling	industry	is	highly	competitive	with	numerous	industry	participants,	none	of	which	at	the	present	time	has	a	dominant market	share.	The	drilling	industry	has	experienced	consolidation	in	recent	years	and	may	experience	additional	consolidation,	which	could	create	additional	large competitors.	Some	of	Diamond	Offshore's	competitors	may	have	greater	financial	or	other	resources	 than	Diamond	Offshore.	Diamond	Offshore	competes	with offshore	drilling	contractors	that	together	have	more	than	600	mobile	rigs	available	worldwide.

The	offshore	contract	drilling	 industry	 is	 influenced	by	a	number	of	factors,	 including	global	economies	and	demand	for	oil	and	natural	gas,	current	and anticipated	prices	of	oil	and	natural	gas,	expenditures	by	oil	and	gas	companies	for	exploration	and	development	of	oil	and	natural	gas	and	the	availability	of	drilling rigs.

Drilling	contracts	are	traditionally	awarded	on	a	competitive	bid	basis.	Intense	price	competition	is	often	the	primary	factor	in	determining	which	qualified contractor	is	awarded	a	job.	Customers	may	also	consider	rig	availability	and	location,	a	drilling	contractor's	operational	and	safety	performance	record,	and	condition and	suitability	of	equipment.	Diamond	Offshore	believes	it	competes	favorably	with	respect	to	these	factors.

Governmental	Regulation:		Diamond	Offshore's	operations	are	subject	to	numerous	international,	U.S.,	state	and	local	laws	and	regulations	that	relate	directly	or indirectly	to	its	operations,	including	regulations	controlling	the	discharge	of	materials	into	the	environment,	requiring	removal	and	clean-up	under	some	circumstances, or	otherwise	relating	to	the	protection	of	the	environment,	and	may	include	laws	or	regulations	pertaining	to	climate	change,	carbon	emissions	or	energy	use.

Operations	Outside	the	United	States:		Diamond	Offshore's	operations	outside	the	U.S.	accounted	for	approximately	66%,	59%	and	50%	of	its	total	consolidated revenues	for	the	years	ended	December	31,	2009,	2008	and	2007.

Properties:	Diamond	Offshore	owns	an	eight-story	office	building	containing	approximately	182,000-net	rentable	square	feet	on	approximately	6.2	acres	of	land located	in	Houston,	Texas,	where	its	corporate	headquarters	is	located,	two	buildings	totaling	39,000	square	feet	and	20	acres	of	land	in	New	Iberia,	Louisiana,	for	its offshore	drilling	warehouse	and	storage	facility,	a	13,000-square	foot	building	and	five	acres	of	land	in	Aberdeen,	Scotland,	for	its	North	Sea	operations	and	two buildings	totaling	65,000	square	feet	and	11	acres	of	land	in	Macae,	Brazil,	for	its	South	American	operations.	Additionally,	Diamond	Offshore	currently	leases	various office,	warehouse	and	storage	facilities	in	Louisiana,	Australia,	Brazil,	Indonesia,	Norway,	the	Netherlands,	Malaysia,	Singapore,	Egypt,	Angola,	Vietnam	and	Mexico to	support	its	offshore	drilling	operations.

# HIGHMOUNT	EXPLORATION	&	PRODUCTION	LLC

HighMount	is	engaged	in	the	exploration,	production	and	marketing	of	natural	gas,	NGLs	(predominantly	ethane	and	propane)	and,	to	a	small	extent,	oil, primarily	 in	 the	Permian	Basin	 in	Texas,	 the	Antrim	Shale	 in	Michigan	and	 the	Black	Warrior	Basin	 in	Alabama.	HighMount	holds	 interests	 in	developed	and undeveloped	acreage,	wellbores	and	well	facilities,	which	generally	take	the	form	of	working	interests	in	leases	that	have	varying	terms.	HighMount's	interests	in	these properties	are,	in	many	cases,	held	jointly	with	third	parties	and	may	be	subject	to	royalty,	overriding	royalty,	carried,	net	profits,	working	and	other	similar	interests	and contractual	arrangements	with	other	parties	as	is	customary	in	the	oil	and	gas	industry.	HighMount	also	owns	or	has	interests	in	gathering	systems	which	transport natural	gas	and	NGLs,	principally	from	its	producing	wells,	to	processing	plants	and	pipelines	owned	by	third	parties.	HighMount	accounted	for	4.4%,	5.8%	and	2.1% of	our	consolidated	total	revenue	for	the	years	ended	December	31,	2009,	2008	and	2007.

# HighMount	Exploration	&	Production	LLC	–	(Continued)

We	use	the	following	terms	throughout	this	discussion	of	HighMount's	business,	with	"equivalent"	volumes	computed	with	oil	and	natural	gas	liquid	("NGL") quantities	converted	to	Mcf,	on	an	energy	equivalent	ratio	of	one	barrel	to	six	Mcf:

In	addition,	as	used	in	this	discussion	of	HighMount's	business,	"gross	wells"	refers	to	the	total	number	of	wells	in	which	HighMount	owns	a	working	interest	and "net	wells"	refers	to	the	sum	of	each	of	the	gross	wells	multiplied	by	the	percentage	working	interest	owned	by	HighMount	in	such	well.	"Gross	acres"	refers	to	the	total number	of	acres	with	respect	to	which	HighMount	owns	or	leases	an	interest	and	"net	acres"	is	the	sum	of	each	unit	of	gross	acres	covered	by	a	lease	or	other arrangement	multiplied	by	HighMount's	percentage	mineral	interest	in	such	gross	acreage.

As	of	December	31,	2009,	HighMount	owned	2.0	Tcfe	of	net	proved	reserves,	of	which	80.5%	were	classified	as	proved	developed	reserves.	HighMount's estimated	total	proved	reserves	consist	of	1.5	Tcf	of	natural	gas,	70.1	MMBbls	of	NGLs,	and	3.7	MMBbls	of	oil	and	condensate.	HighMount	produced	approximately 271	MMcfe	per	day	of	natural	gas,	NGLs	and	oil	during	2009.	HighMount	holds	leasehold	or	drilling	rights	in	1.0	million	net	acres,	of	which	0.6	million	is	developed acreage	and	the	balance	is	held	for	future	exploration	and	development	drilling	opportunities.	HighMount	participated	in	the	drilling	of	159	wells	during	2009,	of	which 154	(or	96.9%)	are	productive	wells.

Reserves:		HighMount's	reserves	disclosed	in	this	Report	represent	its	share	of	reserves	based	on	its	net	revenue	interest	in	each	property.	Estimated	reserves	as of	December	31,	2009	are	based	upon	studies	for	each	of	HighMount's	properties	prepared	by	HighMount	staff	engineers.	Calculations	were	prepared	using	standard geological	and	engineering	methods	generally	accepted	by	the	petroleum	industry	and	in	accordance	with	Securities	and	Exchange	Commission	("SEC")	guidelines.

HighMount	implements	various	internal	controls	to	assure	objectivity	of	the	reserve	estimation	process.	The	main	internal	controls	include	(a)	detailed	reviews	of reserve-related	information	at	various	levels	of	the	organization	–	Asset	Management,	Division	Management,	Corporate	Engineering	and	Executive	Management, (b)	reserve	audit	performed	by	an	independent	third	party	reserve	auditor,	(c)	segregation	of	duties	and	(d)	system	reconciliation	or	automated	interface	between	various systems	used	in	the	reserve	estimation	process.

HighMount	employs	a	team	of	reservoir	engineers	that	specialize	in	each	of	HighMount's	three	basins.	HighMount's	lead	evaluator	has	over	thirty	years	of	oil and	gas	engineering	experience,	twelve	of	those	in	the	reservoir	discipline	and	has	a	registered	professional	engineering	license	from	the	State	of	Oklahoma.

Ryder	Scott	Company,	L.P.,	an	independent	third	party	petroleum	engineering	consulting	firm,	has	audited	HighMount's	reserve	estimates	in	accordance	with	the "Standards	Pertaining	to	the	Estimating	and	Auditing	of	Oil	and	Gas	Reserves	Information"	promulgated	by	the	Society	of	Petroleum	Engineers.	Ryder	Scott's	lead reservoir	engineer	responsible	for	the	reserve	audit	has	more	than	thirty	years	of	experience	in	the	field	of	estimation	and	evaluation	of	petroleum	reserves	and	resources. He	has	the	professional	qualifications	of	a	Reserve	Estimator	and	a	Reserve	Auditor	set	forth	in	Article	III	of	the	"Standards	Pertaining	to	the	Estimating	and	Auditing	of Oil	and	Gas	Reserves	Information"	promulgated	by	the	Society	of	Petroleum	Engineers.	He	earned	a	Bachelor	of	Science	degree	in	Chemical	Engineering	at	the University	of	Notre	Dame	in	1975	and	a	Masters	of	Business	Administration	at	the	University	of	Texas	at	Austin	in	1998.	He	is	a	registered	Professional	Engineer	in	the State	of	Texas.	He	is	also	a	member	of	the	Society	of	Petroleum	Engineers,	the	Texas	Independent	Producers	and	Royalty	Owners	Association,	and	the	Houston's Producers	Forum.

The	following	table	sets	forth	HighMount's	proved	reserves	at	December	31,	2009,	based	on	average	2009	prices	of	$3.87	per	MMBtu	for	natural	gas,	$31.73	per Bbl	for	NGLs	and	$61.18	per	Bbl	for	oil.

|  | Natural	Gas<br>(MMcf) | NGLs<br>(Bbls) | Oil<br>(Bbls) | Equivalents<br>(MMcfe) |
| :--- | :--- | :--- | :--- | :--- |
| Proved\tdeveloped |  |  |  |  |
| Permian\tBasin | 942,639 | 55,198,202 | 2,706,258 | 1,290,066 |
| Antrim\tShale | 188,327 |  | 226,598 | 189,686 |
| Black\tWarrior\tBasin | 100,164 |  | 96,138 | 100,741 |
| Proved\tundeveloped |  |  |  |  |
| Permian\tBasin | 242,046 | 14,905,936 | 704,698 | 335,710 |
| Antrim\tShale | 39,422 |  |  | 39,422 |
| Black\tWarrior\tBasin | 8,710 |  |  | 8,710 |
| Total\tproved | 1,521,308 | 70,104,138 | 3,733,692 | 1,964,335 |

During	2009,	natural	gas	prices	decreased	significantly	from	their	2008	levels	due	largely	to	increased	onshore	natural	gas	production,	plentiful	levels	of	working gas	 in	storage	and	reduced	demand.	At	 the	same	 time,	drilling	costs	remained	relatively	high	during	 the	first	and	second	quarter	of	2009.	The	 impact	of	 these developments	was	a	reduction	of	HighMount's	proved	reserves	by	181.1	Bcfe,	that	included	a	reduction	of	proved	undeveloped	reserves	of	115.4	Bcfe.	During	2009, HighMount	converted	20.8	Bcfe	from	proved	undeveloped	reserves	to	proved	developed	reserves	by	drilling	63	gross	proved	undeveloped	wells.	HighMount	spent	$27 million	to	drill	and	complete	these	wells.	During	2009,	HighMount	added	8.9	Bcfe	to	its	proved	undeveloped	reserves	as	a	result	of	its	development	drilling.

Estimated	net	quantities	of	proved	natural	gas	and	oil	(including	condensate	and	NGLs)	reserves	at	December	31,	2009,	2008	and	2007	and	changes	in	the reserves	during	2009,	2008	and	2007	are	shown	in	Note	15	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8.

HighMount's	 properties	 typically	 have	 relatively	 long	 reserve	 lives,	 high	 well	 completion	 success	 rates	 and	 predictable	 production	 profiles.	 Based	 on December	31,	2009	proved	reserves	and	HighMount's	average	production	from	these	properties	during	2009,	the	average	reserve-to-production	index	of	HighMount's proved	reserves	is	20	years.

In	order	to	replenish	reserves	as	they	are	depleted	by	production,	and	to	increase	reserves,	HighMount	further	develops	its	existing	acreage	by	drilling	new	wells and,	where	available,	employing	new	technologies	and	drilling	strategies	designed	to	enhance	production	from	existing	wells.	HighMount	seeks	to	opportunistically acquire	additional	acreage	in	its	core	areas	of	operation,	as	well	as	other	locations	where	its	management	has	identified	an	opportunity.

During	the	years	ended	December	31,	2009,	2008	and	2007,	HighMount	engaged	in	the	drilling	activity	presented	in	the	following	table.	All	wells	drilled	during 2009,	2008	and	2007	disclosed	in	the	table	below	were	development	wells.

| Year	Ended	December	31 | 2009 | 2009 | 2008 | 2008 | 2007	(a) | 2007	(a) |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Gross | Net | Gross | Net | Gross | Net |
| Productive\tWells |  |  |  |  |  |  |
| Permian\tBasin | 100 | 98.5 | 369 | 363.5 | 196 | 191.5 |
| Antrim\tShale | 35 | 15.1 | 59 | 22.7 | 5 | 3.7 |
| Black\tWarrior\tBasin | 19 | 17.1 | 61 | 42.9 | 35 | 24.5 |
| Total\tProductive\tWells | 154 | 130.7 | 489 | 429.1 | 236 | 219.7 |
| Dry\tWells\nPermian\tBasin | 5 | 5.0 | 9 | 9.0 | 6 | 6.0 |
| Total\tDry\tWells | 5 | 5.0 | 9 | 9.0 | 6 | 6.0 |
| Total\tCompleted\tWells | 159 | 135.7 | 498 | 438.1 | 242 | 225.7 |
| Wells\tin\tProgress |  |  |  |  |  |  |
| Permian\tBasin | 67 | 66.9 | 32 | 31.9 | 12 | 12.0 |
| Antrim\tShale | 4 | 2.8 | 2 | 0.2 |  |  |
| Black\tWarrior\tBasin | 9 | 7.2 | 1 | 1.0 | 7 | 4.9 |
| Total\tWells\tin\tProgress | 80 | 76.9 | 35 | 33.1 | 19 | 16.9 |

(a) HighMount	commenced	operations	on	July	31,	2007.

In	addition,	in	2009,	HighMount	drilled	one	successful	exploratory	well.

Acreage:		As	of	December	31,	2009,	HighMount	owned	interests	in	developed	and	undeveloped	acreage	in	the	locations	set	forth	in	the	table	below:

|  | Developed	Acreage | Developed	Acreage | Undeveloped	Acreage | Undeveloped	Acreage | Total	Acreage | Total	Acreage |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Gross | Net | Gross | Net | Gross | Net |
| Permian\tBasin | 588,973 | 450,746 | 202,258 | 64,828 | 791,231 | 515,574 |
| Antrim\tShale | 246,611 | 115,345 | 18,102 | 6,536 | 264,713 | 121,881 |
| Black\tWarrior\tBasin | 112,764 | 80,331 | 394,031 | 254,158 | 506,795 | 334,489 |
| Total | \t\t\t948,348 | \t\t\t646,422 | \t\t\t614,391 | \t\t\t325,522 | 1,562,739 | \t\t\t971,944 |

Production	and	Sales:		Please	see	the	Production	and	Sales	statistics	table	for	additional	information	included	under	MD&A	in	Item	7.

HighMount	utilizes	its	own	marketing	and	sales	personnel	to	market	the	natural	gas	and	NGLs	that	it	produces	to	large	energy	companies	and	intrastate	pipelines and	gathering	companies.	Production	is	typically	sold	and	delivered	directly	to	a	pipeline	at	liquid	pooling	points	or	at	the	tailgates	of	various	processing	plants,	where	it then	enters	a	pipeline	system.	Permian	Basin	sales	prices	are	primarily	at	a	Houston	Ship	Channel	Index,	Antrim	sales	are	at	a	MichCon	Index	and	Black	Warrior	sales are	at	a	Southern	Natural	Gas	Pipeline	Index.

To	manage	the	risk	of	fluctuations	in	prevailing	commodity	prices,	HighMount	enters	into	commodity	and	basis	swaps	and	other	derivative	instruments.

Wells:		As	of	December	31,	2009,	HighMount	had	an	interest	in	the	following	natural	gas	producing	wells:

|  | Gross | Net |
| :--- | :--- | :--- |
| Permian\tBasin | 5,823 | 5,568 |
| Antrim\tShale | 2,258 | 1,004 |
| Black\tWarrior\tBasin | 1,437 | 1,127 |
| Total\tproducing\twells | 9,518 | 7,699 |

Wells	located	in	the	Permian	Basin	have	a	typical	well	depth	in	the	range	of	6,000	to	9,000	feet,	while	wells	located	in	the	Antrim	Shale	and	the	Black	Warrior Basin	have	typical	well	depths	of	1,200	feet	and	2,000	feet.

Competition:		HighMount	competes	with	other	oil	and	gas	companies	in	all	aspects	of	its	business,	including	acquisition	of	producing	properties	and	leases	and obtaining	goods,	services	and	labor,	including	drilling	rigs	and	well	completion	services.	HighMount	also	competes	in	the	marketing	of	produced	natural	gas	and	NGLs. Some	of	HighMount's	competitors	have	substantially	larger	financial	and	other	resources	than	HighMount.	Factors	that	affect	HighMount's	ability	to	acquire	producing properties	include	available	funds,	available	information	about	the	property	and	standards	established	by	HighMount	for	minimum	projected	return	on	investment. Competition	for	sales	of	natural	gas	and	NGLs	is	also	presented	by	alternative	fuel	sources,	including	heating	oil,	imported	liquefied	natural	gas	and	other	fossil	fuels.

Governmental	Regulation: 	All	 of	 HighMount's	 operations	 are	 conducted	 onshore	 in	 the	 United	 States.	The	 U.S.	 oil	 and	 gas	 industry,	 and	 HighMount's operations,	are	subject	to	regulation	at	the	federal,	state	and	local	level.	Such	regulation	includes	requirements	with	respect	to,	among	other	things:	permits	to	drill	and	to conduct	other	operations;	provision	of	financial	assurances	(such	as	bonds)	covering	drilling	and	well	operations;	the	location	of	wells;	the	method	of	drilling	and completing	wells;	the	surface	use	and	restoration	of	properties	upon	which	wells	are	drilled;	the	plugging	and	abandoning	of	wells;	the	marketing,	transportation	and reporting	of	production;	and	the	valuation	and	payment	of	royalties;	the	size	of	drilling	and	spacing	units	(regarding	the	density	of	wells	which	may	be	drilled	in	a particular	area);	the	unitization	or	pooling	of	properties;	maximum	rates	of	production	from	wells;	venting	or	flaring	of	natural	gas	and	the	ratability	of	production.

The	Federal	Energy	Policy	Act	of	2005	amended	the	Natural	Gas	Act	("NGA")	to	prohibit	natural	gas	market	manipulation	by	any	entity,	directed	the	Federal Energy	Regulatory	Commission	("FERC")	to	facilitate	market	transparency	in	the	sale	or	transportation	of	physical	natural	gas	and	significantly	increased	the	penalties for	violations	of	the	NGA	of	1938,	the	NGA	of	1978,	or	FERC	regulations	or	orders	thereunder.	In	addition,	HighMount	owns	and	operates	gas	gathering	lines	and related	facilities	which	are	regulated	by	the	U.S.	Department	of	Transportation	("DOT")	and	state	agencies	with	respect	to	safety	and	operating	conditions.

HighMount's	operations	are	also	subject	to	federal,	state	and	local	laws	and	regulations	concerning	the	discharge	of	contaminants	into	the	environment,	the generation,	storage,	transportation	and	disposal	of	contaminants,	and	the	protection	of	public	health,	natural	resources,	wildlife	and	the	environment.	In	most	instances, the	regulatory	requirements	relate	to	the	handling	and	disposal	of	drilling	and	production	waste	products,	water	and	air	pollution	control	procedures,	and	the	remediation of	petroleum-product	contamination.	In	addition,	HighMount's	operations	may	require	it	to	obtain	permits	for,	among	other	things,	air	emissions,	discharges	into	surface waters,	and	the	construction	and	operation	of	underground	injection	wells	or	surface	pits	to	dispose	of	produced	saltwater	and	other	non-hazardous	oilfield	wastes. HighMount	could	be	required,	without	regard	to	fault	or	the	legality	of	the	original	disposal,	to	remove	or	remediate	previously	disposed	wastes,	to	suspend	or	cease operations	in	contaminated	areas	or	to	perform	remedial	well	plugging	operations	or	cleanups	to	prevent	future	contamination.

In	September	2009,	the	United	States	Environmental	Protection	Agency	("EPA")	adopted	regulations	under	the	Clean	Air	Act	requiring	the	monitoring	and reporting	of	annual	greenhouse	gas	("GHG")	emissions	by	certain	large	U.S.	GHG	emitters.	Affected	companies	were	required	to	monitor	their	GHG	emissions	starting January	1,	2010	and	will	be	required	to	report	to	the	EPA	beginning	in	March	2011.	Oil	and	gas	exploration	and	production	companies	that	emit	less	than	25,000	metric tons	of	GHG	per	year	from	any	facility	(as	defined	in	the	regulations),	including	HighMount,	are	not	required	to	monitor	or	report	emissions	at	this	time.	However,	the EPA	has	indicated	it	will	issue	a	proposed	rule	for

comment	as	it	pertains	to	Oil	and	Gas	Systems	and	HighMount	anticipates	that	it	will	be	required	to	begin	data	collection	in	2011	for	subsequent	reporting	to	the	EPA.

Properties:		In	addition	to	its	interests	in	oil	and	gas	producing	properties,	HighMount	leases	an	aggregate	of	approximately	120,000	square	feet	of	office	space	in three	locations	in	Houston,	Texas,	which	includes	its	corporate	headquarters,	and	approximately	102,000	square	feet	of	office	space	in	Oklahoma	City,	Oklahoma	and Traverse	City,	Michigan	which	is	used	in	its	operations.	HighMount	also	leases	other	surface	rights	and	office,	warehouse	and	storage	facilities	necessary	to	operate	its business.

# BOARDWALK	PIPELINE	PARTNERS,	LP

Boardwalk	Pipeline	Partners,	LP	("Boardwalk	Pipeline")	is	engaged	in	the	interstate	transportation	and	storage	of	natural	gas.	Boardwalk	Pipeline	accounted	for 6.4%,	6.4%	and	4.7%	of	our	consolidated	total	revenue	for	the	years	ended	December	31,	2009,	2008	and	2007.

As	of	February	19,	2010,	we	owned	approximately	67%	of	Boardwalk	Pipeline	comprised	of	104,219,466	common	units,	22,866,667	class	B	units	and	a	2% general	partner	interest.	A	wholly	owned	subsidiary	of	ours	("BPHC")	is	the	general	partner	and	holds	all	of	Boardwalk	Pipeline's	incentive	distribution	rights	which entitle	the	general	partner	to	an	increasing	percentage	of	the	cash	that	is	distributed	by	Boardwalk	Pipeline	in	excess	of	$0.4025	per	unit	per	quarter.

Boardwalk	Pipeline	owns	and	operates	 three	 interstate	natural	gas	pipelines,	with	approximately	14,200	miles	of	 interconnected	pipelines,	directly	serving customers	in	12	states	and	indirectly	serving	customers	throughout	the	northeastern	and	southeastern	United	States	through	numerous	interconnections	with	unaffiliated pipelines.	In	2009,	its	pipeline	systems	transported	approximately	2.1	trillion	cubic	feet	("Tcf")	of	gas.	Average	daily	throughput	on	Boardwalk	Pipeline's	pipeline systems	during	2009	was	approximately	5.7	billion	cubic	feet	("Bcf").	Boardwalk	Pipeline's	natural	gas	storage	facilities	are	comprised	of	11	underground	storage	fields located	in	four	states	with	aggregate	working	gas	capacity	of	approximately	163.0	Bcf.

# Boardwalk	Pipeline	conducts	all	of	its	operations	through	its	three	operating	subsidiaries:

Gulf	Crossing	Pipeline	Company	LLC	("Gulf	Crossing"):		The	Gulf	Crossing	pipeline	system,	located	in	Texas	and	Louisiana,	operates	approximately	360	miles of	natural	gas	pipeline.	The	pipeline	system	has	a	peak-day	delivery	capacity	of	1.4	Bcf	per	day	and	average	daily	throughput	for	the	year	ended	December	31,	2009	was 0.7	Bcf	per	day.	The	designated	peak-day	transmission	capacity	is	expected	to	increase	to	1.7	Bcf	per	day	from	the	addition	of	compression	which	is	expected	to	be placed	into	service	in	the	first	quarter	of	2010.

Gulf	South	Pipeline	Company,	L.P.	("Gulf	South"):		The	Gulf	South	pipeline	system	runs	approximately	7,700	miles	along	the	Gulf	Coast	in	the	states	of	Texas, Louisiana,	Mississippi,	Alabama	and	Florida.	Gulf	South	has	two	natural	gas	storage	facilities	with	83.0	Bcf	of	working	gas	storage	capacity.	The	pipeline	system	has	a peak-day	delivery	capacity	of	6.2	Bcf	per	day	and	average	daily	throughput	for	the	year	ended	December	31,	2009	was	3.1	Bcf	per	day.

Texas	Gas	Transmission,	LLC	("Texas	Gas"):		The	Texas	Gas	pipeline	system	originates	in	Louisiana,	East	Texas	and	Arkansas	and	runs	for	approximately	6,110 miles	north	and	east	through	Louisiana,	Arkansas,	Mississippi,	Tennessee,	Kentucky,	Indiana,	and	into	Ohio,	with	smaller	diameter	lines	extending	into	Illinois.	The pipeline	system	has	a	peak-day	delivery	capacity	of	4.3	Bcf	per	day	and	average	daily	throughput	for	the	year	ended	December	31,	2009	was	2.8	Bcf	per	day.	Texas	Gas owns	nine	natural	gas	storage	fields,	of	which	it	owns	the	majority	of	the	working	and	base	gas,	with	80.0	Bcf	of	working	gas	storage	capacity.

In	2008	and	2009,	Boardwalk	Pipeline	completed	its	East	Texas	Pipeline,	Southeast	Expansion	and	Gulf	Crossing	Project	("42-inch	pipeline	expansion	projects"), which	collectively	consist	of	approximately	700	miles	of	42-inch	pipeline	and	certain	related	compression	facilities.	Boardwalk	Pipeline	also	completed	and	placed	in service	 its	Fayetteville	and	Greenville	Laterals,	which	 together	consist	of	approximately	260	miles	of	36-inch	pipeline	and	certain	related	compression	facilities. Additional	compression	was	placed	into	service	on	the	Fayetteville	and	Greenville	Laterals	in	January	of	2010	and	Boardwalk	Pipeline	expects	to	place	into	service additional	compression	on	the	Gulf	Crossing	Project	in	the	first	quarter	of	2010.	With	the	exception	of	the	Greenville	Lateral,	these	projects	were	designed	to	operate	at higher	than	normal	operating	pressures.	While	completing	the	requirements	to	operate	Boardwalk	Pipeline's

Boardwalk	Pipeline	Partners,	LP	–	(Continued)

42-inch	expansion	project	pipelines	and	the	Fayetteville	Lateral	at	higher	than	normal	operating	pressures	in	2009,	Boardwalk	Pipeline	discovered	anomalies	in	certain pipeline	segments	on	each	of	the	projects,	which	resulted	in	reductions	of	operating	pressures	on	these	pipelines	below	normal	operating	pressures	and	the	shut	down	of segments	of	the	pipelines	for	periods	of	time	to	remediate	the	anomalies,	adversely	impacting	average	daily	throughput.	Please	see	MD&A	under	Item	7	for	additional information.	Boardwalk	Pipeline	is	currently	engaged	in	the	Haynesville	Project	and	Clarence	Compression	Project.

Boardwalk	Pipeline	serves	a	broad	mix	of	customers,	including	marketers,	local	distribution	companies,	producers,	electric	power	generators,	intrastate	and interstate	pipelines	and	direct	industrial	users	located	throughout	the	Gulf	Coast,	Midwest	and	Northeast	regions	of	the	U.S.

Competition:		Boardwalk	Pipeline	competes	with	other	pipelines	to	maintain	current	business	levels	and	to	serve	new	demand	and	markets.	Boardwalk	Pipeline also	competes	with	other	pipelines	for	contracts	with	producers	that	would	support	new	growth	opportunities.	The	principal	elements	of	competition	among	pipelines	are available	capacity,	rates,	terms	of	service,	access	to	supply	and	flexibility	and	reliability	of	service.	Competition	is	particularly	strong	in	the	Midwest	and	Gulf	Coast states	where	Boardwalk	Pipeline	competes	with	numerous	existing	pipelines,	including	the	Rockies	Express	Pipeline	that	transports	natural	gas	from	northern	Colorado to	eastern	Ohio	and	the	Mid-Continent	Express	Pipeline	that	transports	natural	gas	from	Oklahoma	and	Texas	to	Alabama.	Boardwalk	Pipeline	will	also	directly	compete with	several	new	pipeline	projects	that	are	proposed	or	under	development,	including	projects	originating	in	the	Haynesville	Shale	area	–	more	specifically,	the	Tiger Pipeline	that	will	transport	gas	to	Perryville,	Louisiana	and	the	Haynesville	Extension	Pipeline	that	will	transport	gas	to	the	industrial	complex	in	southeastern	Louisiana -	and	the	Fayetteville	Express	Pipeline	which	will	originate	in	the	Fayetteville	Shale	area	and	continue	eastward	to	Mississippi.	In	addition,	regulators'	continuing	efforts to	increase	competition	in	the	natural	gas	industry	have	increased	the	natural	gas	transportation	options	of	Boardwalk	Pipeline's	traditional	customers.	As	a	result	of	the regulators'	policies,	segmentation	and	capacity	release	have	created	an	active	secondary	market	which	 increasingly	competes	with	Boardwalk	Pipeline's	pipeline services.	Additionally,	natural	gas	competes	with	other	forms	of	energy	available	to	Boardwalk	Pipeline's	customers,	including	electricity,	coal	and	fuel	oils.

The	natural	gas	industry	has	built,	or	is	in	the	process	of	completing,	significant	new	pipeline	infrastructure	that	will	support	the	development	of	unconventional natural	gas	supply	basins	across	the	U.S.	Additional	pipeline	infrastructure	projects	are	being	proposed.	These	new	pipeline	developments	have	increased	competition	in certain	pipeline	markets,	resulting	in	lower	price	differentials	between	physical	locations	(basis	spreads).	Basis	spreads	can	impact	the	rates	Boardwalk	Pipeline	will	be able	to	negotiate	with	its	customers	when	contracts	come	up	for	renewal.	Despite	these	competitive	conditions,	assuming	that	customers	use	all	of	their	reserved capacity,	substantially	all	of	the	operating	capacity	on	Boardwalk	Pipeline's	pipeline	systems	is	contracted	for	with	a	weighted-average	contract	life	of	approximately	5.9 years,	although	each	year	a	portion	of	Boardwalk	Pipeline's	capacity	becomes	subject	to	re-contracting	risk.	For	example,	approximately	14.0%	of	Boardwalk	Pipeline's contracts	are	due	to	expire	in	2010.

Seasonality:		Boardwalk	Pipeline's	revenues	can	be	affected	by	weather	and	natural	gas	price	levels	and	volatility.	Weather	impacts	natural	gas	demand	for heating	needs	and	power	generation,	which	in	turn	influences	the	short-term	value	of	transportation	and	storage	across	its	pipeline	systems.	Colder	than	normal	winters can	result	in	an	increase	in	the	demand	for	natural	gas	for	heating	needs	and	warmer	than	normal	summers	can	impact	cooling	needs,	both	of	which	typically	result	in increased	pipeline	transportation	revenues	and	throughput.	While	traditionally	peak	demand	for	natural	gas	occurred	during	the	winter	months	driven	by	heating	needs, the	increased	use	of	natural	gas	for	cooling	needs	during	the	summer	months	has	reduced	the	seasonality	of	Boardwalk	Pipeline's	revenues	over	time.	During	2009, approximately	55.0%	of	Boardwalk	Pipeline's	revenues	were	recognized	in	the	first	and	fourth	quarters	of	the	year.

Governmental	Regulation:		FERC	regulates	Boardwalk	Pipeline's	operating	subsidiaries	under	the	NGA	of	1938	and	the	NGA	of	1978.	FERC	regulates,	among other	things,	the	rates	and	charges	for	the	transportation	and	storage	of	natural	gas	in	interstate	commerce	and	the	extension,	enlargement	or	abandonment	of	facilities under	its	jurisdiction.	Where	required,	Boardwalk	Pipeline's	operating	subsidiaries	hold	certificates	of	public	convenience	and	necessity	issued	by	FERC	covering certain	of	its	facilities,	activities	and	services.	The	maximum	rates	that	may	be	charged	by	Boardwalk	Pipeline	for	gas	transportation	are	established	through	FERC's cost-of-service	 rate-making	 process.	The	 maximum	 rates	 that	 may	 be	 charged	 by	 Boardwalk	 Pipeline	 for	 storage	 services	 on	Texas	 Gas,	 with	 the	 exception	 of approximately	8.3	Bcf	of	working	gas	capacity	on	that	system,	are	also	established	through	FERC's	cost-of-service	rate-making	process.	Key	determinants	in	FERC's cost-of-service	rate-making	process	are	the	costs	of	providing	service,	the	allowed	rate	of

return,	throughput	assumptions,	the	allocation	of	costs,	the	capital	structure	and	the	rate	design.	FERC	has	authorized	Gulf	South	to	charge	market-based	rates	for	its firm	and	interruptible	storage.	Texas	Gas	is	authorized	to	charge	market-based	rates	for	the	firm	and	ISS	services	associated	with	approximately	8.3	Bcf	of	its	storage capacity.	Texas	Gas	is	prohibited	from	placing	new	rates	into	effect	prior	to	November	1,	2010,	and	neither	Gulf	South	nor	Texas	Gas	has	an	obligation	to	file	a	new rate	case.	Gulf	Crossing	will	have	to	either	file	a	rate	case	or	justify	its	initial	firm	transportation	rates	by	the	end	of	the	first	quarter	of	2012.

Boardwalk	Pipeline	is	also	regulated	by	the	DOT	under	the	Natural	Gas	Pipeline	Safety	Act	of	1968,	as	amended	by	Title	I	of	the	Pipeline	Safety	Act	of	1979, which	regulates	safety	requirements	in	the	design,	construction,	operation	and	maintenance	of	interstate	natural	gas	pipelines.	Boardwalk	Pipeline	has	received	authority from	the	Pipeline	and	Hazardous	Materials	Safety	Administration	("PHMSA"),	an	agency	of	the	DOT,	to	operate	its	recently	completed	42-inch	pipeline	expansion projects	under	special	permits	that	will	allow	it	to	operate	the	pipelines	at	higher	than	normal	operating	pressures	of	up	to	0.80	of	the	pipe's	Specified	Minimum	Yield Strength	(SMYS).	Boardwalk	Pipeline	is	seeking	authority	from	PHMSA	to	operate	its	Fayetteville	Lateral	at	higher	than	normal	operating	pressures.	Boardwalk Pipeline	will	need	to	operate	each	of	these	pipelines	at	higher	than	normal	operating	pressures	in	order	to	transport	all	of	the	volumes	it	has	contracted	for	with	its customers.	PHMSA	retains	discretion	whether	to	grant	or	maintain	authority	for	Boardwalk	Pipeline	to	operate	these	pipelines	at	higher	pressures.

Boardwalk	Pipeline's	operations	are	also	subject	to	extensive	federal,	state,	and	local	laws	and	regulations	relating	to	protection	of	the	environment.	Such regulations	impose,	among	other	things,	restrictions,	liabilities	and	obligations	in	connection	with	the	generation,	handling,	use,	storage,	transportation,	treatment	and disposal	of	hazardous	substances	and	waste	and	in	connection	with	spills,	releases	and	emissions	of	various	substances	into	the	environment.	Environmental	regulations also	require	that	Boardwalk	Pipeline's	facilities,	sites	and	other	properties	be	operated,	maintained,	abandoned	and	reclaimed	to	the	satisfaction	of	applicable	regulatory authorities.

Under	the	EPA's	regulations	adopted	in	September	of	2009,	Boardwalk	Pipeline	was	required,	beginning	in	January	of	2010,	to	monitor	the	GHG	emissions	from certain	of	its	facilities,	particularly	compression	stations,	that	emit	more	than	25,000	metric	tons	of	GHG	per	year	and	must	report	on	such	emissions	to	the	EPA beginning	in	March	of	2011.

Properties:		Boardwalk	Pipeline	is	headquartered	in	approximately	103,000	square	feet	of	leased	office	space	located	in	Houston,	Texas.	Boardwalk	Pipeline	also has	approximately	108,000	square	feet	of	office	space	in	Owensboro,	Kentucky	in	a	building	that	it	owns.	Boardwalk	Pipeline's	operating	subsidiaries	own	their respective	pipeline	systems	in	fee.	However,	substantial	portions	of	these	systems	are	constructed	and	maintained	on	property	owned	by	others	pursuant	to	rights-of-way, easements,	permits,	licenses	or	consents.

# LOEWS	HOTELS	HOLDING	CORPORATION

The	subsidiaries	of	Loews	Hotels	Holding	Corporation	("Loews	Hotels"),	our	wholly	owned	subsidiary,	presently	operate	the	following	18	hotels.	Loews	Hotels accounted	for	2.0%,	2.9%	and	2.7%	of	our	consolidated	total	revenue	for	the	years	ended	December	31,	2009,	2008	and	2007.

| Name	and	Location | Number	of<br>Rooms | Owned,	Leased	or	Managed |
| :--- | :--- | :--- |
| Loews\tAnnapolis\tHotel | 220 | Owned |
| Annapolis,\tMaryland |  |  |
| Loews\tCoronado\tBay | 440 | Land\tlease\texpiring\t2034 |
| San\tDiego,\tCalifornia |  |  |
| Loews\tDenver\tHotel | 185 | Owned |
| Denver,\tColorado |  |  |
| The\tDon\tCeSar,\ta\tLoews\tHotel | 347 | Management\tcontract\t(a)(b) |
| St.\tPete\tBeach,\tFlorida |  |  |
| Hard\tRock\tHotel, | 650 | Management\tcontract\t(c) |
| at\tUniversal\tOrlando |  |  |
| Orlando,\tFlorida |  |  |
| Loews\tLake\tLas\tVegas | 493 | Management\tcontract\t(a) |
| Henderson,\tNevada |  |  |
| Loews\tLe\tConcorde\tHotel | 405 | Land\tlease\texpiring\t2069 |
| Quebec\tCity,\tCanada |  |  |
| The\tMadison,\ta\tLoews\tHotel | 353 | Management\tcontract\texpiring\t2021\t(a) |
| Washington,\tD.C. |  |  |
| Loews\tMiami\tBeach\tHotel | 790 | Owned |
| Miami\tBeach,\tFlorida |  |  |
| Loews\tNew\tOrleans\tHotel | 285 | Management\tcontract\texpiring\t2018\t(a) |
| New\tOrleans,\tLouisiana |  |  |
| Loews\tPhiladelphia\tHotel | 585 | Owned |
| Philadelphia,\tPennsylvania |  |  |
| Loews\tPortofino\tBay\tHotel, | 750 | Management\tcontract\t(c) |
| at\tUniversal\tOrlando |  |  |
| Orlando,\tFlorida |  |  |
| Loews\tRegency\tHotel | 350 | Land\tlease\texpiring\t2013,\twith\trenewal\toption\tfor\t47\tyears |
| New\tYork,\tNew\tYork |  |  |
| Loews\tRoyal\tPacific\tResort | 1,000 | Management\tcontract\t(c) |
| at\tUniversal\tOrlando |  |  |
| Orlando,\tFlorida |  |  |
| Loews\tSanta\tMonica\tBeach\tHotel | 340 | Management\tcontract\texpiring\t2018,\twith\trenewal\toption\tfor |
| Santa\tMonica,\tCalifornia |  | \t\t\t\t5\tyears\t(a) |
| Loews\tVanderbilt\tHotel | 340 | Owned |
| Nashville,\tTennessee |  |  |
| Loews\tVentana\tCanyon | 400 | Management\tcontract\texpiring\t2019\t(a) |
| Tucson,\tArizona |  |  |
| Loews\tHotel\tVogue | 140 | Owned |

(a) These	management	contracts	are	subject	to	termination	rights.

(b) A	Loews	Hotels	subsidiary	is	a	20%	owner	of	the	hotel,	which	is	being	operated	by	Loews	Hotels	pursuant	to	a	management	contract.

(c) A	Loews	Hotels	subsidiary	is	a	50%	owner	of	these	hotels	located	at	the	Universal	Orlando	theme	park,	through	a	joint	venture	with	Universal	Studios	and	the Rank	Group.	The	hotels	are	on	land	leased	by	the	joint	venture	and	are	operated	by	Loews	Hotels	pursuant	to	a	management	contract.

# Loews	Hotels	Holding	Corporation	–	(Continued)

The	hotels	owned	by	Loews	Hotels	are	subject	to	mortgage	indebtedness	totaling	approximately	$224	million	at	December	31,	2009	with	interest	rates	ranging from	2.5%	to	6.3%,	and	maturing	between	2010	and	2028.	In	addition,	certain	hotels	are	held	under	leases	which	are	subject	to	formula	derived	rental	increases,	with rentals	aggregating	approximately	$6	million	for	the	year	ended	December	31,	2009.

Competition	from	other	hotels	and	lodging	facilities	is	vigorous	in	all	areas	in	which	Loews	Hotels	operates.	The	demand	for	hotel	rooms	in	many	areas	is seasonal	and	dependent	on	general	and	local	economic	conditions.	Loews	Hotels	properties	also	compete	with	facilities	offering	similar	services	in	locations	other	than those	in	which	its	hotels	are	located.	Competition	among	luxury	hotels	is	based	primarily	on	location	and	service.	Competition	among	resort	and	commercial	hotels	is based	on	price	as	well	as	location	and	service.	Because	of	the	competitive	nature	of	the	industry,	hotels	must	continually	make	expenditures	for	updating,	refurnishing and	repairs	and	maintenance,	in	order	to	prevent	competitive	obsolescence.

# SEPARATION	OF	LORILLARD

In	June	of	2008,	we	disposed	of	our	entire	ownership	interest	in	our	wholly	owned	subsidiary,	Lorillard,	Inc.	("Lorillard"),	through	the	following	two	integrated transactions,	collectively	referred	to	as	the	"Separation":

•	 On	June	10,	2008,	we	distributed	108,478,429	shares,	or	approximately	62%,	of	the	outstanding	common	stock	of	Lorillard	in	exchange	for	and	in redemption	of	all	of	the	108,478,429	outstanding	shares	of	our	former	Carolina	Group	stock,	in	accordance	with	our	Restated	Certificate	of	Incorporation (the	"Redemption");	and

•	 On	June	16,	2008,	we	distributed	the	remaining	65,445,000	shares,	or	approximately	38%,	of	the	outstanding	common	stock	of	Lorillard	in	exchange	for 93,492,857	shares	of	Loews	common	stock,	reflecting	an	exchange	ratio	of	0.70	(the	"Exchange	Offer").

As	a	result	of	the	Separation,	Lorillard	is	no	longer	a	subsidiary	of	ours	and	we	no	longer	own	any	interest	in	the	outstanding	stock	of	Lorillard.	As	of	the completion	of	the	Redemption,	the	former	Carolina	Group	and	former	Carolina	Group	stock	have	been	eliminated.	In	addition,	at	that	time	all	outstanding	stock	options and	stock	appreciation	rights	("SARs")	awarded	under	our	former	Carolina	Group	2002	Stock	Option	Plan	were	assumed	by	Lorillard	and	converted	into	stock	options and	SARs	which	are	exercisable	for	shares	of	Lorillard	common	stock.

The	Loews	common	stock	acquired	by	us	in	the	Exchange	Offer	was	recorded	as	a	decrease	in	our	Shareholders'	equity,	reflecting	Loews	common	stock	at market	value	of	the	shares	of	Loews	common	stock	delivered	in	the	Exchange	Offer.	This	decline	was	offset	by	a	$4.3	billion	gain	to	us	from	the	Exchange	Offer,	which was	reported	as	a	gain	on	disposal	of	the	discontinued	business.

Our	Consolidated	Financial	Statements	have	been	reclassified	to	reflect	Lorillard	as	a	discontinued	operation.	Accordingly,	the	assets	and	liabilities,	revenues	and expenses	and	cash	flows	have	been	excluded	from	the	respective	captions	in	the	Consolidated	Balance	Sheets,	Consolidated	Statements	of	Income,	and	Consolidated Statements	of	Cash	Flows	and	have	been	included	in	Assets	and	Liabilities	of	discontinued	operations,	Discontinued	operations,	net	and	Net	cash	flows	-	discontinued operations.

Prior	to	the	Redemption,	we	had	a	two	class	common	stock	structure:	Loews	common	stock	and	former	Carolina	Group	stock.	Former	Carolina	Group	stock, commonly	called	a	tracking	stock,	was	intended	to	reflect	the	performance	of	a	defined	group	of	Loews's	assets	and	liabilities	referred	to	as	the	former	Carolina	Group. The	principal	assets	and	liabilities	attributable	to	the	former	Carolina	Group	were	our	100%	ownership	of	Lorillard,	including	all	dividends	paid	by	Lorillard	to	us,	and any	and	all	liabilities,	costs	and	expenses	arising	out	of	or	relating	to	tobacco	or	tobacco-related	businesses.	Immediately	prior	to	the	Separation,	outstanding	former Carolina	Group	stock	represented	an	approximately	62%	economic	interest	in	the	performance	of	the	former	Carolina	Group.	The	Loews	Group	consisted	of	all	of Loews's	assets	and	liabilities	other	than	those	allocated	to	the	former	Carolina	Group,	including	an	approximately	38%	economic	interest	in	the	former	Carolina	Group.

# EMPLOYEE	RELATIONS

Including	our	operating	subsidiaries	as	described	below,	we	employed	approximately	18,500	persons	at	December	31,	2009.	We,	and	our	subsidiaries,	have experienced	satisfactory	labor	relations.

# CNA	employed	approximately	8,900	persons.

Diamond	Offshore	employed	approximately	5,500	persons,	including	international	crew	personnel	furnished	through	independent	labor	contractors.

# HighMount	employed	approximately	600	persons.

Boardwalk	Pipeline	employed	approximately	1,110	persons,	approximately	115	of	whom	are	included	in	collective	bargaining	units.

Loews	Hotels	employed	approximately	2,070	persons,	approximately	800	of	whom	are	union	members	covered	under	collective	bargaining	agreements.

# AVAILABLE	INFORMATION

Our	website	address	is	www.loews.com.	We	make	available,	free	of	charge,	through	the	website	our	Annual	Report	on	Form	10-K,	Quarterly	Reports	on	Form 10-Q,	Current	Reports	on	Form	8-K	and	amendments	to	those	reports	filed	or	furnished	pursuant	to	Section	13(a)	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	as amended,	as	soon	as	reasonably	practicable	after	these	reports	are	electronically	filed	with	or	furnished	to	the	SEC.	Copies	of	our	Code	of	Business	Conduct	and	Ethics, Corporate	Governance	Guidelines,	Audit	Committee	charter,	Compensation	Committee	charter	and	Nominating	and	Governance	Committee	charter	have	also	been posted	and	are	available	on	our	website.

# Item	1A.	RISK	FACTORS.

Our	business	faces	many	risks.	We	have	described	below	some	of	the	more	significant	risks	which	we	and	our	subsidiaries	face.	There	may	be	additional	risks that	we	do	not	yet	know	of	or	that	we	do	not	currently	perceive	to	be	significant	that	may	also	impact	our	business	or	the	business	of	our	subsidiaries.

Each	of	 the	risks	and	uncertainties	described	below	could	 lead	 to	events	or	circumstances	 that	have	a	material	adverse	effect	on	our	business,	results	of operations,	cash	flows,	financial	condition	or	equity	and/or	the	business,	results	of	operations,	financial	condition	or	equity	of	one	or	more	of	our	subsidiaries.

You	should	carefully	consider	and	evaluate	all	of	the	information	included	in	this	Report	and	any	subsequent	reports	we	may	file	with	the	SEC	or	make	available to	the	public	before	investing	in	any	securities	issued	by	us.	Our	subsidiaries,	CNA	Financial	Corporation,	Diamond	Offshore	Drilling,	Inc.	and	Boardwalk	Pipeline Partners,	LP,	are	public	companies	and	file	reports	with	the	SEC.	You	are	also	cautioned	to	carefully	review	and	consider	the	information	contained	in	the	reports	filed by	those	subsidiaries	before	investing	in	any	of	their	securities.

# We	are	a	holding	company	and	derive	substantially	all	of	our	income	and	cash	flow	from	our	subsidiaries.

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	holders	of	our	common	stock.	Our	subsidiaries	are	separate	and	independent	legal	entities	and	have	no	obligation,	contingent	or	otherwise,	to	make funds	available	to	us,	whether	in	the	form	of	loans,	dividends	or	otherwise.	The	ability	of	our	subsidiaries	to	pay	dividends	to	us	is	also	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,	and	their	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	our	creditors	and	shareholders.

# Deterioration	in	the	public	debt	and	equity	markets	could	lead	to	investment	losses	and	lower	cash	balances	at	the	parent	company,	which	could	impair	our	ability	to fund	acquisitions,	share	buybacks,	dividends	or	other	investments	or	to	fund	capital	needed	by	our	subsidiaries.

The	U.S.	and	global	capital	and	credit	markets	experienced	severe	volatility,	illiquidity,	uncertainty	and	disruption	in	recent	years,	including	among	other	things, large	bankruptcies,	government	intervention	in	a	number	of	large	financial	institutions,	growing	levels	of	defaults	on	indebtedness,	recessionary	economic	conditions and	widening	of	credit	spreads.	These	conditions	resulted	 in	significant	realized	and	unrealized	 losses	and	substantially	reduced	 investment	 income,	 including	a significant	decline	in	income	from	limited	partnership	investments,	at	CNA	and	the	parent	company	during	2008.	Should	these	or	similar	conditions	recur,	we	could experience	additional	losses	and	further	reduced	investment	income,	which	would	among	other	things	reduce	the	cash	balances	available	at	the	parent	company.	Please see	MD&A	under	Item	7	of	this	Report	for	additional	information	on	our	Investments.

Certain	of	our	operating	subsidiaries	require	substantial	amounts	of	capital	or	other	financial	support	from	time	to	time	to	fund	expansions,	enhance	capital, refinance	indebtedness,	satisfy	rating	agency	or	regulatory	requirements	or	for	other	reasons.	Sufficient	capital	to	satisfy	these	needs	may	not	be	available	to	our subsidiaries	when	needed	on	acceptable	terms	from	the	credit	or	capital	markets	or	other	third	parties.	In	such	cases,	we	have	in	the	past,	and	may	in	the	future,	provide substantial	amounts	of	debt	or	equity	capital	to	our	subsidiaries,	which	may	not	be	on	market	terms.	Any	such	investments	further	reduce	the	amount	of	cash	available	at the	parent	company	which	might	otherwise	be	used	to	fund	acquisitions,	share	buybacks,	dividends	or	other	investments	or	to	fund	other	capital	requirements	of	our subsidiaries.	In	addition,	significantly	reduced	levels	of	cash	at	the	parent	company	could	make	us	unable	or	unwilling	to	fund	future	capital	needs	of	our	subsidiaries and	result	in	a	downgrade	of	our	ratings	by	the	major	credit	rating	agencies.

# We	could	have	liability	in	the	future	for	tobacco-related	lawsuits.

As	a	result	of	our	ownership	of	Lorillard,	Inc.	("Lorillard")	prior	to	the	separation	(the	"Separation"),	which	was	consummated	in	June	2008,	from	time	to	time	we have	been	named	as	a	defendant	in	tobacco-related	lawsuits.	We	are	currently	a	defendant	in	three	such	lawsuits	and	could	be	named	as	a	defendant	in	additional tobacco-related	suits,	notwithstanding	the	completion	of	the	Separation.	In	the	Separation	Agreement	entered	into	between	us	and	Lorillard	and	its	subsidiaries	in connection	with	 the	Separation,	Lorillard	and	each	of	 its	subsidiaries	has	agreed	 to	 indemnify	us	for	 liabilities	related	 to	Lorillard's	 tobacco	business,	 including liabilities	that	we	may	incur	for	current	and	future	tobacco-related	litigation	against	us.	An	adverse	decision	in	a	tobacco-related	lawsuit	against	us	could,	if	the indemnification	is	deemed	for	any	reason	to	be	unenforceable	or	any	amounts	owed	to	us	thereunder	are	not	collectible,	in	whole	or	in	part,	have	a	material	adverse effect	on	our	financial	condition,	results	of	operations	and	equity.	We	do	not	expect	that	the	Separation	will	alter	the	legal	exposure	of	either	entity	with	respect	to tobacco-related	claims.	We	do	not	believe	that	we	had	or	have	any	liability	for	tobacco-related	claims,	and	we	have	never	been	held	liable	for	any	such	claims.

# Risks	Related	to	Us	and	Our	Subsidiary,	CNA	Financial	Corporation

CNA	has	incurred	and	may	continue	to	incur	significant	realized	and	unrealized	investment	losses	and	volatility	in	net	investment	income	arising	from	the	severe disruption	in	the	capital	and	credit	markets.

Investment	returns	are	an	important	part	of	CNA's	overall	profitability.	General	economic	conditions,	changes	in	financial	markets	such	as	fluctuations	in	interest rates,	long	term	periods	of	low	interest	rates,	credit	conditions	and	currency,	commodity	and	stock	prices,	including	the	short	and	long-term	effects	of	losses	in	relation to	asset-backed	securities,	and	many	other	factors	beyond	CNA's	control	can	adversely	affect	the	value	of	CNA's	investments	and	the	realization	of	investment	income. Further,	CNA	invests	a	portion	of	its	assets	in	equity	securities	and	limited	partnerships	which	are	subject	to	greater	volatility	than	CNA's	fixed	income	investments. Limited	partnership	investments	generally	present	greater	volatility,	higher	illiquidity,	and	greater	risk	than	fixed	income	investments.	As	a	result	of	all	of	these	factors, CNA	may	not	realize	an	adequate	return	on	CNA's	investments,	may	incur	losses	on	sales	of	its	investments,	and	may	be	required	to	write	down	the	value	of	its investments.	Therefore,	the	Company's	results	of	operations,	equity	and	CNA's	business,	insurer	financial	strength	and	debt	ratings	could	be	materially	adversely impacted.

# CNA's	underwriting	results	may	continue	to	suffer	as	a	result	of	the	unfavorable	global	economic	conditions.

Overall	global	economic	conditions	may	continue	to	be	recessionary	and	highly	unfavorable.	Although	many	lines	of	CNA's	business	have	both	direct	and indirect	exposure	to	these	economic	conditions,	the	exposure	is	especially	high	for	the	lines	of	business	that	provide	management	and	professional	liability	insurance,	as well	as	surety	bonds,	to	businesses	engaged	in	real	estate,	financial	services	and	professional	services.	As	a	result,	CNA	has	experienced	and	may	continue	to	experience unanticipated	underwriting	losses	with	respect	to	these	lines	of	business.	Additionally,	global	recessionary	conditions	have	led	to	decreased	insured	exposures	causing CNA	to	experience	declines	in	premium	volume.	Consequently,	the	Company's	results	of	operations	and	equity,	and	CNA's	business,	insurer	financial	strength	and	debt ratings	could	be	adversely	impacted.

# CNA's	valuation	of	investments	and	impairment	of	securities	requires	significant	judgment.

CNA's	investment	portfolio	is	exposed	to	various	risks,	such	as	interest	rate,	credit,	and	currency	risks,	many	of	which	are	unpredictable.	CNA	exercises significant	judgment	in	analyzing	these	risks	and	in	validating	fair	values	provided	by	third	parties	for	securities	in	its	investment	portfolio	that	are	not	regularly	traded. CNA	 also	 exercises	 significant	 judgment	 in	 determining	 whether	 the	 impairment	 of	 particular	 investments	 is	 temporary	 or	 other-than-temporary.	 Securities	 with exposure	to	residential	and	commercial	mortgage	and	other	loan	collateral	can	be	particularly	sensitive	to	fairly	small	changes	in	actual	collateral	performance	and assumptions	as	to	future	collateral	performance.

During	 2008,	 CNA	 incurred	 significant	 unrealized	 losses	 in	 its	 investment	 portfolio.	 During	 2009,	 financial	 markets	 were	 volatile	 and	 CNA	 experienced improvement	in	its	unrealized	position.	In	addition,	during	2009	and	2008	CNA	recorded	significant	other-than-temporary	impairment	("OTTI")	losses	primarily	in	the corporate	and	other	taxable	bonds,	asset-backed	securities	and	non-redeemable	preferred	equity	securities	sectors.

Due	to	the	inherent	uncertainties	involved	with	these	types	of	risks	and	the	resulting	judgments,	CNA	may	incur	further	unrealized	losses	and	conclude	that further	other-than-temporary	write	downs	of	CNA's	investments	are	required.	As	a	result,	the	Company's	results	of	operations	and	equity,	and	CNA's	business,	insurer financial	strength	and	debt	ratings	could	be	materially	adversely	impacted.	Additional	information	on	CNA's	investment	portfolio	is	included	in	the	MD&A	under Item	7	and	Notes	3,	4,	and	5	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8.

# CNA	is	unable	to	predict	the	impact	on	itself	of	governmental	efforts	and	policy	changes	taken	and	proposed	to	be	taken	in	response	to	the	unfavorable	economic conditions.

The	federal	government	has	implemented	various	measures,	including	the	establishment	of	the	Troubled	Assets	Relief	Program	pursuant	to	the	Emergency Economic	Stabilization	Act	of	2008,	in	an	effort	to	deal	with	the	ongoing	economic	conditions.	In	addition,	there	are	numerous	proposals	for	further	legislative	and regulatory	actions	at	both	the	federal	and	state	levels,	particularly	with	respect	to	the	financial	services	industry.	Since	these	new	laws	and	regulations,	or	other	policy changes,	could	involve	critical	matters	affecting	CNA's	operations,	they	may	have	an	impact	on	CNA's	business	and	its	overall	financial	condition.	Due	to	this significant	uncertainty,	CNA	is	unable	to	determine	whether	its	actions	in	response	to	these	governmental	efforts	will	be	effective	or	to	predict	with	any	certainty	the overall	impact	these	governmental	efforts	will	have	on	it.	As	a	result,	the	Company's	results	of	operations	and	equity	and	CNA's	business,	insurer	financial	strength	and debt	ratings	could	be	materially	adversely	impacted.

# CNA	is	subject	to	extensive	federal,	state	and	local	governmental	regulations	that	restrict	its	ability	to	do	business	and	generate	revenues.

The	insurance	industry	is	subject	to	comprehensive	and	detailed	regulation	and	supervision	throughout	the	United	States.	Most	insurance	regulations	are	designed to	protect	the	interests	of	CNA's	policyholders	rather	than	its	investors.	Each	state	in	which	CNA	does	business	has	established	supervisory	agencies	that	regulate	the manner	in	which	it	does	business.	Their	regulations	relate	to,	among	other	things,	the	following:

•standards	of	solvency	including	risk-based	capital	measurements;

•restrictions	on	the	nature,	quality	and	concentration	of	investments;

•restrictions	on	CNA's	ability	to	withdraw	from	unprofitable	lines	of	insurance	or	unprofitable	market	areas;

•the	required	use	of	certain	methods	of	accounting	and	reporting;

•the	establishment	of	reserves	for	unearned	premiums,	losses	and	other	purposes;

•potential	assessments	for	funds	necessary	to	settle	covered	claims	against	impaired,	insolvent	or	failed	private	or	quasi-governmental	insurers;

•licensing	of	insurers	and	agents;

•approval	of	policy	forms;

•limitations	on	the	ability	of	CNA's	insurance	subsidiaries	to	pay	dividends	to	CNA;	and

•limitations	on	the	ability	to	non-renew,	cancel	or	change	terms	and	conditions	in	policies.

Regulatory	powers	also	extend	to	premium	rate	regulations	which	require	that	rates	not	be	excessive,	inadequate	or	unfairly	discriminatory.	The	states	in	which CNA	does	business	also	require	CNA	to	provide	coverage	to	persons	whom	CNA	would	not	otherwise	consider	eligible.	Each	state	dictates	the	types	of	insurance	and the	level	of	coverage	that	must	be	provided	to	such	involuntary	risks.	CNA's	share	of	these	involuntary	risks	is	mandatory	and	generally	a	function	of	its	respective share	of	the	voluntary	market	by	line	of	insurance	in	each	state.

Any	of	these	regulations	could	materially	adversely	affect	the	Company's	results	of	operations	and	equity,	and	CNA's	business,	insurer	financial	strength	and debt	ratings.

# CNA	is	subject	to	capital	adequacy	requirements	and,	if	it	is	unable	to	maintain	or	raise	sufficient	capital	to	meet	these	requirements,	regulatory	agencies	may restrict	or	prohibit	CNA	from	operating	its	business.

Insurance	companies	such	as	CNA	are	subject	to	risk-based	capital	standards	set	by	state	regulators	to	help	identify	companies	that	merit	further	regulatory attention.	These	standards	apply	specified	risk	factors	to	various	asset,	premium	and	reserve	components	of	CNA's	statutory	capital	and	surplus	reported	in	CNA's statutory	basis	of	accounting	financial	statements.	Current	rules	require	companies	to	maintain	statutory	capital	and	surplus	at	a	specified	minimum	level	determined using	the	risk-based	capital	formula.	If	CNA	does	not	meet	these	minimum	requirements,	state	regulators	may	restrict	or	prohibit	it	from	operating	its	business.	If	CNA is	required	to	record	a	material	charge	against	earnings	in	connection	with	a	change	in	estimates	or	circumstances	or	if	it	incurs	significant	unrealized	losses	related	to	its investment	portfolio,	CNA	may	violate	these	minimum	capital	adequacy	requirements	unless	it	is	able	to	raise	sufficient	additional	capital.	Examples	of	events	leading CNA	to	record	a	material	charge	against	its	earnings	include	impairment	of	CNA's	investments	or	unexpectedly	poor	claims	experience.

Loews	has	provided	CNA	with	substantial	amounts	of	capital	in	prior	years.	Loews	may	be	restricted	in	its	ability	or	willingness	to	provide	additional	capital support	to	CNA.	As	a	result,	if	CNA	is	in	need	of	additional	capital,	CNA	may	be	required	to	secure	this	funding	from	sources	other	than	Loews.	CNA	may	be	limited in	its	ability	to	raise	significant	amounts	of	capital	on	favorable	terms	or	at	all.

# Rating	agencies	may	downgrade	their	ratings	of	CNA	and	thereby	adversely	affect	its	ability	to	write	insurance	at	competitive	rates	or	at	all.

Ratings	are	an	important	factor	in	establishing	the	competitive	position	of	insurance	companies.	CNA's	insurance	company	subsidiaries,	as	well	as	CNA's	public debt,	are	rated	by	rating	agencies,	namely,	A.M.	Best	Company,	Moody's	Investors	Service,	Inc.	and	Standard	&	Poor's.	Ratings	reflect	the	rating	agency's	opinions	of an	insurance	company's	or	insurance	holding	company's	financial	strength,	capital	adequacy,	operating	performance,	strategic	position	and	ability	to	meet	its	obligations to	policyholders	and	debt	holders.

Due	to	the	intense	competitive	environment	in	which	CNA	operates,	the	disruption	in	the	capital	and	credit	markets,	the	uncertainty	in	determining	reserves	and the	potential	for	CNA	to	take	material	unfavorable	development	in	the	future,

and	possible	changes	in	the	methodology	or	criteria	applied	by	the	rating	agencies,	the	rating	agencies	may	take	action	to	lower	CNA's	ratings	in	the	future.	If	CNA's property	and	casualty	insurance	financial	strength	ratings	are	downgraded	below	current	levels,	CNA's	business	and	results	of	operations	could	be	materially	adversely affected.	The	severity	of	the	impact	on	CNA's	business	is	dependent	on	the	level	of	downgrade	and,	for	certain	products,	which	rating	agency	takes	the	rating	action. Among	the	adverse	effects	in	the	event	of	such	downgrades	would	be	the	inability	to	obtain	a	material	volume	of	business	from	certain	major	insurance	brokers,	the inability	to	sell	a	material	volume	of	CNA's	insurance	products	to	certain	markets,	and	the	required	collateralization	of	certain	future	payment	obligations	or	reserves.

In	addition,	it	is	possible	that	a	lowering	of	the	debt	ratings	of	Loews	by	certain	of	the	rating	agencies	could	result	in	an	adverse	impact	on	CNA's	ratings, independent	 of	 any	 change	 in	 CNA's	 circumstances.	 CNA	 has	 entered	 into	 several	 settlement	 agreements	 and	 assumed	 reinsurance	 contracts	 that	 require collateralization	of	future	payment	obligations	and	assumed	reserves	 if	 its	ratings	or	other	specific	criteria	fall	below	certain	 thresholds.	The	ratings	 triggers	are generally	more	than	one	level	below	CNA's	current	ratings.	Additional	information	on	CNA's	ratings	and	ratings	triggers	is	included	in	the	MD&A	under	Item	7.

# CNA's	insurance	subsidiaries,	upon	whom	CNA	depends	for	dividends	in	order	to	fund	its	working	capital	needs,	are	limited	by	state	regulators	in	their	ability	to pay	dividends.

CNA	is	a	holding	company	and	is	dependent	upon	dividends,	loans	and	other	sources	of	cash	from	its	subsidiaries	in	order	to	meet	its	obligations.	Ordinary dividend	payments,	or	dividends	that	do	not	require	prior	approval	by	subsidiaries'	domiciliary	state	departments	of	insurance	and	are	generally	limited	to	amounts determined	by	formula	which	varies	by	state.	The	formula	for	the	majority	of	the	states	is	the	greater	of	10%	of	the	prior	year	statutory	surplus	or	the	prior	year	statutory net	income,	less	the	aggregate	of	all	dividends	paid	during	the	twelve	months	prior	to	the	date	of	payment.	Some	states,	however,	have	an	additional	stipulation	that dividends	cannot	exceed	the	prior	year's	earned	surplus.	If	CNA	is	restricted,	by	regulatory	rule	or	otherwise,	from	paying	or	receiving	inter-company	dividends,	CNA may	not	be	able	to	fund	its	working	capital	needs	and	debt	service	requirements	from	available	cash.	As	a	result,	CNA	would	need	to	look	to	other	sources	of	capital which	may	be	more	expensive	or	may	not	be	available	at	all.

# If	CNA	determines	that	its	recorded	loss	reserves	are	insufficient	to	cover	its	estimated	ultimate	unpaid	liability	for	claims,	CNA	may	need	to	increase	its	loss reserves.

CNA	maintains	loss	reserves	to	cover	its	estimated	ultimate	unpaid	liability	for	claims	and	claim	adjustment	expenses	for	reported	and	unreported	claims	and	for future	policy	benefits.	Reserves	represent	CNA's	best	estimate	at	a	given	point	in	time.	Insurance	reserves	are	not	an	exact	calculation	of	liability	but	instead	are complex	estimates	derived	by	CNA,	generally	utilizing	a	variety	of	reserve	estimation	techniques	from	numerous	assumptions	and	expectations	about	future	events, many	of	which	are	highly	uncertain,	such	as	estimates	of	claims	severity,	frequency	of	claims,	mortality,	morbidity,	expected	interest	rates,	inflation,	claims	handling, case	reserving	policies	and	procedures,	underwriting	and	pricing	policies,	changes	in	the	legal	and	regulatory	environment	and	the	lag	time	between	the	occurrence	of	an insured	event	and	the	time	of	its	ultimate	settlement.	Many	of	these	uncertainties	are	not	precisely	quantifiable	and	require	significant	judgment	on	CNA's	part.	As trends	in	underlying	claims	develop,	particularly	in	so-called	"long	tail"	or	long	duration	coverages,	CNA	is	sometimes	required	to	add	to	its	reserves.	This	is	called unfavorable	net	prior	year	development	and	results	in	a	charge	to	CNA's	earnings	in	the	amount	of	the	added	reserves,	recorded	in	the	period	the	change	in	estimate	is made.	These	charges	can	be	substantial.	Additional	information	on	CNA's	reserves	is	included	in	the	MD&A	under	Item	7	and	Note	9	of	the	Notes	to	Consolidated Financial	Statements	included	under	Item	8.

CNA	is	subject	to	the	uncertain	effects	of	emerging	or	potential	claims	and	coverage	issues	that	arise	as	industry	practices	and	legal,	judicial,	social	and	other environmental	conditions	change.	These	issues	have	had,	and	may	continue	to	have,	a	negative	effect	on	CNA's	business	by	either	extending	coverage	beyond	the original	underwriting	intent	or	by	increasing	the	number	or	size	of	claims,	resulting	in	further	increases	in	CNA's	reserves	which	can	have	a	material	adverse	effect	on its	results	of	operations	and	equity.	The	effects	of	these	and	other	unforeseen	emerging	claim	and	coverage	issues	are	extremely	hard	to	predict.	Examples	of	emerging	or potential	claim	and	coverage	issues	include:

•increases	in	the	number	and	size	of	claims	relating	to	injuries	from	various	medical	products	including	pharmaceuticals;

•the	effects	of	recessionary	economic	conditions	and	financial	reporting	scandals,	which	have	resulted	in	an	increase	in	the	number	and	size	of	claims,	due	to corporate	failures;	these	claims	include	both	directors	and	officers	("D&O")	and	errors	and	omissions	("E&O")	insurance	claims;

•class	action	litigation	relating	to	claims	handling	and	other	practices;

•construction	defect	claims,	including	claims	for	a	broad	range	of	additional	insured	endorsements	on	policies;

•clergy	abuse	claims,	including	passage	of	legislation	to	reopen	or	extend	various	statutes	of	limitations;	and

•	 mass	tort	claims,	including	bodily	injury	claims	related	to	welding	rods,	benzene,	lead,	noise	induced	hearing	loss	and	various	other	chemical	and	radiation exposure	claims.

In	light	of	the	many	uncertainties	associated	with	establishing	the	estimates	and	making	the	assumptions	necessary	to	establish	reserve	levels,	CNA	reviews	and change	 its	reserve	estimates	 in	a	regular	and	ongoing	process	as	experience	develops	and	further	claims	are	reported	and	settled.	In	addition,	CNA	periodically undergoes	state	regulatory	financial	examinations,	including	review	and	analysis	of	CNA's	reserves.	If	estimated	reserves	are	insufficient	for	any	reason,	the	required increase	in	reserves	would	be	recorded	as	a	charge	against	CNA's	earnings	for	the	period	in	which	reserves	are	determined	to	be	insufficient.	These	charges	could	be substantial	and	could	materially	adversely	affect	the	Company's	results	of	operations	and	equity,	and	CNA's	business,	insurer	financial	strength	and	debt	ratings.

# Loss	reserves	for	asbestos	and	environmental	pollution	are	especially	difficult	to	estimate	and	may	result	in	more	frequent	and	larger	additions	to	these	reserves.

CNA's	experience	has	been	that	establishing	reserves	for	casualty	coverages	relating	to	asbestos	and	environmental	pollution	(which	CNA	refers	to	as	A&E) claim	and	claim	adjustment	expenses	are	subject	to	uncertainties	that	are	greater	than	those	presented	by	other	claims.	Estimating	the	ultimate	cost	of	both	reported	and unreported	claims	are	subject	to	a	higher	degree	of	variability	due	to	a	number	of	additional	factors	including,	among	others,	the	following:

•coverage	issues	including	whether	certain	costs	are	covered	under	the	policies	and	whether	policy	limits	apply;

•inconsistent	court	decisions	and	developing	legal	theories;

•continuing	aggressive	tactics	of	plaintiffs'	lawyers;

•the	risks	and	lack	of	predictability	inherent	in	major	litigation;

•changes	in	the	frequency	of	asbestos	and	environmental	pollution	claims;

•changes	in	the	severity	of	claims	including	bodily	injury	claims	for	malignancies	arising	out	of	exposure	to	asbestos;

•the	impact	of	the	exhaustion	of	primary	limits	and	the	resulting	increase	in	claims	on	any	umbrella	or	excess	policies	CNA	has	issued;

•	 CNA's	ability	to	recover	reinsurance	for	these	claims;	and

•changes	in	the	legal	and	legislative	environment	in	which	CNA	operates.

As	a	result	of	this	higher	degree	of	variability,	CNA	has	necessarily	supplemented	traditional	actuarial	methods	and	 techniques	with	additional	estimating techniques	and	methodologies,	many	of	which	involve	significant	judgment	on	its	part.	Consequently,	CNA	may	periodically	need	to	record	changes	in	its	claim	and claim	adjustment	expense	reserves	in	the	future	in	these	areas	in	amounts	that	could	materially	adversely	affect	the	Company's	results	of	operations	and	equity,	and CNA's	business,	insurer	financial	strength	and	debt	ratings.	Additional	information	on	A&E	claims	is	included	in	the	MD&A	under	Item	7	and	Note	9	of	the	Notes	to Consolidated	Financial	Statements	included	under	Item	8.

Asbestos	claims.		The	estimation	of	reserves	for	asbestos	claims	is	particularly	difficult	in	light	of	the	factors	noted	above.	In	addition,	CNA's	ability	to	estimate the	ultimate	cost	of	asbestos	claims	is	further	complicated	by	the	following:

•inconsistency	of	court	decisions	and	jury	attitudes,	as	well	as	future	court	decisions;

•interpretation	of	specific	policy	provisions;

•allocation	of	liability	among	insurers	and	insureds;

•	 missing	policies	and	proof	of	coverage;

•the	proliferation	of	bankruptcy	proceedings	and	attendant	uncertainties;

•novel	theories	asserted	by	policyholders	and	their	legal	counsel;

•the	targeting	of	a	broader	range	of	businesses	and	entities	as	defendants;

•uncertainties	in	predicting	the	number	of	future	claims	and	which	other	insureds	may	be	targeted	in	the	future;

•volatility	in	frequency	of	claims	and	severity	of	settlement	demands;

•increases	in	the	number	of	non-impaired	claimants	and	the	extent	to	which	they	can	be	precluded	from	making	claims;

•the	efforts	by	insureds	to	obtain	coverage	that	is	not	subject	to	aggregate	limits;

•the	long	latency	period	between	asbestos	exposure	and	disease	manifestation,	as	well	as	the	resulting	potential	for	involvement	of	multiple	policy	periods for	individual	claims;

•	 medical	inflation	trends;

•the	mix	of	asbestos-related	diseases	presented;	and

•the	ability	to	recover	reinsurance.

In	addition,	a	number	of	CNA's	insureds	have	asserted	that	their	claims	for	insurance	are	not	subject	to	aggregate	limits	on	coverage.	If	these	insureds	are successful	in	this	regard,	CNA's	potential	liability	for	their	claims	would	be	unlimited.	Some	of	these	insureds	contend	that	their	asbestos	claims	fall	within	the	so-called "non-products"	liability	coverage	within	their	policies,	rather	than	the	products	liability	coverage,	and	that	this	"non-products"	liability	coverage	is	not	subject	to	any aggregate	limit.	It	is	difficult	to	predict	the	extent	to	which	these	claims	will	succeed	and,	as	a	result,	the	ultimate	size	of	these	claims.

Environmental	pollution	claims.		The	estimation	of	reserves	for	environmental	pollution	claims	is	complicated	by	liability	and	coverage	issues	arising	from	these claims.	CNA	and	others	in	the	insurance	industry	are	disputing	coverage	for	many	such	claims.	In	addition	to	the	coverage	issues	noted	in	the	asbestos	claims	section above,	key	coverage	issues	in	environmental	pollution	claims	include	the	following:

•	 whether	cleanup	costs	are	considered	damages	under	the	policies	(and	accordingly	whether	CNA	would	be	liable	for	these	costs);

•the	trigger	of	coverage	and	the	allocation	of	liability	among	triggered	policies;

•the	applicability	of	pollution	exclusions	and	owned	property	exclusions;

•the	potential	for	joint	and	several	liability;	and

# •the	definition	of	an	occurrence.

To	date,	courts	have	been	inconsistent	in	their	rulings	on	these	issues,	thus	adding	to	the	uncertainty	of	the	outcome	of	many	of	these	claims.

Further,	the	scope	of	federal	and	state	statutes	and	regulations	determining	liability	and	insurance	coverage	for	environmental	pollution	liabilities	have	been	the subject	of	extensive	litigation.	In	many	cases,	courts	have	expanded	the	scope	of	coverage	and	liability	for	cleanup	costs	beyond	the	original	intent	of	CNA's	insurance policies.	Additionally,	the	standards	for	cleanup	in	environmental	pollution	matters	are	unclear,	the	number	of	sites	potentially	subject	to	cleanup	under	applicable	laws is	unknown,	and	the	impact	of	various	proposals	to	reform	existing	statutes	and	regulations	is	difficult	to	predict.

# Catastrophe	losses	are	unpredictable.

Catastrophe	losses	are	an	inevitable	part	of	CNA's	business.	Various	events	can	cause	catastrophe	losses,	including	hurricanes,	windstorms,	earthquakes,	hail, explosions,	severe	winter	weather,	and	fires,	and	their	frequency	and	severity	are	inherently	unpredictable.	In	addition,	longer-term	natural	catastrophe	trends	may	be changing	and	new	types	of	catastrophe	losses	may	be	developing	due	to	climate	change,	a	phenomenon	that	has	been	associated	with	extreme	weather	events	linked	to rising	temperatures,	and	includes	effects	on	global	weather	patterns,	greenhouse	gases,	sea,	land	and	air	temperatures,	sea	levels,	rain,	and	snow.	The	extent	of	CNA's losses	from	catastrophes	is	a	function	of	both	the	total	amount	of	CNA's	insured	exposures	in	the	affected	areas	and	the	severity	of	the	events	themselves.	In	addition,	as in	the	case	of	catastrophe	losses	generally,	it	can	take	a	long	time	for	the	ultimate	cost	to	CNA	to	be	finally	determined.	As	CNA's	claim	experience	develops	on	a particular	catastrophe,	CNA	may	be	required	to	adjust	its	reserves,	or	take	unfavorable	development,	to	reflect	its	revised	estimates	of	the	total	cost	of	claims.	CNA believes	it	could	incur	significant	catastrophe	losses	in	the	future.	Therefore,	the	Company's	results	of	operations	and	equity,	and	CNA's	business,	insurer	financial strength	and	debt	ratings	could	be	materially	adversely	impacted.	Additional	information	on	catastrophe	losses	is	included	in	the	MD&A	under	Item	7	and	Note	9	of	the Notes	to	Consolidated	Financial	Statements	included	under	Item	8.

# CNA's	key	assumptions	used	to	determine	reserves	and	deferred	acquisition	costs	for	CNA's	long	term	care	product	offerings	could	vary	significantly	from	actual experience.

CNA's	reserves	and	deferred	acquisition	costs	for	its	long	term	care	product	offerings	are	based	on	certain	key	assumptions	including	morbidity,	which	is	the frequency	and	severity	of	illness,	sickness	and	diseases	contracted,	policy	persistency,	which	is	the	percentage	of	policies	remaining	in	force,	interest	rates	and	future health	care	cost	trends.	If	actual	experience	differs	from	these	assumptions,	the	deferred	acquisition	asset	may	not	be	fully	realized	and	the	reserves	may	not	be adequate,	requiring	CNA	to	add	to	reserves,	or	take	unfavorable	development.	Therefore,	the	Company's	results	of	operations	and	equity,	and	CNA's	business,	insurer financial	strength	and	debt	ratings	could	be	materially	adversely	impacted.

# CNA	is	unable	to	predict	the	impact	of	federal	health	care	reform	legislation.

The	federal	government	may	be	implementing	landmark	health	care	reform	legislation	that	could	involve	critical	matters	affecting	CNA's	operations,	particularly CNA's	workers'	compensation	and	long	term	care	products.	Until	the	legislation	is	enacted,	CNA	is	unable	to	predict	with	any	certainty	the	overall	impact	it	will	have. As	a	result,	the	Company's	results	of	operations	and	equity,	and	CNA	business,	insurer	financial	strength	and	debt	ratings	could	be	materially	adversely	impacted.

# CNA's	premium	writings	and	profitability	are	affected	by	the	availability	and	cost	of	reinsurance.

CNA	purchases	reinsurance	to	help	manage	its	exposure	to	risk.	Under	CNA's	reinsurance	arrangements,	another	insurer	assumes	a	specified	portion	of	its	claim and	claim	adjustment	expenses	in	exchange	for	a	specified	portion	of	policy	premiums.	Market	conditions	determine	the	availability	and	cost	of	the	reinsurance protection	CNA	purchases,	which	affects	the	level	of	CNA's	business	and	profitability,	as	well	as	the	level	and	types	of	risk	CNA	retains.	If	CNA	is	unable	to	obtain sufficient	reinsurance	at	a	cost	it	deems	acceptable,	CNA	may	be	unwilling	to	bear	the	increased	risk

and	 would	 reduce	 the	 level	 of	 its	 underwriting	 commitments.	Therefore,	 the	 Company's	 financial	 results	 of	 operations	 could	 be	 materially	 adversely impacted. Additional	information	on	reinsurance	is	included	in	Note	17	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8.

# CNA	may	not	be	able	to	collect	amounts	owed	to	it	by	reinsurers.

CNA	has	significant	amounts	recoverable	from	reinsurers	which	are	reported	as	receivables	in	its	balance	sheets	and	are	estimated	in	a	manner	consistent	with claim	and	claim	adjustment	expense	reserves	or	future	policy	benefits	reserves.	The	ceding	of	insurance	does	not,	however,	discharge	CNA's	primary	liability	for	claims. As	a	result,	CNA	is	subject	to	credit	risk	relating	to	its	ability	to	recover	amounts	due	from	reinsurers.	Certain	of	CNA's	reinsurance	carriers	have	experienced deteriorating	financial	conditions	or	have	been	downgraded	by	rating	agencies.	A	continuation	or	worsening	of	the	current	unfavorable	global	economic	conditions	could similarly	impact	all	of	CNA's	reinsurers.	In	addition,	reinsurers	could	dispute	amounts	which	CNA	believes	are	due	to	it.	If	CNA	is	not	able	to	collect	the	amounts	due to	it	from	reinsurers,	CNA's	claims	expenses	will	be	higher	which	could	materially	adversely	affect	the	Company's	results	of	operations	and	equity,	and	CNA's business,	insurer	financial	strength	and	debt	ratings.	Additional	information	on	reinsurance	is	included	in	Note	17	of	the	Notes	to	Consolidated	Financial	Statements included	under	Item	8.

# Risks	Related	to	Us	and	Our	Subsidiary,	Diamond	Offshore	Drilling,	Inc.

# Diamond	Offshore's	business	depends	on	the	level	of	activity	in	the	oil	and	gas	industry,	which	is	significantly	affected	by	volatile	oil	and	gas	prices.

Diamond	Offshore's	business	depends	on	the	level	of	activity	in	offshore	oil	and	gas	exploration,	development	and	production	in	markets	worldwide.	Worldwide demand	for	oil	and	gas,	oil	and	gas	prices,	market	expectations	of	potential	changes	in	these	prices	and	a	variety	of	political	and	economic	factors	significantly	affect	this level	of	activity.	However,	higher	or	lower	commodity	demand	and	prices	do	not	necessarily	translate	into	increased	or	decreased	drilling	activity	since	Diamond Offshore's	customers'	project	development	time,	reserve	replacement	needs,	as	well	as	expectations	of	future	commodity	demand	and	prices	all	combine	to	affect demand	for	Diamond	Offshore's	rigs.	Oil	and	gas	prices	have	been,	and	are	expected	to	continue	to	be,	extremely	volatile	and	are	affected	by	numerous	factors	beyond Diamond	Offshore's	control,	including:

•	 worldwide	demand	for	oil	and	gas;

•the	level	of	economic	activity	in	energy-consuming	markets;

•the	worldwide	economic	environment	or	economic	trends,	such	as	recessions;

•the	ability	of	the	Organization	of	Petroleum	Exporting	Countries,	commonly	called	OPEC,	to	set	and	maintain	production	levels	and	pricing;

•the	level	of	production	in	non-OPEC	countries;

•the	 worldwide	 political	 and	 military	 environment,	 including	 uncertainty	 or	 instability	 resulting	 from	 an	 escalation	 or	 additional	 outbreak	 of	 armed hostilities	in	the	Middle	East,	other	oil-producing	regions	or	other	geographic	areas	or	further	acts	of	terrorism	in	the	United	States	or	elsewhere;

•the	cost	of	exploring	for,	producing	and	delivering	oil	and	gas;

•the	discovery	rate	of	new	oil	and	gas	reserves;

•the	rate	of	decline	of	existing	and	new	oil	and	gas	reserves;

•available	pipeline	and	other	oil	and	gas	transportation	capacity;

•the	ability	of	oil	and	gas	companies	to	raise	capital;

•	 weather	conditions	in	the	United	States	and	elsewhere;

•the	policies	of	various	governments	regarding	exploration	and	development	of	their	oil	and	gas	reserves;

•development	and	exploitation	of	alternative	fuels;

•competition	for	customers'	drilling	budgets	from	land-based	energy	markets	around	the	world;

•domestic	and	foreign	tax	policy;	and

•advances	in	exploration	and	development	technology.

# The	continuing	global	financial	crisis	and	worldwide	economic	downturn	has	had,	and	may	continue	to	have,	a	negative	impact	on	Diamond	Offshore's	business and	financial	condition.

The	continuing	worldwide	financial	crisis	has	reduced	the	availability	of	liquidity	and	in	some	cases	has	reduced	the	availability	of	and/or	increased	the	cost	of credit	to	fund	the	continuation	and	expansion	of	industrial	business	operations	worldwide,	and	has	led	to	a	worldwide	economic	recession.	This	deterioration	of	the worldwide	economy	has	resulted	in	reduced	demand	for	crude	oil	and	natural	gas,	exploration	and	production	activity	and	offshore	drilling	services	that	has	had	a negative	impact	on	our	business	and	financial	condition,	including	declines	in	dayrates	earned	by	Diamond	Offshore's	drilling	rigs	and	a	decrease	in	new	contract activity,	which	may	continue	and	may	worsen.

In	addition,	the	worldwide	economic	recession	has	had,	and	could	continue	to	have,	a	negative	impact	on	Diamond	Offshore's	customers	and/or	its	suppliers including,	among	other	things,	causing	them	to	fail	to	meet	their	obligations	to	Diamond	Offshore.	Additionally,	if	a	potential	customer	is	unable	to	obtain	an	adequate level	of	credit,	 it	may	preclude	Diamond	Offshore	from	doing	business	with	 that	potential	customer.	Similarly,	 the	restricted	credit	market	could	affect	 lenders participating	in	Diamond	Offshore's	credit	facility,	making	them	unable	to	fulfill	their	commitments	and	obligations	to	Diamond	Offshore.	Any	such	reductions	in drilling	activity	or	failure	by	Diamond	Offshore's	customers,	suppliers	or	lenders	to	meet	their	contractual	obligations	to	Diamond	Offshore,	or	Diamond	Offshore's inability	to	secure	additional	financing,	could	adversely	affect	the	Company's	financial	position,	results	of	operations	and	cash	flows.

# Diamond	Offshore's	industry	is	cyclical.

Diamond	Offshore's	industry	has	historically	been	cyclical.	There	have	been	periods	of	high	demand,	short	rig	supply	and	high	dayrates,	followed	by	periods	of lower	demand,	excess	rig	supply	and	low	dayrates.	Diamond	Offshore	cannot	predict	the	timing	or	duration	of	such	business	cycles.	Periods	of	excess	rig	supply intensify	the	competition	in	the	industry	and	often	result	in	rigs	being	idle	for	long	periods	of	time.	In	response	to	a	contraction	in	demand	for	its	services,	Diamond Offshore	has	cold	stacked	three	of	its	rigs	and	is	in	the	process	of	cold	stacking	a	fourth	unit.	Diamond	Offshore	may	be	required	to	idle	additional	rigs	or	to	enter	into lower	rate	contracts.	Prolonged	periods	of	low	utilization	and	dayrates	could	also	result	in	the	recognition	of	impairment	charges	on	certain	of	Diamond	Offshore's drilling	rigs	if	future	cash	flow	estimates,	based	upon	information	available	to	management	at	the	time,	indicate	that	the	carrying	value	of	these	rigs	may	not	be recoverable.

# Diamond	Offshore	can	provide	no	assurance	that	its	current	backlog	of	contract	drilling	revenue	will	be	ultimately	realized.

As	of	February	1,	2010,	Diamond	Offshore's	contract	drilling	backlog	was	approximately	$8.5	billion	for	contracted	future	work	extending,	in	some	cases,	until 2016.	Generally,	contract	backlog	only	includes	future	revenue	under	firm	commitments;	however,	from	time	to	time,	Diamond	Offshore	may	report	anticipated commitments	for	which	definitive	agreements	have	not	yet	been	executed.	Diamond	Offshore	can	provide	no	assurance	that	it	will	be	able	to	perform	under	these contracts	due	to	events	beyond	its	control	or	that	Diamond	Offshore	will	be	able	to	ultimately	execute	a	definitive	agreement	where	one	does	not	currently	exist.	In addition,	Diamond	Offshore	can	provide	no	assurance	that	its	customers	will	be	able	to	or	willing	to	fulfill	their	contractual	commitments.	Diamond	Offshore's	inability to	perform	under	its	contractual	obligations	or	to	execute	definitive	agreements	or	its	customers'	inability	to	fulfill	their	contractual	commitments	may	have	a	material adverse	effect	on	Diamond	Offshore's	business.

# Diamond	Offshore	relies	heavily	on	a	relatively	small	number	of	customers	and	the	loss	of	a	significant	customer	and/or	a	dispute	that	leads	to	the	loss	of	a customer	could	have	a	material	adverse	impact	on	its	financial	results.

Diamond	Offshore	provides	offshore	drilling	services	to	a	customer	base	that	includes	major	and	independent	oil	and	gas	companies	and	government-owned	oil companies.	However,	the	number	of	potential	customers	has	decreased	in	recent	years	as	a	result	of	mergers	among	the	major	international	oil	companies	and	large independent	oil	companies.	In	2009,	Diamond	Offshore's	five	largest	customers	in	the	aggregate	accounted	for	approximately	41.0%	of	its	consolidated	revenues. Diamond	Offshore	expects	Petrobras,	which	accounted	for	approximately	15.0%	of	Diamond	Offshore's	consolidated	revenues	in	2009	to	continue	to	be	a	significant customer	in	2010.	While	it	is	normal	for	Diamond	Offshore's	customer	base	to	change	over	time	as	work	programs	are	completed,	the	loss	of	any	major	customer	may have	a	material	adverse	effect	on	Diamond	Offshore's	business.

# The	terms	of	Diamond	Offshore's	dayrate	drilling	contracts	may	limit	its	ability	to	attain	profitability	in	a	declining	market	or	to	benefit	from	increasing	dayrates	in an	improving	market.

The	duration	of	offshore	drilling	contracts	is	generally	determined	by	customer	requirements	and,	to	a	lesser	extent,	the	respective	management	strategies	of	the offshore	drilling	contractors.	In	periods	of	decreasing	demand	for	offshore	rigs,	drilling	contractors	generally	prefer	longer	term	contracts,	but	often	at	flat	or	slightly lower	dayrates,	to	preserve	dayrates	at	existing	levels	and	ensure	utilization,	while	customers	prefer	shorter	contracts	that	allow	them	to	more	quickly	obtain	the	benefit of	lower	dayrates.	Conversely,	in	periods	of	rising	demand	for	offshore	rigs,	contractors	typically	prefer	shorter	contracts	that	allow	them	to	more	quickly	profit	from increasing	dayrates.	In	contrast,	during	these	periods	customers	with	reasonably	definite	drilling	programs	typically	prefer	longer	term	contracts	to	maintain	dayrate prices	at	a	consistent	level.	An	inability	to	obtain	longer	term	contracts	in	a	declining	market	or	to	fully	benefit	from	increasing	dayrates	in	an	improving	market	through shorter	term	contracts	may	limit	Diamond	Offshore's	profitability.

# Contracts	for	Diamond	Offshore's	drilling	units	are	generally	fixed	dayrate	contracts,	and	increases	in	Diamond	Offshore's	operating	costs	could	adversely	affect the	profitability	of	those	contracts.

Diamond	Offshore's	contracts	for	its	drilling	units	provide	for	the	payment	of	a	fixed	dayrate	per	rig	operating	day,	although	some	contracts	do	provide	for	a limited	escalation	in	dayrate	due	to	increased	operating	costs	incurred.	Many	of	Diamond	Offshore's	operating	costs,	such	as	labor	costs,	are	unpredictable	and	fluctuate based	on	events	beyond	Diamond	Offshore's	control.	The	gross	margin	 that	Diamond	Offshore	realizes	on	 these	fixed	dayrate	contracts	will	fluctuate	based	on variations	in	Diamond	Offshore's	operating	costs	over	the	terms	of	the	contracts.	In	addition,	for	contracts	with	dayrate	escalation	clauses,	Diamond	Offshore	may	be unable	to	recover	increased	or	unforeseen	costs	from	its	customers	which	could	adversely	affect	the	Company's	financial	position,	results	of	operations,	or	cash	flows.

# Diamond	Offshore's	drilling	contracts	may	be	terminated	due	to	events	beyond	its	control.

Diamond	Offshore's	customers	may	terminate	some	of	their	drilling	contracts	if	the	drilling	unit	is	destroyed	or	lost	or	if	drilling	operations	are	suspended	for	a specified	period	of	time	as	a	result	of	a	breakdown	of	major	equipment	or,	in	some	cases,	due	to	other	events	beyond	the	control	of	either	party.	In	addition,	some	of Diamond	Offshore's	drilling	contracts	permit	the	customer	to	terminate	the	contract	after	specified	notice	periods	by	tendering	contractually	specified	termination amounts.	These	termination	payments	may	not	fully	compensate	Diamond	Offshore	for	the	loss	of	a	contract.	In	addition,	the	early	termination	of	a	contract	may	result in	a	rig	being	idle	for	an	extended	period	of	time.	During	periods	of	depressed	market	conditions,	Diamond	Offshore	may	be	subject	to	an	increased	risk	of	its	customers seeking	to	repudiate	their	contracts.	Diamond	Offshore's	customers'	ability	to	perform	their	obligations	under	drilling	contracts	may	also	be	adversely	affected	by restricted	credit	markets	and	the	economic	downturn.	If	Diamond	Offshore's	customers	cancel	some	of	their	contracts,	and	Diamond	Offshore	is	unable	to	secure	new contracts	on	a	timely	basis	and	on	substantially	similar	terms,	or	if	contracts	are	suspended	for	an	extended	period	of	time	or	if	a	number	of	Diamond	Offshore's contracts	are	renegotiated,	it	could	adversely	affect	the	Company's	financial	position,	results	of	operations	or	cash	flows.

# Diamond	Offshore's	business	involves	numerous	operating	hazards	and	Diamond	Offshore	is	not	fully	insured	against	all	of	them.

Diamond	Offshore's	operations	are	subject	 to	 the	usual	hazards	 inherent	 in	drilling	for	oil	and	gas	offshore,	such	as	blowouts,	reservoir	damage,	 loss	of production,	loss	of	well	control,	punchthroughs,	craterings	and	natural	disasters	such	as	hurricanes	or	fires.	The	occurrence	of	these	events	could	result	in	the	suspension of	drilling	operations,	damage	to	or	destruction	of	the	equipment	involved	and	injury	or	death	to	rig	personnel,	damage	to	producing	or	potentially	productive	oil	and	gas formations	and	environmental	damage.	Operations	also	may	be	suspended	because	of	machinery	breakdowns,	abnormal	drilling	conditions,	failure	of	subcontractors	to perform	or	supply	goods	or	services	or	personnel	shortages.	In	addition,	offshore	drilling	operators	are	subject	 to	perils	peculiar	 to	marine	operations,	 including capsizing,	grounding,	collision	and	loss	or	damage	from	severe	weather,	and	Diamond	Offshore	does	not	typically	retain	loss-of-hire	insurance	policies	to	cover	its	rigs. Damage	to	the	environment	could	also	result	from	Diamond	Offshore's	operations,	particularly	through	oil	spillage	or	extensive	uncontrolled	fires.	Diamond	Offshore may	also	be	subject	to	damage	claims	by	oil	and	gas	companies	or	other	parties.

Pollution	 and	 environmental	 risks	 generally	 are	 not	 fully	 insurable.	 Diamond	 Offshore's	 insurance	 policies	 and	 contractual	 rights	 to	 indemnity	 may	 not adequately	cover	its	losses,	or	may	have	exclusions	of	coverage	for	some	losses.	Diamond	Offshore	does	not	have	insurance	coverage	or	rights	to	indemnity	for	all	risks, including,	among	other	things,	liability	risk	for	certain	amounts	of	excess	coverage	and	certain	physical	damage	risk.	If	a	significant	accident	or	other	event	occurs	and is	not	fully	covered	by	insurance	or	contractual	indemnity,	it	could	adversely	affect	Diamond	Offshore's	financial	position,	results	of	operations	and	cash	flows.	There can	be	no	assurance	that	Diamond	Offshore	will	continue	to	carry	the	insurance	it	currently	maintains	or	that	those	parties	with	contractual	obligations	to	indemnify Diamond	Offshore	will	necessarily	be	financially	able	to	indemnify	it	against	all	these	risks.	In	addition,	no	assurance	can	be	made	that	Diamond	Offshore	will	be	able	to maintain	adequate	insurance	in	the	future	at	rates	it	considers	to	be	reasonable	or	that	it	will	be	able	to	obtain	insurance	against	some	risks.

# Diamond	Offshore	is	self-insured	for	physical	damage	to	rigs	and	equipment	caused	by	named	windstorms	in	the	U.S.	Gulf	of	Mexico.

Because	the	amount	of	insurance	coverage	available	has	been	limited,	and	the	cost	for	such	coverage	has	increased	substantially,	Diamond	Offshore	has	elected	to self-insure	for	physical	damage	to	rigs	and	equipment	caused	by	named	windstorms	in	the	U.S.	Gulf	of	Mexico.	This	results	in	a	higher	risk	of	losses,	which	could	be material,	that	are	not	covered	by	third	party	insurance	contracts.	If	one	or	more	named	windstorms	in	the	U.S.	Gulf	of	Mexico	cause	significant	damage	to	Diamond Offshore's	rigs	or	equipment,	it	could	have	a	material	adverse	effect	on	the	Company's	financial	position,	results	of	operations	or	cash	flows.

# A	 significant	 portion	 of	 Diamond	 Offshore's	 operations	 are	 conducted	 outside the	 United	 States	 and involve	 additional	 risks	 not	 associated	 with	 domestic operations.

Diamond	Offshore	operates	in	various	regions	throughout	the	world	that	may	expose	it	to	political	and	other	uncertainties,	including	risks	of:

•terrorist	acts,	war	and	civil	disturbances;

•piracy	or	assaults	on	property	or	personnel;

•kidnapping	of	personnel;

•expropriation	of	property	or	equipment;

•renegotiation	or	nullification	of	existing	contracts;

•changing	political	conditions;

•foreign	and	domestic	monetary	policies;

# •the	inability	to	repatriate	income	or	capital;

•difficulties	in	collecting	accounts	receivable	and	longer	collection	periods;

•fluctuations	in	currency	exchange	rates;

•regulatory	or	financial	requirements	to	comply	with	foreign	bureaucratic	actions;

•travel	limitations	or	operational	problems	caused	by	public	health	threats;	and

# •changing	taxation	policies.

Diamond	Offshore	is	subject	to	the	U.S.	Treasury	Department's	Office	of	Foreign	Assets	Control	and	other	U.S.	laws	and	regulations	governing	its	international operations.	In	addition,	international	contract	drilling	operations	are	subject	to	various	laws	and	regulations	in	countries	in	which	Diamond	Offshore	operates,	including laws	and	regulations	relating	to:

•the	equipping	and	operation	of	drilling	units;

•repatriation	of	foreign	earnings;

•import	-	export	quotas	or	other	trade	barriers;

•oil	and	gas	exploration	and	development;

•taxation	of	offshore	earnings	and	earnings	of	expatriate	personnel;	and

•use	and	compensation	of	local	employees	and	suppliers	by	foreign	contractors.

Some	foreign	governments	favor	or	effectively	require	the	awarding	of	drilling	contracts	to	local	contractors,	require	use	of	a	local	agent	or	require	foreign contractors	to	employ	citizens	of,	or	purchase	supplies	from,	a	particular	jurisdiction.	These	practices	may	adversely	affect	Diamond	Offshore's	ability	to	compete	in those	regions.	It	is	difficult	to	predict	what	governmental	regulations	may	be	enacted	in	the	future	that	could	adversely	affect	the	international	drilling	industry.	The actions	of	foreign	governments	may	adversely	affect	Diamond	Offshore's	ability	to	compete.

The	greatest	concentration	of	Diamond	Offshore's	operating	assets	outside	the	United	States	is	Brazil,	where	it	has	12	rigs	in	its	fleet	either	currently	working	or contracted	to	work	during	2010	offshore	Brazil.

# Diamond	Offshore's	drilling	contracts	offshore	Mexico	expose	it	to	greater	risks	than	they	normally	assume.

Diamond	Offshore	currently	operates	and	expects	to	continue	to	operate	rigs	drilling	offshore	Mexico	for	PEMEX	-	Exploracion	Y	Produccion	("PEMEX"),	the national	oil	company	of	Mexico.	The	terms	of	these	contracts	expose	Diamond	Offshore	to	greater	risks	than	they	normally	assume,	such	as	exposure	to	greater environmental	liability.	In	addition,	each	contract	can	be	terminated	by	PEMEX	on	30	days	notice,	contractually	or	by	statute,	subject	to	certain	conditions.	While Diamond	Offshore	believes	that	the	financial	terms	of	these	contracts	and	its	operating	safeguards	in	place	mitigate	these	risks,	Diamond	Offshore	can	provide	no assurance	that	the	increased	risk	exposure	will	not	have	a	negative	impact	on	its	future	operations	or	financial	results.

# Fluctuations	in	exchange	rates	and	nonconvertibility	of	currencies	could	result	in	losses.

Due	to	Diamond	Offshore's	international	operations,	Diamond	Offshore	may	experience	currency	exchange	losses	where	revenues	are	received	and	expenses	are paid	in	nonconvertible	currencies	or	where	it	does	not	effectively	hedge	an	exposure	to	a	foreign	currency.	Diamond	Offshore	may	also	incur	losses	as	a	result	of	an inability	to	collect	revenues	because	of	a	shortage	of	convertible	currency	available	to	the	country	of	operation,	controls	over	currency	exchange	or	controls	over	the repatriation	 of	 income	 or	 capital.	 Diamond	 Offshore	 can	 provide	 no	 assurance	 that	 financial	 hedging	 arrangements	 will	 effectively	 hedge	 any	 foreign	 currency fluctuation	losses	that	may	arise.

# Diamond	Offshore	may	be	required	to	accrue	additional	tax	liability	on	certain	of	its	foreign	earnings.

Certain	of	Diamond	Offshore's	international	rigs	are	owned	and	operated,	directly	or	indirectly,	by	Diamond	Offshore	International	Limited	("DOIL"),	a	wholly owned	Cayman	Islands	subsidiary.	Since	forming	this	subsidiary	it	has	been	Diamond	Offshore's	intention	to	indefinitely	reinvest	the	earnings	of	this	subsidiary	to finance	foreign	operations.	During	2007,	DOIL	made	a	non-recurring	distribution	to	its	U.S.	parent	company,	and	Diamond	Offshore	recognized	U.S.	federal	income	tax expense	on	the	portion	of	the	distribution	that	consisted	of	earnings	of	the	subsidiary	that	had	not	previously	been	subjected	to	U.S.	federal	income	tax.	Notwithstanding the	non-recurring	distribution	made	in	December	of	2007,	it	remains	Diamond	Offshore's	intention	to	indefinitely	reinvest	the	future	earnings	of	DOIL	to	finance	foreign activities,	except	for	the	earnings	of	Diamond	East	Asia	Limited,	a	wholly	owned	subsidiary	of	DOIL	formed	in	December	of	2008.	It	is	Diamond	Offshore's	intention to	repatriate	the	earnings	of	Diamond	East	Asia	Limited,	and	U.S.	income	taxes	will	be	provided	on	such	earnings.	Diamond	Offshore	does	not	expect	to	provide	for U.S.	taxes	on	any	future	earnings	generated	by	DOIL,	except	to	the	extent	that	these	earnings	are	immediately	subjected	to	U.S.	federal	income	tax	or	as	they	relate	to Diamond	East	Asia	Limited.	Should	a	future	distribution	be	made	from	any	unremitted	earnings	of	this	subsidiary,	Diamond	Offshore	may	be	required	to	record additional	U.S.	income	taxes.

# Public	health	threats	could	have	a	material	adverse	effect	on	Diamond	Offshore's	operations	and	financial	results.

Public	health	threats	such	as	outbreaks	of	highly	communicable	diseases,	which	periodically	occur	in	various	parts	of	the	world	in	which	Diamond	Offshore operates,	could	adversely	impact	its	operations,	the	operations	of	its	customers	and	the	global	economy,	including	the	worldwide	demand	for	oil	and	natural	gas	and	the level	of	demand	for	Diamond	Offshore's	services.	Any	quarantine	of	personnel	or	inability	to	access	Diamond	Offshore's	offices	or	rigs	could	adversely	affect	its operations.	Travel	restrictions	or	operational	problems	in	any	part	of	the	world	in	which	Diamond	Offshore	operates,	or	any	reduction	in	the	demand	for	drilling	services caused	by	public	health	threats	in	the	future,	may	have	a	material	adverse	effect	on	the	Company's	financial	position,	results	of	operations	and	cash	flows.

# Rig	conversions,	upgrades	or	new	builds	may	be	subject	to	delays	and	cost	overruns.

From	time	to	time,	Diamond	Offshore	may	undertake	to	add	new	capacity	through	conversions	or	upgrades	to	rigs	or	through	new	construction.	Projects	of	this type	are	subject	to	risks	of	delay	or	cost	overruns	inherent	in	any	large	construction	project	resulting	from	numerous	factors,	including	the	following:

•shortages	of	equipment,	materials	or	skilled	labor;

•	 work	stoppages;

•unscheduled	delays	in	the	delivery	of	ordered	materials	and	equipment;

•unanticipated	cost	increases;

•	 weather	interferences;

•difficulties	in	obtaining	necessary	permits	or	in	meeting	permit	conditions;

•design	and	engineering	problems;

•customer	acceptance	delays;

# •shipyard	failures	or	unavailability;	and

•failure	or	delay	of	third	party	service	providers	and	labor	disputes.

Failure	to	complete	a	rig	upgrade	or	new	construction	on	time,	or	failure	to	complete	a	rig	conversion	or	new	construction	in	accordance	with	its	design specifications	may,	in	some	circumstances,	result	in	the	delay,	renegotiation	or	cancellation	of	a	drilling	contract,	resulting	in	a	loss	of	revenue	to	Diamond	Offshore.	If	a drilling	contract	is	terminated	under	these	circumstances,	Diamond	Offshore	may	not	be	able	to	secure	a	replacement	contract	with	equally	favorable	terms.

# Risks	Related	to	Us	and	Our	Subsidiary,	HighMount	Exploration	&	Production	LLC

# HighMount	may	not	be	able	to	replace	reserves	and	sustain	production	at	current	levels.	Replacing	reserves	is	risky	and	uncertain	and	requires	significant	capital expenditures.

HighMount's	future	success	depends	largely	upon	its	ability	to	find,	develop	or	acquire	additional	reserves	that	are	economically	recoverable.	Unless	HighMount replaces	the	reserves	produced	through	successful	development,	exploration	or	acquisition,	its	proved	reserves	will	decline	over	time.	HighMount	may	not	be	able	to successfully	find	and	produce	reserves	economically	in	the	future	or	to	acquire	proved	reserves	at	acceptable	costs.

HighMount	makes	a	substantial	amount	of	capital	expenditures	for	the	acquisition,	exploration	and	development	of	reserves.	HighMount	expects	to	fund	its capital	expenditures	with	cash	from	its	operating	activities.	If	HighMount's	cash	flow	from	operations	is	not	sufficient	to	fund	its	capital	expenditure	budget,	there	can be	no	assurance	that	additional	debt	or	equity	financing	will	be	available	or	available	at	favorable	terms	to	meet	those	requirements.

# Estimates	of	natural	gas	and	NGL	reserves	are	uncertain	and	inherently	imprecise.

Estimating	the	volume	of	proved	natural	gas	and	NGL	reserves	is	a	complex	process	and	is	not	an	exact	science	because	of	numerous	uncertainties	inherent	in	the process.	The	process	relies	on	interpretations	of	available	geological,	geophysical,	engineering	and	production	data.	The	extent,	quality	and	reliability	of	this	technical data	can	vary.	The	process	also	requires	certain	economic	assumptions,	some	of	which	are	mandated	by	the	SEC,	such	as	oil	and	gas	prices,	drilling	and	operating expenses,	capital	expenditures,	taxes	and	availability	of	funds.	Therefore,	these	estimates	are	inherently	imprecise.	The	accuracy	of	reserve	estimates	is	a	function	of:

•the	quality	and	quantity	of	available	data;

•the	interpretation	of	that	data;

•the	accuracy	of	various	mandated	economic	assumptions;	and

•the	judgment	of	the	persons	preparing	the	estimate.

Actual	future	production,	commodity	prices,	revenues,	taxes,	development	expenditures,	operating	expenses	and	quantities	of	recoverable	reserves	most	likely will	 vary	 from	 HighMount's	 estimates.	Any	 significant	 variance	 could	 materially	 affect	 the	 quantities	 and	 present	 value	 of	 HighMount's	 reserves.	 In	 addition, HighMount	may	adjust	estimates	of	proved	reserves	upward	or	downward	to	reflect	production	history,	results	of	exploration	and	development	drilling,	prevailing commodity	prices	and	prevailing	development	expenses.

The	timing	of	both	the	production	and	the	expenses	from	the	development	and	production	of	natural	gas	and	NGL	properties	will	affect	both	the	timing	of	actual future	net	cash	flows	from	proved	reserves	and	their	present	value.	In	addition,	the	10.0%	discount	factor,	which	is	required	by	the	SEC	to	be	used	in	calculating discounted	future	net	cash	flows	for	reporting	purposes,	is	not	necessarily	the	most	accurate	representation	of	their	value.	The	effective	interest	rate	at	various	times,	and the	risks	associated	with	our	business,	or	the	oil	and	gas	industry	in	general,	will	affect	their	value	relative	to	the	10.0%	discount	factor.

# If	commodity	prices	decrease,	HighMount	may	be	required	to	take	additional	write-downs	of	the	carrying	values	of	its	properties.

HighMount	may	be	required,	under	full	cost	accounting	rules,	to	write	down	the	carrying	value	of	its	natural	gas	and	NGL	properties	if	commodity	prices	decline significantly,	 or	 if	 it	 makes	 substantial	 downward	 adjustments	 to	 its	 estimated	 proved	 reserves,	 or	 increases	 its	 estimates	 of	 development	 costs	 or	 experiences deterioration	in	its	exploration	results.	HighMount	utilizes	the	full	cost	method	of	accounting	for	its	exploration	and	development	activities.	Under	full	cost	accounting, HighMount	is	required	to	perform	a	ceiling	test	each	quarter.	The	ceiling	test	is	an	impairment	test	and	generally	establishes	a	maximum,	or	"ceiling,"	of	the	book	value of	HighMount's	natural	gas	properties	that	is	equal	to	the	expected	after	tax	present	value	(discounted	at	the	required	rate	of	10.0%)	of	the	future	net	cash	flows	from proved	reserves,	including	the	effect	of	cash	flow	hedges,	calculated	using	the	average	first	day	of	the	month	price	for	the	preceding	12-month	period.

If	the	net	book	value	of	HighMount's	exploration	and	production	("E&P")	properties	(reduced	by	any	related	net	deferred	income	tax	liability)	exceeds	its	ceiling limitation,	SEC	regulations	require	HighMount	to	impair	or	"write	down"	the	book	value	of	its	E&P	properties.	HighMount	recorded	after	tax	ceiling	test	impairment charges	of	$660	million	and	$440	million	in	the	first	quarter	of	2009	and	the	fourth	quarter	of	2008.	A	write	down	may	not	be	reversed	in	future	periods,	even	though higher	natural	gas	and	NGL	prices	may	subsequently	increase	the	ceiling.	Depending	on	the	magnitude	of	any	future	impairment,	a	ceiling	test	write	down	could significantly	reduce	HighMount's	income,	or	produce	a	loss.	As	ceiling	test	computations	involve	the	average	first	day	of	the	month	price	for	the	preceding	12-month period,	it	is	impossible	to	predict	the	timing	and	magnitude	of	any	future	impairment.	Additional	information	on	the	ceiling	test	is	included	in	Critical	Accounting Estimates	included	in	MD&A	under	Item	7	and	Note	8	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8.

# HighMount	may	incur	additional	goodwill	impairment	charges	if	market	conditions	deteriorate.

HighMount	evaluates	goodwill	for	impairment	annually,	or	when	events	or	circumstances	change,	such	as	an	adverse	change	in	business	climate,	that	would indicate	 an	 impairment	 may	 have	 occurred.	 Goodwill	 is	 deemed	 to	 be	 impaired	 when	 the	 carrying	 value	 exceeds	 its	 estimated	 fair	 value.	 HighMount's	 annual impairment	test,	which	is	performed	as	of	April	30th	each	year,	is	based	on	several	factors	requiring	judgment.	A	significant	decrease	in	expected	cash	flows	or	changes in	market	conditions	may	represent	an	impairment	indicator	requiring	an	assessment	for	the	potential	impairment	of	recorded	goodwill.	Also,	a	ceiling	test	impairment may	represent	a	triggering	event	requiring	HighMount	to	perform	an	interim	period	goodwill	impairment	test.	Should	market	conditions	continue	to	significantly deteriorate,	including	further	declining	commodity	prices,	HighMount	could	be	required	to	record	additional	goodwill	impairments	that	may	be	significant.	HighMount recorded	an	after	tax	goodwill	impairment	charge	of	$314	million	in	the	fourth	quarter	of	2008.	Please	read	Critical	Accounting	Estimates	included	in	MD&A	under Item	7	and	Note	1	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8.

# Natural	gas,	NGL	and	other	commodity	prices	are	volatile.

The	commodity	price	HighMount	receives	for	its	production	heavily	influences	its	revenue,	profitability,	access	to	capital	and	future	rate	of	growth.	HighMount is	subject	to	risks	due	to	frequent	and	often	substantial	fluctuations	in	commodity	prices.	NGL	prices	generally	fluctuate	on	a	basis	that	correlates	to	fluctuations	in	crude oil	prices.	In	the	past,	the	prices	of	natural	gas	and	crude	oil	have	been	extremely	volatile,	and	HighMount	expects	this	volatility	to	continue.	The	markets	and	prices	for natural	gas	and	NGLs	depend	upon	factors	beyond	HighMount's	control.	These	factors	 include	demand,	which	fluctuates	with	changes	 in	market	and	economic conditions	and	other	factors,	including:

•the	impact	of	market	and	basis	differentials	-	market	price	spreads	between	two	points	across	HighMount's	natural	gas	system;

•the	impact	of	weather	on	the	demand	for	these	commodities;

•the	level	of	domestic	production	and	imports	of	these	commodities;

•the	impact	of	changes	in	technologies	on	the	level	of	supply;

# •natural	gas	storage	levels;

•actions	taken	by	foreign	producing	nations;

•the	availability	of	local,	intrastate	and	interstate	transportation	systems;

•the	availability	and	marketing	of	competitive	fuels;

•the	impact	of	energy	conservation	efforts;	and

•the	extent	of	governmental	regulation	and	taxation.

Lower	commodity	prices	may	decrease	HighMount's	revenues	and	may	reduce	the	amount	of	natural	gas	and	NGLs	that	HighMount	can	produce	economically.

# HighMount	engages	in	commodity	price	hedging	activities.

HighMount	is	exposed	to	risks	associated	with	fluctuations	in	commodity	prices.	The	extent	of	HighMount's	commodity	price	risk	is	related	to	the	effectiveness and	scope	of	HighMount's	hedging	activities.	To	the	extent	HighMount	hedges	its	commodity	price	risk,	HighMount	will	forego	the	benefits	it	would	otherwise experience	if	commodity	prices	or	interest	rates	were	to	change	in	its	favor.	Furthermore,	because	HighMount	has	entered	into	derivative	transactions	related	to	only	a portion	of	the	volume	of	its	expected	natural	gas	supply	and	production	of	NGLs,	HighMount	will	continue	to	have	direct	commodity	price	risk	on	the	unhedged	portion. HighMount's	actual	future	supply	and	production	may	be	significantly	higher	or	lower	than	HighMount	estimates	at	the	time	it	enters	into	derivative	transactions	for	that period.

As	a	result,	HighMount's	hedging	activities	may	not	be	as	effective	as	HighMount	intends	in	reducing	the	volatility	of	its	cash	flows,	and	in	certain	circumstances may	actually	increase	the	volatility	of	cash	flows.	In	addition,	even	though	HighMount's	management	monitors	its	hedging	activities,	these	activities	can	result	in substantial	losses.	Such	losses	could	occur	under	various	circumstances,	including	if	a	counterparty	does	not	perform	its	obligations	under	the	applicable	hedging arrangement,	the	hedging	arrangement	is	imperfect	or	ineffective.

# Drilling	for	and	producing	natural	gas	and	NGLs	is	a	high	risk	activity	with	many	uncertainties.

HighMount's	future	success	will	depend	in	part	on	the	success	of	its	exploitation,	exploration,	development	and	production	activities.	HighMount's	E&P	activities are	subject	to	numerous	risks	beyond	its	control,	including	the	risk	that	drilling	will	not	result	in	oil	and	natural	gas	production	volumes	that	are	commercially	viable. HighMount's	decisions	to	purchase,	explore,	develop	or	otherwise	exploit	prospects	or	properties	will	depend	in	part	on	the	evaluation	of	data	obtained	through geophysical	 and	 geological	 analyses,	 production	 data	 and	 engineering	 studies,	 the	 results	 of	 which	 are	 often	 inconclusive	 or	 subject	 to	 varying	 interpretations. HighMount's	cost	of	drilling,	completing	and	operating	wells	is	often	uncertain	before	drilling	commences.	Overruns	in	budgeted	expenditures	are	common	risks	that can	make	a	particular	project	uneconomical.	Further,	many	factors	may	curtail,	delay	or	cancel	drilling,	including	the	following:

•lack	of	acceptable	prospective	acreage;

•inadequate	capital	resources;

•unexpected	drilling	conditions;	pressure	or	irregularities	in	formations;	equipment	failures	or	accidents;

•adverse	weather	conditions;

•unavailability	or	high	cost	of	drilling	rigs,	equipment,	labor	or	services;

•reductions	in	commodity	prices;

•the	impact	of	changes	in	technologies	on	commodity	prices;

•limitations	in	the	market	for	natural	gas	and	NGLs;

•title	problems;

•compliance	with	and	the	impact	of	changes	in	governmental	regulations;	and

•	 mechanical	difficulties.

# HighMount's	business	involves	many	hazards	and	operational	risks,	some	of	which	may	not	be	fully	covered	by	insurance.

HighMount	 is	 not	 insured	 against	 all	 risks.	 Losses	 and	 liabilities	 arising	 from	 uninsured	 and	 underinsured	 events	 could	 materially	 and	 adversely	 affect HighMount's	business,	financial	condition	or	results	of	operations.	HighMount's	E&P	activities	are	subject	to	all	of	the	operating	risks	associated	with	drilling	for	and producing	natural	gas	and	NGLs,	including	the	possibility	of:

•environmental	 hazards,	 such	 as	 uncontrollable	 flows	 of	 natural	 gas,	 brine,	 well	 fluids, toxic	 gas	 or	 other	 pollution into the	 environment, including groundwater	contamination;

•abnormally	pressured	formations;

•	 mechanical	difficulties,	such	as	stuck	drilling	and	service	tools	and	casing	collapse;

•fires	and	explosions;

•personal	injuries	and	death;	and

# •natural	disasters.

If	any	of	these	events	occur,	HighMount	could	incur	substantial	losses	as	a	result	of	injury	or	loss	of	life,	damage	to	and	destruction	of	property,	natural	resources and	equipment,	pollution	and	other	environmental	damage,	clean-up	responsibilities,	regulatory	investigation	and	penalties,	suspension	of	HighMount's	operations	and repairs	to	resume	operations,	any	of	which	could	adversely	affect	its	ability	to	conduct	operations	or	result	in	substantial	losses.	HighMount	may	elect	not	to	obtain insurance	if	the	cost	of	available	insurance	is	excessive	relative	to	the	risks	presented.	In	addition,	pollution	and	environmental	risks	generally	are	not	fully	insurable.

# Risks	Related	to	Us	and	Our	Subsidiary,	Boardwalk	Pipeline	Partners,	LP

# Boardwalk	Pipeline	needs	to	obtain	and	maintain	authority	from	PHMSA	to	operate	at	higher	than	normal	operating	pressures.

Boardwalk	Pipeline	has	entered	into	firm	transportation	contracts	with	shippers	which	would	utilize	the	maximum	design	capacity	of	its	recently	completed	42- inch	pipeline	expansion	projects	and	the	Fayetteville	Lateral	assuming	that	Boardwalk	Pipeline	operates	those	pipelines	at	higher	than	normal	operating	pressures	(up	to 0.80	SMYS),	which	increases	the	pipeline's	peak-day	transmission	capacity	from	that	available	at	normal	operating	pressures	(up	to	0.72	SMYS).

In	December	of	2009,	Boardwalk	Pipeline	received	authority	from	PHMSA	to	operate	its	42-inch	pipeline	expansion	projects	at	higher	than	normal	operating pressures.	If	PHMSA	were	to	withdraw	such	authority,	Boardwalk	Pipeline	would	not	be	able	to	transport	all	of	its	contracted	quantities	of	natural	gas	on	these	pipelines, beginning	in	mid-2010,	or	Boardwalk	Pipeline	could	incur	additional	costs	to	re-obtain	such	authority	or	seek	alternate	ways	to	meet	its	contractual	obligations,	any	of which	could	have	a	material	adverse	affect	on	Boardwalk	Pipeline's	business,	financial	condition,	results	of	operations	and	cash	flows.

Boardwalk	Pipeline	is	seeking	authority	from	PHMSA	to	operate	its	Fayetteville	Lateral	at	higher	than	normal	operating	pressures.	Unless	Boardwalk	Pipeline obtains	such	authority	from	PHMSA,	Boardwalk	Pipeline	will	not	be	able	to	operate	the	Fayetteville	Lateral	at	its	anticipated	peak-day	transmission	capacity,	and beginning	in	mid-2011,	will	not	be	able	to	transport	all	of	the	contracted	for	volumes	on	that	pipeline.	In	addition,	Boardwalk	Pipeline	has	incurred	and	may	continue	to incur	significant	costs	to	inspect,	test	and	remediate	pipe	segments	on	the	Fayetteville	Lateral	in	order	to	obtain,	or	maintain	if	granted,	authority	to	operate	at	higher	than normal	operating	pressures	or	to	develop	alternative	ways	to	meet	Boardwalk	Pipeline's	contractual	obligations,	any	of	which	could	have	a	material	adverse	affect	on Boardwalk	Pipeline's	business,	financial	condition,	results	of	operations	and	cash	flows.	PHMSA	retains	discretion	as	to	whether	to	grant,	or	to	maintain	in	force, authority	to	operate	a	pipeline	at	higher	than	normal	operating	pressures.

# Boardwalk	Pipeline	may	not	be	able	to	maintain	or	replace	expiring	gas	transportation	and	storage	contracts	at	favorable	rates.

Boardwalk	 Pipeline's	 primary	 exposure	 to	 market	 risk	 occurs	 at	 the	 time	 existing	 transportation	 contracts	 expire	 and	 are	 subject	 to	 renegotiation.	As	 of December	31,	2009,	approximately	14.0%	of	the	contracts	for	firm	transportation	capacity	on	Boardwalk	Pipeline's	pipeline	systems	will	expire	during	2010.	Upon expiration,	Boardwalk	Pipeline	may	not	be	able	to	extend	contracts	with	existing	customers	or	obtain	replacement	contracts	at	favorable	rates	or	on	a	long-term	basis. Key	drivers	that	influence	the	rates	that	Boardwalk	Pipeline's	customers	are	willing	to	pay	for	transportation	is	the	price	differential	of	natural	gas	between	physical locations,	which	can	be	affected	by,	among	other	things,	the	availability	and	supply	of	natural	gas,	available	capacity,	storage	inventories,	weather	and	general	market demand	in	the	respective	areas.

The	extension	or	replacement	of	existing	contracts	depends	on	a	number	of	factors	beyond	Boardwalk	Pipeline's	control,	including:

•existing	and	new	competition	to	deliver	natural	gas	to	Boardwalk	Pipeline's	markets;

•development	of	new	supplies	located	near	key	markets;

•the	growth	in	demand	for	natural	gas	in	Boardwalk	Pipeline's	markets;

•	 whether	the	market	will	continue	to	support	long-term	contracts;

•the	current	price	differentials,	or	market	price	spreads	between	various	pipeline	receipt	and	delivery	points;	and

•the	effects	of	state	regulation	on	customer	contracting	practices.

# Increased	competition	could	result	in	lower	contracted	pipeline	capacity,	decreased	rates	for	Boardwalk	Pipeline's	services	and	reduced	revenues.

Boardwalk	Pipeline	competes	primarily	with	other	interstate	and	intrastate	pipelines	in	the	transportation	and	storage	of	natural	gas.	Competition	is	particularly strong	in	the	Midwest	and	Gulf	Coast	states	where	Boardwalk	Pipeline	competes	with	numerous	existing	pipelines,	such	as	the	Rockies	Express	Pipeline	and	the	Mid- Continent	Express	Pipeline.	Boardwalk	Pipeline	will	also	compete	with	several	new	pipeline	projects	that	are	proposed	or	under	development,	including	projects originating	in	the	Haynesville	Shale	area	–	more	specifically,	the	Tiger	Pipeline	that	will	transport	gas	to	Perryville,	Louisiana	and	the	Haynesville	Extension	Pipeline that	will	transport	gas	to	the	industrial	complex	in	southeastern	Louisiana	-	and	the	Fayetteville	Express	Pipeline	which	will	originate	in	the	Fayetteville	Shale	area	and continue	eastward	to	Mississippi.	For	new	growth	and	expansion	projects,	Boardwalk	Pipeline	competes	with	other	pipelines	for	contracts	mainly	with	producers	that would	support	such	projects	in	order	to	transport	their	gas	to	market	areas.	At	an	industry	level,	the	various	natural	gas	supply	areas	compete	against	one	another	to	reach optimal	market	areas,	and	natural	gas,	as	a	commodity,	competes	with	other	forms	of	energy	available	to	Boardwalk	Pipeline's	customers,	including	electricity,	coal	and fuel	oils,	and	other	alternative	fuel	resources.

Boardwalk	Pipeline's	ability	to	renew	or	replace	existing	contracts	at	rates	sufficient	to	maintain	current	revenues	and	cash	flows	could	be	adversely	affected	by competition	or	changing	market	conditions.	The	principal	elements	of	competition	among	pipelines	are	availability	of	capacity,	rates,	terms	of	service,	access	to	gas supplies,	flexibility	and	reliability.	FERC's	policies	promote	competition	in	gas	markets	by	increasing	the	number	of	gas	transportation	options	available	to	Boardwalk Pipeline's	customer	base.	Increased	competition	could	reduce	the	volumes	of	gas	transported	by	Boardwalk	Pipeline's	pipeline	systems	or,	in	instances	where	Boardwalk Pipeline	does	not	have	long-term	contracts	with

fixed	rates,	could	force	Boardwalk	Pipeline	to	decrease	transportation	or	storage	rates	charged	to	its	customers.	Competition	could	intensify	the	negative	impact	of factors	that	could	significantly	decrease	demand	for	natural	gas	in	the	markets	served	by	Boardwalk	Pipeline's	operating	subsidiaries,	such	as	a	recession	or	adverse economic	conditions,	weather,	higher	fuel	costs	and	taxes	or	other	governmental	or	regulatory	actions	that	directly	or	indirectly	increase	the	cost	or	limit	the	use	of natural	gas.

The	regulatory	program	that	applies	to	interstate	pipelines	is	different	than	the	regulatory	program	that	applies	to	many	of	Boardwalk	Pipeline's	competitors	that are	not	regulated	interstate	pipelines.	This	difference	in	regulatory	oversight	can	result	in	longer	lead	times	to	develop	and	complete	a	project	when	it	is	regulated	at	the federal	level.	Boardwalk	Pipeline	competes	against	a	number	of	intrastate	pipelines	which	have	significant	regulatory	advantages	because	of	the	absence	of	FERC regulation.	In	view	of	potential	rate	advantages	and	construction	and	service	flexibility	available	to	intrastate	pipelines,	Boardwalk	Pipeline	may	lose	customers	and throughput	to	intrastate	competitors.

# Continued	development	of	new	supply	sources	could	impact	demand.

The	discovery	of	non-traditional	natural	gas	production	areas	nearer	to	key	market	areas	Boardwalk	Pipeline	accesses	directly,	or	indirectly	through	third-party pipeline	 interconnects,	 may	 compete	 with	 gas	 originating	 in	 production	 areas	 connected	 to	 Boardwalk	 Pipeline's	 system.	 For	 example,	 the	 Marcellus	 Shale	 in Pennsylvania,	New	York,	West	Virginia	and	Ohio,	may	cause	gas	in	supply	areas	connected	to	Boardwalk	Pipeline's	system	to	be	diverted	to	markets	other	than Boardwalk	Pipeline's	traditional	market	areas	and	may	adversely	affect	capacity	utilization	on	Boardwalk	Pipeline's	systems	and	its	ability	to	renew	or	replace	existing contracts	at	rates	sufficient	to	maintain	current	revenues	and	cash	flows.	In	addition	to	supply	volumes	from	the	Marcellus	Shale,	gas	from	the	Rocky	Mountains,	Canada and	LNG	import	terminals	may	compete	with	and	displace	volumes	from	the	Gulf	Coast	and	Mid-Continent	supply	sources	in	order	to	serve	the	Midwest	and	East	Coast markets.	The	displacement	of	gas	originating	in	supply	areas	connected	to	Boardwalk	Pipeline's	pipeline	systems	by	these	new	supply	sources	that	are	closer	to	the	end- use	markets	could	result	in	lower	transportation	revenues,	which	could	have	a	material	adverse	impact	on	Boardwalk	Pipeline's	business,	financial	condition,	results	of operations	and	cash	flows.

# Boardwalk	Pipeline	is	undertaking	and	may	continue	to	pursue	complex	pipeline	or	storage	projects	which	involve	significant	risks	that	may	adversely	affect	its business.

Boardwalk	Pipeline	has	recently	completed	several	pipeline	expansion	projects	and	may	also	undertake	additional	pipeline	or	storage	projects	in	the	future.	In pursuing	previous	projects,	Boardwalk	Pipeline	has	experienced	significant	cost	overruns	and	may	experience	cost	increases	in	the	future.	Boardwalk	Pipeline	has	also experienced	delays	in	constructing	and	commissioning	previous	projects	and	may	experience	additional	delays	or	cost	increases	in	the	future	resulting	from	a	variety	of factors,	including	but	not	limited	to	the	following:

•delays	in	obtaining	regulatory	approvals,	including	delays	in	receiving	authorization	from	PHMSA	to	operate	at	higher	than	normal	operating	pressures under	special	permits;

•difficult	construction	conditions,	including	adverse	weather	conditions;

•delays	in	obtaining,	or	high	demand	for,	key	materials;	and

•shortages	of	qualified	labor	and	escalating	costs	of	labor	and	materials	resulting	from	the	high	level	of	construction	activity	in	the	pipeline	industry.

In	pursuing	current	or	future	projects,	Boardwalk	Pipeline	could	experience	delays	or	cost	increases	for	the	reasons	described	above	or	as	a	result	of	other	factors. Boardwalk	Pipeline	may	not	be	able	to	complete	its	current	or	future	projects	on	the	expected	terms,	cost	or	schedule,	or	at	all.	In	addition,	Boardwalk	Pipeline	cannot	be certain	that,	if	completed,	it	will	be	able	to	operate	these	projects,	or	that	they	will	perform,	in	accordance	with	expectations.	Other	areas	of	Boardwalk	Pipeline's business	may	suffer	as	a	result	of	the	diversion	of	management's	attention	and	other	resources	from	its	other	business	concerns	to	Boardwalk	Pipeline's	projects.	Any	of these	factors	could	impair	Boardwalk	Pipeline's	ability	to	realize	revenues	from	its	current	or	future	projects	sufficient	to	cover	the	costs	associated	with	owning	and operating	these	pipelines	and	to	provide	the	benefits	it	had	anticipated	from	the	projects,	which	could

have	a	material	adverse	effect	on	Boardwalk	Pipeline's	business,	financial	condition,	results	of	operations	and	cash	flows,	including	its	ability	to	make	distributions	to	its unitholders.

# Boardwalk	Pipeline	is	exposed	to	credit	risk	relating	to	nonperformance	by	its	customers.

Credit	risk	relates	to	the	risk	of	loss	resulting	from	the	nonperformance	by	a	customer	of	its	contractual	obligations.	Boardwalk	Pipeline's	exposure	generally relates	 to	receivables	for	services	provided,	future	performance	under	firm	agreements	and	volumes	of	gas	owed	by	customers	for	 imbalances	or	gas	 loaned	by Boardwalk	Pipeline	to	them	under	certain	no-notice	services	and	parking	and	lending	("PAL")	services.	FERC	gas	tariffs	only	allow	Boardwalk	Pipeline	to	require limited	credit	support	in	the	event	that	transportation	customers	are	unable	to	pay	for	its	services.	If	any	of	Boardwalk	Pipeline's	significant	customers	have	credit	or financial	problems	which	result	in	a	delay	or	failure	to	pay	for	services	provided	by	Boardwalk	Pipeline	or	contracted	for	with	Boardwalk	Pipeline,	or	to	repay	the	gas they	owe	Boardwalk	Pipeline,	it	could	have	a	material	adverse	effect	on	Boardwalk	Pipeline's	business.	In	addition,	as	contracts	expire,	the	failure	of	any	of	Boardwalk Pipeline's	customers	could	also	result	in	the	non-renewal	of	contracted	capacity,	which	could	have	a	material	adverse	effect	on	Boardwalk	Pipeline's	business.	See Item	7A	for	more	information	on	credit	risk	arising	from	gas	loaned	to	customers.

# Boardwalk	Pipeline	depends	on	certain	key	customers	for	a	significant	portion	of	its	revenues.	The	loss	of	any	of	these	key	customers	could	result	in	a	decline	in Boardwalk	Pipeline's	revenues.

Boardwalk	Pipeline	relies	on	a	 limited	number	of	customers	for	a	significant	portion	of	revenues.	For	example,	Devon	Energy	Production	Company,	LP represented	over	11.0%	of	Boardwalk	Pipeline's	2009	revenues	and	Boardwalk	Pipeline	expects	this	customer	to	continue	to	account	for	more	than	10.0%	of	Boardwalk Pipeline's	2010	revenues.	Additionally,	Boardwalk	Pipeline	may	be	unable	to	negotiate	extensions	or	replacements	of	contracts	and	key	customers	on	favorable	terms. The	loss	of	all	or	even	a	portion	of	the	contracted	volumes	of	these	customers,	as	a	result	of	competition,	creditworthiness	or	otherwise,	could	have	a	material	adverse effect	on	Boardwalk	Pipeline's	business,	financial	condition,	operating	revenues	and	cash	flows.

Significant	changes	in	energy	prices	could	affect	natural	gas	market	supply	and	demand,	or	potentially	reduce	the	competitiveness	of	natural	gas	compared	with other	forms	of	energy	available	to	Boardwalk	Pipeline's	customers,	which	could	reduce	system	throughput	and	adversely	affect	Boardwalk	Pipeline's	revenues	and available	cash.

Due	to	the	natural	decline	in	traditional	gas	production	connected	to	Boardwalk	Pipeline's	system,	Boardwalk	Pipeline's	success	depends	on	its	ability	to	obtain access	to	new	sources	of	natural	gas,	which	is	dependent	on	factors	beyond	its	control	including	the	price	level	of	natural	gas.	In	general	terms,	the	price	of	natural	gas fluctuates	in	response	to	changes	in	supply	and	demand,	market	uncertainty	and	a	variety	of	additional	factors	that	are	beyond	Boardwalk	Pipeline's	control.	These factors	include:

# •	 worldwide	economic	conditions;

•	 weather	conditions,	seasonal	trends	and	hurricane	disruptions;

•the	relationship	between	the	available	supplies	and	the	demand	for	natural	gas;

•the	availability	of	LNG;

•the	availability	of	adequate	transportation	capacity;

•storage	inventory	levels;

•the	price	and	availability	of	other	forms	of	energy;

•the	effect	of	energy	conservation	measures;

•the	nature	and	extent	of,	and	changes	in,	governmental	regulation,	for	example	greenhouse	gas	legislation	and	taxation;	and

•the	anticipated	future	prices	of	natural	gas,	LNG	and	other	commodities.

It	is	difficult	to	predict	future	changes	in	gas	prices,	however	the	abundance	of	natural	gas	supply	discoveries	over	the	last	few	years	and	global	economic slowdown	would	generally	indicate	a	bias	toward	downward	pressure	on	prices.	Downward	movement	in	gas	prices	could	negatively	impact	producers	in	nontraditional supply	areas	such	as	the	Barnett	Shale,	the	Bossier	Sands,	the	Caney	Woodford	Shale,	the	Fayetteville	Shale	and	the	Haynesville	Shale,	including	producers	who	have contracted	for	capacity	with	Boardwalk	Pipeline.	Significant	financial	difficulties	experienced	by	Boardwalk	Pipeline's	producer	customers	could	impact	their	ability	to pay	for	services	rendered	or	otherwise	reduce	their	demand	for	Boardwalk	Pipeline's	services.

High	natural	gas	prices	may	result	in	a	reduction	in	the	demand	for	natural	gas.	A	reduced	level	of	demand	for	natural	gas	could	reduce	the	utilization	of	capacity on	Boardwalk	Pipeline's	systems,	reduce	the	demand	for	Boardwalk	Pipeline's	services	and	could	result	in	the	non-renewal	of	contracted	capacity	as	contracts	expire.

# Boardwalk	Pipeline's	natural	gas	transportation	and	storage	operations	are	subject	to	FERC's	rate-making	policies	which	could	limit	Boardwalk	Pipeline's	ability to	recover	the	full	cost	of	operating	its	pipelines,	including	earning	a	reasonable	return.

Boardwalk	Pipeline	is	subject	to	extensive	regulations	relating	to	the	rates	it	can	charge	for	its	transportation	and	storage	operations.	For	cost-based	services, FERC	establishes	both	the	maximum	and	minimum	rates	Boardwalk	Pipeline	can	charge.	The	basic	elements	that	FERC	considers	are	the	cost	of	providing	the	service, the	volumes	of	gas	being	transported,	how	costs	are	allocated	between	services,	the	capital	structure	and	the	rate	of	return	a	pipeline	is	permitted	to	earn.	While	neither Gulf	South	nor	Texas	Gas	has	an	obligation	to	file	a	rate	case,	Boardwalk	Pipeline's	Gulf	Crossing	pipeline	has	an	obligation	to	file	either	a	rate	case	or	a	cost-and- revenue	study	by	the	end	of	the	first	quarter	of	2012	to	justify	its	rates.	Customers	of	Boardwalk	Pipeline's	subsidiaries	or	FERC	can	challenge	the	existing	rates	on	any of	its	pipelines.	FERC	recently	challenged	the	rates	of	three	non-affiliated	pipelines.	Such	a	challenge	against	Boardwalk	Pipeline	could	adversely	affect	its	ability	to establish	reasonable	transportation	rates,	to	charge	rates	that	would	cover	future	increases	in	Boardwalk	Pipeline's	costs	or	even	to	continue	to	collect	rates	to	maintain its	current	revenue	levels	that	are	designed	to	permit	a	reasonable	opportunity	to	recover	current	costs	and	depreciation	and	earn	a	reasonable	return.	Additionally,	FERC can	propose	changes	or	modifications	to	any	of	its	existing	rate-related	policies.

If	Boardwalk	Pipeline's	subsidiaries	were	to	file	a	rate	case,	or	if	Boardwalk	Pipeline	has	to	defend	its	rates	in	a	proceeding	commenced	by	a	customer	or	FERC, Boardwalk	Pipeline	would	be	required,	among	other	things,	to	establish	that	the	inclusion	of	an	income	tax	allowance	in	Boardwalk	Pipeline's	cost	of	service	is	just	and reasonable.	Under	current	FERC	policy,	since	Boardwalk	Pipeline	is	a	limited	partnership	and	does	not	pay	U.S.	federal	income	taxes,	this	would	require	Boardwalk Pipeline	to	show	that	its	unitholders	(or	their	ultimate	owners)	are	subject	to	federal	income	taxation.	To	support	such	a	showing,	Boardwalk	Pipeline's	general	partner may	elect	to	require	owners	of	Boardwalk	Pipeline's	units	to	re-certify	their	status	as	being	subject	to	U.S.	federal	income	taxation	on	the	income	generated	by Boardwalk	Pipeline's	subsidiaries	or	Boardwalk	Pipeline	may	attempt	to	provide	other	evidence.	Boardwalk	Pipeline	can	provide	no	assurance	that	the	evidence	it	might provide	to	FERC	will	be	sufficient	to	establish	that	its	unitholders	(or	their	ultimate	owners)	are	subject	to	U.S.	federal	income	tax	liability	on	the	income	generated	by Boardwalk	Pipeline's	jurisdictional	pipelines.	If	Boardwalk	Pipeline	is	unable	to	make	such	a	showing,	FERC	could	disallow	a	substantial	portion	of	the	income	tax allowance	included	in	the	determination	of	the	maximum	rates	that	may	be	charged	by	Boardwalk	Pipeline's	subsidiaries,	which	could	result	in	a	reduction	of	such maximum	rates	from	current	levels.

Boardwalk	Pipeline	may	not	be	able	to	recover	all	of	its	costs	through	existing	or	future	rates.	An	adverse	determination	in	any	future	rate	proceeding	brought	by or	against	any	of	Boardwalk	Pipeline's	subsidiaries	could	have	a	material	adverse	effect	on	its	business.

# Boardwalk	Pipeline's	operations	are	subject	to	catastrophic	losses,	operational	hazards	and	unforeseen	interruptions	for	which	it	may	not	be	adequately	insured.

There	are	a	variety	of	operating	risks	inherent	in	Boardwalk	Pipeline's	natural	gas	transportation	and	storage	operations	such	as	leaks,	explosions	and	mechanical problems.	Additionally,	the	nature	and	location	of	Boardwalk	Pipeline's	business	may	make	Boardwalk	Pipeline	susceptible	to	catastrophic	losses	from	hurricanes	or other	named

storms,	particularly	with	regard	to	its	assets	in	the	Gulf	Coast	region,	windstorms,	earthquakes,	hail,	explosions,	severe	winter	weather	and	fires.	Any	of	these	or	other similar	occurrences	could	result	in	the	disruption	of	Boardwalk	Pipeline's	operations,	substantial	repair	costs,	personal	injury	or	loss	of	human	life,	significant	damage	to property,	environmental	pollution,	impairment	of	Boardwalk	Pipeline's	operations	and	substantial	financial	losses.	The	location	of	pipelines	near	populated	areas, including	residential	areas,	commercial	business	centers	and	industrial	sites,	could	significantly	increase	the	level	of	damages	resulting	from	some	of	these	risks.

Boardwalk	Pipeline	currently	possesses	property,	business	interruption	and	general	liability	insurance,	but	proceeds	from	such	insurance	coverage	may	not	be adequate	for	all	liabilities	or	expenses	incurred	or	revenues	lost.	Moreover,	such	insurance	may	not	be	available	in	the	future	at	commercially	reasonable	costs	and	terms. The	insurance	coverage	Boardwalk	Pipeline	does	obtain	may	contain	large	deductibles	or	fail	to	cover	certain	hazards	or	all	potential	losses.

# Risks	Related	to	Us	and	Our	Subsidiaries	Generally

In	addition	to	the	specific	risks	and	uncertainties	faced	by	our	subsidiaries,	as	discussed	above,	we	and	all	of	our	subsidiaries	face	risks	and	uncertainties	related to,	among	other	things,	terrorism,	hurricanes	and	other	natural	disasters,	competition,	government	regulation,	dependence	on	key	executives	and	employees,	litigation, dependence	on	information	technology	and	compliance	with	environmental	laws.

# Future	acts	of	terrorism	could	harm	us	and	our	subsidiaries.

Future	terrorist	attacks	and	the	continued	threat	of	terrorism	in	this	country	or	abroad,	as	well	as	possible	retaliatory	military	and	other	action	by	the	United	States and	its	allies,	could	have	a	significant	impact	on	the	businesses	of	certain	of	our	subsidiaries,	including	the	following:

CNA.		CNA	continues	to	face	exposure	to	losses	arising	from	terrorist	acts,	despite	the	passage	of	the	Terrorism	Risk	Insurance	Program	Reauthorization	Act	of 2007.	The	Terrorism	Risk	Insurance	Program	Reauthorization	Act	of	2007	extended,	until	December	31,	2014,	the	program	established	within	the	U.S.	Department	of Treasury	by	the	Terrorism	Risk	Insurance	Act	of	2002.	This	program	requires	insurers	to	offer	terrorism	coverage	and	the	federal	government	to	share	in	insured	losses arising	from	acts	of	terrorism.	Given	the	unpredictability	of	the	nature,	targets,	severity	and	frequency	of	potential	terrorist	acts,	this	program	does	not	provide	complete protection	for	future	losses	derived	from	acts	of	terrorism.	Further,	the	laws	of	certain	states	restrict	CNA's	ability	to	mitigate	this	residual	exposure.	For	example,	some states	mandate	property	insurance	coverage	of	damage	from	fire	following	a	loss,	thereby	prohibiting	CNA	from	excluding	terrorism	exposure.	In	addition,	some	states generally	prohibit	CNA	from	excluding	terrorism	exposure	from	its	primary	workers'	compensation	policies.	Consequently,	there	is	substantial	uncertainty	as	to	CNA's ability	to	contain	its	terrorism	exposure	effectively	since	CNA	continues	to	issue	forms	of	coverage,	in	particular,	workers'	compensation,	that	are	exposed	to	risk	of	loss from	a	terrorism	act.

Diamond	Offshore,	Boardwalk	Pipeline	and	HighMount.		The	continued	threat	of	terrorism	and	the	impact	of	retaliatory	military	and	other	action	by	the	United States	and	its	allies	might	lead	to	increased	political,	economic	and	financial	market	instability	and	volatility	in	prices	for	oil	and	gas,	which	could	affect	the	market	for Diamond	Offshore's	oil	and	gas	offshore	drilling	services,	Boardwalk	Pipeline's	natural	gas	transportation,	gathering	and	storage	services	and	HighMount's	natural	gas exploration	and	production	activities.	In	addition,	it	has	been	reported	that	terrorists	might	target	domestic	energy	facilities.	While	our	subsidiaries	take	steps	that	they believe	are	appropriate	to	increase	the	security	of	their	energy	assets,	there	is	no	assurance	that	they	can	completely	secure	their	assets,	completely	protect	them	against	a terrorist	attack	or	obtain	adequate	insurance	coverage	for	terrorist	acts	at	reasonable	rates.

Loews	Hotels.		The	travel	and	tourism	industry	went	into	a	steep	decline	in	the	periods	following	the	2001	World	Trade	Center	event	which	had	a	negative	impact on	the	occupancy	levels	and	average	room	rates	at	Loews	Hotels.	Future	terrorist	attacks	could	similarly	lead	to	reductions	in	business	travel	and	tourism	which	could harm	Loews	Hotels.

# Certain	of	our	subsidiaries	face	significant	risks	related	to	the	impact	of	hurricanes	and	other	natural	disasters.

In	addition	to	CNA's	exposure	to	catastrophe	losses	discussed	above,	the	businesses	operated	by	several	of	our	other	subsidiaries	are	exposed	to	significant	harm from	the	effects	of	natural	disasters,	particularly	hurricanes	and	related	flooding	and	other	damage.	While	much	of	the	damage	caused	by	natural	disasters	is	covered	by insurance,	we	cannot	be	sure	that	such	coverage	will	be	available	or	be	adequate	in	all	cases.	These	risks	include	the	following:

Diamond	Offshore.		Diamond	Offshore	operates	its	offshore	rig	fleet	in	waters	that	can	be	severely	impacted	by	hurricanes	and	other	natural	disasters,	including the	U.S.	Gulf	of	Mexico.	In	September	of	2008,	one	of	Diamond	Offshore's	jack-up	drilling	rigs,	the	Ocean	Tower,	was	damaged	in	Hurricane	Ike,	losing	its	derrick, drill	floor	and	drill	floor	equipment.	In	late	August	2005,	one	of	Diamond	Offshore's	jack-up	drilling	rigs,	the	Ocean	Warwick,	was	seriously	damaged	during	Hurricane Katrina	and	other	rigs	in	Diamond's	fleet	and	its	warehouse	in	New	Iberia,	Louisiana	sustained	lesser	damage	in	Hurricanes	Katrina	or	Rita,	or	in	some	cases	both storms.	In	addition	to	damaging	or	destroying	rig	equipment,	some	or	all	of	which	may	be	covered	by	insurance,	catastrophes	of	this	kind	result	in	additional	operating expenses	for	Diamond	Offshore,	including	the	cost	of	reconnaissance	aircraft,	rig	crew	over-time	and	employee	assistance,	hurricane	relief	supplies,	temporary	housing and	office	space	and	the	rental	of	mooring	equipment	and	others	which	may	not	be	covered	by	insurance.

Boardwalk	Pipeline. 	The	nature	and	location	of	Boardwalk	Pipeline's	business,	particularly	with	regard	to	its	assets	in	the	Gulf	Coast	region,	may	make Boardwalk	Pipeline	susceptible	 to	catastrophic	 losses	especially	from	hurricanes	or	named	storms.	Various	other	events	can	cause	catastrophic	 losses,	 including windstorms,	earthquakes,	hail,	explosions,	and	severe	winter	weather	and	fires.	The	frequency	and	severity	of	these	events	are	inherently	unpredictable.	The	extent	of losses	from	catastrophes	is	a	function	of	both	the	total	amount	of	insured	exposures	in	the	affected	areas	and	the	severity	of	the	events	themselves.	Although	Boardwalk Pipeline	carries	insurance,	in	the	event	of	a	loss	the	coverage	could	be	insufficient	or	there	could	be	a	material	delay	in	the	receipt	of	the	insurance	proceeds.

Loews	 Hotels.		Hotels	operated	by	Loews	Hotels	are	exposed	to	damage,	business	interruption	and	reductions	in	travel	and	tourism	in	markets	affected	by significant	natural	disasters	such	as	hurricanes.	For	example,	Loews	Hotels'	properties	located	in	Florida	and	New	Orleans	suffered	significant	damage	from	hurricanes and	related	flooding	during	the	past	five	years.

# Certain	of	our	subsidiaries	are	subject	to	extensive	federal,	state	and	local	governmental	regulations.

The	businesses	operated	by	certain	of	our	subsidiaries	are	impacted	by	current	and	potential	federal,	state	and	local	governmental	regulations	which	imposes	or might	impose	a	variety	of	restrictions	and	compliance	obligations	on	those	companies.	Governmental	regulations	can	also	change	materially	in	ways	that	could	adversely affect	those	companies.	Risks	faced	by	our	subsidiaries	related	to	governmental	regulation	include	the	following:

CNA.		The	insurance	industry	is	subject	to	comprehensive	and	detailed	regulation	and	supervision	throughout	the	United	States.	Most	insurance	regulations	are designed	to	protect	the	interests	of	CNA's	policyholders	rather	than	its	investors.	Each	state	in	which	CNA	does	business	has	established	supervisory	agencies	that regulate	the	manner	in	which	CNA	does	business.	Their	regulations	relate	to,	among	other	things:

•limitations	on	the	ability	of	CNA's	insurance	subsidiaries	to	pay	dividends	to	us;	and

Regulatory	powers	also	extend	to	premium	rate	regulations	which	require	that	rates	not	be	excessive,	inadequate	or	unfairly	discriminatory.	CNA	also	is	required by	the	states	to	provide	coverage	to	persons	who	would	not	otherwise	be	considered	eligible	by	the	insurers.	Each	state	dictates	the	types	of	insurance	and	the	level	of coverage	that	must	be	provided	to	such	involuntary	risks.	CNA's	share	of	these	involuntary	risks	is	mandatory	and	is	generally	a	function	of	its	respective	share	of	the voluntary	market	by	line	of	insurance	in	each	state.

Diamond	Offshore.		The	drilling	industry	is	dependent	on	demand	for	services	from	the	oil	and	gas	exploration	industry	and,	accordingly,	is	affected	by	changing tax	and	other	laws	relating	to	the	energy	business	generally.	Diamond	Offshore	may	be	required	to	make	significant	capital	expenditures	to	comply	with	governmental laws	and	regulations.	It	is	also	possible	that	these	laws	and	regulations	may	in	the	future	add	significantly	to	Diamond	Offshore's	operating	costs	or	may	significantly limit	drilling	activity.

Governments	in	some	foreign	countries	are	increasingly	active	in	regulating	and	controlling	the	ownership	of	concessions,	the	exploration	for	oil	and	gas	and other	aspects	of	the	oil	and	gas	industries.	The	modification	of	existing	laws	or	regulations	or	the	adoption	of	new	laws	or	regulations	curtailing	exploratory	or developmental	drilling	for	oil	and	gas	for	economic,	environmental	or	other	reasons	could	materially	and	adversely	affect	Diamond	Offshore's	operations	by	limiting drilling	opportunities.

The	Minerals	Management	Service	of	the	U.S.	Department	of	the	Interior,	or	MMS,	has	established	guidelines	for	drilling	operations	in	the	GOM.	Diamond Offshore	believes	that	it	is	currently	in	compliance	with	the	existing	regulations	set	forth	by	the	MMS	with	respect	to	its	operations	in	the	GOM;	however,	these regulations	are	continually	under	review.	Implementation	of	additional	MMS	regulations	may	subject	Diamond	Offshore	to	increased	costs	of	operating,	or	a	reduction in	the	area	and/or	periods	of	operation,	in	the	GOM.

HighMount.		All	of	HighMount's	operations	are	conducted	onshore	in	the	United	States.	The	U.S.	oil	and	gas	industry,	and	HighMount's	operations,	are	subject	to regulation	at	 the	federal,	state	and	 local	 level.	Such	regulation	 includes	requirements	with	respect	 to,	among	other	 things:	permits	 to	drill	and	 to	conduct	other operations;	provision	of	financial	assurances	(such	as	bonds)	covering	drilling	and	well	operations;	the	location	of	wells;	the	method	of	drilling	and	completing	wells; the	surface	use	and	restoration	of	properties	upon	which	wells	are	drilled;	 the	plugging	and	abandoning	of	wells;	 the	marketing,	 transportation	and	reporting	of production;	and	the	valuation	and	payment	of	royalties;	the	size	of	drilling	and	spacing	units	(regarding	the	density	of	wells	which	may	be	drilled	in	a	particular	area); the	unitization	or	pooling	of	natural	gas	and	oil	properties;	maximum	rates	of	production	from	natural	gas	and	oil	wells;	venting	or	flaring	of	natural	gas	and	the ratability	of	production.

The	conference	committee	report	for	The	Department	of	the	Interior,	Environment,	and	Related	Agencies	Appropriations	Act	for	Fiscal	Year	2010	requested	the EPA	to	conduct	a	study	of	hydraulic	fracturing,	particularly	the	relationship	between	hydraulic	fracturing	and	drinking	water.	Hydraulic	fracturing	is	a	technique commonly	used	by	oil	and	gas	exploration	companies,	including	HighMount,	to	stimulate	the	production	of	oil	and	natural	gas	by	injecting	fluids	and	sand	into underground	wells	at	high	pressures,	causing	fractures	or	fissures	in	the	geological	formation	which	allow	oil	and	gas	to	flow	more	freely.	In	recent	years,	concerns	have been	raised	 that	 the	fracturing	process	may	contaminate	underground	sources	of	drinking	water.	Several	bills	have	been	 introduced	 in	Congress	seeking	federal regulation	of	hydraulic	fracturing,	which	has	historically	been	regulated	at	the	state	level,	though	none	of	the	proposed	legislation	has	moved	out	of	committee.	If hydraulic	 fracturing	 is	 banned	 or	 significantly	 restricted	 by	 federal	 regulation	 or	 otherwise,	 it	 would	 have	 a	 material	 adverse	 effect	 on	 HighMount's	 ability	 to economically	drill	new	natural	gas	wells,	which	would	materially	reduce	its	production,	revenues	and	profitability.

HighMount's	operations	are	also	subject	to	federal,	state	and	local	laws	and	regulations	concerning	the	discharge	of	contaminants	into	the	environment,	the generation,	storage,	transportation	and	disposal	of	contaminants,	and	the

protection	of	public	health,	natural	resources,	wildlife	and	the	environment.	In	most	instances,	the	regulatory	requirements	relate	to	the	handling	and	disposal	of	drilling and	 production	 waste	 products,	 water	 and	 air	 pollution	 control	 procedures,	 and	 the	 remediation	 of	 petroleum-product	 contamination.	 In	 addition,	 HighMount's operations	may	require	it	to	obtain	permits	for,	among	other	things,	air	emissions,	discharges	into	surface	waters,	and	the	construction	and	operation	of	underground injection	wells	or	surface	pits	to	dispose	of	produced	saltwater	and	other	non-hazardous	oilfield	wastes.

Boardwalk	Pipeline.		Boardwalk	Pipeline's	natural	gas	transportation	and	storage	operations	are	subject	to	extensive	regulation	by	FERC	and	the	DOT	among other	federal	and	state	authorities.	In	addition	to	FERC	rules	and	regulations	related	to	the	rates	Boardwalk	Pipeline	can	charge	for	its	services,	FERC's	regulatory authority	extends	to:

•operating	terms	and	conditions	of	service;

•the	types	of	services	Boardwalk	Pipeline	may	offer	to	its	customers;

•construction	of	new	facilities;

•creation,	extension	or	abandonment	of	services	or	facilities;

# •accounts	and	records;	and

•relationships	with	certain	types	of	affiliated	companies	involved	in	the	natural	gas	business.

FERC's	action	in	any	of	these	areas	or	modifications	of	its	current	regulations	can	adversely	impact	Boardwalk	Pipeline's	ability	to	compete	for	business,	to construct	new	facilities,	offer	new	services	or	to	recover	the	full	cost	of	operating	its	pipelines.	This	regulatory	oversight	can	result	in	longer	lead	times	to	develop	and complete	any	future	project.	The	federal	regulatory	approval	and	compliance	process	could	raise	the	costs	of	such	projects	to	the	point	where	they	are	no	longer sufficiently	timely	or	cost	competitive	when	compared	to	competing	projects	that	are	not	subject	to	the	federal	regulatory	regime.

# The	businesses	operated	by	our	subsidiaries	face	intense	competition.

Each	of	the	businesses	operated	by	our	subsidiaries	faces	intense	competition	in	its	industry	and	will	be	harmed	materially	if	it	is	unable	to	compete	effectively. Certain	of	the	competitive	risks	faced	by	those	companies	include:

CNA.		All	aspects	of	the	insurance	industry	are	highly	competitive	and	CNA	must	continuously	allocate	resources	to	refine	and	improve	its	insurance	products and	services.	CNA	competes	with	a	large	number	of	stock	and	mutual	insurance	companies	and	other	entities	for	both	distributors	and	customers.	Insurers	compete	on the	basis	of	factors	including	products,	price,	services,	ratings	and	financial	strength.	CNA	may	lose	business	to	competitors	offering	competitive	insurance	products	at lower	prices.

Diamond	 Offshore.		The	offshore	contract	drilling	industry	is	highly	competitive	with	numerous	industry	participants,	none	of	which	at	the	present	time	has	a dominant	market	share.	Some	of	Diamond	Offshore's	competitors	may	have	greater	financial	or	other	resources	than	Diamond	Offshore.	The	drilling	industry	has experienced	 consolidation	 in	 recent	 years	 and	 may	 experience	 additional	 consolidation,	 which	 could	 create	 additional	 large	 competitors.	 Drilling	 contracts	 are traditionally	awarded	on	a	competitive	bid	basis.	Intense	price	competition	is	often	the	primary	factor	in	determining	which	qualified	contractor	is	awarded	a	job, although	rig	availability	and	location,	a	drilling	contractor's	safety	record	and	the	quality	and	technical	capability	of	service	and	equipment	may	also	be	considered. Mergers	among	oil	and	gas	exploration	and	production	companies	have	reduced	the	number	of	available	customers	as	well	as	the	contraction	of	the	global	economy, increasing	competition.	Significant	new	rig	construction	and	upgrades	of	existing	drilling	units	could	also	intensify	price	competition.	Diamond	Offshore	believes	there are	approximately	50	jack-up	rigs	and	70	floaters	on	order	and	scheduled	for	delivery	between	2010	and	2012.	The	resulting	increase	in	rig	supply	could	result	in depressed	rig	utilization	and	greater	price	competition.

HighMount.		HighMount	competes	with	other	oil	and	gas	companies	in	all	aspects	of	its	business,	including	acquisition	of	producing	properties	and	leases	and obtaining	goods,	services	and	labor,	including	drilling	rigs	and	well

completion	services.	HighMount	also	competes	in	the	marketing	of	produced	natural	gas	and	NGLs.	Some	of	HighMount's	competitors	have	substantially	larger financial	and	other	resources	than	HighMount.	Factors	that	affect	HighMount's	ability	to	acquire	producing	properties	include	available	funds,	available	information about	the	property	and	standards	established	by	HighMount	for	minimum	projected	return	on	investment.	Competition	for	sales	of	natural	gas	and	NGLs	is	also presented	by	alternative	fuel	sources,	including	heating	oil,	imported	LNG	and	other	fossil	fuels.

Boardwalk	Pipeline.		Boardwalk	Pipeline	competes	with	other	pipelines	to	maintain	current	business	levels	and	to	serve	new	demand	and	markets.	Boardwalk Pipeline	also	competes	with	other	pipelines	for	contracts	with	producers	that	would	support	new	growth	opportunities.	The	principal	elements	of	competition	among pipelines	are	available	capacity,	rates,	terms	of	service,	access	to	supply	and	flexibility	and	reliability	of	service.	Competition	is	particularly	strong	in	the	Midwest	and Gulf	Coast	states	where	Boardwalk	Pipeline	competes	with	numerous	existing	pipelines,	including	the	Rockies	Express	Pipeline	that	transports	natural	gas	from	northern Colorado	to	eastern	Ohio	and	the	Mid-Continent	Express	Pipeline	that	transports	natural	gas	from	Oklahoma	and	Texas	to	Alabama.	Boardwalk	Pipeline	will	also directly	compete	with	several	new	pipeline	projects	that	are	proposed	or	under	development,	including	projects	originating	in	the	Haynesville	Shale	area	–	more specifically,	the	Tiger	Pipeline	that	will	transport	gas	to	Perryville,	Louisiana	and	the	Haynesville	Extension	Pipeline	that	will	transport	gas	to	the	industrial	complex	in southeastern	Louisiana	-	and	the	Fayetteville	Express	Pipeline	which	will	originate	in	the	Fayetteville	Shale	area	and	continue	eastward	to	Mississippi.	In	addition, regulators'	continuing	efforts	to	increase	competition	in	the	natural	gas	industry	have	increased	the	natural	gas	transportation	options	of	Boardwalk	Pipeline's	traditional customers.	As	a	result	of	 the	regulators'	policies,	segmentation	and	capacity	release	have	created	an	active	secondary	market	which	 increasingly	competes	with Boardwalk	Pipeline's	pipeline	services.	Additionally,	natural	gas	competes	with	other	forms	of	energy	available	to	Boardwalk	Pipeline's	customers,	including	electricity, coal	and	fuel	oils.	The	natural	gas	industry	has	built,	or	is	in	the	process	of	completing,	significant	new	pipeline	infrastructure	that	will	support	the	development	of unconventional	natural	gas	supply	basins	across	the	U.S.	Additional	pipeline	infrastructure	projects	are	being	proposed.	These	new	pipeline	developments	have	increased competition	in	certain	pipeline	markets,	resulting	in	lower	price	differentials	between	physical	locations	(basis	spreads).	Basis	spreads	can	impact	the	rates	Boardwalk Pipeline	will	be	able	to	negotiate	with	its	customers	when	contracts	come	up	for	renewal.	Each	year	a	portion	of	Boardwalk	Pipeline's	capacity	becomes	subject	to	re- contracting	risk.	For	example,	approximately	14.0%	of	Boardwalk	Pipeline's	contracts	are	due	to	expire	in	2010.	Increased	competition	could	reduce	the	volumes	of	gas transported	by	Boardwalk	Pipeline's	systems	or,	in	instances	where	Boardwalk	Pipeline	does	not	have	long	term	contracts	with	fixed	rates,	could	force	Boardwalk Pipeline	to	decrease	its	transportation	or	storage	rates.

The	regulatory	program	that	applies	to	interstate	pipelines	is	different	than	the	regulatory	program	that	applies	to	many	of	Boardwalk	Pipeline's	competitors	that are	not	regulated	interstate	pipelines.	This	difference	in	regulatory	oversight	can	result	in	longer	lead	times	to	develop	and	complete	a	project	when	it	is	regulated	at	the federal	level.	Boardwalk	Pipeline	competes	against	a	number	of	intrastate	pipelines	which	have	significant	regulatory	advantages	over	Boardwalk	Pipeline	because	of the	absence	of	FERC	regulation.	In	view	of	potential	rate	advantages	and	construction	and	service	flexibility	available	to	intrastate	pipelines,	Boardwalk	Pipeline	may lose	customers	and	throughput	to	intrastate	competitors.

# We	and	our	subsidiaries	are	subject	to	litigation.

We	and	our	subsidiaries	are	subject	to	litigation	in	the	normal	course	of	business.	Litigation	is	costly	and	time	consuming	to	defend	and	could	result	in	a	material expense.	Please	read	information	on	litigation	included	in	the	MD&A	under	Item	7	and	Notes	9	and	19	of	the	Notes	to	Consolidated	Financial	Statements	included under	Item	8.	Certain	of	the	litigation	risks	faced	by	us	and	our	subsidiaries	are	as	follows:

CNA.		CNA	faces	substantial	risks	of	litigation	and	arbitration	beyond	ordinary	course	claims	and	A&E	matters,	which	may	contain	assertions	in	excess	of amounts	covered	by	reserves	that	it	has	established.	These	matters	may	be	difficult	to	assess	or	quantify	and	may	seek	recovery	of	very	large	or	indeterminate	amounts that	include	punitive	or	treble	damages.

# We	and	our	subsidiaries	are	each	dependent	on	a	small	number	of	key	executives	and	other	key	personnel	to	operate	our	businesses	successfully.

Our	success	and	the	success	of	our	operating	subsidiaries	substantially	depends	upon	each	company's	ability	to	attract	and	retain	high	quality	executives	and	other qualified	employees.	In	many	instances,	there	may	be	only	a	limited	number

of	available	qualified	executives	in	the	business	lines	in	which	we	and	our	subsidiaries	compete	and	the	loss	of	one	or	more	key	employees	or	the	inability	to	attract	and retain	other	talented	personnel	could	impede	the	successful	implementation	of	our	and	our	subsidiaries'	business	strategies.	Diamond	Offshore	has	experienced	upward pressure	on	salaries	and	wages	and	increased	competition	for	skilled	workers	as	a	result	of	the	strong	drilling	market	in	recent	years	and	has	lost	experienced	personnel to	competitors	and	customers.	As	a	result,	Diamond	Offshore	has	implemented	retention	programs,	including	increases	in	compensation.

# Certain	of	our	subsidiaries	face	significant	risks	related	to	compliance	with	environmental	laws.

Certain	of	our	subsidiaries	have	extensive	obligations	and/or	financial	exposure	related	to	compliance	with	federal,	state	and	local	environmental	laws.	Laws	and regulations	protecting	the	environment	have	become	increasingly	stringent	in	recent	years,	and	may	in	some	cases	impose	"strict	liability,"	rendering	a	person	liable	for environmental	damage	without	regard	to	negligence	or	fault	on	the	part	of	that	person.	These	laws	and	regulations	may	expose	us	and	our	subsidiaries	to	liability	for	the conduct	of	or	conditions	caused	by	others	or	for	acts	that	were	in	compliance	with	all	applicable	laws	at	the	time	they	were	performed.	For	example:

•as	discussed	in	more	detail	above,	many	of	CNA's	policyholders	have	made	claims	for	defense	costs	and	indemnification	in	connection	with	environmental pollution	matters;

•as	an	operator	of	mobile	offshore	drilling	units	in	navigable	U.S.	waters	and	some	offshore	areas,	Diamond	Offshore	may	be	liable	for,	among	other things,	damages	and	costs	incurred	in	connection	with	oil	spills	related	to	those	operations,	including	for	conduct	of	or	conditions	caused	by	others	or	for acts	that	were	in	compliance	with	all	applicable	laws	at	the	time	they	were	performed;

•the	risk	of	substantial	environmental	costs	and	liabilities	is	inherent	in	natural	gas	transportation,	gathering	and	storage,	including	with	respect	to,	among other	things,	the	handling	and	discharge	of	solid	and	hazardous	waste	from	Boardwalk	Pipeline's	facilities,	compliance	with	clean	air	standards	and	the abandonment	and	reclamation	of	Boardwalk	Pipeline's	facilities,	sites	and	other	properties;	and

•development,	production	and	sale	of	natural	gas	and	NGLs	in	the	United	States	are	subject	to	extensive	environmental	laws	and	regulations,	including	those related	to	discharge	of	materials	into	the	environment	and	environmental	protection,	permits	for	drilling	operations,	bonds	for	ownership,	development	and production	of	oil	and	gas	properties	and	reports	concerning	operations,	which	could	result	in	liabilities	for	personal	injuries,	property	damage,	spills, discharge	of	hazardous	materials,	remediation	and	clean-up	costs	and	other	environmental	damages,	suspension	or	termination	of	HighMount's	operations and	administrative,	civil	and	criminal	penalties.

# Certain	of	our	subsidiaries	are	subject	to	physical	and	financial	risks	associated	with	climate	change.

As	awareness	of	climate	change	issues	increases,	governments	around	the	world	are	beginning	to	address	the	matter.	This	may	result	in	new	environmental regulations	that	may	unfavorably	impact	us,	our	subsidiaries	and	their	suppliers	and	customers.	We	and	our	subsidiaries	may	be	exposed	to	risks	related	to	new	laws	or regulations	pertaining	to	climate	change,	carbon	emissions	or	energy	use	that	could	decrease	the	use	of	oil	or	natural	gas,	thus	reducing	demand	for	hydrocarbon-based fuel	and	related	services	or	imposing	significant	new	costs.	Governments	also	may	pass	laws	or	regulations	encouraging	or	mandating	the	use	of	alternative	energy sources,	such	as	wind	power	and	solar	energy,	which	may	reduce	demand	for	oil	and	natural	gas.	In	addition,	changing	global	weather	patterns	have	been	associated with	extreme	weather	events	and	could	change	longer-term	natural	catastrophe	trends,	including	increasing	the	frequency	and	severity	of	hurricanes	and	other	natural disasters	which	could	increase	future	catastrophe	losses	at	CNA	and	damage	to	property,	disruption	of	business	and	higher	operating	costs	at	Diamond	Offshore, Boardwalk	Pipeline,	HighMount	and	Loews	Hotels.

There	is	currently	no	federal	regulation	that	limits	or	imposes	additional	costs	with	respect	to	greenhouse	gas	("GHG")	emissions	in	the	U.S.	However,	several bills	were	introduced	in	Congress	during	2009	that	would	regulate	U.S.	GHG	emissions	under	a	cap	and	trade	system	and	some	regulation	of	that	type	may	be	enacted	in the	U.S.	in	the	near	future.	In	addition,	in	September	2009,	the	EPA	adopted	regulations	under	the	Clean	Air	Act	requiring	the	monitoring	and	reporting	of	annual	GHG emissions	by	operators	of	facilities	that	emit	more	than	25,000	metric	tons	of	GHG	per	year,

which	includes	Boardwalk	Pipeline	beginning	in	2010	and	may	include	HighMount	beginning	in	2011.	Numerous	states	and	several	regional	multi-state	climate initiatives	have	announced	or	adopted	plans	to	regulate	GHG	emissions,	though	the	state	programs	vary	widely.	The	establishment	of	a	GHG	reporting	system	and registry	may	be	a	first	step	toward	broader	regulation	of	GHG	emissions.	Compliance	with	future	laws	and	regulations	could	impose	significant	costs	on	affected companies	or	adversely	affect	the	demand	for	and	the	cost	to	produce	and	transport	natural	gas	and	oil,	which	would	adversely	affect	the	businesses	of	our	energy subsidiaries.

# The	economic	recession	and	ongoing	financial	and	credit	markets	crisis	have	had	and	may	continue	to	have	a	negative	impact	on	the	business	and	financial condition	of	us	and	our	subsidiaries.

The	recent	financial	and	credit	crisis	has	substantially	reduced	the	availability	of	liquidity	and	credit	available	to	businesses	and	consumers	worldwide.	The continued	shortage	of	liquidity	and	credit,	combined	with	substantial	losses	in	equity	and	fixed	income	markets,	has	led	to	an	economic	recession	in	the	United	States and	abroad.	Such	deterioration	of	the	worldwide	economy	and	credit	and	capital	markets	has	and	may	continue	to	adversely	affect	the	customers	of	our	subsidiaries, including	the	ability	of	such	customers	to	perform	under	contracts.	The	recession	has	also	resulted	in,	and	may	result	in	further,	reduced	demand	for	certain	of	the products	and	services	provided	by	our	subsidiaries,	including	property	casualty	insurance,	natural	gas	and	gas	transportation	services,	offshore	drilling	services	and	hotel rooms	and	related	services.	Such	decline	in	demand	could	lead	to	lower	revenues	and	earnings	by	our	subsidiaries.	We	cannot	predict	if	the	actions	being	taken	by	the United	States	and	other	governments	around	the	world	to	address	this	situation	will	be	successful	in	reducing	the	severity	or	duration	of	this	recession.

# Item	1B.	Unresolved	Staff	Comments.

# None.

# Item	2.	Properties.

Our	corporate	headquarters	is	located	in	approximately	113,000	square	feet	of	leased	office	space	in	New	York	City.	Information	relating	to	our	subsidiaries' properties	is	contained	under	Item	1.

# Item	3.	Legal	Proceedings.

Information	with	respect	to	legal	proceedings	is	incorporated	by	reference	to	Note	19	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8.

# Item	4.	Submission	of	Matters	to	a	Vote	of	Security	Holders.

# EXECUTIVE	OFFICERS	OF	THE	REGISTRANT

| Name | Position	and	Offices	Held | Age | Officer |
| :--- | :--- | :--- | :--- |
| David\tB.\tEdelson | Senior\tVice\tPresident | 50 | 2005 |
| Gary\tW.\tGarson | Senior\tVice\tPresident,\tGeneral\tCounsel\tand\tSecretary | 63 | 1988 |
| Herbert\tC.\tHofmann | Senior\tVice\tPresident | 67 | 1979 |
| Peter\tW.\tKeegan | Senior\tVice\tPresident\tand\tChief\tFinancial\tOfficer | 65 | 1997 |
| Richard\tW.\tScott | Senior\tVice\tPresident\tand\tChief\tInvestment\tOfficer | 56 | 2010 |
| Kenneth\tI.\tSiegel | Senior\tVice\tPresident | 52 | 2009 |
| Andrew\tH.\tTisch | Office\tof\tthe\tPresident,\tCo-Chairman\tof\tthe\tBoard\tand\tChairman\tof\tthe\tExecutive\tCommittee | 60 | 1985 |
| James\tS.\tTisch | Office\tof\tthe\tPresident,\tPresident\tand\tChief\tExecutive\tOfficer | 57 | 1981 |
| Jonathan\tM.\tTisch | Office\tof\tthe\tPresident\tand\tCo-Chairman\tof\tthe\tBoard | 56 | 1987 |

Andrew	H.	Tisch	and	James	S.	Tisch	are	brothers	and	are	cousins	of	Jonathan	M.	Tisch.	None	of	the	other	officers	or	directors	of	Registrant	is	related	to	any other.

All	of	our	executive	officers	except	for	Kenneth	I.	Siegel	and	Richard	W.	Scott	have	been	engaged	actively	and	continuously	in	our	business	for	more	than	the past	five	years.	Prior	to	joining	us,	Mr.	Siegel	was	employed	as	a	Managing	Director	in	the	Mergers	&	Acquisitions	Department	at	Lehman	Brothers	Holdings	Inc.	and in	2009	at	Barclays	Capital	Inc.	in	a	similar	capacity.	Prior	to	joining	us,	Mr.	Scott	was	employed	at	American	International	Group,	Inc.	for	more	than	five	years,	serving in	various	senior	investment	positions,	including	Chief	Investment	Officer–Insurance	Portfolio	Management.

Officers	are	elected	and	hold	office	until	their	successors	are	elected	and	qualified,	and	are	subject	to	removal	by	the	Board	of	Directors.

# PART	II

# Item	5.	Market	for	the	Registrant's	Common	Equity,	Related	Stockholder	Matters	and	Issuer	Purchases	of	Equity	Securities.

# Price	Range	of	Common	Stock

Our	common	stock	is	listed	on	the	New	York	Stock	Exchange	under	the	symbol	"L."	The	following	table	sets	forth	the	reported	high	and	low	sales	prices	in	each calendar	quarter:

|  | 2009<br>High | Low | 2008<br>High | Low |
| :--- | :--- | :--- | :--- | :--- |
| First\tQuarter | \t\t $30.60\t\t $17.40\t\t $51.33\t\t $37.65 | \t\t $30.60\t\t $17.40\t\t $51.33\t\t $37.65 | \t\t $30.60\t\t $17.40\t\t $51.33\t\t $37.65 | \t\t $30.60\t\t $17.40\t\t $51.33\t\t $37.65 |
| Second\tQuarter | \t 29.17 | \t 21.49 | \t 51.51 | \t 39.89 |
| Third\tQuarter | \t 35.49 | \t 25.27 | \t 49.32 | \t 35.00 |
| Fourth\tQuarter | \t 36.84 | \t 32.77 | \t 39.17 | \t 19.39 |

The	following	graph	compares	annual	total	return	of	our	Common	Stock,	the	Standard	&	Poor's	500	Composite	Stock	Index	("S&P	500	Index")	and	our	Peer Group	("Loews	Peer	Group")	for	the	five	years	ended	December	31,	2009.	The	graph	assumes	that	the	value	of	the	investment	in	our	Common	Stock,	the	S&P	500 Index	and	the	Loews	Peer	Group	was	$100	on	December	31,	2004	and	that	all	dividends	were	reinvested.

|  | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Loews\tCommon\tStock | 100.00 | 135.92 | 179.47 | 219.01 | 123.70 | 160.62 |
| S&amp;P\t500\tIndex | 100.00 | 104.91 | 121.48 | 128.16 | \t\t80.74 | 102.11 |
| Loews\tPeer\tGroup\t(a) | 100.00 | 133.59 | 152.24 | 174.46 | 106.30 | 136.35 |

(a) The	Loews	Peer	Group	consists	of	the	following	companies	that	are	industry	competitors	of	our	principal	operating	subsidiaries:	Ace	Limited,	W.R.	Berkley Corporation,	Cabot	Oil	&	Gas	Corporation,	The	Chubb	Corporation,	Energy	Transfer	Partners	L.P.,	ENSCO	International	Incorporated,	The	Hartford	Financial Services	Group,	Inc.,	Kinder	Morgan	Energy	Partners,	L.P.,	Noble	Corporation,	Range	Resources	Corporation,	Spectra	Energy	Corporation	(included	from December	14,	2006	when	it	began	trading),	Transocean,	Ltd.	and	The	Travelers	Companies,	Inc.

# Dividend	Information

We	have	paid	quarterly	cash	dividends	on	Loews	common	stock	in	each	year	since	1967.	Regular	dividends	of	$0.0625	per	share	of	Loews	common	stock	were paid	in	each	calendar	quarter	of	2009	and	2008.

We	paid	quarterly	cash	dividends	on	the	former	Carolina	Group	stock	until	the	Separation.	Regular	dividends	of	$0.455	per	share	of	the	former	Carolina	Group stock	were	paid	in	the	first	and	second	quarters	of	2008.

# Item	5.	Market	for	the	Registrant's	Common	Equity,	Related	Stockholder	Matters

and	Issuer	Purchases	of	Equity	Securities

# Securities	Authorized	for	Issuance	Under	Equity	Compensation	Plans

The	following	table	provides	certain	information	as	of	December	31,	2009	with	respect	to	our	equity	compensation	plans	under	which	our	equity	securities	are authorized	for	issuance.

| Plan	category | Number	of<br>securities	to	be<br>issued	upon	exercise<br>of	outstanding<br>options,	warrants<br>and	rights | Weighted	average<br>exercise	price	of<br>outstanding	options,<br>warrants	and	rights | available	for	future<br>issuance	under<br>equity	compensation<br>plans	(excluding<br>securities	reflected<br>in	the	first	column) |
| :--- | :--- | :--- | :--- |
| Equity\tcompensation\tplans\tapproved\tby |  |  |  |
| security\tholders\t(a) | 5,657,996 | $31.24 | 3,447,947 |
| Equity\tcompensation\tplans\tnot\tapproved\tby\tsecurity\tholders\t(b) | N/A | N/A | N/A |

(a) Reflects	stock	options	and	stock	appreciation	rights	awarded	under	the	Loews	Corporation	2000	Stock	Option	Plan.

(b) We	do	not	have	equity	compensation	plans	that	have	not	been	approved	by	our	shareholders.

# Approximate	Number	of	Equity	Security	Holders

We	have	approximately	1,440	holders	of	record	of	Loews	common	stock.

# Common	Stock	Repurchases

We	repurchased	Loews	common	stock	in	2009	as	follows:

| Period | Total	number	of<br>shares	purchased | Average	price<br>paid	per	share |
| :--- | :--- | :--- |
| January\t1,\t2009\t–\tMarch\t31,\t2009 | 0 | N/A |
| April\t1,\t2009\t–\tJune\t30,\t2009 | 1,195,900 | $26.79 |
| July\t1,\t2009\t–\tSeptember\t30,\t2009 | 3,516,200 | 31.52 |
| October\t1,\t2009\t–\tDecember\t31,\t2009 | 5,811,700 | 35.26 |

# MANAGEMENT'S	REPORT	ON	INTERNAL	CONTROL	OVER	FINANCIAL	REPORTING

Our	management	is	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting	(as	defined	in	Exchange	Act	Rules	13a-15(f) and	15d-15(f))	for	us.	Our	internal	control	system	was	designed	to	provide	reasonable	assurance	to	our	management	and	Board	of	Directors	regarding	the	preparation and	fair	presentation	of	published	financial	statements.

There	are	inherent	limitations	to	the	effectiveness	of	any	control	system,	however	well	designed,	including	the	possibility	of	human	error	and	the	possible circumvention	or	overriding	of	controls.	Further,	the	design	of	a	control	system	must	reflect	the	fact	that	there	are	resource	constraints,	and	the	benefits	of	controls	must be	considered	relative	to	their	costs.	Management	must	make	judgments	with	respect	to	the	relative	cost	and	expected	benefits	of	any	specific	control	measure.	The design	of	a	control	system	also	is	based	in	part	upon	assumptions	and	judgments	made	by	management	about	the	likelihood	of	future	events,	and	there	can	be	no assurance	that	a	control	will	be	effective	under	all	potential	future	conditions.	As	a	result,	even	an	effective	system	of	internal	control	over	financial	reporting	can provide	no	more	than	reasonable	assurance	with	respect	to	the	fair	presentation	of	financial	statements	and	the	processes	under	which	they	were	prepared.

Our	management	assessed	the	effectiveness	of	our	internal	control	over	financial	reporting	as	of	December	31,	2009.	In	making	this	assessment,	management used	the	criteria	set	forth	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	in	Internal	Control	–	Integrated	Framework.	Based	on	this assessment,	our	management	believes	that,	as	of	December	31,	2009,	our	internal	control	over	financial	reporting	was	effective.

Our	independent	registered	public	accounting	firm,	Deloitte	&	Touche	LLP,	has	issued	an	audit	report	on	the	Company's	internal	control	over	financial	reporting. The	report	of	Deloitte	&	Touche	LLP	follows	this	Report.

# REPORT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

To	the	Board	of	Directors	and	Shareholders	of

# New	York,	NY

We	have	audited	the	internal	control	over	financial	reporting	of	Loews	Corporation	and	subsidiaries	(the	"Company")	as	of	December	31,	2009,	based	on	criteria established in	Internal	 Control	 – Integrated	 Framework issued	 by	 the	 Committee	 of	 Sponsoring	 Organizations	 of	 the	 Treadway	 Commission.	 The	 Company's management	is	responsible	for	maintaining	effective	internal	control	over	financial	reporting	and	for	its	assessment	of	the	effectiveness	of	internal	control	over	financial reporting	included	in	the	accompanying	management's	report	on	internal	control	over	financial	reporting.	Our	responsibility	is	to	express	an	opinion	on	the	Company's internal	control	over	financial	reporting	based	on	our	audit.

We	conducted	our	audit	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	effective	internal	control	over	financial	reporting	was	maintained	in	all	material	respects.	Our audit	included	obtaining	an	understanding	of	internal	control	over	financial	reporting,	assessing	the	risk	that	a	material	weakness	exists,	testing	and	evaluating	the	design and	operating	effectiveness	of	internal	control	based	on	the	assessed	risk,	and	performing	such	other	procedures	as	we	considered	necessary	in	the	circumstances.	We believe	that	our	audit	provides	a	reasonable	basis	for	our	opinion.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	by,	or	under	the	supervision	of,	the	company's	principal	executive	and	principal financial	officers,	or	persons	performing	similar	functions,	and	effected	by	the	company's	board	of	directors,	management,	and	other	personnel	to	provide	reasonable assurance	regarding	 the	reliability	of	financial	reporting	and	 the	preparation	of	financial	statements	for	external	purposes	 in	accordance	with	generally	accepted accounting	principles.	A	company's	internal	control	over	financial	reporting	includes	those	policies	and	procedures	that	(1)	pertain	to	the	maintenance	of	records	that,	in reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the	company;	(2)	provide	reasonable	assurance	that	transactions	are recorded	as	necessary	to	permit	preparation	of	financial	statements	in	accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures	of	the company	are	being	made	only	 in	accordance	with	authorizations	of	 management	 and	 directors	 of	 the	 company;	 and	 (3)	 provide	 reasonable	 assurance	 regarding prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or	disposition	of	the	company's	assets	that	could	have	a	material	effect	on	the	financial	statements.

Because	of	the	inherent	limitations	of	internal	control	over	financial	reporting,	including	the	possibility	of	collusion	or	improper	management	override	of	controls, material	misstatements	due	to	error	or	fraud	may	not	be	prevented	or	detected	on	a	timely	basis.	Also,	projections	of	any	evaluation	of	the	effectiveness	of	internal control	over	financial	reporting	to	future	periods	are	subject	to	the	risk	that	the	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of compliance	with	the	policies	or	procedures	may	deteriorate.

In	our	opinion,	the	Company	maintained,	in	all	material	respects,	effective	internal	control	over	financial	reporting	as	of	December	31,	2009,	based	on	criteria established	in	Internal	Control	–	Integrated	Framework	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission.

We	have	also	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the	Company's	consolidated financial	statements	and	financial	statement	schedules	as	of	and	for	the	year	ended	December	31,	2009	and	our	report	dated	February	24,	2010	expressed	an	unqualified opinion	on	 those	consolidated	financial	statements	and	financial	statement	schedules	and	 included	an	explanatory	paragraph	regarding	 the	change	 in	methods	of accounting	for	noncontrolling	interests	in	consolidated	financial	statements,	accounting	for	oil	and	gas	reserves,	and	accounting	for	other-than-temporary	impairments.

# DELOITTE	&	TOUCHE	LLP

We	have	audited	the	accompanying	consolidated	balance	sheets	of	Loews	Corporation	and	subsidiaries	(the	"Company")	as	of	December	31,	2009	and	2008,	and the	related	consolidated	statements	of	income,	comprehensive	income,	equity,	and	cash	flows	for	each	of	the	three	years	in	the	period	ended	December	31,	2009	listed	in the	Index	at	Item	8.	Our	audits	also	included	the	financial	statement	schedules	listed	in	the	Index	at	Item	15.	These	consolidated	financial	statements	and	financial statement	schedules	are	the	responsibility	of	the	Company's	management.	Our	responsibility	is	to	express	an	opinion	on	the	consolidated	financial	statements	and financial	statement	schedules	based	on	our	audits.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we plan	and	perform	the	audit	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of	material	misstatement.	An	audit	includes	examining,	on	a test	basis,	evidence	supporting	the	amounts	and	disclosures	in	the	financial	statements.	An	audit	also	includes	assessing	the	accounting	principles	used	and	significant estimates	made	by	management,	as	well	as	evaluating	the	overall	financial	statement	presentation.	We	believe	that	our	audits	provide	a	reasonable	basis	for	our	opinion.

In	our	opinion,	such	consolidated	financial	statements	present	fairly,	in	all	material	respects,	the	financial	position	of	Loews	Corporation	and	subsidiaries	as	of December	31,	2009	and	2008,	and	the	results	of	their	operations	and	their	cash	flows	for	each	of	the	three	years	in	the	period	ended	December	31,	2009,	in	conformity with	accounting	principles	generally	accepted	in	the	United	States	of	America.	Also,	in	our	opinion,	such	financial	statement	schedules,	when	considered	in	relation	to the	basic	consolidated	financial	statements	taken	as	a	whole,	present	fairly,	in	all	material	respects,	the	information	set	forth	therein.

As	 discussed	 in	 Note	 1	 to	 the	 consolidated	 financial	 statements,	 the	 Company	 changed	 its	 methods	 of	 accounting related to	 noncontrolling interests in consolidated	financial	statements,	accounting	for	oil	and	gas	reserves,	and	accounting	for	other-than-temporary	impairments.

We	have	also	audited,	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States),	the	Company's	internal	control	over financial	reporting	as	of	December	31,	2009,	based	on	the	criteria	established	in	Internal	Control	–	Integrated	Framework	issued	by	the	Committee	of	Sponsoring Organizations	of	the	Treadway	Commission	and	our	report	dated	February	24,	2010	expressed	an	unqualified	opinion	on	the	Company's	internal	control	over	financial reporting.

# Item	6.	Selected	Financial	Data.

The	following	table	presents	selected	financial	data.	The	table	should	be	read	in	conjunction	with	Item	7.	Management's	Discussion	and	Analysis	of	Financial Condition	and	Results	of	Operations	and	Item	8.	Financial	Statements	and	Supplementary	Data	of	this	Form	10-K.

| Year	Ended	December	31<br>(In	millions,	except	per	share	data) | 2009 | 2008 | 2007 | 2006 | 2005 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Results\tof\tOperations: |  |  |  |  |  |
| Revenues | \t\t $14,117 | $13,247 | $14,302\t\t $13,844\t\t $12,197 | $14,302\t\t $13,844\t\t $12,197 | $14,302\t\t $13,844\t\t $12,197 |
| Income\tbefore\tincome\ttax | \t\t $1,730 | $587 | $3,194\t\t $ | 3,096\t\t $ | 659 |
| Income\tfrom\tcontinuing\toperations | \t\t $1,385 | $580 | $2,199\t\t $ | 2,172\t\t $ | 621 |
| Discontinued\toperations,\tnet | (2) | 4,713 | 901 | 818 | 739 |
| Net\tincome | 1,383 | 5,293 | 3,100 | 2,990 | 1,360 |
| Amounts\tattributable\tto\tnoncontrolling\tinterests | 819 | 763 | 612 | 503 | 157 |
| Net\tincome\tattributable\tto\tLoews\tCorporation | \t\t $564 | $4,530 | $2,488\t\t $ | 2,487\t\t $ | 1,203 |
| Income\t(loss)\tattributable\tto: |  |  |  |  |  |
| Loews\tcommon\tstock: |  |  |  |  |  |
| Income\t(loss)\tfrom\tcontinuing\toperations | \t\t $566 | $(182) | $1,586\t\t $ | 1,672\t\t $ | 466 |
| Discontinued\toperations,\tnet | (2) | 4,501 | 369 | 399 | 486 |
| Loews\tcommon\tstock | 564 | 4,319 | 1,955 | 2,071 | 952 |
| Former\tCarolina\tGroup\tstock: |  |  |  |  |  |
| Discontinued\toperations,\tnet |  | 211 | 533 | 416 | 251 |
| Net\tincome | \t\t $564 | $4,530 | $2,488\t\t $ | 2,487\t\t $ | 1,203 |
| Diluted\tNet\tIncome\t(Loss)\tPer\tShare: |  |  |  |  |  |
| Loews\tcommon\tstock: |  |  |  |  |  |
| Income\t(loss)\tfrom\tcontinuing\toperations | \t\t $1.31 | $(0.38) | $2.96\t\t $ | 3.02\t\t $ | 0.84 |
| Discontinued\toperations,\tnet | (0.01) | 9.43 | 0.69 | 0.72 | 0.87 |
| Net\tincome | \t\t $1.30 | $9.05 | $3.65\t\t $ | 3.74\t\t $ | 1.71 |
| Former\tCarolina\tGroup\tstock:\nDiscontinued\toperations,\tnet | \t\t $- | $1.95 | $4.91\t\t $ | 4.46\t\t $ | 3.62 |
| Financial\tPosition: |  |  |  |  |  |
| Investments | \t\t $46,034 | $38,450 | $46,669\t\t $52,102\t\t $43,612 | $46,669\t\t $52,102\t\t $43,612 | $46,669\t\t $52,102\t\t $43,612 |
| Total\tassets | \t 74,070 | \t 69,870 | \t 76,128 | \t 76,898 | \t 70,917 |
| Debt | 9,485 | 8,258 | 7,258 | 5,540 | 5,157 |
| Shareholders'\tequity | \t 16,899 | \t 13,133 | \t 17,599 | \t 16,511 | \t 13,113 |
| Cash\tdividends\tper\tshare: |  |  |  |  |  |
| Loews\tcommon\tstock | 0.25 | 0.25 | 0.25 | 0.24 | 0.20 |
| Former\tCarolina\tGroup\tstock | - | 0.91 | 1.82 | 1.82 | 1.82 |
| Book\tvalue\tper\tshare\tof\tLoews\tcommon\tstock | 39.76 | 30.18 | 32.42 | 30.17 | 23.68 |
| Shares\toutstanding: |  |  |  |  |  |
| Loews\tcommon\tstock | \t 425.07 | \t 435.09 | \t 529.68 | \t 544.20 | \t 557.54 |
| Former\tCarolina\tGroup\tstock | - | - | \t 108.46 | \t 108.33 | 78.19 |

# Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations.

       Management's	discussion	and	analysis	of	financial	condition	and	results	of	operations	is	comprised	of	the	following	sections:

| Management's	discussion	and	analysis	of	financial	condition	and	results	of	operations	is	comprised	of	the	following	sections: |  |
| :--- | :--- |
|  | Page\n\t\t\t\tNo. |
| Overview |  |
| Consolidated\tFinancial\tResults | 58 |
| Parent\tCompany\tStructure | 59 |
| Critical\tAccounting\tEstimates | 59 |
| Results\tof\tOperations\tby\tBusiness\tSegment | 62 |
| CNA\tFinancial | 62 |
| Reserves\t–\tEstimates\tand\tUncertainties | 63 |
| CNA\tSpecialty | 69 |
| CNA\tCommercial | 71 |
| Life\t&amp;\tGroup\tNon-Core | 73 |
| Other\tInsurance | 74 |
| A&amp;E\tReserves | 75 |
| Diamond\tOffshore | 76 |
| HighMount | 80 |
| Boardwalk\tPipeline | 84 |
| Loews\tHotels | 89 |
| Corporate\tand\tOther | 90 |
| Liquidity\tand\tCapital\tResources | 91 |
| CNA\tFinancial | 91 |
| Diamond\tOffshore | 93 |
| HighMount | 94 |
| Boardwalk\tPipeline | 95 |
| Loews\tHotels | 96 |
| Corporate\tand\tOther | 96 |
| Contractual\tObligations | 97 |
| Investments | 97 |
| Accounting\tStandards\tUpdate | 103 |
| Forward-Looking\tStatements | 104 |

# OVERVIEW

•commercial	property	and	casualty	insurance	(CNA	Financial	Corporation	("CNA"),	a	90%	owned	subsidiary);

•operation	of	offshore	oil	and	gas	drilling	rigs	(Diamond	Offshore	Drilling,	Inc.	("Diamond	Offshore"),	a	50.4%	owned	subsidiary);

•exploration,	 production	 and	 marketing	 of	 natural	 gas,	 natural	 gas liquids	 and, to	 a lesser	 extent,	 oil (HighMount	 Exploration	 &	 Production	 LLC ("HighMount"),	a	wholly	owned	subsidiary);

•operation	of	interstate	natural	gas	transmission	pipeline	systems	(Boardwalk	Pipeline	Partners,	LP	("Boardwalk	Pipeline"),	a	67%	owned	subsidiary);	and

•operation	of	hotels	(Loews	Hotels	Holding	Corporation	("Loews	Hotels"),	a	wholly	owned	subsidiary).

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

The	following	discussion	should	be	read	in	conjunction	with	Item	1A,	Risk	Factors,	and	Item	8,	Financial	Statements	and	Supplementary	Data	of	this	Form	10-K.

# Consolidated	Financial	Results

Consolidated	income	from	continuing	operations	for	the	year	ended	December	31,	2009	was	$566	million,	or	$1.31	per	share,	compared	to	a	loss	of	$182	million, or	$0.38	per	share,	in	2008.	Income	from	continuing	operations	for	the	2009	fourth	quarter	was	$403	million,	or	$0.94	per	share	compared	to	a	loss	of	$958	million,	or $2.20	per	share	in	the	2008	fourth	quarter.

Net	income	for	2009	amounted	to	$564	million	compared	to	$4.5	billion	in	2008.	Net	income	in	2008	included	a	tax-free	non-cash	gain	of	$4.3	billion	related	to the	Separation	of	Lorillard	and	an	after	tax	gain	of	$75	million	from	the	sale	of	Bulova,	both	reported	as	discontinued	operations.

Net	income	and	earnings	(loss)	per	share	information	attributable	to	Loews	common	stock	and	our	former	Carolina	Group	stock	is	summarized	in	the	table below.

| Year	Ended	December	31<br>(In	millions,	except	per	share	data) | 2009 | 2008 |
| :--- | :--- | :--- |
| Net\tincome\t(loss)\tattributable\tto\tLoews\tcommon\tstock: |  |  |
| Income\t(loss)\tfrom\tcontinuing\toperations | \t\t $566 | $(182) |
| Discontinued\toperations,\tnet | (2) | \t 4,501 |
| Net\tincome\tattributable\tto\tLoews\tcommon\tstock | 564 | \t 4,319 |
| Net\tincome\tattributable\tto\tformer\tCarolina\tGroup\tstock\t– |  |  |
| Discontinued\toperations,\tnet\t(a) |  | 211 |
| Net\tincome\t(loss)\tattributable\tto\tLoews\tCorporation | \t\t $564 | $4,530 |
| Net\tincome\t(loss)\tper\tshare: |  |  |
| Loews\tcommon\tstock |  |  |
| Income\t(loss)\tfrom\tcontinuing\toperations | \t\t $1.31 | $(0.38) |
| Discontinued\toperations,\tnet | (0.01) | 9.43 |
| Loews\tcommon\tstock | \t\t $1.30 | $9.05 |
| Former\tCarolina\tGroup\tstock\t–\tDiscontinued\toperations,\tnet\t(a) |  | $1.95 |

(a) The	Carolina	Group	and	Carolina	Group	stock	were	eliminated	as	part	of	the	Separation	of	Lorillard.

Consolidated	Financial	Results	–	(Continued)

Income	from	continuing	operations	primarily	reflects	improved	net	investment	income	and	net	investment	gains	at	CNA,	compared	to	a	loss	from	continuing operations	in	the	prior	year.	Net	investment	income	benefited	from	higher	limited	partnership	results,	partially	offset	by	the	impact	of	lower	short-term	interest	rates.	In addition,	higher	investment	income	from	the	holding	company	trading	portfolio	contributed	to	the	improved	results.

Net	investment	losses	were	$503	million	(after	tax	and	noncontrolling	interests)	in	2009,	compared	to	losses	of	$754	million	in	the	prior	year.	The	improvement was	driven	by	a	$217	million	(after	tax	and	noncontrolling	interest)	realized	investment	gain	from	the	sale	of	CNA's	common	stock	holdings	in	Verisk	Analytics,	Inc. and	decreased	OTTI	losses	recognized	in	CNA's	available-for-sale	portfolio.	The	OTTI	losses	in	2009	were	primarily	driven	by	the	impact	of	difficult	economic conditions	on	residential	and	commercial	mortgage-backed	securities	and	by	credit	issues	in	the	financial	sector.

These	improvements	were	partially	offset	by	a	non-cash	impairment	charge	of	$660	million	(after	tax)	in	2009	related	to	the	carrying	value	of	HighMount's natural	gas	and	oil	properties,	reflecting	declines	in	commodity	prices.	Excluding	impairment	charges,	HighMount's	results	declined	over	the	prior	year	due	to	decreased production	volumes	and	lower	natural	gas	prices.	Results	at	Boardwalk	Pipeline	were	lower	primarily	due	to	loss	of	revenues	while	remediating	pipeline	anomalies,	and favorable	one	time	transactions	in	2008.

The	prior	year	loss	from	continuing	operations	reflects	a	$440	million	(after	tax)	non-cash	impairment	charge	related	to	the	carrying	value	of	HighMount Exploration	&	Production	LLC's	natural	gas	and	oil	properties,	reflecting	negative	revisions	in	proved	reserve	quantities	as	a	result	of	declines	in	commodity	prices;	a $314	million	(after	tax)	non-cash	goodwill	impairment	charge	related	to	HighMount;	and	other-than-temporary	impairment	(OTTI)	losses	related	to	CNA's	investment portfolio.

# Parent	Company	Structure

We	are	a	holding	company	and	derive	substantially	all	of	our	cash	flow	from	our	subsidiaries.	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	Liquidity	and	Capital	Resources	–	CNA Financial,	below)	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.

# CRITICAL	ACCOUNTING	ESTIMATES

The	preparation	of	the	Consolidated	Financial	Statements	in	conformity	with	accounting	principles	generally	accepted	in	the	United	States	of	America	("GAAP") requires	us	to	make	estimates	and	assumptions	that	affect	the	amounts	reported	in	the	Consolidated	Financial	Statements	and	the	related	notes.	Actual	results	could	differ from	those	estimates.

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

We	consider	the	accounting	policies	discussed	below	to	be	critical	to	an	understanding	of	our	Consolidated	Financial	Statements	as	their	application	places	the most	significant	demands	on	our	judgment.	Due	to	the	inherent	uncertainties	involved	with	this	type	of	judgment,	actual	results	could	differ	significantly	from	estimates and	may	have	a	material	adverse	impact	on	our	results	of	operations	and/or	equity.

Critical	Accounting	Estimates	–	(Continued)

# Insurance	Reserves

Insurance	reserves	are	established	for	both	short	and	long-duration	insurance	contracts.	Short-duration	contracts	are	primarily	related	to	property	and	casualty insurance	policies	where	the	reserving	process	is	based	on	actuarial	estimates	of	the	amount	of	loss,	including	amounts	for	known	and	unknown	claims.	Long-duration contracts	typically	include	traditional	life	insurance,	payout	annuities	and	long	term	care	products	and	are	estimated	using	actuarial	estimates	about	mortality,	morbidity and	persistency	as	well	as	assumptions	about	expected	investment	returns.	The	reserve	for	unearned	premiums	on	property	and	casualty	and	accident	and	health contracts	represents	the	portion	of	premiums	written	related	to	the	unexpired	terms	of	coverage.	The	inherent	risks	associated	with	the	reserving	process	are	discussed	in the	Reserves	–	Estimates	and	Uncertainties	section	below.

# Reinsurance

Amounts	recoverable	from	reinsurers	are	estimated	in	a	manner	consistent	with	claim	and	claim	adjustment	expense	reserves	or	future	policy	benefits	reserves	and are	reported	as	receivables	in	the	Consolidated	Balance	Sheets.	The	ceding	of	insurance	does	not	discharge	CNA	of	its	primary	liability	under	insurance	contracts written	by	CNA.	An	exposure	exists	with	respect	to	property	and	casualty	and	life	reinsurance	ceded	to	the	extent	that	any	reinsurer	is	unable	to	meet	its	obligations	or disputes	the	liabilities	assumed	under	reinsurance	agreements.	An	estimated	allowance	for	doubtful	accounts	is	recorded	on	the	basis	of	periodic	evaluations	of	balances due	from	reinsurers,	reinsurer	solvency,	CNA's	past	experience	and	current	economic	conditions.	Further	information	on	CNA's	reinsurance	program	is	included	in Note	17	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8.

# Litigation

We	 and	 our	 subsidiaries	 are	 involved	 in	 various	 legal	 proceedings	 that	 have	 arisen	 during	 the	 ordinary	 course	 of	 business.	 We	 evaluate	 the	 facts	 and circumstances	of	each	situation,	and	when	management	determines	it	necessary,	a	liability	is	estimated	and	recorded.	Please	read	Note	19	of	the	Notes	to	Consolidated Financial	Statements	included	under	Item	8.

# Valuation	of	Investments	and	Impairment	of	Securities

The	 Company	 classifies	 its	 fixed	 maturity	 securities	 and	 equity	 securities	 as	 either	 available-for-sale	 or	 trading	 which	 are	 both	 carried	 at	 fair	 value.	The determination	of	fair	value	requires	management	to	make	a	significant	number	of	assumptions,	particularly	with	respect	to	asset-backed	securities.	Due	to	the	level	of uncertainty	related	to	changes	in	the	fair	value	of	these	assets,	it	is	possible	that	changes	in	the	near	term	could	have	a	material	adverse	impact	on	our	results	of operations	and/or	equity.

CNA's	investment	portfolio	is	subject	to	market	declines	below	amortized	cost	that	may	be	other-than-temporary.	A	significant	judgment	in	the	valuation	of investments	is	the	determination	of	whether	a	credit	loss	exists	on	impaired	securities,	which	results	in	the	recognition	of	impairment	losses	in	earnings.	CNA	has	an Impairment	Committee	which	reviews	the	investment	portfolio	on	at	least	a	quarterly	basis,	with	ongoing	analysis	as	new	information	becomes	available.	Further information	on	CNA's	process	for	evaluating	impairments	is	included	in	Note	3	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8.

# Long	Term	Care	Products

Reserves	and	deferred	acquisition	costs	for	CNA's	long	term	care	products	are	based	on	certain	assumptions	including	morbidity,	policy	persistency	and	interest rates.	The	recoverability	of	deferred	acquisition	costs	and	the	adequacy	of	the	reserves	are	contingent	on	actual	experience	related	to	these	key	assumptions	and	other factors	such	as	future	health	care	cost	trends.	If	actual	experience	differs	from	these	assumptions,	the	deferred	acquisition	costs	may	not	be	fully	realized	and	the reserves	may	not	be	adequate,	requiring	CNA	to	add	to	reserves,	or	take	unfavorable	development.	Therefore,	our	financial	results	could	be	adversely	impacted.

# Payout	Annuity	Contracts

Reserves	for	CNA's	payout	annuity	products	are	based	on	certain	assumptions	including	mortality	and	interest	rates.	The	adequacy	of	the	reserves	is	contingent	on actual	experience	related	to	these	key	assumptions.	If	actual	experience

differs	from	 these	assumptions,	reserves	may	not	be	adequate,	requiring	CNA to	add to its	reserves,	or take	unfavorable	development.	Therefore,	our	results	of operations	and/or	equity	could	be	adversely	impacted.

# Pension	and	Postretirement	Benefit	Obligations

We	are	required	to	make	a	significant	number	of	assumptions	in	order	to	estimate	the	liabilities	and	costs	related	to	our	pension	and	postretirement	benefit obligations	to	employees	under	our	benefit	plans.	The	assumptions	that	have	the	most	impact	on	pension	costs	are	the	discount	rate,	the	expected	return	on	plan	assets and	the	rate	of	compensation	increases.	These	assumptions	are	evaluated	relative	to	current	market	factors	such	as	inflation,	interest	rates	and	fiscal	and	monetary policies.	Changes	in	these	assumptions	can	have	a	material	impact	on	pension	obligations	and	pension	expense.

In	determining	the	discount	rate	assumption,	we	utilized	current	market	information	and	liability	information,	including	a	discounted	cash	flow	analysis	of	our pension	and	postretirement	obligations.	In	particular,	the	basis	for	our	discount	rate	selection	was	the	yield	on	indices	of	highly	rated	fixed	income	debt	securities	with durations	comparable	to	that	of	our	plan	liabilities.	The	yield	curve	was	applied	to	expected	future	retirement	plan	payments	to	adjust	the	discount	rate	to	reflect	the	cash flow	characteristics	of	the	plans.	The	yield	curves	and	indices	evaluated	in	the	selection	of	the	discount	rate	are	comprised	of	high	quality	corporate	bonds	that	are	rated AA	by	an	accepted	rating	agency.

In	2009,	the	Company	recorded	an	expense	of	$65	million	for	pension	and	other	postretirement	benefit	plans.	Based	on	current	assumptions,	the	expected	expense for	the	2010	pension	and	other	postretirement	benefit	plans	is	approximately	$50	million.

Further	information	on	our	pension	and	postretirement	benefit	obligations	is	included	in	Note	16	of	the	Notes	to	Consolidated	Financial	Statements	included under	Item	8.

# Valuation	of	HighMount's	Proved	Reserves

HighMount	follows	the	full	cost	method	of	accounting	for	natural	gas	and	oil	exploration	and	production	("E&P")	activities	prescribed	by	the	Securities	and Exchange	 Commission	 ("SEC").	 Under	 the	 full	 cost	 method,	 all	 direct	 costs	 of	 property	 acquisition,	 exploration	 and	 development	 activities	 are	 capitalized	 and subsequently	depleted	using	the	units-of-production	method.	The	depletable	base	of	costs	includes	estimated	future	costs	to	be	incurred	in	developing	proved	natural	gas and	natural	gas	liquids	("NGLs")	reserves,	as	well	as	capitalized	asset	retirement	costs,	net	of	projected	salvage	values.	Capitalized	costs	in	the	depletable	base	are subject	to	a	ceiling	test	prescribed	by	the	SEC.	The	test	limits	capitalized	amounts	to	a	ceiling	the	present	value	of	estimated	future	net	revenues	to	be	derived	from	the production	of	proved	natural	gas	and	NGL	reserves,	using	calculated	average	prices	adjusted	for	any	cash	flow	hedges	in	place.	If	net	capitalized	costs	exceed	the	ceiling test	at	the	end	of	any	quarterly	period,	then	a	permanent	write-down	of	the	assets	must	be	recognized	in	that	period.	A	write-down	may	not	be	reversed	in	future	periods, even	 though	higher	natural	gas	and	NGL	prices	may	subsequently	 increase	 the	ceiling.	HighMount	performs	 the	ceiling	 test	quarterly.	At	 March	 31,	 2009	 and December	31,	2008,	total	capitalized	costs	exceeded	the	ceiling	and	HighMount	recognized	non-cash	impairment	charges	of	$1,036	million	($660	million	after	tax)	and $691	million	($440	million	after	tax),	related	to	the	carrying	value	of	natural	gas	and	oil	properties,	as	discussed	further	in	Note	8	of	the	Notes	to	Consolidated	Financial Statements	included	under	Item	8.	In	addition,	gains	or	losses	on	the	sale	or	other	disposition	of	natural	gas	and	NGL	properties	are	not	recognized	unless	the	gain	or	loss would	significantly	alter	the	relationship	between	capitalized	costs	and	proved	reserves.

HighMount's	estimate	of	proved	reserves	requires	a	high	degree	of	judgment	and	is	dependent	on	factors	such	as	historical	data,	engineering	estimates	of	proved reserve	quantities,	estimates	of	the	amount	and	timing	of	future	expenditures	to	develop	the	proved	reserves,	and	estimates	of	future	production	from	the	proved reserves.	HighMount's	estimated	proved	reserves	as	of	December	31,	2009	and	2008	are	based	upon	studies	for	each	of	HighMount's	properties	prepared	by	HighMount staff	engineers.	Calculations	were	prepared	using	standard	geological	and	engineering	methods	generally	accepted	by	the	petroleum	industry	and	in	accordance	with SEC	guidelines.

Ryder	Scott	Company,	L.P.,	an	independent	third	party	petroleum	engineering	consulting	firm,	has	audited	HighMount's	reserve	estimates	in	accordance	with	the "Standards	Pertaining	to	the	Estimating	and	Auditing	of	Oil	and	Gas	Reserves	Information"	promulgated	by	the	Society	of	Petroleum	Engineers.	Given	the	volatility	of natural	gas	and

NGL	prices,	it	is	possible	that	HighMount's	estimate	of	discounted	future	net	cash	flows	from	proved	natural	gas	and	NGL	reserves	that	is	used	to	calculate	the	ceiling could	materially	change	in	the	near	term.

The	process	 to	estimate	reserves	 is	 imprecise,	and	estimates	are	subject	 to	revision.	If	 there	 is	a	significant	variance	 in	any	of	HighMount's	estimates	or assumptions	in	the	future	and	revisions	to	the	value	of	HighMount's	proved	reserves	are	necessary,	related	depletion	expense	and	the	calculation	of	the	ceiling	test	would be	affected	and	recognition	of	natural	gas	and	NGL	property	impairments	could	occur.

# Impairment	of	Long-Lived	Assets

The	Company	reviews	its	long-lived	assets	for	impairment	when	changes	in	circumstances	indicate	that	the	carrying	amount	of	an	asset	may	not	be	recoverable. Long-lived	assets	and	intangibles	with	finite	lives	are	reported	at	the	lower	of	the	carrying	amount	or	fair	value.	The	Company	uses	a	probability-weighted	cash	flow analysis	to	test	property	and	equipment	for	impairment	based	on	relevant	market	data.	Management's	cash	flow	assumptions	are	an	inherent	part	of	our	asset	impairment evaluation	and	the	use	of	different	assumptions	could	produce	results	that	differ	from	the	reported	amounts.

# Goodwill

Management	 must	 apply	 judgment	 in	 determining	 the	 estimated	 fair	 value	 of	 its	 reporting	 units'	 goodwill	 for	 purposes	 of	 performing	 impairment	 tests. Management	uses	all	available	information	to	make	these	fair	value	determinations,	including	the	present	values	of	expected	future	cash	flows	using	discount	rates commensurate	 with	 the	 risks	 involved	 in	 the	 assets	 and	 observed	 market	 multiples.	 Goodwill	 is	 required	 to	 be	 evaluated	 on	 an	 annual	 basis	 and	 whenever,	 in management's	judgment,	there	is	a	significant	change	in	circumstances	that	would	be	considered	a	triggering	event.

# Income	Taxes

We	account	for	taxes	under	the	asset	and	liability	method.	Under	this	method,	deferred	income	taxes	are	recognized	for	temporary	differences	between	the financial	statement	and	tax	return	bases	of	assets	and	liabilities.	Any	resulting	future	tax	benefits	are	recognized	to	the	extent	that	realization	of	such	benefits	is	more likely	than	not,	and	a	valuation	allowance	is	established	for	any	portion	of	a	deferred	tax	asset	that	management	believes	may	not	be	realized.	The	assessment	of	the need	for	a	valuation	allowance	requires	management	to	make	estimates	and	assumptions	about	future	earnings,	reversal	of	existing	temporary	differences	and	available tax	planning	strategies.	If	actual	experience	differs	from	these	estimates	and	assumptions,	the	recorded	deferred	tax	asset	may	not	be	fully	realized	resulting	in	an increase	to	income	tax	expense	in	our	results	of	operations.	In	addition,	the	ability	to	record	deferred	tax	assets	in	the	future	could	be	limited	resulting	in	a	higher effective	tax	rate	in	that	future	period.

The	Company	has	not	established	deferred	tax	liabilities	for	certain	of	its	foreign	earnings	as	it	intends	to	indefinitely	reinvest	those	earnings	to	finance	foreign activities.	However,	if	these	earnings	become	subject	to	U.S.	federal	tax,	any	required	provision	could	have	a	material	impact	on	our	financial	results.

# RESULTS	OF	OPERATIONS	BY	BUSINESS	SEGMENT

# CNA	Financial

As	a	result	of	CNA's	realignment	of	management	responsibilities,	CNA	revised	its	property	and	casualty	segments	in	the	fourth	quarter	of	2009.	There	was	no change	in	CNA's	Life	&	Group	Non-Core	and	Other	Insurance	segments.	Prior	period	segment	disclosures	have	been	conformed	to	the	current	year	presentation.	The new	segment	structure	reflects	the	way	CNA	management	currently	reviews	results	and	makes	business	decisions.

CNA's	 core	 property	 and	 casualty	 commercial	 insurance	 operations	 are	 reported	 in	 two	 business	 segments:	 CNA	 Specialty	 and	 CNA	 Commercial.	 CNA Specialty	provides	a	broad	array	of	professional,	financial	and	specialty	property	and	casualty	products	and	services,	primarily	through	insurance	brokers	and	managing general	underwriters.	CNA	Commercial	includes	property	and	casualty	coverages	sold	to	small	businesses	and	middle	market	entities	and	organizations	primarily through	an	independent	agency	distribution	system.	CNA	Commercial	also	includes	commercial	insurance	and	risk	management	products	sold	to	large	corporations primarily	through	insurance	brokers.	Previously,

Results	of	Operations	–	CNA	Financial	–	(Continued)

CNA's	international	operations	were	treated	as	a	separate	business	unit	within	CNA	Specialty.	The	products	sold	through	CNA's	international	operations	are	now reflected	within	CNA	Specialty	and	CNA	Commercial	in	a	manner	that	aligns	with	the	products	within	each	segment.	Additionally,	CNA's	excess	and	surplus	lines, which	were	previously	included	in	CNA	Specialty,	are	now	included	in	CNA	Commercial,	as	part	of	CNA	Select	Risk.

CNA's	non-core	operations	are	managed	in	two	segments:	Life	&	Group	Non-Core	and	Other	Insurance.	Life	&	Group	Non-Core	primarily	includes	the	results	of the	life	and	group	lines	of	business	that	have	been	placed	in	run-off.	Other	Insurance	primarily	includes	certain	corporate	expenses,	including	interest	on	corporate	debt, and	the	results	of	certain	property	and	casualty	business	primarily	in	run-off,	including	CNA	Re.	This	segment	also	includes	the	results	related	to	the	centralized adjusting	and	settlement	of	asbestos	and	environmental	pollution	("A&E").

# Reserves	–	Estimates	and	Uncertainties

CNA	maintains	reserves	to	cover	its	estimated	ultimate	unpaid	liability	for	claim	and	claim	adjustment	expenses,	including	the	estimated	cost	of	the	claims adjudication	process,	for	claims	that	have	been	reported	but	not	yet	settled	(case	reserves)	and	claims	that	have	been	incurred	but	not	reported	("IBNR").	Claim	and claim	adjustment	expense	reserves	are	reflected	as	liabilities	and	are	included	on	the	Consolidated	Balance	Sheets	under	the	heading	"Insurance	Reserves."	Adjustments to	prior	year	reserve	estimates,	if	necessary,	are	reflected	in	results	of	operations	in	the	period	that	the	need	for	such	adjustments	is	determined.	The	carried	case	and IBNR	reserves	as	of	each	balance	sheet	date	are	provided	in	the	Segment	Results	section	of	this	MD&A	and	in	Note	9	of	the	Notes	to	Consolidated	Financial	Statements included	under	Item	8.

The	level	of	reserves	CNA	maintains	represents	its	best	estimate,	as	of	a	particular	point	in	time,	of	what	the	ultimate	settlement	and	administration	of	claims	will cost	based	on	CNA's	assessment	of	facts	and	circumstances	known	at	that	time.	Reserves	are	not	an	exact	calculation	of	liability	but	instead	are	complex	estimates	that CNA	derives,	generally	utilizing	a	variety	of	actuarial	reserve	estimation	techniques,	from	numerous	assumptions	and	expectations	about	future	events,	both	internal	and external,	many	of	which	are	highly	uncertain.

CNA	is	subject	to	the	uncertain	effects	of	emerging	or	potential	claims	and	coverage	issues	that	arise	as	industry	practices	and	legal,	judicial,	social	and	other environmental	conditions	change.	These	issues	have	had,	and	may	continue	to	have,	a	negative	effect	on	CNA's	business	by	either	extending	coverage	beyond	the original	underwriting	intent	or	by	increasing	the	number	or	size	of	claims.	Examples	of	emerging	or	potential	claims	and	coverage	issues	include:

CNA's	experience	has	been	that	establishing	reserves	for	casualty	coverages	relating	to	A&E	claims	and	claim	adjustment	expenses	are	subject	to	uncertainties that	are	greater	than	those	presented	by	other	claims.	Estimating	the	ultimate	cost	of	both	reported	and	unreported	A&E	claims	are	subject	to	a	higher	degree	of variability	due	to	a	number	of	additional	factors,	including	among	others:

•changes	in	the	frequency	of	A&E	claims;

•	 CNA's	ability	to	recover	reinsurance	for	A&E	claims;	and

It	is	also	difficult	to	forecast	changes	in	the	legal	and	legislative	environment	and	the	impact	on	the	future	development	of	A&E	claims.	This	development	will	be affected	by	future	court	decisions	and	interpretations,	as	well	as	changes	in	applicable	legislation.	It	is	difficult	to	predict	the	ultimate	outcome	of	large	coverage	disputes until	settlement	negotiations	near	completion	and	significant	legal	questions	are	resolved	or,	failing	settlement,	until	the	dispute	is	adjudicated.	This	is	particularly	the case	with	policyholders	in	bankruptcy	where	negotiations	often	involve	a	large	number	of	claimants	and	other	parties	and	require	court	approval	to	be	effective.

Traditional	actuarial	methods	and	techniques	employed	to	estimate	the	ultimate	cost	of	claims	for	more	traditional	property	and	casualty	exposures	are	less precise	in	estimating	claim	and	claim	adjustment	reserves	for	A&E,	particularly	in	an	environment	of	emerging	or	potential	claims	and	coverage	issues	that	arise	from industry	practices	and	legal,	judicial	and	social	conditions.	Therefore,	these	traditional	actuarial	methods	and	techniques	are	necessarily	supplemented	with	additional estimation	 techniques	and	methodologies,	many	of	which	 involve	significant	 judgments	 that	are	required	of	management.	For	A&E,	CNA	regularly	monitors	 its exposures,	including	reviews	of	loss	activity,	regulatory	developments	and	court	rulings.	In	addition,	CNA	performs	a	ground	up	analysis	on	its	exposures.	CNA's actuaries,	in	conjunction	with	its	specialized	claim	unit,	use	various	modeling	techniques	to	estimate	its	overall	exposure	to	known	accounts.	CNA	uses	this	information and	additional	modeling	techniques	to	develop	loss	distributions	and	claim	reporting	patterns	to	determine	reserves	for	accounts	that	will	report	A&E	exposure	in	the future.	Estimating	the	average	claim	size	requires	analysis	of	the	impact	of	large	losses	and	claim	cost	trend	based	on	changes	in	the	cost	of	repairing	or	replacing property,	changes	in	the	cost	of	legal	fees,	judicial	decisions,	legislative	changes,	and	other	factors.	Due	to	the	inherent	uncertainties	in	estimating	reserves	for	A&E claim	and	claim	adjustment	expenses	and	the	degree	of	variability	due	to,	among	other	things,	the	factors	described	above,	CNA	may	be	required	to	record	material changes	in	CNA's	claim	and	claim	adjustment	expense	reserves	in	the	future,	should	new	information	become	available	or	other	developments	emerge.	See	the	A&E Reserves	section	of	this	MD&A	and	Note	9	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8	for	additional	information	relating	to	A&E	claims and	reserves.

The	impact	of	these	and	other	unforeseen	emerging	or	potential	claims	and	coverage	issues	is	difficult	to	predict	and	could	materially	adversely	affect	the adequacy	of	CNA's	claim	and	claim	adjustment	expense	reserves	and	could	lead	to	future	reserve	additions.	See	the	Segment	Results	sections	of	this	MD&A	and	Note	9 of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8	for	a	discussion	of	changes	in	reserve	estimates	and	the	impact	on	our	results	of	operations.

# Establishing	Reserve	Estimates

In	developing	claim	and	claim	adjustment	expense	("loss"	or	"losses")	reserve	estimates,	CNA's	actuaries	perform	detailed	reserve	analyses	that	are	staggered throughout	the	year.	The	data	is	organized	at	a	"product"	level.	A	product	can	be	a	line	of	business	covering	a	subset	of	insureds	such	as	commercial	automobile	liability for	small	and	middle	market	customers,	it	can	encompass	several	lines	of	business	provided	to	a	specific	set	of	customers	such	as	dentists,	or	it	can	be	a	particular	type	of claim	such	as	construction	defect.	Every	product	is	analyzed	at	least	once	during	the	year,	and	many

products	are	analyzed	multiple	times.	The	analyses	generally	review	losses	gross	of	ceded	reinsurance	and	apply	the	ceded	reinsurance	terms	to	the	gross	estimates	to establish	estimates	net	of	reinsurance.	In	addition	to	the	detailed	analyses,	CNA	reviews	actual	loss	emergence	for	all	products	each	quarter.

The	detailed	analyses	use	a	variety	of	generally	accepted	actuarial	methods	and	techniques	to	produce	a	number	of	estimates	of	ultimate	loss.	CNA's	actuaries determine	a	point	estimate	of	ultimate	loss	by	reviewing	the	various	estimates	and	assigning	weight	to	each	estimate	given	the	characteristics	of	the	product	being reviewed.	The	reserve	estimate	is	the	difference	between	the	estimated	ultimate	loss	and	the	losses	paid	to	date.	The	difference	between	the	estimated	ultimate	loss	and the	case	incurred	loss	(paid	loss	plus	case	reserve)	is	IBNR.	IBNR	calculated	as	such	includes	a	provision	for	development	on	known	cases	(supplemental	development) as	well	as	a	provision	for	claims	that	have	occurred	but	have	not	yet	been	reported	(pure	IBNR).

Most	of	CNA's	business	can	be	characterized	as	long-tail.	For	long-tail	business,	it	will	generally	be	several	years	between	the	time	the	business	is	written	and	the time	when	all	claims	are	settled.	CNA's	long-tail	exposures	include	commercial	automobile	liability,	workers'	compensation,	general	liability,	medical	malpractice, other	 professional	 liability	 coverages,	 assumed	 reinsurance	 run-off	 and	 products	 liability.	 Short-tail	 exposures	 include	 property,	 commercial	 automobile	 physical damage,	marine	and	warranty.	CNA	Specialty	and	CNA	Commercial	contain	both	long-tail	and	short-tail	exposures.	Other	Insurance	contains	long-tail	exposures.

Various	methods	are	used	to	project	ultimate	loss	for	both	long-tail	and	short-tail	exposures	including,	but	not	limited	to,	the	following:

# •Paid	Development,

•Incurred	Development,

•Loss	Ratio,

•	 Bornhuetter-Ferguson	Using	Premiums	and	Paid	Loss,

•	 Bornhuetter-Ferguson	Using	Premiums	and	Incurred	Loss,

# •Frequency	times	Severity,	and

# •Stochastic	modeling.

The	paid	development	method	estimates	ultimate	losses	by	reviewing	paid	loss	patterns	and	applying	them	to	accident	years	with	further	expected	changes	in	paid loss.	Selection	of	the	paid	loss	pattern	requires	analysis	of	several	factors	including	the	impact	of	inflation	on	claims	costs,	the	rate	at	which	claims	professionals	make claim	payments	and	close	claims,	the	impact	of	judicial	decisions,	the	impact	of	underwriting	changes,	the	impact	of	large	claim	payments	and	other	factors.	Claim	cost inflation	itself	requires	evaluation	of	changes	in	the	cost	of	repairing	or	replacing	property,	changes	in	the	cost	of	medical	care,	changes	in	the	cost	of	wage	replacement, judicial	decisions,	legislative	changes	and	other	factors.	Because	this	method	assumes	that	losses	are	paid	at	a	consistent	rate,	changes	in	any	of	these	factors	can	impact the	results.	Since	the	method	does	not	rely	on	case	reserves,	it	is	not	directly	influenced	by	changes	in	the	adequacy	of	case	reserves.

For	many	products,	paid	loss	data	for	recent	periods	may	be	too	immature	or	erratic	for	accurate	predictions.	This	situation	often	exists	for	long-tail	exposures.	In addition,	changes	in	the	factors	described	above	may	result	in	inconsistent	payment	patterns.	Finally,	estimating	the	paid	loss	pattern	subsequent	to	the	most	mature	point available	in	the	data	analyzed	often	involves	considerable	uncertainty	for	long-tail	products	such	as	workers'	compensation.

								The	incurred	development	method	is	similar	to	the	paid	development	method,	but	it	uses	case	incurred	losses	instead	of	paid	losses.	Since	the	method	uses	more data	(case	reserves	in	addition	to	paid	losses)	than	the	paid	development	method,	the	incurred	development	patterns	may	be	less	variable	than	paid	patterns.	However, selection	of	the	incurred	loss	pattern	requires	analysis	of	all	of	the	factors	above.	In	addition,	the	inclusion	of	case	reserves	can	lead	to	distortions

if	changes	in	case	reserving	practices	have	taken	place,	and	the	use	of	case	incurred	losses	may	not	eliminate	the	issues	associated	with	estimating	the	incurred	loss pattern	subsequent	to	the	most	mature	point	available.

The	loss	ratio	method	multiplies	premiums	by	an	expected	loss	ratio	to	produce	ultimate	loss	estimates	for	each	accident	year.	This	method	may	be	useful	for immature	accident	periods	or	if	loss	development	patterns	are	inconsistent,	losses	emerge	very	slowly,	or	there	is	relatively	little	loss	history	from	which	to	estimate future	losses.	The	selection	of	the	expected	loss	ratio	requires	analysis	of	loss	ratios	from	earlier	accident	years	or	pricing	studies	and	analysis	of	inflationary	trends, frequency	trends,	rate	changes,	underwriting	changes,	and	other	applicable	factors.

The	Bornhuetter-Ferguson	using	premiums	and	paid	loss	method	is	a	combination	of	the	paid	development	approach	and	the	loss	ratio	approach.	This	method normally	determines	expected	loss	ratios	similar	to	the	approach	used	to	estimate	the	expected	loss	ratio	for	the	loss	ratio	method	and	requires	analysis	of	the	same factors	described	above.	This	method	assumes	that	only	future	losses	will	develop	at	the	expected	loss	ratio	level.	The	percent	of	paid	loss	to	ultimate	loss	implied	from the	paid	development	method	is	used	to	determine	what	percentage	of	ultimate	loss	is	yet	to	be	paid.	The	use	of	the	pattern	from	the	paid	development	method	requires consideration	of	all	factors	listed	in	the	description	of	the	paid	development	method.	The	estimate	of	losses	yet	to	be	paid	is	added	to	current	paid	losses	to	estimate	the ultimate	loss	for	each	year.	This	method	will	react	very	slowly	if	actual	ultimate	loss	ratios	are	different	from	expectations	due	to	changes	not	accounted	for	by	the expected	loss	ratio	calculation.

The	Bornhuetter-Ferguson	using	premiums	and	incurred	loss	method	is	similar	to	the	Bornhuetter-Ferguson	using	premiums	and	paid	loss	method	except	that	it uses	case	incurred	losses.	The	use	of	case	incurred	losses	instead	of	paid	losses	can	result	in	development	patterns	that	are	less	variable	than	paid	patterns.	However,	the inclusion	of	case	reserves	can	lead	to	distortions	if	changes	in	case	reserving	have	taken	place,	and	the	method	requires	analysis	of	all	the	factors	that	need	to	be reviewed	for	the	loss	ratio	and	incurred	development	methods.

The	Frequency	times	Severity	method	multiplies	a	projected	number	of	ultimate	claims	by	an	estimated	ultimate	average	loss	for	each	accident	year	to	produce ultimate	loss	estimates.	Since	projections	of	the	ultimate	number	of	claims	are	often	less	variable	than	projections	of	ultimate	loss,	this	method	can	provide	more	reliable results	for	products	where	loss	development	patterns	are	inconsistent	or	too	variable	to	be	relied	on	exclusively.	In	addition,	this	method	can	more	directly	account	for changes	in	coverage	that	impact	the	number	and	size	of	claims.	However,	this	method	can	be	difficult	to	apply	to	situations	where	very	large	claims	or	a	substantial number	of	unusual	claims	result	in	volatile	average	claim	sizes.	Projecting	the	ultimate	number	of	claims	requires	analysis	of	several	factors	including	the	rate	at	which policyholders	report	claims	to	us,	the	impact	of	judicial	decisions,	the	impact	of	underwriting	changes	and	other	factors.	Estimating	the	ultimate	average	loss	requires analysis	of	the	impact	of	large	losses	and	claim	cost	trend	based	on	changes	in	the	cost	of	repairing	or	replacing	property,	changes	in	the	cost	of	medical	care,	changes	in the	cost	of	wage	replacement,	judicial	decisions,	legislative	changes	and	other	factors.

Stochastic	modeling	produces	a	range	of	possible	outcomes	based	on	varying	assumptions	related	to	the	particular	product	being	modeled.	For	some	products, CNA	uses	models	which	rely	on	historical	development	patterns	at	an	aggregate	level,	while	other	products	are	modeled	using	individual	claim	variability	assumptions supplied	by	the	claims	department.	In	either	case,	multiple	simulations	are	run	and	the	results	are	analyzed	to	produce	a	range	of	potential	outcomes.	The	results	will typically	include	a	mean	and	percentiles	of	the	possible	reserve	distribution	which	aid	in	the	selection	of	a	point	estimate.

For	many	exposures,	especially	those	that	can	be	considered	long-tail,	a	particular	accident	year	may	not	have	a	sufficient	volume	of	paid	losses	to	produce	a statistically	reliable	estimate	of	ultimate	losses.	In	such	a	case,	CNA's	actuaries	typically	assign	more	weight	to	the	incurred	development	method	than	to	the	paid development	method.	As	claims	continue	to	settle	and	the	volume	of	paid	loss	increases,	the	actuaries	may	assign	additional	weight	to	the	paid	development	method.	For most	of	CNA's	products,	even	the	incurred	losses	for	accident	years	that	are	early	in	the	claim	settlement	process	will	not	be	of	sufficient	volume	to	produce	a	reliable estimate	of	ultimate	losses.	In	these	cases,	CNA	will	not	assign	any	weight	to	the	paid	and	incurred	development	methods.	CNA	will	use	loss	ratio,	Bornhuetter- Ferguson	and	average	loss	methods.	For	short-tail	exposures,	the	paid	and	incurred	development	methods	can	often	be	relied	on	sooner	primarily	because	CNA's	history includes	a	sufficient	number	of	years	to	cover	the	entire	period	over	which	paid	and	incurred	losses	are	expected	to	change.	However,	CNA	may	also	use	loss	ratio, Bornhuetter-Ferguson	and	average	loss	methods	for	short-tail	exposures.

For	other	more	complex	products	where	the	above	methods	may	not	produce	reliable	indications,	CNA	uses	additional	methods	tailored	to	the	characteristics	of the	specific	situation.	Such	products	include	construction	defect	losses	and	A&E.

For	construction	defect	losses,	CNA's	actuaries	organize	losses	by	report	year.	Report	year	groups	claims	by	the	year	in	which	they	were	reported.	To	estimate losses	from	claims	that	have	not	been	reported,	various	extrapolation	techniques	are	applied	to	the	pattern	of	claims	that	have	been	reported	to	estimate	the	number	of claims	yet	to	be	reported.	This	process	requires	analysis	of	several	factors	including	the	rate	at	which	policyholders	report	claims	to	us,	the	impact	of	judicial	decisions, the	impact	of	underwriting	changes	and	other	factors.	An	average	claim	size	is	determined	from	past	experience	and	applied	to	the	number	of	unreported	claims	to estimate	reserves	for	these	claims.

# Periodic	Reserve	Reviews

The	reserve	analyses	performed	by	CNA's	actuaries	result	in	point	estimates.	Each	quarter,	the	results	of	the	detailed	reserve	reviews	are	summarized	and discussed	with	CNA's	senior	management	to	determine	the	best	estimate	of	reserves.	This	group	considers	many	factors	in	making	this	decision.	The	factors	include,	but are	not	limited	to,	the	historical	pattern	and	volatility	of	the	actuarial	indications,	the	sensitivity	of	the	actuarial	indications	to	changes	in	paid	and	incurred	loss	patterns, the	consistency	of	claims	handling	processes,	the	consistency	of	case	reserving	practices,	changes	in	CNA's	pricing	and	underwriting,	pricing	and	underwriting	trends	in the	insurance	market,	and	legal,	judicial,	social	and	economic	trends.

CNA's	recorded	reserves	reflect	its	best	estimate	as	of	a	particular	point	in	time	based	upon	known	facts,	consideration	of	the	factors	cited	above,	and	its judgment.	The	carried	reserve	may	differ	from	the	actuarial	point	estimate	as	the	result	of	CNA's	consideration	of	the	factors	noted	above	as	well	as	the	potential volatility	of	the	projections	associated	with	the	specific	product	being	analyzed	and	other	factors	impacting	claims	costs	that	may	not	be	quantifiable	through	traditional actuarial	analysis.	This	process	results	in	management's	best	estimate	which	is	then	recorded	as	the	loss	reserve.

Currently,	CNA's	recorded	reserves	are	modestly	higher	than	the	actuarial	point	estimate.	For	both	CNA	Commercial	and	CNA	Specialty,	the	difference	between CNA's	reserves	and	the	actuarial	point	estimate	is	primarily	driven	by	uncertainty	with	respect	to	immature	accident	years,	claim	cost	inflation,	changes	in	claims handling,	tort	reform	roll-backs	which	may	adversely	impact	claim	costs,	and	the	effects	of	the	recessionary	economy.	For	Other	Insurance,	the	carried	reserve	is relatively	consistent	with	the	actuarial	point	estimate.

The	key	assumptions	fundamental	to	the	reserving	process	are	often	different	for	various	products	and	accident	years.	Some	of	these	assumptions	are	explicit assumptions	that	are	required	of	a	particular	method,	but	most	of	the	assumptions	are	implicit	and	cannot	be	precisely	quantified.	An	example	of	an	explicit	assumption is	the	pattern	employed	in	the	paid	development	method.	However,	the	assumed	pattern	is	itself	based	on	several	implicit	assumptions	such	as	the	impact	of	inflation	on medical	costs	and	the	rate	at	which	claim	professionals	close	claims.	As	a	result,	the	effect	on	reserve	estimates	of	a	particular	change	in	assumptions	usually	cannot	be specifically	quantified,	and	changes	in	these	assumptions	cannot	be	tracked	over	time.

CNA's	recorded	reserves	are	management's	best	estimate.	In	order	to	provide	an	indication	of	the	variability	associated	with	CNA's	net	reserves,	the	following discussion	provides	a	sensitivity	analysis	that	shows	the	approximate	estimated	impact	of	variations	in	the	most	significant	factor	affecting	CNA's	reserve	estimates	for particular	types	of	business.	These	significant	factors	are	the	ones	that	could	most	likely	materially	impact	the	reserves.	This	discussion	covers	the	major	types	of business	for	which	CNA	believes	a	material	deviation	to	its	reserves	is	reasonably	possible.	There	can	be	no	assurance	that	actual	experience	will	be	consistent	with	the current	assumptions	or	with	the	variation	indicated	by	the	discussion.	In	addition,	there	can	be	no	assurance	that	other	factors	and	assumptions	will	not	have	a	material impact	on	CNA's	reserves.

Within	CNA	Specialty,	CNA	believes	a	material	deviation	to	its	net	reserves	is	reasonably	possible	for	professional	liability	and	related	business.	This	business includes	professional	liability	coverages	provided	to	various	professional	firms,	including	architects,	realtors,	small	and	mid-sized	accounting	firms,	law	firms	and technology	firms.	This	business	also	includes	D&O,	employment	practices,	fiduciary	and	fidelity	coverages	as	well	as	insurance	products	serving	the	healthcare	delivery system.	The	most	significant	factor	affecting	reserve	estimates	for	this	business	is	claim	severity.	Claim	severity	is	driven	by	the	cost	of	medical	care,	the	cost	of	wage replacement,	legal	fees,	judicial	decisions,

legislation	and	other	factors.	Underwriting	and	claim	handling	decisions	such	as	the	classes	of	business	written	and	individual	claim	settlement	decisions	can	also	impact claim	severity.	If	the	estimated	claim	severity	increases	by	9.0%,	CNA	estimates	that	the	net	reserves	would	increase	by	approximately	$450	million.	If	the	estimated claim	 severity	 decreases	 by	 3.0%,	 CNA	 estimates	 that	 net	 reserves	 would	 decrease	 by	 approximately	 $150	 million.	 CNA's	 net	 reserves	 for	 this	 business	 were approximately	$4.9	billion	at	December	31,	2009.

Within	CNA	Commercial, the two types	of	business	for	which	CNA	believes	a	material	deviation to its	net	reserves is	reasonably	possible	are	workers' compensation	and	general	liability.

For	CNA	Commercial	workers'	compensation,	since	many	years	will	pass	from	the	time	the	business	is	written	until	all	claim	payments	have	been	made,	claim cost	inflation	on	claim	payments	is	the	most	significant	factor	affecting	workers'	compensation	reserve	estimates.	Workers'	compensation	claim	cost	inflation	is	driven by	the	cost	of	medical	care,	the	cost	of	wage	replacement,	expected	claimant	lifetimes,	judicial	decisions,	legislative	changes	and	other	factors.	If	estimated	workers' compensation	claim	cost	inflation	increases	by	100	basis	points	for	the	entire	period	over	which	claim	payments	will	be	made,	CNA	estimates	that	its	net	reserves	would increase	by	approximately	$450	million.	If	estimated	workers'	compensation	claim	cost	inflation	decreases	by	100	basis	points	for	the	entire	period	over	which	claim payments	will	be	made,	CNA	estimates	that	its	net	reserves	would	decrease	by	approximately	$400	million.	CNA's	net	reserves	for	CNA	Commercial	workers' compensation	were	approximately	$4.8	billion	at	December	31,	2009.

For	CNA	Commercial	general	liability,	the	most	significant	factor	affecting	reserve	estimates	is	severity.	Claim	severity	is	driven	by	changes	in	the	cost	to	repair or	replace	property,	the	cost	of	medical	care,	the	cost	of	wage	replacement,	judicial	decisions,	legislation	and	other	factors.	If	the	estimated	claim	severity	for	general liability	increases	by	6.0%,	CNA	estimates	that	its	net	reserves	would	increase	by	approximately	$200	million.	If	the	estimated	claim	severity	for	general	liability decreases	by	3.0%,	CNA	estimates	that	its	net	reserves	would	decrease	by	approximately	$100	million.	CNA's	net	reserves	for	CNA	Commercial	general	liability	were approximately	$3.3	billion	at	December	31,	2009.

Within	Other	Insurance,	the	two	types	of	business	for	which	CNA	believes	a	material	deviation	to	its	net	reserves	is	reasonably	possible	are	CNA	Re	and	A&E.

For	CNA	Re,	the	predominant	method	used	for	estimating	reserves	is	the	incurred	development	method.	Changes	in	the	cost	to	repair	or	replace	property,	the	cost of	medical	care,	the	cost	of	wage	replacement,	the	rate	at	which	ceding	companies	report	claims,	judicial	decisions,	legislation	and	other	factors	all	impact	the	incurred development	pattern	for	CNA	Re.	The	pattern	selected	results	in	the	incurred	development	factor	that	estimates	future	changes	in	case	incurred	loss.	If	the	estimated incurred	development	factor	for	CNA	Re	increases	by	40.0%,	CNA	estimates	that	its	net	reserves	for	CNA	Re	would	increase	by	approximately	$100	million.	If	the estimated	incurred	development	factor	for	CNA	Re	decreases	by	30.0%,	CNA	estimates	that	its	net	reserves	would	decrease	by	approximately	$75	million.	CNA's	net reserves	for	CNA	Re	were	approximately	$0.7	billion	at	December	31,	2009.

For	A&E,	the	most	significant	factor	affecting	reserve	estimates	is	overall	account	severity.	Overall	account	severity	for	A&E	reflects	the	combined	impact	of economic	trends	(inflation),	changes	in	the	types	of	defendants	involved,	the	expected	mix	of	asbestos	disease	types,	judicial	decisions,	legislation	and	other	factors.	If the	estimated	overall	account	severity	for	A&E	increases	approximately	20.0%,	CNA	estimates	that	its	A&E	net	reserves	would	increase	by	approximately	$300 million.	 If	 the	 estimated	 overall	 account	 severity	 for	 A&E	 decreases	 by	 approximately	 10.0%,	 CNA	 estimates	 that	 its	 A&E	 net	 reserves	 would	 decrease	 by approximately	$150	million.	CNA's	net	reserves	for	A&E	were	approximately	$1.4	billion	at	December	31,	2009.

Given	the	factors	described	above,	it	is	not	possible	to	quantify	precisely	the	ultimate	exposure	represented	by	claims	and	related	litigation.	As	a	result,	CNA regularly	reviews	the	adequacy	of	its	reserves	and	reassesses	its	reserve	estimates	as	historical	loss	experience	develops,	additional	claims	are	reported	and	settled	and additional	information	becomes	available	in	subsequent	periods.

In	light	of	the	many	uncertainties	associated	with	establishing	the	estimates	and	making	the	assumptions	necessary	to	establish	reserve	levels,	CNA	reviews	its reserve	estimates	on	a	regular	basis	and	make	adjustments	in	the	period	that	the	need	for	such	adjustments	is	determined.	These	reviews	have	resulted	in	CNA's identification	of	information	and	trends

that	have	caused	CNA	to	change	its	reserves	in	prior	periods	and	could	lead	to	the	identification	of	a	need	for	additional	material	increases	or	decreases	in	claim	and claim	adjustment	expense	reserves,	which	could	materially	affect	our	results	of	operations	and	equity	and	CNA's	business,	insurer	financial	strength	and	debt	ratings positively	or	negatively.	See	the	Ratings	section	of	this	MD&A	for	further	information	regarding	CNA's	financial	strength	and	debt	ratings.

# Segment	Results

CNA	utilizes	the	net	operating	income	financial	measure	to	monitor	its	operations.	Net	operating	income	is	calculated	by	excluding	from	net	income	the	after	tax effects	of	(i)	net	realized	investment	gains	or	losses,	(ii)	income	or	loss	from	discontinued	operations	and	(iii)	any	cumulative	effects	of	changes	in	accounting	guidance. In	evaluating	the	results	of	the	CNA	Specialty	and	CNA	Commercial	segments,	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.

Changes	in	estimates	of	claim	and	allocated	claim	adjustment	expense	reserves	and	premium	accruals,	net	of	reinsurance,	for	prior	years	are	defined	as	net	prior year	development	within	this	MD&A.	These	changes	can	be	favorable	or	unfavorable.	Net	prior	year	development	does	not	include	the	impact	of	related	acquisition expenses.	Further	information	on	CNA's	reserves	is	provided	in	Note	9	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8.

The	following	discusses	the	results	of	continuing	operations	for	CNA's	operating	segments.

The	following	table	summarizes	the	results	of	operations	for	CNA	Specialty:

| Year	Ended	December	31<br>(In	millions,	except	%) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Net\twritten\tpremiums | $2,684 | $2,719 | $2,766 |
| Net\tearned\tpremiums | \t 2,697 | \t 2,755 | \t 2,759 |
| Net\tinvestment\tincome | 526 | 354 | 493 |
| Net\toperating\tincome | 532 | 372 | 467 |
| Net\trealized\tinvestment\tlosses | (110) | (150) | (41) |
| Net\tincome | 422 | 222 | 426 |
| Ratios: |  |  |  |
| Loss\tand\tloss\tadjustment\texpense | 56.9% | 61.7% | 62.5% |
| Expense | 29.3 | 27.3 | 25.8 |
| Dividend | 0.3 | 0.5 | 0.2 |
| Combined | 86.5% | 89.5% | 88.5% |

Net	written	premiums	for	CNA	Specialty	decreased	$35	million	in	2009	as	compared	with	2008.	The	decrease	in	net	written	premiums	was	driven	by	CNA's architects	and	engineers	and	surety	bond	lines	of	business,	as	current	economic	conditions	have	led	to	decreased	insured	exposures.	This,	along	with	the	competitive market	conditions,	may	continue	to	put	ongoing	pressure	on	premium	and	income	levels	and	the	expense	ratio.	Net	written	premiums	were	also	unfavorably	impacted	by foreign	exchange.	Net	earned	premiums	decreased	$58	million	as	compared	with	the	same	period	in	2008,	consistent	with	the	trend	of	lower	net	written	premiums.

CNA	Specialty's	average	rate	decreased	2.0%	for	2009	as	compared	to	a	decrease	of	4.0%	for	2008	for	policies	that	renewed	in	each	period.	Retention	rates	of 85.0%	were	achieved	for	those	policies	that	were	available	for	renewal	in	each	period.

Net	income	improved	$200	million	in	2009	as	compared	with	2008.	This	increase	was	due	to	improved	net	operating	income	and	lower	net	realized	investment losses.	See	the	Investments	section	of	this	MD&A	for	further	discussion	of	net	investment	income	and	net	realized	investment	results.

Net	operating	income	improved	$160	million	in	2009	as	compared	with	2008,	primarily	due	to	higher	net	investment	income	and	increased	favorable	net	prior year	development.

The	combined	ratio	improved	3.0	points	in	2009	as	compared	with	2008.	The	loss	ratio	improved	4.8	points	primarily	due	to	increased	favorable	net	prior	year development.	The	expense	ratio	increased	2.0	points	in	2009	as	compared	with	2008,	primarily	due	to	higher	underwriting	expenses	and	the	lower	net	earned	premium base.	Underwriting	expenses	increased	primarily	due	to	higher	employee-related	costs.

Favorable	net	prior	year	development	of	$224	million	was	recorded	in	2009	compared	to	$106	million	in	2008.	Further	information	on	CNA	Specialty	net	prior year	development	for	2009	and	2008	is	included	in	Note	9	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8.

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

Net	written	premiums	for	CNA	Specialty	decreased	$47	million	in	2008	as	compared	with	2007.	Premiums	written	in	2008	were	unfavorably	impacted	by competitive	market	conditions	resulting	in	decreased	production,	as	compared	with	2007,	primarily	in	professional	management	and	liability	lines.	The	unfavorable impact	in	premiums	written	was	partially	offset	by	decreased	ceded	premiums	primarily	due	to	decreased	use	of	reinsurance.	Net	earned	premiums	decreased	$4	million as	compared	with	the	same	period	in	2007,	consistent	with	the	decrease	in	net	written	premiums.

CNA	Specialty's	rate	on	average	decreased	4.0%	for	2008,	as	compared	to	a	decrease	of	5.0%	for	2007	for	policies	that	renewed	in	each	period.	Retention	rates	of 85.0%	and	83.0%	were	achieved	for	those	policies	that	were	up	for	renewal	in	each	period.

Net	income	decreased	$204	million	in	2008	as	compared	with	2007.	This	decrease	was	primarily	attributable	to	higher	net	realized	investment	losses	and	lower	net operating	income.	See	the	Investments	section	of	this	MD&A	for	further	discussion	of	net	investment	income	and	net	realized	investment	results.

Net	operating	income	decreased	$95	million	in	2008	as	compared	with	2007.	This	decrease	was	primarily	driven	by	significantly	lower	net	investment	income	and decreased	current	accident	year	underwriting	results.	These	unfavorable	results	were	partially	offset	by	the	impact	of	favorable	net	prior	year	development	in	2008	as compared	to	unfavorable	net	prior	year	development	in	2007.

The	combined	ratio	increased	1.0	point	in	2008	as	compared	with	2007.	The	loss	ratio	improved	0.8	points,	primarily	due	to	the	impact	of	development.	This	was partially	offset	by	higher	current	accident	year	loss	ratios	recorded	primarily	in	CNA's	E&O	and	D&O	coverages	for	financial	institutions	due	to	the	financial	markets credit	crisis	in	2008.

The	expense	ratio	increased	1.5	points	in	2008	as	compared	with	2007.	The	increase	primarily	related	to	increased	underwriting	expenses	and	reduced	ceding commissions.

Favorable	net	prior	year	development	of	$106	million	was	recorded	in	2008	compared	to	unfavorable	net	prior	year	development	of	$24	million	in	2007.	Further information	on	CNA	Specialty	net	prior	year	development	for	2008	and	2007	is	included	in	Note	9	of	the	Notes	to	Consolidated	Financial	Statements	included	under Item	8.

The	following	table	summarizes	the	results	of	operations	for	CNA	Commercial:

| Year	Ended	December	31<br>(In	millions,	except	%) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Net\twritten\tpremiums | $3,448 | $3,770 | $4,007 |
| Net\tearned\tpremiums | \t 3,432 | \t 3,787 | \t 4,104 |
| Net\tinvestment\tincome | 922 | 603 | \t 1,006 |
| Net\toperating\tincome | 456 | 261 | 619 |
| Net\trealized\tinvestment\tlosses | (209) | (302) | (93) |
| Net\tincome\t(loss) | 247 | (41) | 526 |
| Ratios: |  |  |  |
| Loss\tand\tloss\tadjustment\texpense | 69.6% | 73.0% | 66.8% |
| Expense | 35.2 | 31.2 | 32.1 |
| Dividend | 0.3 |  | 0.2 |
| Combined | \t 105.1% | \t 104.2% | 99.1% |

Net	written	premiums	for	CNA	Commercial	decreased	$322	million	in	2009	as	compared	to	2008.	Written	premiums	declined	in	most	lines	primarily	due	to general	economic	conditions.	Current	economic	conditions	have	led	to	decreased	insured	exposures,	such	as	in	small	businesses	and	in	the	construction	industry	due	to smaller	payrolls	and	reduced	project	volume.	This,	along	with	competitive	market	conditions,	may	continue	to	put	ongoing	pressure	on	premium	and	income	levels	and the	expense	ratio.	Net	earned	premiums	decreased	$355	million	in	2009	as	compared	with	2008,	consistent	with	the	trend	of	lower	net	written	premiums.	Premiums	were also	impacted	by	unfavorable	premium	development	recorded	in	2009	and	unfavorable	foreign	exchange.

CNA	Commercial's	average	rate	was	flat,	as	compared	to	a	decrease	of	4.0%	for	2008	for	policies	that	renewed	in	each	period.	Retention	rates	of	81.0%	were achieved	for	those	policies	that	were	available	for	renewal	in	both	periods.

Net	results	improved	$288	million	in	2009	as	compared	with	2008.	This	improvement	was	due	to	increased	net	operating	income	and	decreased	net	realized investment	losses.	See	the	Investments	section	of	this	MD&A	for	further	discussion	of	net	realized	investment	results	and	net	investment	income.

Net	operating	income	improved	$195	million	in	2009	compared	with	2008.	This	improvement	was	primarily	driven	by	higher	net	investment	income	and	lower catastrophe	losses.	Partially	offsetting	these	favorable	items	was	an	unfavorable	change	in	current	accident	year	underwriting	results	excluding	catastrophes.

The	combined	ratio	increased	0.9	points	in	2009	as	compared	with	2008.	The	loss	ratio	improved	3.4	points	primarily	due	to	decreased	catastrophe	losses, partially	offset	by	the	impact	of	higher	current	accident	year	non-catastrophe	loss	ratios.	Catastrophe	losses	were	$82	million,	or	2.4	points	of	the	loss	ratio,	for	2009	as compared	to	$343	million,	or	9.0	points	of	the	loss	ratio,	for	2008.	The	current	accident	year	loss	ratio,	excluding	catastrophe	losses,	was	unfavorably

impacted	by	loss	experience	in	several	lines	of	business,	including	workers'	compensation	and	renewable	energy,	as	well	as	several	significant	property	losses.

The	expense	ratio	increased	4.0	points	in	2009	as	compared	with	2008,	primarily	related	to	higher	underwriting	expenses,	unfavorable	changes	in	estimates	for insurance-related	assessments	and	the	lower	net	earned	premium	base.	Underwriting	expenses	increased	primarily	due	to	higher	employee-related	costs.

In	2008,	the	amount	due	from	policyholders	related	to	losses	under	deductible	policies	within	CNA	Commercial	was	reduced	by	$90	million	for	insolvent insureds.	The	reduction	of	this	amount,	which	was	reflected	as	unfavorable	net	prior	year	reserve	development	in	2008,	had	no	effect	on	2008	results	of	operations	as CNA	had	previously	recognized	provisions	in	prior	years.	These	impacts	were	reported	in	Insurance	claims	and	policyholders'	benefits	in	the	2008	Consolidated Statements	of	Income.

Favorable	net	prior	year	development	of	$168	million	was	recorded	in	2009,	compared	to	favorable	net	prior	year	development	of	$96	million	in	2008.	Excluding the	impact	of	the	$90	million	of	unfavorable	net	prior	year	reserve	development	discussed	above,	which	had	no	net	impact	on	the	2008	results	of	operations,	favorable net	prior	year	development	was	$186	million.	Further	information	on	CNA	Commercial	net	prior	year	development	for	2009	and	2008	is	included	in	Note	9	of	the	Notes to	Consolidated	Financial	Statements	included	under	Item	8.

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

Net	written	premiums	for	CNA	Commercial	decreased	$237	million	in	2008	as	compared	with	2007.	Premiums	written	in	2008	were	unfavorably	impacted	by competitive	market	conditions	resulting	in	decreased	production,	as	compared	with	2007,	across	most	lines	of	business.	This	unfavorable	impact	was	partially	offset	by decreased	ceded	premiums.	Net	earned	premiums	decreased	$317	million	in	2008	as	compared	with	2007,	consistent	with	the	decreased	net	written	premiums.

CNA	Commercial's	average	rate	decreased	4.0%	for	2008,	as	compared	to	a	decrease	of	3.0%	for	2007	for	policies	that	renewed	in	each	period.	Retention	rates	of 81.0%	and	79.0%	were	achieved	for	those	policies	that	were	available	for	renewal	in	each	period.

Net	results	decreased	$567	million	in	2008	as	compared	with	2007.	This	decrease	was	attributable	to	decreased	net	operating	income	and	higher	net	realized investment	losses.	See	the	Investments	section	of	this	MD&A	for	further	discussion	of	the	net	realized	investment	results	and	net	investment	income.

Net	operating	income	decreased	$358	million	in	2008	as	compared	with	2007.	This	decrease	was	primarily	driven	by	significantly	lower	net	investment	income and	higher	catastrophe	impacts.	The	catastrophe	impacts	were	$207	million	after	tax	and	noncontrolling	interest	in	2008,	which	included	a	$6	million	after	tax	and noncontrolling	interest	catastrophe-related	insurance	assessment,	as	compared	to	catastrophe	losses	of	$44	million	after	tax	and	noncontrolling	interest	in	2007.

The	combined	ratio	increased	5.1	points	in	2008	as	compared	with	2007.	The	loss	ratio	increased	6.2	points	primarily	due	to	increased	catastrophe	losses. Catastrophes	losses	related	to	2008	events	had	an	adverse	impact	of	9.0	points	on	the	loss	ratio	in	2008	compared	with	an	adverse	impact	of	1.8	points	in	2007.

The	expense	ratio	decreased	0.9	points	in	2008	as	compared	with	2007	primarily	related	to	changes	in	the	assessment	rates	imposed	by	certain	states	for	insurance- related	 assessments.	The	 dividend	 ratio	 decreased	 0.2	 points	 in	 2008	 as	 compared	 with	 2007	 due	 to	 increased	 favorable	 dividend	 development	 in	 the	 workers' compensation	line	of	business.

Favorable	net	prior	year	development	of	$96	million	was	recorded	in	2008.	Excluding	the	impact	of	the	$90	million	of	unfavorable	net	prior	year	reserve development	discussed	above,	which	had	no	net	impact	on	the	2008	results	of	operations,	favorable	net	prior	year	development	was	$186	million.	Favorable	net	prior year	development	of	$183	million	was	recorded	in	2007.	Further	information	on	CNA	Commercial	net	prior	year	development	for	2008	and	2007	is	included	in	Note	9 of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8.

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

Net	earned	premiums	for	Life	&	Group	Non-Core	decreased	$17	million	in	2009	as	compared	with	2008.	Net	earned	premiums	relate	primarily	to	the	individual and	group	long	term	care	businesses.

Net	loss	decreased	$157	million	in	2009	as	compared	with	2008.	The	decrease	in	net	loss	was	primarily	due	to	improved	net	realized	investment	results,	favorable performance	on	CNA's	remaining	pension	deposit	business	as	further	discussed	below,	and	a	settlement	reached	with	Willis	Limited	that	resolved	litigation	related	to the	placement	of	personal	accident	reinsurance.	Under	the	settlement	agreement,	Willis	Limited	agreed	to	pay	CNA	a	total	of	$130	million,	which	resulted	in	an	after	tax and	noncontrolling	interest	gain	of	$55	million,	net	of	reinsurance.	This	litigation	was	brought	by	CNA	in	response	to	its	settlement	of	the	IGI	contingency	in	2007,	as discussed	below.

Certain	of	the	separate	account	investment	contracts	related	to	CNA's	pension	deposit	business	guarantee	principal	and	an	annual	minimum	rate	of	interest,	for which	CNA	recorded	an	additional	pretax	liability	in	Policyholders'	funds	in	2008.	Based	on	the	increase	in	value	of	the	investments	supporting	this	business,	CNA decreased	this	pretax	liability	by	$42	million	during	2009.	During	2008,	CNA	increased	this	liability	by	$68	million.

These	favorable	impacts	were	partially	offset	by	unfavorable	results	in	CNA's	long	term	care	business	and	a	$25	million	after	tax	and	noncontrolling	interest	legal accrual	recorded	in	the	second	quarter	of	2009	related	to	a	previously	held	limited	partnership	investment.	The	limited	partnership	investment	supported	the	indexed group	annuity	portion	of	CNA's	pension	deposit	business.

Net	 investment	 income	 for	 the	 year	 ended	 December	 31,	 2008	 included	 trading	 portfolio	 losses	 of	 $146	 million,	 which	 were	 substantially	 offset	 by	 a corresponding	decrease	in	the	policyholders'	funds	reserves	supported	by	the	trading	portfolio.	This	trading	portfolio	supported	the	indexed	group	annuity	portion	of CNA's	pension	deposit	business.	During	2008,	CNA	settled	these	liabilities	with	policyholders	with	no	material	impact	to	results	of	operations.	That	business	had	a	net loss	of	$20	million	for	the	year	ended	December	31,	2008.

Net	earned	premiums	for	Life	&	Group	Non-Core	decreased	$6	million	in	2008	as	compared	with	2007.

Net	loss	increased	$135	million	in	2008	as	compared	with	2007.	The	increase	in	net	loss	was	primarily	due	to	increased	net	realized	investment	losses	and	adverse investment	 performance	 on	 a	 portion	 of	 CNA's	 pension	 deposit	 business.	As	 discussed	 above,	 during	 2008,	 CNA	 recorded	 a	 pretax	 liability	 of	 $68	 million	 in Policyholders'	funds	due	to	the	performance	of	the	related	assets	supporting	the	pension	deposit	business	in	2008.	There	was	no	liability	recorded	in	2007	related	to	this business.

The	net	loss	in	2007	included	an	after	tax	and	noncontrolling	interest	loss	of	$96	million	related	to	the	settlement	of	the	IGI	contingency.	The	IGI	contingency related	to	reinsurance	arrangements	with	respect	to	personal	accident	insurance	coverages	provided	between	1997	and	1999	which	were	the	subject	of	arbitration proceedings.

The	 decreased	 net	 investment	 income	 included	 a	 decline	 of	 trading	 portfolio	 results,	 which	 was	 substantially	 offset	 by	 a	 corresponding	 decrease	 in	 the policyholders'	fund	reserves	supported	by	the	indexed	group	annuity	trading	portfolio.	The	trading	portfolio	supported	the	indexed	group	annuity	portion	of	CNA's pension	deposit	business.	See	the	Investments	section	of	this	MD&A	for	further	discussion	of	net	investment	income	and	net	realized	investment	results.

The	following	table	summarizes	the	results	of	operations	for	the	Other	Insurance	segment,	including	A&E	and	intrasegment	eliminations.

Net	loss	decreased	$22	million	in	2009	as	compared	with	2008,	primarily	due	to	improved	net	realized	investment	results	and	higher	net	investment	income. Partially	offsetting	these	favorable	items	was	increased	unfavorable	net	prior	year	development	primarily	related	to	A&E.

Unfavorable	net	prior	year	development	of	$184	million	was	recorded	in	2009,	including	$79	million	for	asbestos	exposures	and	$76	million	for	environmental pollution	exposures.	In	CNA's	most	recent	actuarial	ground	up	review	CNA	noted	adverse	development	in	various	asbestos	accounts	due	to	increases	in	average	claim severity	and	defense	expense	arising	from	increased	trial	activity.	Additionally,	CNA	has	not	seen	a	decline	in	the	overall	emergence	of	new	accounts	during	the	last	few years.	CNA	noted	adverse	development	in	various	pollution	accounts	due	to	changes	in	the	liabilities	attributed	to	its	policyholders	and	adverse	changes	in	case	law impacting	insurers'	coverage	obligations.	These	changes	in	turn	increased	CNA's	account	estimates	on	certain	accounts.	In	addition,	the	frequency	of	environmental pollution	claims	did	not	decline	at	the	rate	previously	anticipated.	Unfavorable	net	prior	year	development	of	$122	million	was	recorded	in	2008.	Further	information	on Other	Insurance	net	prior	year	development	for	2009	and	2008	is	included	in	Note	9	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8.

The	following	table	summarizes	the	gross	and	net	carried	reserves	for	the	Other	Insurance	segment:

| December	31<br>(In	millions) | 2009 | 2008 |
| :--- | :--- | :--- |
| Gross\tCase\tReserves | \t\t $1,548 | $1,823 |
| Gross\tIBNR\tReserves | \t 2,458 | \t 2,578 |
| Total\tGross\tCarried\tClaim\tand\tClaim\tAdjustment\tExpense\tReserves | \t\t $4,006 | $4,401 |
| Net\tCase\tReserves | \t\t $972 | $1,126 |
| Net\tIBNR\tReserves | \t 1,515 | \t 1,561 |
| Total\tNet\tCarried\tClaim\tand\tClaim\tAdjustment\tExpense\tReserves | \t\t $2,487 | $2,687 |

Net	results	decreased	$132	million	in	2008	as	compared	with	2007.	This	decrease	was	primarily	due	 to	 lower	net	 investment	 income,	higher	net	realized investment	losses	and	expenses	associated	with	a	legal	contingency.	These	unfavorable	impacts	were	partially	offset	by	a	$27	million	release	from	the	allowance	for uncollectible	reinsurance	receivables	arising	from	a	change	in	estimate.	In	addition,	the	2007	results	included	current	accident	year	losses	related	to	certain	mass	torts.

Unfavorable	net	prior	year	development	of	$122	million	was	recorded	during	2008.	Unfavorable	net	prior	year	development	of	$86	million	was	recorded	in	2007. Further	information	on	Other	Insurance's	net	prior	year	development	for	2008	and	2007	is	included	in	Note	9	of	the	Notes	to	Consolidated	Financial	Statements included	under	Item	8.

# A&E	Reserves

CNA's	property	and	casualty	insurance	subsidiaries	have	actual	and	potential	exposures	related	to	A&E	claims.

Establishing	reserves	for	A&E	claim	and	claim	adjustment	expenses	is	subject	to	a	higher	degree	of	variability	due	to	a	number	of	factors,	as	further	discussed	in the	Reserve	Estimates	&	Uncertainties	section	of	this	MD&A.	Due	to	the	inherent	uncertainties	in	estimating	claim	and	claim	adjustment	expense	reserves	for	A&E	and due	to	the	significant	uncertainties	described	related	to	A&E	claims,	CNA's	ultimate	liability	for	these	cases,	both	individually	and	in	aggregate,	may	exceed	the recorded	reserves.	Any	such	potential	additional	liability,	or	any	range	of	potential	additional	amounts,	cannot	be	reasonably	estimated	currently,	but	could	be	material to	our	results	of	operations	and	equity,	and	CNA's	business,	insurer	financial	strength	and	debt	ratings.

# Asbestos

In	the	past	several	years,	CNA	experienced,	at	certain	points	in	time,	significant	increases	in	claim	counts	for	asbestos-related	claims.	The	factors	that	led	to	these increases	included,	among	other	things,	intensive	advertising	campaigns	by	lawyers	for	asbestos	claimants,	mass	medical	screening	programs	sponsored	by	plaintiff lawyers	and	the	addition	of	new	defendants	such	as	the	distributors	and	installers	of	products	containing	asbestos.	In	recent	years,	the	rate	of	new	filings	has	decreased. Various	challenges	to	mass	screening	claimants	have	been	successful.	Historically,	the	majority	of	asbestos	bodily	injury	claims	have	been	filed	by	persons	exhibiting few,	if	any,	disease	symptoms.	Studies	have	concluded	that	the	percentage	of	unimpaired	claimants	to	total	claimants	ranges	between	66.0%	and	up	to	90.0%.	Some courts	and	some	state	statutes	mandate	that	so-called	"unimpaired"	claimants	may	not	recover	unless	at	some	point	the	claimant's	condition	worsens	to	the	point	of impairment.	Some	plaintiffs	classified	as	"unimpaired"	continue	to	challenge	those	orders	and	statutes.	Therefore,	the	ultimate	impact	of	the	orders	and	statutes	on	future asbestos	claims	remains	uncertain.

Despite	the	decrease	in	new	claim	filings	in	recent	years,	there	are	several	factors,	in	CNA's	view,	negatively	impacting	asbestos	claim	trends.	Plaintiff	attorneys who	previously	sued	entities	that	are	now	bankrupt	continue	to	seek	other	viable	targets.	As	plaintiff	attorneys	named	additional	defendants	to	new	and	existing	asbestos bodily	injury	lawsuits,	CNA	experienced	an	increase	in	the	total	number	of	policyholders	with	current	asbestos	claims.	Companies	with	few	or	no	previous	asbestos claims	are	becoming	targets	in	asbestos	litigation	and,	although	they	may	have	little	or

no	liability,	nevertheless	must	be	defended.	Additionally,	plaintiff	attorneys	and	trustees	for	future	claimants	are	demanding	that	policy	limits	be	paid	lump-sum	into	the bankruptcy	asbestos	trusts	prior	to	presentation	of	valid	claims	and	medical	proof	of	these	claims.	Various	challenges	to	these	practices	have	succeeded	in	litigation,	and are	continuing	to	be	litigated.	Plaintiff	attorneys	and	trustees	for	future	claimants	are	also	attempting	to	devise	claims	payment	procedures	for	bankruptcy	trusts	that would	allow	asbestos	claims	to	be	paid	under	lax	standards	for	injury,	exposure	and	causation.	This	also	presents	the	potential	for	exhausting	policy	limits	in	an accelerated	fashion.	Challenges	to	these	practices	are	being	mounted,	though	the	ultimate	impact	or	success	of	these	tactics	remains	uncertain.

CNA	is	involved	in	significant	asbestos-related	claim	litigation,	which	is	described	in	Note	9	of	the	Notes	to	Consolidated	Financial	Statements	included	under

# Environmental	Pollution

Environmental	pollution	cleanup	is	the	subject	of	both	federal	and	state	regulation.	By	some	estimates,	there	are	thousands	of	potential	waste	sites	subject	to cleanup.	The	insurance	industry	has	been	involved	in	extensive	litigation	regarding	coverage	issues.	Judicial	interpretations	in	many	cases	have	expanded	the	scope	of coverage	and	liability	beyond	the	original	intent	of	the	policies.	The	Comprehensive	Environmental	Response	Compensation	and	Liability	Act	of	1980	("Superfund") and	comparable	state	statutes	("mini-Superfunds")	govern	the	cleanup	and	restoration	of	toxic	waste	sites	and	formalize	the	concept	of	legal	liability	for	cleanup	and restoration	by	"Potentially	Responsible	Parties"	("PRP"s).	Superfund	and	the	mini-Superfunds	establish	mechanisms	to	pay	for	cleanup	of	waste	sites	if	PRPs	fail	to	do so	and	assign	liability	to	PRPs.	The	extent	of	liability	to	be	allocated	to	a	PRP	is	dependent	upon	a	variety	of	factors.	Further,	the	number	of	waste	sites	subject	to cleanup	is	unknown.	To	date,	approximately	1,500	cleanup	sites	have	been	identified	by	the	Environmental	Protection	Agency	("EPA")	and	included	on	its	National Priorities	List	("NPL").	State	authorities	have	designated	many	cleanup	sites	as	well.

Many	policyholders	have	made	claims	against	CNA	for	defense	costs	and	indemnification	in	connection	with	environmental	pollution	matters.	The	vast	majority of	these	claims	relate	to	accident	years	1989	and	prior,	which	coincides	with	CNA's	adoption	of	the	Simplified	Commercial	General	Liability	coverage	form,	which includes	what	is	referred	to	in	the	industry	as	absolute	pollution	exclusion.	CNA	and	the	insurance	industry	are	disputing	coverage	for	many	such	claims.	Key	coverage issues	include	whether	cleanup	costs	are	considered	damages	under	the	policies,	trigger	of	coverage,	allocation	of	liability	among	triggered	policies,	applicability	of pollution	 exclusions	 and	 owned	 property	 exclusions,	 the	 potential	 for	 joint	 and	 several	 liability	 and	 the	 definition	 of	 an	 occurrence.	To	 date,	 courts	 have	 been inconsistent	in	their	rulings	on	these	issues.

Further	information	on	A&E	claim	and	claim	adjustment	expense	reserves	and	net	prior	year	development	is	included	in	Note	9	of	the	Notes	to	Consolidated Financial	Statements	included	under	Item	8.

# Diamond	Offshore

The	two	most	significant	variables	affecting	revenues	are	dayrates	for	rigs	and	rig	utilization	rates,	each	of	which	is	a	function	of	rig	supply	and	demand	in	the marketplace.	Demand	for	drilling	services	is	dependent	upon	the	level	of	expenditures	set	by	oil	and	gas	companies	for	offshore	exploration	and	development,	as	well	as a	variety	of	political	and	economic	factors.	The	availability	of	rigs	in	a	particular	geographical	region	also	affects	both	dayrates	and	utilization	rates.	These	factors	are not	within	Diamond	Offshore's	control	and	are	difficult	to	predict.

Demand	affects	the	number	of	days	the	fleet	is	utilized	and	the	dayrates	earned.	When	a	rig	is	idle,	no	dayrate	is	earned	and	revenues	will	decrease	as	a	result. Revenues	can	also	be	affected	as	a	result	of	the	acquisition	or	disposal	of	rigs,	required	surveys	and	shipyard	upgrades.	In	order	to	improve	utilization	or	realize	higher dayrates,	Diamond	Offshore	may	mobilize	its	rigs	from	one	market	to	another.	However,	during	periods	of	mobilization,	revenues	may	be	adversely	affected.	As	a response	to	changes	in	demand,	Diamond	Offshore	may	withdraw	a	rig	from	the	market	by	stacking	it	or	may	reactivate	a	rig	stacked	previously,	which	may	decrease	or increase	revenues.

Diamond	Offshore's	operating	income	is	primarily	affected	by	revenue	factors,	but	is	also	a	function	of	varying	levels	of	operating	expenses.	Diamond	Offshore's contract	drilling	expenses	represent	all	direct	and	indirect	costs	associated	with	the	operation	and	maintenance	of	its	drilling	equipment.	The	principal	components	of Diamond	Offshore's	contract	drilling	costs	are,	among	other	things,	direct	and	indirect	costs	of	labor	and	benefits,	repairs	and	maintenance,	freight,

Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations Results	of	Operations	–	Diamond	Offshore	–	(Continued)

regulatory	inspections,	boat	and	helicopter	rentals	and	insurance.	Labor	and	repair	and	maintenance	costs	represent	the	most	significant	components	of	contract	drilling expenses.	In	periods	of	high,	sustained	utilization,	maintenance	and	repair	costs	may	increase	in	order	to	maintain	Diamond	Offshore's	equipment	in	proper,	working order.	Costs	to	repair	and	maintain	equipment	fluctuate	depending	upon	the	type	of	activity	the	drilling	unit	is	performing,	as	well	as	the	age	and	condition	of	the equipment	and	the	regions	in	which	the	rigs	are	working.	In	general,	Diamond	Offshore's	labor	costs	increase	primarily	due	to	higher	salary	levels,	rig	staffing requirements	and	costs	associated	with	labor	regulations	in	the	geographic	regions	in	which	Diamond	Offshore's	rigs	operate.

Contract	drilling	expenses	generally	are	not	affected	by	changes	in	dayrates,	and	short	term	reductions	in	utilization	do	not	necessarily	result	in	lower	operating expenses.	For	instance,	if	a	rig	is	to	be	idle	for	a	short	period	of	time,	few	decreases	in	contract	drilling	expenses	may	actually	occur	since	the	rig	is	typically	maintained in	a	prepared	or	"ready	stacked"	state	with	a	full	crew.	In	addition,	when	a	rig	is	idle,	Diamond	Offshore	is	responsible	for	certain	contract	drilling	expenses	such	as	rig fuel	and	supply	boat	costs,	which	are	typically	costs	of	the	operator	when	a	rig	is	under	contract.	However,	if	the	rig	is	to	be	idle	for	an	extended	period	of	time, Diamond	Offshore	may	reduce	the	size	of	a	rig's	crew	and	take	steps	to	"cold	stack"	the	rig,	which	lowers	expenses	and	partially	offsets	the	impact	on	operating	income.

Operating	income	is	also	negatively	impacted	when	Diamond	Offshore	performs	certain	regulatory	inspections	that	are	due	every	five	years	("5-year	survey")	for each	of	Diamond	Offshore's	rigs	as	well	as	intermediate	surveys,	which	are	performed	at	interim	periods	between	5-year	surveys.	Contract	drilling	revenue	decreases because	these	surveys	are	performed	during	scheduled	downtime	in	a	shipyard.	No	revenue	is	generally	earned	during	periods	of	downtime	for	regulatory	surveys. Contract	drilling	expenses	increase	as	a	result	of	these	surveys	due	to	the	cost	to	mobilize	the	rigs	to	a	shipyard,	inspection	costs	incurred	and	repair	and	maintenance costs.	Repair	and	maintenance	costs	may	be	required	resulting	from	the	survey	or	may	have	been	previously	planned	to	take	place	during	this	mandatory	downtime.	The number	of	rigs	undergoing	a	5-year	survey	will	vary	from	year	to	year,	as	well	as	from	quarter	to	quarter.

The	global	economy	remained	weak	in	the	fourth	quarter	of	2009	and	into	the	first	quarter	of	2010,	and	energy	prices	continued	to	be	volatile.	Given	the unpredictable	economic	environment,	the	demand	for	Diamond	Offshore's	services	and	the	dayrates	it	was	able	to	command	for	new	contracts	softened.	This	volatility and	uncertainty	could	continue	until	the	global	economy	improves.	Absent	global	economic	improvement,	the	decline	in	drilling	activity	could	be	further	exacerbated	by the	influx	of	new	build	rigs	over	the	next	several	years,	particularly	in	regard	to	jack-up	units.	Diamond	Offshore	has	experienced	negative	effects	of	the	current	market such	as	customer	credit	problems,	customers	attempting	to	renegotiate	or	terminate	contracts,	one	customer	seeking	bankruptcy	protection,	a	further	slowing	in	the	pace of	new	contracting	activity,	declines	in	dayrates	for	new	contracts,	declines	in	utilization	and	the	stacking	of	idle	equipment.	Nevertheless,	during	2009,	Diamond Offshore	added	new	commitments	to	its	contract	backlog.	Diamond	Offshore	entered	2010	with	a	contract	backlog	approaching	$8.5	billion,	which	it	expects	to	help mitigate	the	impact	of	the	current	market	in	2010.

# Contract	Drilling	Backlog

The	following	table	reflects	Diamond	Offshore's	contract	drilling	backlog	as	of	February	1,	2010,	October	22,	2009	(the	date	reported	in	our	Quarterly	Report	on Form	10-Q	for	the	quarter	ended	September	30,	2009)	and	February	5,	2009	(the	date	reported	in	our	Annual	Report	on	Form	10-K	for	the	year	ended	December	31, 2008).	The	October	2009	period	includes	both	firm	commitments	(typically	represented	by	signed	contracts),	as	well	as	previously-disclosed	letters	of	intent	("LOIs"), where	indicated.	An	LOI	is	subject	to	customary	conditions,	including	the	execution	of	a	definitive	agreement,	and	as	such	may	not	result	in	a	binding	contract.	Contract drilling	backlog	is	calculated	by	multiplying	the	contracted	operating	dayrate	by	the	firm	contract	period	and	adding	one-half	of	any	potential	rig	performance	bonuses. 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	shown	in	the	tables	below due	to	various	factors.	Utilization	rates,	which	generally	approach	95.0%	-	98.0%	during	contracted	periods,	can	be	adversely	impacted	by	downtime	due	to	various operating	 factors	 including,	 but	 not	 limited	 to,	 weather	 conditions	 and	 unscheduled	 repairs	 and	 maintenance.	 Contract	 drilling	 backlog	 excludes	 revenues	 for mobilization,	demobilization,

# Results	of	Operations	–	Diamond	Offshore	–	(Continued)

contract	preparation	and	customer	reimbursables.	No	revenue	is	generally	earned	during	periods	of	downtime	for	regulatory	surveys.	Changes	in	Diamond	Offshore's contract	drilling	backlog	between	periods	are	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	millions) | February	1,<br>2010	(a)(b) | October	22,<br>2009	(c) | February	5,<br>2009 |
| :--- | :--- | :--- | :--- |
| High\tspecification\tfloaters\t(a)\t(c) | $4,177 | $4,450 | $4,448 |
| Intermediate\tsemisubmersible\trigs\t(b) | 4,030 | 4,061 | 5,985 |
| Jack-ups | 249 | 249 | 421 |
| Total | $8,456 | $8,760 | $10,854 |

(a) Contract	drilling	backlog	as	of	February	1,	2010	for	Diamond	Offshore's	high	specification	floaters	includes	$1.3	billion	attributable	to	expected	operations	offshore	Brazil	for	the	years	2010	to	2016.

(b) Contract	drilling	backlog	as	of	February	1,	2010	for	Diamond	Offshore's	intermediate	semisubmersible	rigs	includes	$2.9	billion	attributable	to	expected	operations	offshore	Brazil	for	the	years	2010	to	2015.

(c) Contract	drilling	backlog	as	of	October	22,	2009	included	an	aggregate	$124	million	in	contract	drilling	revenue	related	to	future	work	for	one	of	Diamond	Offshore's	high	specification	floaters	for	which	a definitive	agreement	was	subsequently	reached.

The	following	table	reflects	the	amount	of	Diamond	Offshore's	contract	drilling	backlog	by	year	as	of	February	1,	2010.

| Year	Ended	December	31<br>(In	millions) | Total | 2010 | 2011 | 2012 | 2013	-	2016 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| High\tspecification\tfloaters\t(a) | $4,177 | $1,536 | $1,245 | $570 | $826 |
| Intermediate\tsemisubmersible\trigs\t(b) | \t 4,030 | \t 1,393 | \t 1,026 | 860 | 751 |
| Jack-ups | 249 | 210 | 39 |  |  |
| Total | $8,456 | $3,139 | $2,310 | $1,430 | $1,577 |

(a) Contract	drilling	backlog	as	of	February	1,	2010	for	Diamond	Offshore's	high	specification	floaters	includes	$374	million,	$294	million	and	$135	million	for	the	years	2010,	2011	and	2012,	and	$476	million	in the	aggregate	for	the	years	2013	to	2016	attributable	to	expected	operations	offshore	Brazil.

(b) Contract	drilling	backlog	as	of	February	1,	2010	for	Diamond	Offshore's	intermediate	semisubmersible	rigs	includes	$715	million,	$788	million	and	$732	million	for	the	years	2010,	2011	and	2012,	and	$698 million	in	the	aggregate	for	the	years	2013	to	2015	attributable	to	expected	operations	offshore	Brazil.

The	following	table	reflects	the	percentage	of	rig	days	committed	by	year	as	of	February	1,	2010.	The	percentage	of	rig	days	committed	is	calculated	as	the	ratio of	total	days	committed	under	contracts	and	LOIs,	as	well	as	scheduled	shipyard,	survey	and	mobilization	days	for	all	rigs	in	Diamond	Offshore's	fleet,	to	total	available days	(number	of	rigs	multiplied	by	the	number	of	days	in	a	particular	year).	The	total	available	days	have	been	calculated	based	on	the	expected	final	commissioning date	for	the	Ocean	Valor.

| Year	Ended	December	31 | 2010	(a) | 2011	(a) | 2012 | 2013	-	2016 |
| :--- | :--- | :--- | :--- | :--- |
| High\tspecification\tfloaters | 84.0% | 57.0% | 27.0% | 10.0% |
| Intermediate\tsemisubmersible\trigs | 78.0 | 54.0 | 44.0 | 10.0 |
| Jack-ups | 42.0 | 6.0 |  |  |

(a) Includes	approximately	970	and	80	scheduled	shipyard,	survey	and	mobilization	days	for	2010	and	2011.

# Results	of	Operations

The	following	table	summarizes	the	results	of	operations	for	Diamond	Offshore	for	the	years	ended	December	31,	2009,	2008	and	2007	as	presented	in	Note	23	of the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8:

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Revenues: |  |  |  |
| Contract\tdrilling | \t\t $3,537 | $3,476 | $2,506 |
| Net\tinvestment\tincome | 4 | 12 | 34 |
| Investment\tgains\t(losses) | 1 | 1 | (1) |
| Other\trevenue | 112 | (2) | 77 |
| Total | \t 3,654 | \t 3,487 | \t 2,616 |
| Expenses: |  |  |  |
| Contract\tdrilling | \t 1,224 | \t 1,185 | \t 1,004 |
| Other\toperating | 515 | 448 | 355 |
| Interest | 50 | 10 | 20 |
| Total | \t 1,789 | \t 1,643 | \t 1,379 |
| Income\tbefore\tincome\ttax | \t 1,865 | \t 1,844 | \t 1,237 |
| Income\ttax\texpense | (540) | (582) | (429) |
| Net\tincome | \t 1,325 | \t 1,262 | 808 |
| Amounts\tattributable\tto\tnoncontrolling\tinterests | (682) | (650) | (415) |
| Net\tincome\tattributable\tto\tLoews\tCorporation | \t\t $643 | $612 | $393 |

Revenues	increased	$167	million,	or	4.8%,	and	net	income	increased	$31	million	or	5.1%,	in	2009,	as	compared	to	2008.	During	2009	Diamond	Offshore's contracted	revenue	backlog	partially	mitigated	the	impact	of	the	global	economic	recession	on	its	industry.	However,	Diamond	Offshore's	operating	results	also	reflect the	negative	impact	of	ready	stacking	the	Ocean	Star,	Ocean	Victory,	Ocean	Guardian	and	Ocean	Scepter	for	extended	periods	and	the	cold	stacking	of	three	mat- supported	jack-up	rigs	in	the	U.S.	Gulf	of	Mexico.	In	addition,	the	international	jack-up	market,	which	had	been	strong	throughout	the	majority	of	2008,	also	reflected softening	demand	and	reduced	dayrates	during	2009.

Revenues	from	high	specification	floaters	and	intermediate	semisubmersible	rigs	increased	$128	million	in	2009,	as	compared	to	2008.	Revenues	increased	in 2009,	primarily	due	to	increased	dayrates	of	$120	million	and	utilization	of	$8	million.

Revenues	from	jack-up	rigs	decreased	$68	million	in	2009,	as	compared	to	2008,	due	primarily	to	decreased	utilization	of	$80	million,	partially	offset	by increased	dayrates	of	$12	million	in	2009.

Net	income	increased	in	2009	as	compared	to	2008,	primarily	due	to	the	changes	in	revenues	as	noted	above.	Operating	costs	are	inclusive	of	normal	operating costs	for	the	recently	upgraded	Ocean	Monarch	and	Diamond	Offshore's	new	jack-ups	Ocean	Shield	and	Ocean	Scepter,	as	well	as	contract	preparation,	partially	offset by	lower	operating	costs	resulting	from	the	decline	in	utilization	and	overall	lower	survey	and	related	costs	compared	to	the	prior	period.	Depreciation	expense	increased $59	million	during	2009	due	to	a	higher	depreciable	asset	base.	Interest	expense	increased	in	2009,	by	$40	million	due	to	the	additional	expense	related	to	the	issuance	of 5.9%	senior	notes	in	May	of	2009,	the	issuance	of	5.7%	senior	notes	 in	October	of	2009	and	 the	reduction	of	capitalized	 interest	resulting	from	completion	of construction	projects.

Revenues	increased	by	$871	million,	or	33.3%,	and	net	income	increased	by	$219	million,	or	55.7%,	in	2008,	as	compared	to	2007.	Continued	high	overall utilization	and	historically	high	dayrates	for	Diamond	Offshore's	floater	fleet	contributed	to	an	overall	increase	in	net	income.	In	many	of	the	floater	markets	in	which Diamond	Offshore	operates,	average	realized	dayrates	increased	as	Diamond	Offshore's	rigs	operated	under	contracts	at	higher	dayrates	than	those	earned	during	2007. Diamond	Offshore's	results	for	the	year	ended	December	31,	2008	were	impacted	by	$54	million	in	pretax	losses	on	foreign	currency	forward	exchange	contracts	($37 million	in	net	unrealized	losses	resulting	from	mark-to-market	accounting	on	Diamond	Offshore's	open	positions	at	December	31,	2008	and	$17	million	in	net	realized losses	on	settlement),	which	is	included	in	Other	revenues.

Revenues	from	high	specification	floaters	and	intermediate	semisubmersible	rigs	increased	by	$892	million	in	2008,	as	compared	to	2007.	The	increase	primarily reflects	increased	dayrates	of	$767	million	and	increased	utilization	of	$110	million.

Revenues	from	jack-up	rigs	increased	$79	million	in	2008,	as	compared	to	2007,	due	primarily	 to	 increased	utilization	of	$96	million,	partially	offset	by decreased	dayrates	of	$20	million.	Revenues	were	favorably	impacted	by	an	increase	in	the	recognition	of	mobilization	fees	and	other	operating	revenues,	primarily	for the	Ocean	Scepter,	of	$3	million	in	2008.

Net	income	increased	in	2008,	as	compared	to	2007,	due	to	the	revenue	increases	as	noted	above,	partially	offset	by	increased	contract	drilling	expenses.	Overall cost	increases	for	maintenance	and	repairs	between	the	2008	and	2007	periods	reflect	the	impact	of	high,	sustained	utilization	of	Diamond	Offshore's	drilling	units across	its	fleet,	additional	survey	and	related	maintenance	costs,	contract	preparation	and	mobilization	costs.	Diamond	Offshore's	results	for	2008	also	include	normal operating	costs	for	its	newly	constructed	jack-up	rigs,	the	Ocean	Shield	and	Ocean	Scepter,	that	began	operating	offshore	Malaysia	in	the	second	quarter	of	2008	and offshore	Argentina	during	the	third	quarter	of	2008.	The	increase	in	overall	operating	and	overhead	costs	also	reflects	the	impact	of	higher	prices	throughout	the	offshore drilling	industry	and	its	support	businesses,	including	higher	costs	associated	with	hiring	and	retaining	skilled	personnel	for	Diamond	Offshore's	worldwide	offshore fleet.	Results	for	2008	were	also	adversely	impacted	by	a	$32	million	provision	for	bad	debt	related	to	a	North	Sea	semisubmersible	rig	contracted	to	a	U.K.	customer that	has	entered	into	administration.

Interest	expense	decreased	$10	million	in	2008,	primarily	due	to	the	reduced	interest	expense	and	the	absence	of	a	$9	million	write-off	of	debt	issuance	costs related	to	conversions	of	Diamond	Offshore's	1.5%	debentures	into	common	stock	in	2007.

In	connection	with	a	non-recurring	distribution	of	$850	million	from	a	Diamond	Offshore	foreign	subsidiary,	a	portion	of	which	consisted	of	earnings	of	the subsidiary	that	had	not	previously	been	subjected	to	U.S.	federal	income	tax,	Diamond	Offshore	recognized	$59	million	of	U.S.	federal	income	tax	expense	in	2007.

# HighMount

We	use	the	following	terms	throughout	this	discussion	of	HighMount's	results	of	operations,	with	"equivalent"	volumes	computed	with	oil	and	NGL	quantities converted	to	Mcf,	on	an	energy	equivalent	ratio	of	one	barrel	to	six	Mcf:

HighMount's	revenues,	profitability	and	future	growth	depend	substantially	on	natural	gas	and	NGL	prices	and	HighMount's	ability	to	increase	its	natural	gas	and NGL	production.	In	recent	years,	there	has	been	significant	price	volatility	in	natural	gas	and	NGL	prices	due	to	a	variety	of	factors	HighMount	cannot	control	or predict.	These	factors,

Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations Results	of	Operations	–	HighMount	–	(Continued)

which	 include	weather	conditions,	political	and	economic	events,	and	competition	from	other	energy	sources,	 impact	supply	and	demand	for	natural	gas,	which determines	the	pricing.	In	addition,	the	price	HighMount	realizes	for	its	gas	production	is	affected	by	HighMount's	hedging	activities	as	well	as	locational	differences	in market	prices.	The	level	of	natural	gas	production	is	dependent	upon	HighMount's	ability	to	realize	attractive	returns	on	its	capital	investment	program.	Returns	are affected	by	commodity	prices,	capital	and	operating	costs.

During	2009,	natural	gas	prices	decreased	significantly	compared	to	2008,	due	largely	to	increased	onshore	natural	gas	production,	plentiful	levels	of	working	gas in	storage	and	reduced	demand.	The	increase	in	onshore	natural	gas	production	was	due	largely	to	increased	production	from	"unconventional"	sources	of	natural	gas such	as	shale	gas,	coalbed	methane	and	tight	sandstones,	made	possible	in	recent	years	by	modern	technology	in	creating	extensive	artificial	fractures	around	well	bores and	advances	in	horizontal	drilling	technology.	At	the	same	time,	drilling	costs	remained	high	in	the	first	half	of	2009	and	did	not	decrease	until	late	in	the	third	quarter. In	light	of	these	developments,	HighMount	elected	to	substantially	reduce	its	2009	drilling	activity	earlier	in	the	year	and	implemented	a	limited	drilling	program	in	the second	half	of	the	year.	Also,	as	a	result	of	the	low	natural	gas	prices,	HighMount	elected	to	curtail	production	during	the	third	and	fourth	quarters.	Reduced	drilling activity	and	well	curtailments	negatively	impact	production	volumes.

HighMount's	operating	income,	which	represents	revenues	less	operating	expenses,	is	primarily	affected	by	revenue	factors,	but	is	also	a	function	of	varying levels	of	production	expenses,	production	and	ad	valorem	taxes,	as	well	as	depreciation,	depletion	and	amortization	("DD&A")	expenses.	HighMount's	production expenses	represent	all	costs	incurred	to	operate	and	maintain	wells	and	related	equipment	and	facilities.	The	principal	components	of	HighMount's	production	expenses are,	among	other	things,	direct	and	indirect	costs	of	labor	and	benefits,	repairs	and	maintenance,	materials,	supplies	and	fuel.	HighMount's	production	and	ad	valorem taxes	increase	primarily	when	prices	of	natural	gas	and	NGLs	increase,	but	they	are	also	affected	by	changes	in	production,	as	well	as	appreciated	property	values. HighMount	calculates	depletion	using	the	units-of-production	method,	which	depletes	the	capitalized	costs	and	future	development	costs	associated	with	evaluated properties	based	on	the	ratio	of	production	volumes	for	the	current	period	to	total	remaining	reserve	volumes	for	the	evaluated	properties.	HighMount's	depletion expense	 is	 affected	 by	 its	 capital	 spending	 program	 and	 projected	 future	 development	 costs,	 as	 well	 as	 reserve	 changes	 resulting	 from	 drilling	 programs,	 well performance,	and	revisions	due	to	changing	commodity	prices.

As	part	of	the	acquisition	of	exploration	and	production	assets	from	Dominion	Resources,	Inc.	in	July	of	2007,	HighMount	assumed	an	obligation	to	deliver specified	quantities	of	natural	gas	under	previously	existing	Volumetric	Production	Payment	("VPP")	agreements,	which	expired	in	February	of	2009.	Natural	gas	sales and	production	costs	related	to	the	VPP	agreements	were	not	recognized	in	HighMount's	results.	Upon	expiration	of	the	VPP	agreements,	HighMount	recognized additional	gas	sales	volume	of	7.9	Bcf	and	the	related	production	costs	during	the	year	ended	December	31,	2009.

# Results	of	Operations	–	HighMount	–	(Continued)

Presented	below	are	production	and	sales	statistics	related	to	HighMount's	operations	for	the	years	ended	December	31,	2009,	2008	and	2007:

| Year	Ended	December	31 | 2009 | 2008 | 2007	(a) |
| :--- | :--- | :--- | :--- |
| Gas\tproduction\t(Bcf) | 77.0 | 78.9 | 34.0 |
| Gas\tsales\t(Bcf) | 70.8 | 72.5 | 31.4 |
| Oil\tproduction/sales\t(Mbbls) | 363.0 | 351.3 | 114.0 |
| NGL\tproduction/sales\t(Mbbls) | \t 3,315.9 | \t 3,507.4 | \t 1,512.9 |
| Equivalent\tproduction\t(Bcfe) | 99.0 | 102.0 | 43.8 |
| Equivalent\tsales\t(Bcfe) | 92.9 | 95.7 | 41.2 |
| Average\trealized\tprices\twithout\thedging\tresults: |  |  |  |
| Gas\t(per\tMcf) | $3.72 | $8.25 | $5.95 |
| NGL\t(per\tBbl) | 30.07 | 51.26 | 51.02 |
| Oil\t(per\tBbl) | 55.37 | 95.26 | 83.37 |
| Equivalent\t(per\tMcfe) | 4.13 | 8.48 | 6.65 |
| Average\trealized\tprices\twith\thedging\tresults: |  |  |  |
| Gas\t(per\tMcf) | $6.94 | $7.71 | $6.00 |
| NGL\t(per\tBbl) | 30.98 | 47.73 | 46.41 |
| Oil\t(per\tBbl) | 55.37 | 95.26 | 83.37 |
| Equivalent\t(per\tMcfe) | 6.61 | 7.94 | 6.51 |
| Average\tcost\tper\tMcfe: |  |  |  |
| Production\texpenses | $1.10 | $1.04 | $0.89 |
| Production\tand\tad\tvalorem\ttaxes | 0.36 | 0.70 | 0.54 |
| General\tand\tadministrative\texpenses | 0.58 | 0.69 | 0.58 |
| Depletion\texpense | 0.98 | 1.58 | 1.41 |

The	following	table	summarizes	the	results	of	operations	for	HighMount	for	the	years	ended	December	31,	2009,	2008	and	2007	as	presented	in	Note	23	of	the Notes	to	Consolidated	Financial	Statements	included	in	Item	8.

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007	(a) |
| :--- | :--- | :--- | :--- |
| Revenues: |  |  |  |
| Other\trevenue,\tprimarily\toperating | $620 | $770 | $274 |
| Investment\tgains |  |  | 32 |
| Total | 620 | 770 | 306 |
| Expenses: |  |  |  |
| Impairment\tof\tnatural\tgas\tand\toil\tproperties | \t 1,036 | 691 |  |
| Impairment\tof\tgoodwill |  | 482 |  |
| Operating | 343 | 411 | 150 |
| Interest | 80 | 76 | 32 |
| Total | \t 1,459 | \t 1,660 | 182 |
| Income\t(loss)\tbefore\tincome\ttax | (839) | (890) | 124 |
| Income\ttax\t(expense)\tbenefit | 302 | 315 | (46) |
| Net\tincome\t(loss)\tattributable\tto\tLoews\tCorporation | $(537) | $(575) | $78 |

HighMount's	revenues	decreased	by	$150	million	to	$620	million	in	2009,	compared	to	$770	million	for	2008.	This	decrease	was	primarily	due	to	lower commodity	prices	which	decreased	revenues	by	$405	million,	partially	offset	by	an	increase	of	$282	million	due	to	the	effect	of	HighMount's	hedging	activities. HighMount	had	hedges	in	place	as	of	December	31,	2009	that	covered	approximately	64.0%	and	35.0%	of	HighMount's	total	estimated	2010	and	2011	natural	gas equivalent	production	at	a	weighted	average	price	of	$6.43	and	$6.49	per	Mcfe.	HighMount	sales	volumes	were	92.9	Bcfe	in	2009	compared	to	95.7	Bcfe	during	2008. This	decrease	reflects	the	reduction	in	HighMount's	drilling	activity	beginning	in	late	2008	and	production	curtailments	during	the	third	and	fourth	quarters	of	2009, partially	offset	by	the	expiration	of	the	VPP	agreements	in	2009.

In	the	first	quarter	of	2009,	HighMount	recorded	a	non-cash	ceiling	test	impairment	charge	of	$1,036	million	($660	million	after	tax)	related	to	the	carrying	value of	its	natural	gas	and	oil	properties.	The	write-down	was	the	result	of	declines	in	commodity	prices.	Had	the	effects	of	HighMount's	cash	flow	hedges	not	been considered	in	calculating	the	ceiling	limitation,	the	impairment	would	have	been	$1,230	million	($784	million	after	tax).

Operating	expenses	primarily	consist	of	production	expenses,	production	and	ad	valorem	taxes,	general	and	administrative	costs	and	DD&A.	Operating	expenses decreased	by	$68	million	to	$343	million	in	2009,	compared	to	$411	million	in	2008.	In	2009,	HighMount	elected	to	terminate	contracts	for	five	drilling	rigs	at	its Permian	Basin	properties	in	the	Sonora,	Texas	area	and	reduce	its	2009	drilling	activity	which	has	reduced	production	volumes.	The	fee	for	exercising	this	early termination	right	of	$23	million	was	charged	to	Operating	expenses.	Operating	expenses	in	2009	also	included	a	$10	million	impairment	charge	related	to	a	decline	in the	market	value	of	tubular	goods	inventory.

Production	expenses	totaled	$102	million	during	2009,	compared	to	$99	million	in	2008.	The	increase	in	production	expense	of	$3	million	was	primarily	due	to $11	million	in	additional	costs	recognized	as	a	result	of	the	expiration	of	the	VPP	agreements	in	February	of	2009,	largely	offset	by	an	$8	million	decrease	due	to	cost cutting	efforts.	Production	expenses	on	a	per	unit	basis	were	$1.10	in	2009	compared	to	$1.04	in	2008.	Production	and	ad	valorem	taxes	were	$33	million	and	$67 million	for	2009	and	2008.	The	decrease	of	$34	million	was	due	primarily	to	decreased	production	taxes	as	a	result	of	lower	natural	gas	and	NGL	prices	during	2009. Production	and	ad	valorem	taxes	were	$0.36	per	Mcfe	in	2009	compared	to	$0.70	per	Mcfe	in	2008.	General	and	administrative	expenses	declined	to	$56	million	during 2009,	compared	to	$68	million	during	2008	primarily	due	to	a	decrease	in	compensation	related	expenses.

DD&A	expenses	declined	to	$119	million	in	2009	from	$177	million	in	2008.	DD&A	expenses	included	depletion	of	natural	gas	and	NGL	properties	of	$97 million	and	$162	million	for	2009	and	2008.	HighMount's	depletion	rate	per	Mcfe	decreased	by	$0.60	per	Mcfe	to	$0.98	per	Mcfe	in	2009,	compared	to	$1.58	per	Mcfe in	2008	primarily	due	to	impairments	of	natural	gas	and	oil	properties	recorded	in	December	of	2008	and	March	of	2009,	as	well	as	lower	projected	future	development costs.

HighMount	commenced	operations	on	July	31,	2007,	when	it	acquired	certain	exploration	and	production	assets,	and	assumed	certain	related	obligations,	from subsidiaries	of	Dominion	Resources,	Inc.	Prior	to	the	acquisition,	natural	gas	forwards	were	entered	into	in	order	to	manage	the	commodity	price	risk	of	the	natural	gas assets	to	be	acquired.	The	mark-to-market	adjustments	related	to	these	forwards	have	been	reflected	as	investment	gains	in	our	results	of	operations.	Concurrent	with	the closing	of	the	acquisition,	these	forwards	were	designated	as	hedges	and	included	in	HighMount's	operating	results	or	Accumulated	other	comprehensive	income	(loss) on	the	Consolidated	Balance	Sheet.

HighMount's	revenues	increased	by	$464	million	to	$770	million	in	2008,	compared	to	$306	million	for	2007.	HighMount	commenced	operations	on	July	31, 2007.	This	increase	was	primarily	due	to	the	increase	in	volumes	sold	of	54.5	Bcfe,	which	increased	revenues	by	$362	million,	as	well	as	higher	average	commodity prices	in	2008	compared	to	2007,	which	contributed	another	$176	million	to	the	increase	in	revenues.	The	increase	in	revenue	due	to	higher	volumes	and	prices	was offset	by	a	decrease	of	$46	million	due	to	the	effect	of	HighMount's	hedging	activities.

At	December	31,	2008,	HighMount	recorded	a	non-cash	ceiling	test	impairment	charge	of	$691	million	($440	million	after	tax)	related	to	the	carrying	value	of	its natural	gas	and	oil	properties.	The	write-down	was	the	result	of	declines	in	commodity	prices	and	negative	revisions	in	HighMount's	proved	reserve	quantities	during 2008.	The	negative	revisions

were	primarily	a	result	of	lower	commodity	prices.	Had	the	effects	of	HighMount's	cash	flow	hedges	not	been	considered	in	calculating	the	ceiling	limitation,	the impairment	would	have	been	$873	million	($555	million	after	tax).

At	December	31,	2007,	HighMount	had	$1,061	million	of	goodwill	recorded	in	conjunction	with	its	acquisition	of	certain	exploration	and	production	assets	from subsidiaries	of	Dominion	Resources,	Inc.	HighMount	typically	performs	its	annual	goodwill	test	for	impairment	each	April	30th	and	no	impairment	was	determined	at April	30,	2008.	During	the	second	half	of	2008,	severe	disruptions	in	the	credit	and	capital	markets,	reductions	in	global	economic	activity	and	increased	supplies	of domestic	natural	gas	from	unconventional	gas	plays	caused	natural	gas	and	NGL-related	commodity	prices	to	decrease	sharply,	resulting	in,	among	other	things,	the ceiling	 test	 impairment	discussed	above.	As	a	result,	HighMount	performed	a	goodwill	 impairment	 test	as	of	December	31,	2008,	determined	 that	 there	was	an impairment	of	goodwill	and	recorded	a	non-cash	impairment	charge	of	$482	million	($314	million	after	tax).

Production	expenses	totaled	$99	million,	or	$1.04	per	Mcfe	sold	during	2008,	compared	to	$37	million,	or	$0.89	per	Mcfe	sold	in	2007.	The	increase	in production	expense	of	$62	million	was	primarily	due	to	the	increase	in	volumes	sold	totaling	$49	million	and	$13	million	primarily	due	to	a	higher	cost	environment.

Production	and	ad	valorem	taxes	were	$67	million	and	$22	million	for	2008	and	2007.	The	increase	of	$45	million	was	due	primarily	to	increased	production taxes	as	a	result	of	higher	natural	gas	and	NGL	prices	during	2008,	increased	production	and	appreciated	property	values.	Production	and	ad	valorem	taxes	were	$0.70 per	Mcfe	in	2008	as	compared	to	$0.54	per	Mcfe	in	2007.	General	and	administrative	expenses,	which	consist	primarily	of	compensation	related	costs,	increased	by	$44 million	to	$68	million	during	2008,	compared	to	$24	million	during	2007,	primarily	due	to	the	fact	that	the	2007	comparative	period	represents	five	months	of	activity, compared	to	twelve	months	of	activity	in	2008.	General	and	administrative	expense	increased	on	a	per	Mcfe	basis	from	$0.58	in	2007	to	$0.69	in	2008	primarily	due	to increased	headcount	and	compensation	related	expenses.

DD&A	expenses	increased	by	$110	million	to	$177	million	for	2008	as	compared	to	$67	million	for	2007.	DD&A	expenses	included	depletion	of	natural	gas	and NGL	properties	of	$162	million	and	$62	million	for	2008	and	2007.	Depletion	expense	increased	by	$100	million	in	2008,	compared	to	2007,	due	primarily	to	an	$82 million	increase	from	higher	production	volumes	and	$18	million	due	to	higher	depletion	expense	per	Mcfe.	HighMount's	depletion	rate	per	Mcfe	increased	by	$0.17 per	Mcfe	to	$1.58	per	Mcfe	in	2008,	compared	to	$1.41	per	Mcfe	in	2007.	The	increase	on	a	per	unit	basis	was	primarily	due	to	higher	capital	costs	throughout	2008	and higher	projected	future	development	costs,	reflecting	higher	costs	particularly	for	steel	and	diesel	fuel,	and	other	economic	conditions.

# Boardwalk	Pipeline

Boardwalk	Pipeline	derives	revenues	primarily	from	the	interstate	transportation	and	storage	of	natural	gas	for	third	parties.	Transportation	services	consist	of firm	transportation,	whereby	the	customer	pays	a	capacity	reservation	charge	to	reserve	pipeline	capacity	at	certain	receipt	and	delivery	points	along	pipeline	systems, plus	a	commodity	and	fuel	charge	on	the	volume	of	natural	gas	actually	transported,	and	interruptible	transportation,	whereby	the	customer	pays	to	transport	gas	only when	capacity	is	available	and	used.	Boardwalk	Pipeline	offers	firm	storage	services	in	which	the	customer	reserves	and	pays	for	a	specific	amount	of	storage	capacity, including	injection	and	withdrawal	rights,	and	interruptible	storage	and	parking	and	lending	("PAL")	services	where	the	customer	receives	and	pays	for	capacity	only when	it	is	available	and	used.	Some	PAL	agreements	are	paid	for	at	inception	of	the	service	and	revenues	for	these	agreements	are	recognized	as	service	is	provided	over the	term	of	the	agreement.	For	the	year	ended	December	31,	2009,	the	percentage	of	Boardwalk	Pipeline's	total	operating	revenues	associated	with	firm	contracts	was approximately	89.0%.

Boardwalk	Pipeline	is	not	in	the	business	of	buying	and	selling	natural	gas	other	than	for	system	management	purposes,	but	changes	in	the	price	of	natural	gas	can affect	the	overall	supply	and	demand	of	natural	gas,	which	in	turn	can	affect	its	results	of	operations.	Boardwalk	Pipeline's	business	is	affected	by	trends	involving natural	gas	price	levels	and	natural	gas	price	spreads,	including	spreads	between	physical	locations	on	its	pipeline	system,	which	affect	transportation	revenues,	and spreads	in	natural	gas	prices	across	time	(for	example	summer	to	winter),	which	primarily	affects	its	storage	and	PAL	revenues.

A	significant	portion	of	Boardwalk	Pipeline's	operating	revenues	are	derived	from	reservation	charges	under	multi-year	firm	contracts.	For	the	year	ended December	31,	2009,	74.0%	of	Boardwalk	Pipeline's	operating	revenues	were

Results	of	Operations	–	Boardwalk	Pipeline	–	(Continued)

associated	with	reservation	charges	under	firm	contracts	which	do	not	vary	based	on	capacity	utilization.	As	of	December	31,	2009,	the	weighted	average	contract	life	of Boardwalk	Pipeline's	contracts	was	approximately	5.9	years.	Boardwalk	Pipeline's	business	can	be	impacted	by	shifts	in	supply	and	demand	dynamics,	the	mix	of services	requested	by	customers	and	by	competition	and	regulatory	requirements,	particularly	when	accompanied	by	downturns	or	sluggishness	 in	 the	economy, especially	over	a	longer	term.

Boardwalk	Pipeline	competes	with	numerous	interstate	and	intrastate	pipelines	throughout	its	service	territory	to	provide	transportation	and	storage	services	for	its customers.	Despite	these	competitive	conditions,	substantially	all	of	Boardwalk	Pipeline's	operating	capacity	is	contracted	for	under	long-term	firm	agreements.	In 2010,	firm	contracts	representing	approximately	$101	million	of	annual	reservation	charges	are	due	to	expire,	of	which	approximately	$55	million	has	been	recontracted for	as	of	February	16,	2010.	In	2009,	Boardwalk	Pipeline	was	successful	in	renewing	and	remarketing	firm	contracts	representing	approximately	$113	million	of	annual reservation	charges	that	were	due	to	expire	during	that	year,	in	many	cases	obtaining	favorable	rates	and	extended	contract	terms.	Boardwalk	Pipeline's	ability	to remarket	available	capacity	will	be	impacted	by	competition	from	other	pipelines,	natural	gas	price	volatility,	the	price	differential	between	locations	on	its	pipeline systems,	the	economic	slowdown	and	numerous	other	factors	beyond	its	control.

Many	of	Boardwalk	Pipeline's	producer	customers	have	been	negatively	impacted	by	recent	declines	in	natural	gas	prices	which	although	remaining	elevated from	historical	levels,	have	decreased	substantially	from	the	peak	levels	reached	during	the	summer	of	2008.	This	decline	in	prices	has	caused	several	of	Boardwalk Pipeline's	producer	customers	to	announce	plans	to	decrease	drilling	levels	and,	in	some	cases,	to	consider	shutting	in	natural	gas	production	from	some	producing wells,	which	could	adversely	affect	the	volumes	of	natural	gas	Boardwalk	Pipeline	can	transport.	The	majority	of	Boardwalk	Pipeline's	revenues	are	derived	from capacity	reservation	charges	that	are	not	impacted	by	the	volume	of	natural	gas	transported;	however,	smaller	portions	of	Boardwalk	Pipeline's	revenues	are	derived from	charges	based	on	actual	volumes	transported	under	firm	and	interruptible	services.	For	example,	in	2009,	approximately	26.0%	of	Boardwalk	Pipeline's	revenues were	 derived	 from	 charges	 based	 on	 actual	 volumes	 transported.	 Lower	 volumes	 of	 natural	 gas	 transported	 would	 result	 in	 lower	 revenues	 from	 natural	 gas transportation	operations.	Based	on	the	significant	level	of	revenue	Boardwalk	Pipeline	receives	from	reservation	capacity	charges	under	long-term	contracts	and Boardwalk	Pipeline's	review	of	the	recent	announcements	of	drilling	plans	by	its	customers,	Boardwalk	Pipeline	does	not	expect	the	current	level	of	natural	gas	prices	to have	a	significant	adverse	effect	on	its	operating	results.	However,	Boardwalk	Pipeline	cannot	give	assurances	that	this	will	be	the	case,	or	that	commodity	prices	will not	decline	further,	which	could	result	in	a	further	reduction	in	drilling	activities	by	its	customers.

In	addition,	spreads	in	natural	gas	prices	between	time	periods,	such	as	winter	to	summer,	impact	Boardwalk	Pipeline's	PAL	and	interruptible	storage	revenues. These	period	to	period	price	spreads	were	favorable	in	2009	resulting	in	an	increase	in	PAL	and	interruptible	storage	revenues	as	compared	with	the	2008	and	2007 periods.	Boardwalk	Pipeline	cannot	predict	future	time	period	spreads	or	basis	differentials.

# Expansion	and	Growth	Projects

An	abundance	of	recent	natural	gas	supply	discoveries	in	the	Bossier	Sands,	Barnett	Shale,	Haynesville	Shale,	Fayetteville	Shale	and	Caney	Woodford	Shale producing	regions	has	formed	the	basis	for	the	recent	expansion	of	Boardwalk	Pipeline's	pipeline	system.	Boardwalk	Pipeline	recently	added	approximately	1,000	miles of	pipeline	to	its	existing	systems	by	completing	the	following	projects:	the	East	Texas	Pipeline,	the	Southeast	Expansion,	the	Gulf	Crossing	Project	and	the	Fayetteville and	Greenville	Laterals.

For	the	East	Texas	Pipeline,	Southeast	Expansion,	Gulf	Crossing	Pipeline	and	the	Fayetteville	Lateral,	Boardwalk	Pipeline	has	entered	into	firm	transportation contracts	with	shippers	which	would	utilize	the	maximum	capacity	available	from	operating	at	higher	than	normal	operating	pressures	(up	to	0.80	of	the	pipe's	SMYS, which	increases	the	peak-day	transmission	capacity	of	the	pipeline	as	opposed	to	the	normal	operating	pressure	of	up	to	0.72	SMYS).	PHMSA	retains	discretion	as	to whether	to	grant,	or	to	maintain,	the	authority	to	operate	a	pipeline	at	higher	than	normal	operating	pressures.	Absent	the	receipt	and	maintenance	of	authority	from PHMSA	to	operate	at	higher	than	normal	operating	pressures,	Boardwalk	Pipeline	would	not	be	able	to	transport	all	of	the	contracted	quantities	of	natural	gas	on	these pipelines.

While	completing	the	requirements	to	operate	the	East	Texas	Pipeline,	Southeast	Expansion,	Gulf	Crossing	Pipeline	and	the	Fayetteville	Lateral	at	higher	than normal	operating	pressures,	Boardwalk	Pipeline	discovered	anomalies	in	certain	pipeline	segments	on	each	of	the	projects.	Accordingly,	Boardwalk	Pipeline	reduced	the operating	pressures	on	each	pipeline	below	normal	operating	pressures	as	Boardwalk	Pipeline	performed	additional	testing	procedures,	remediated	the	anomalies	and continued	to	seek	authority	from	PHMSA	to	increase	operating	pressures,	first	to	normal	operating	pressures	and	subsequently	to	higher	than	normal	operating	pressures under	the	special	permits.	Boardwalk	Pipeline	also	shut	down	pipeline	segments	for	periods	of	time	to	remediate	anomalies.

The	pressure	reductions	and	shutdowns	that	were	undertaken	to	remediate	anomalies	on	the	expansion	pipeline	projects	have	reduced	throughput	and	adversely impacted	transportation	revenues,	net	income	and	cash	flows	during	2009.	At	the	same	time,	operating	costs	and	expenses,	particularly	depreciation	and	property	taxes, increased	in	2009	due	to	costs	associated	with	the	expansion	project	pipelines	being	placed	into	service.

In	December	of	2009,	Boardwalk	Pipeline	received	authority	from	PHMSA	to	operate	the	East	Texas	Pipeline,	Southeast	Expansion	and	Gulf	Crossing	Project (42-inch	pipeline	expansion	projects)	under	special	permits	that	would	allow	each	of	these	pipelines	to	operate	at	higher	than	normal	operating	pressures.	Boardwalk Pipeline	continues	to	work	with	PHMSA	to	obtain	the	authority	to	operate	the	Fayetteville	Lateral	at	the	higher	than	normal	operating	pressures.	Unless	Boardwalk Pipeline	obtains	PHMSA's	consent	to	increase	operating	pressures	for	the	Fayetteville	Lateral	to	higher	than	normal	levels	under	the	special	permit,	transportation revenues	would	not	grow	to	the	extent	that	Boardwalk	Pipeline	had	originally	expected,	beginning	in	mid-2011,	as	the	volume	commitments	on	the	Fayetteville	Lateral under	existing	firm	contracts	increase.	Absent	authority	to	operate	the	Fayetteville	Lateral	at	higher	than	normal	operating	pressures,	Boardwalk	Pipeline	could	also incur	additional	costs	for	system	upgrades	on	that	project	to	increase	capacity	to	meet	contracted	volume	commitments.

See	Item	1A,	Risk	Factors	–	Boardwalk	Pipeline	needs	to	obtain	and	maintain	authority	from	PHMSA	to	operate	at	higher	than	normal	operating	pressures	for related	information.

Set	forth	below	is	information	with	respect	to	the	status	of	each	of	Boardwalk	Pipeline's	expansion	and	growth	projects.

East	Texas	Pipeline.		Portions	of	this	pipeline	were	shut	down	for	periods	of	time	in	May	and	July	of	2009,	during	which	time	Boardwalk	Pipeline	completed	the requisite	anomaly	remediation.	In	December	of	2009,	Boardwalk	Pipeline	received	authority	from	PHMSA	to	operate	the	East	Texas	pipeline	at	higher	than	normal operating	pressures,	which	provides	a	peak-day	transmission	capacity	of	1.4	Bcf	per	day.	Upon	the	completion	of	the	Haynesville	Project	described	below,	the	peak-day transmission	capacity	of	this	pipeline	is	expected	to	be	2.0	Bcf	per	day.

Southeast	Expansion.		Portions	of	this	pipeline	were	shut	down	for	periods	of	time	in	May	and	July	of	2009,	during	which	time	Boardwalk	Pipeline	completed	the requisite	anomaly	remediation.	In	December	of	2009,	Boardwalk	Pipeline	received	authority	from	PHMSA	to	operate	the	Southeast	Expansion	pipeline	at	higher	than normal	operating	pressures,	which	provides	a	designated	peak-day	transmission	capacity	of	1.9	Bcf	per	day.

Gulf	Crossing	Project.		The	Gulf	Crossing	Project	was	shut	down	the	entire	month	of	June	of	2009,	during	which	time	Boardwalk	Pipeline	completed	the	requisite anomaly	remediation.	In	December	of	2009,	Boardwalk	Pipeline	received	authority	from	PHMSA	to	operate	the	Gulf	Crossing	Project	pipeline	at	higher	than	normal operating	pressures,	which	provides	a	peak-day	transmission	capacity	of	1.4	Bcf	per	day.	Boardwalk	Pipeline	expects	to	increase	the	peak-day	transmission	capacity	of this	pipeline	to	approximately	1.7	Bcf	per	day,	by	adding	compression	in	the	first	quarter	of	2010,	which	has	been	approved	by	FERC.

Fayetteville	and	Greenville	Laterals.		During	the	third	quarter	of	2009,	the	initial	testing	of	the	Fayetteville	and	Greenville	Laterals	was	completed	and	it	was determined	that	approximately	1.0%	of	the	pipeline	joints	contained	anomalies.	In	September	and	October	of	2009,	portions	of	the	Fayetteville	and	Greenville	Laterals were	shut	down	in	order	to	remediate	anomalies.	Effective	October	8,	2009,	Boardwalk	Pipeline	received	authority	from	PHMSA	to	operate	the	Fayetteville	and Greenville	Laterals	at	normal	operating	pressures,	which	has	enabled	Boardwalk	Pipeline	to	meet	its	current	contractual	obligations	of	approximately	0.8	Bcf	per	day	for the	Fayetteville	Lateral	and	0.4	Bcf	per	day	for	the	Greenville	Lateral.	Boardwalk	Pipeline	continues	to	seek	authority	to	operate	the	Fayetteville	Lateral	at	the	higher than	normal	operating	pressures.	Until	Boardwalk	Pipeline	has	obtained	PHMSA's	consent	to	increase	operating	pressures	to

higher	than	normal	levels	under	the	special	permit,	it	will	not	be	able	to	operate	that	pipeline	at	its	anticipated	peak-day	transmission	capacity	as	contracted	volumes increase	in	the	future.	The	Greenville	Lateral	was	constructed	to	operate	at	normal	operating	pressures	and	Boardwalk	Pipeline	is	not	seeking	the	authority	to	operate	that pipeline	at	higher	than	normal	operating	pressures	under	a	special	permit.

In	 January	 of	 2010,	 Boardwalk	 Pipeline	 added	 compression	 facilities	 that	 increased	 peak-day	 delivery	 capacity	 to	 approximately	 1.0	 Bcf	 per	 day	 on	 the Greenville	Lateral	and	approximately	1.1	Bcf	per	day	on	the	Fayetteville	Lateral.	The	designed	peak-day	delivery	capacity	of	the	Fayetteville	Lateral	is	approximately 1.3	Bcf	per	day	once	the	authority	to	operate	the	Fayetteville	Lateral	at	higher	than	normal	operating	pressures	is	received	from	PHMSA	or	Boardwalk	Pipeline completes	other	system	upgrades	on	that	project.	The	increase	in	capacity	to	1.3	Bcf	per	day	will	be	needed	to	meet	contractual	commitments	that	will	be	in	effect	in mid-2011.

Haynesville	Project.		The	Haynesville	Project	consists	of	adding	compression	to	the	East	Texas	pipeline	in	Louisiana,	which	will	add	approximately	0.6	Bcf	per day	of	peak-day	transmission	capacity	with	delivery	capabilities	from	the	DeSoto,	Louisiana,	area	to	the	Perryville,	Louisiana	area.	Boardwalk	Pipeline	recently	received FERC	approval	for	this	expansion,	which	it	anticipates	will	be	in	service	in	late	2010.	Customers	have	contracted	for	substantially	all	of	the	capacity	on	this	project	at	a weighted-average	contract	life	of	approximately	12.2	years.

Clarence	Compression	Project.		The	Clarence	Compression	Project,	which	also	targets	production	from	the	Haynesville	Shale,	will	add	approximately	0.1	Bcf	per day	of	peak-day	transmission	capacity.	This	project	will	receive	gas	from	the	Holly	Field	area	in	Northwest	Louisiana,	and	deliver	to	a	point	near	Olla,	Louisiana. Customers	have	contracted	for	approximately	0.1	Bcf	per	day	of	capacity	with	a	weighted-average	contract	life	of	approximately	11.0	years.	The	compression	is expected	to	be	in	service	in	late	2011,	subject	to	FERC	approval.

Western	Kentucky	Storage	Expansion	Project.		Boardwalk	Pipeline	has	completed	Phase	III	of	the	western	Kentucky	storage	expansion	project,	which	consisted of	developing	approximately	8.3	Bcf	of	new	storage	working	gas	capacity.	Customers	have	contracted	for	all	of	the	available	capacity.	Approximately	5.4	Bcf	of capacity	was	placed	into	service	in	2008	and	Boardwalk	Pipeline	placed	the	remaining	capacity	into	service	in	October	of	2009.	The	total	capital	cost	of	this	project	was $69	million.

The	following	table	summarizes	the	results	of	operations	for	Boardwalk	Pipeline	for	the	years	ended	December	31,	2009,	2008	and	2007	as	presented	in	Note	23 of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8:

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Revenues: |  |  |  |
| Other\trevenue,\tprimarily\toperating | \t\t $910 | $845 | $650 |
| Net\tinvestment\tincome |  | 3 | 21 |
| Total | \t 910 | \t 848 | \t 671 |
| Expenses: |  |  |  |
| Operating | \t 621 | \t 498 | \t 381 |
| Interest | \t 132 | 58 | 61 |
| Total | \t 753 | \t 556 | \t 442 |
| Income\tbefore\tincome\ttax | \t 157 | \t 292 | \t 229 |
| Income\ttax\texpense | (44) | (79) | (68) |
| Net\tincome | \t 113 | \t 213 | \t 161 |
| Amounts\tattributable\tto\tnoncontrolling\tinterests | (46) | (88) | (55) |
| Net\tincome\tattributable\tto\tLoews\tCorporation | \t\t $67 | $125 | $106 |

Total	revenues	increased	$62	million	to	$910	million	in	2009,	compared	to	$848	million	for	2008.	Gas	transportation	revenues,	excluding	fuel,	increased	$152 million,	primarily	from	Boardwalk	Pipeline's	expansion	projects.	PAL	revenues	increased	$19	million	due	to	increased	parking	opportunities	and	favorable	summer-to- summer	natural	gas	price	spreads.	These	increases	were	partially	offset	by	lower	fuel	revenues	of	$53	million	due	to	unfavorable	natural	gas	prices.	The	2008	period	was favorably	impacted	by	gains	of	$35	million	on	the	sale	of	gas	related	to	the	western	Kentucky	storage	expansion,	$17	million	from	the	disposition	of	coal	reserves	and $11	million	from	the	settlement	of	a	contract	claim.

Operating	expenses	increased	$123	million	to	$621	million	in	2009,	compared	to	$498	million	for	2008	primarily	due	to	higher	depreciation	and	property	taxes	of $116	million	associated	with	a	larger	asset	base	from	expansion.	Operations	and	maintenance	expenses	increased	$13	million	primarily	from	increased	maintenance projects	and	expansion	related	operations.	Administrative	and	general	expenses	increased	$11	million	mainly	due	to	increases	in	employee	benefits	as	a	result	of	lower returns	on	trust	assets	for	pension	and	post-retirement	benefit	plans,	and	increases	in	unit-based	compensation	from	an	increase	in	the	price	of	Boardwalk	Pipeline's common	units.	Operations	and	maintenance	expenses	and	losses	on	disposal	of	assets	were	$8	million	higher	due	to	pipeline	investigation	and	retirement	costs	related	to the	East	Texas	Pipeline.	These	increases	were	partially	offset	by	a	decrease	in	fuel	and	gas	transportation	expenses	of	$41	million	primarily	as	a	result	of	lower	natural gas	prices.	The	2008	period	was	favorably	impacted	by	a	gain	of	$7	million	due	to	a	change	in	the	employee	paid	time-off	policy	which	resulted	in	a	reserve	reversal. Interest	expense	increased	$74	million	resulting	from	lower	capitalized	interest	associated	with	placing	expansion	projects	in	service	and	higher	debt	levels	in	2009.

Net	income	decreased	$58	million	to	$67	million	in	2009,	compared	to	$125	million	for	2008	primarily	due	to	higher	operating	expenses,	mainly	as	a	result	of increases	in	depreciation	and	property	taxes	associated	with	the	expansion	projects.	The	increase	in	expenses	more	than	offset	the	increase	in	revenues	from	the expansion	projects,	which	were	approximately	$122	million	lower	than	expected	due	to	operating	the	expansion	pipelines	at	reduced	operating	pressures	and	portions	of the	expansion	pipelines	being	shut	down	for	periods	of	time	during	2009.	The	2008	period	was	favorably	impacted	by	gains	of	$70	million	from	the	disposition	of	coal reserves,	gas	sales	associated	with	storage	expansion,	a	change	in	the	employee	paid	time-off	policy	and	the	settlement	of	a	contract	claim.

Total	revenues	increased	$177	million	to	$848	million	in	2008,	compared	to	$671	million	for	2007.	Gas	transportation	revenues,	excluding	fuel,	increased	$112 million,	primarily	from	Boardwalk	Pipeline's	expansion	projects	and	higher	no-notice	transportation	service	and	interruptible	services	on	its	existing	assets.	Fuel revenues	increased	$44	million	due	to	expansion-related	throughput	and	higher	natural	gas	prices.	Gas	storage	revenues	increased	$12	million	related	to	an	increase	in storage	capacity	associated	with	Boardwalk	Pipeline's	western	Kentucky	storage	expansion	project.	These	increases	were	partially	offset	by	lower	PAL	revenues	of	$27 million	due	to	unfavorable	natural	gas	price	spreads.	Favorably	impacting	2008	was	a	$17	million	gain	on	the	disposition	of	coal	reserves,	an	$11	million	gain	from	the settlement	of	a	contract	claim	and	a	$12	million	increase	in	gains	on	the	sale	of	gas	related	to	the	western	Kentucky	storage	expansion.

Operating	expenses	increased	$117	million	to	$498	million	in	2008,	compared	to	$381	million	for	2007	primarily	due	to	increased	depreciation	and	property	taxes of	$56	million	associated	with	a	larger	asset	base	from	expansion,	increased	fuel	costs	of	$50	million	mainly	from	providing	service	on	the	expansion	projects	and	higher natural	gas	prices	and	$6	million	of	 third	party	 transportation	costs	associated	with	providing	customers	of	 the	expansion	projects	access	 to	off-system	markets. Administrative	and	general	expenses	increased	$5	million	due	to	increased	outside	services	mainly	due	to	legal	matters,	information	technology-related	expenses	from infrastructure	improvements,	corporate	services,	higher	property	insurance	from	an	increase	in	rates	and	asset	base	and	a	bad	debt	recovery	that	favorably	impacted	the 2007	period.	Additionally,	in	the	fourth	quarter	of	2008,	Boardwalk	Pipeline	changed	its	employee	paid	time-off	benefits,	resulting	in	a	reduction	in	operation	and maintenance	expenses	of	$5	million	and	a	reduction	of	administrative	and	general	expenses	of	$2	million.	The	2007	period	was	unfavorably	impacted	by	a	$15	million impairment	charge	related	to	Boardwalk	Pipeline's	Magnolia	storage	project.

Net	income	increased	$19	million	to	$125	million	in	2008,	compared	to	$106	million	for	2007,	primarily	due	to	higher	revenues	from	services	associated	with	the expansion	projects	and	gains	from	the	disposition	of	coal	reserves,	gas	sales	associated	with	the	storage	expansion	and	the	settlement	of	a	contract	claim.	These	increases were	partially	offset	by	lower	PAL	revenues	due	to	unfavorable	natural	gas	price	spreads	and	higher	depreciation	and	property	tax	expense	due	to	an	increase	in	the	asset base	from	expansion.	The	2007	net	income	was	unfavorably	impacted	by	a	$15	million	impairment	charge	related	to	Boardwalk	Pipeline's	Magnolia	storage	facility.

# Loews	Hotels

The	following	table	summarizes	the	results	of	operations	for	Loews	Hotels	for	the	years	ended	December	31,	2009,	2008	and	2007	as	presented	in	Note	23	of	the Notes	to	Consolidated	Financial	Statements	included	under	Item	8:

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Revenues: |  |  |  |
| Other\trevenue,\tprimarily\toperating | \t\t $284 | $379 | $382 |
| Net\tinvestment\tincome |  | 1 | 2 |
| Total | \t 284 | \t 380 | \t 384 |
| Expenses: |  |  |  |
| Operating | \t 327 | \t 307 | \t 313 |
| Interest | 9 | 11 | 11 |
| Total | \t 336 | \t 318 | \t 324 |
| Income\t(loss)\tbefore\tincome\ttax | (52) | 62 | 60 |
| Income\ttax\t(expense)\tbenefit | 18 | (22) | (24) |
| Net\tincome\t(loss)\tattributable\tto\tLoews\tCorporation | \t\t $ (34) | $40 | $36 |

Results	at	Loews	Hotels	for	2009	were	negatively	impacted	by	the	ongoing	economic	downturn.	In	2009,	Loews	Hotels	recorded	a	pretax	charge	of	$10	million related	to	a	development	project	commitment	and	a	pretax	charge	of	$10	million	for	a	loan	guarantee	at	a	managed	hotel.	During	2009,	Loews	Hotels	wrote	down	its entire	investment	in	the	Loews	Lake	Las	Vegas,	resulting	in	a	pretax	impairment	charge	of	$27	million.	Pretax	income	for	2008	reflects	an	$11	million	gain	related	to	an adjustment	in	the	carrying	value	of	a	50.0%	interest	in	a	joint	venture	investment.

Revenues	decreased	in	2008,	as	compared	to	2007,	due	to	a	decrease	in	revenue	per	available	room	to	$183.01,	compared	to	$185.81	in	2007,	reflecting	a	2.1% decrease	in	occupancy	rates	partially	offset	by	improvements	in	average	room	rates	of	$3.35,	or	1.4%.

Net	income	in	2008	increased	primarily	due	to	an	$11	million	pretax	gain	related	to	an	adjustment	in	the	carrying	value	of	a	joint	venture	investment,	partially offset	by	increased	operating	expenses.

# Results	of	Operations	–	Loews	Hotels	–	(Continued)

Revenue	per	available	room	is	an	industry	measure	of	the	combined	effect	of	occupancy	rates	and	average	room	rates	on	room	revenues.	Other	hotel	operating revenues	primarily	include	guest	charges	for	food	and	beverages.

# Corporate	and	Other

Corporate	operations	consist	primarily	of	 investment	 income	at	 the	Parent	Company,	corporate	 interest	expenses	and	other	corporate	administrative	costs. Discontinued	operations	include	the	results	of	operations	and	gain	on	disposal	of	Lorillard	and	the	gain	on	the	sale	of	Bulova	in	2008.

The	following	table	summarizes	the	results	of	operations	for	Corporate	and	Other	for	the	years	ended	December	31,	2009,	2008	and	2007	as	presented	in	Note	23 of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8:

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Revenues: |  |  |  |
| Net\tinvestment\tincome\t(loss) | \t\t $\t\t\t175 | $(54) | $295 |
| Investment\tgains | 3 | 2 | 144 |
| Other | (1) | 16 | 2 |
| Total | 177 | (36) | 441 |
| Expenses: |  |  |  |
| Operating | 80 | 79 | 76 |
| Interest | 49 | 56 | 55 |
| Total | 129 | 135 | 131 |
| Income\t(loss)\tbefore\tincome\ttax | 48 | (171) | 310 |
| Income\ttax\t(expense)\tbenefit | (20) | 55 | (107) |
| Income\t(loss)\tfrom\tcontinuing\toperations | 28 | (116) | 203 |
| Discontinued\toperations,\tnet: |  |  |  |
| Results\tof\toperations |  | 341 | 907 |
| Gain\ton\tdisposal |  | \t 4,362 |  |
| Net\tincome\tattributable\tto\tLoews\tCorporation | \t\t $28 | $4,587 | $1,110 |

Revenues	increased	by	$213	million	and	income	from	continuing	operations	increased	by	$144	million	as	compared	to	2008.	These	increases	were	due	primarily to	improved	performance	of	the	trading	portfolio.

In	2008,	the	Company	completed	the	sale	of	Bulova	and	disposed	of	its	entire	ownership	interest	in	Lorillard.	The	results	of	operations	and	gains	on	disposal	of these	businesses	are	presented	as	discontinued	operations.	Discontinued	operations	for	the	year	ended	December	31,	2008	includes	a	$4,287	million	gain	on	the separation	(the	"Separation")	of	Lorillard	and	a	$75	million	gain	on	the	sale	of	Bulova.

Revenues	decreased	by	$477	million	and	net	income	increased	by	$3,477	million	in	2008	as	compared	to	2007.

Revenues	decreased	 in	2008	as	compared	 to	2007,	due	primarily	 to	decreased	net	 investment	 income	of	$349	million	and	reduced	 investment	gains.	Net investment	income	declined	due	to	losses	recorded	in	the	trading	portfolio	in	2008,	as	compared	to	gains	in	2007.	Results	in	2008	also	reflect	reduced	invested	cash balances	due	to	the	parent	company's	equity	investments	in	its	CNA	and	Boardwalk	Pipeline	subsidiaries	in	2008,	the	HighMount	acquisition	in	2007	and	lower	yields. Investment	gains	for	2007	included	a	$143	million	pretax	gain	($93	million	after	tax)	related	to	the	issuance	of	Diamond	Offshore	common	stock	from	the	conversion	of $456	million	principal	amount	of	Diamond	Offshore's	1.5%	debentures	into	Diamond	Offshore	common	stock.

# Results	of	Operations	–	Corporate	and	Other	–	(Continued)

Loss	from	continuing	operations	was	$116	million	in	2008,	compared	to	income	from	continuing	operations	of	$203	million	in	2007.	The	lower	results	were primarily	due	to	the	reduction	in	revenues	discussed	above.

# LIQUIDITY	AND	CAPITAL	RESOURCES

# Cash	Flows

CNA's	principal	operating	cash	flow	sources	are	premiums	and	investment	income	from	its	insurance	subsidiaries.	CNA's	primary	operating	cash	flow	uses	are payments	for	claims,	policy	benefits	and	operating	expenses.

For	2009,	net	cash	provided	by	operating	activities	was	$1,258	million,	as	compared	to	$1,558	million	for	2008.	Cash	provided	by	operating	activities	in	2008	was favorably	impacted	by	increased	net	sales	of	trading	securities	to	fund	policyholders'	withdrawals	of	investment	contract	products	issued	by	CNA,	which	are	reflected	as financing	cash	flows.	The	primary	source	of	these	cash	flows	was	the	indexed	group	annuity	portion	of	CNA's	pension	deposit	business	which	it	exited	in	2008. Additionally,	during	the	second	quarter	of	2009	CNA	resumed	the	use	of	a	trading	portfolio	for	income	enhancement	purposes.	Because	cash	receipts	and	cash	payments resulting	from	purchases	and	sales	of	trading	securities	are	reported	as	cash	flows	related	to	operating	activities,	operating	cash	flows	were	reduced	by	$164	million related	to	net	cash	outflows	which	increased	the	size	of	the	trading	portfolio	held	at	December	31,	2009.	Cash	provided	by	operating	activities	in	2009	was	favorably impacted	by	decreased	loss	payments	as	compared	to	2008,	and	tax	recoveries	in	2009	compared	with	tax	payments	in	2008.

For	2008,	net	cash	provided	by	operating	activities	was	$1,558	million	as	compared	to	$1,239	million	in	2007.	Cash	provided	by	operating	activities	was	favorably impacted	by	increased	net	sales	of	trading	securities	to	fund	policyholders'	withdrawals	of	investment	contract	products	issued	by	us,	decreased	tax	payments	and decreased	loss	payments.	Policyholders'	fund	withdrawals	are	reflected	as	financing	cash	flows.	Cash	provided	by	operating	activities	was	unfavorably	impacted	by decreased	premium	collections	and	decreased	investment	income	receipts.

Cash	flows	from	investing	activities	include	the	purchase	and	sale	of	available-for-sale	financial	instruments.	Additionally,	cash	flows	from	investing	activities may	include	the	purchase	and	sale	of	businesses,	land,	buildings,	equipment	and	other	assets	not	generally	held	for	resale.

Net	cash	used	by	investing	activities	was	$1,093	million,	$1,908	million	and	$1,082	million	for	2009,	2008,	and	2007.	Cash	flows	used	by	investing	activities related	principally	to	purchases	of	fixed	maturity	securities	and	short	term	investments.	The	cash	flow	from	investing	activities	is	impacted	by	various	factors	such	as	the anticipated	payment	of	claims,	financing	activity,	asset/liability	management	and	individual	security	buy	and	sell	decisions	made	in	the	normal	course	of	portfolio management.

Cash	flows	from	financing	activities	include	proceeds	from	the	issuance	of	debt	and	equity	securities,	outflows	for	dividends	or	repayment	of	debt,	outlays	to reacquire	equity	instruments,	and	deposits	and	withdrawals	related	to	investment	contract	products	issued	by	us.

Net	cash	flows	used	by	financing	activities	was	$120	million	in	2009.	Net	cash	flows	provided	by	financing	activities	was	$347	million	in	2008.	Net	cash	flows used	by	financing	activities	was	$185	million	in	2007.	Net	cash	used	by	financing	activities	in	2009	was	primarily	related	to	the	payment	of	dividends	on	the	2008	Senior Preferred	stock	to	Loews.

# 2008	Senior	Preferred

								In	the	fourth	quarter	of	2008,	CNA	issued,	and	Loews	purchased,	12,500	shares	of	CNA	non-voting	cumulative	senior	preferred	stock	("2008	Senior	Preferred") for	$1.25	billion.	In	the	fourth	quarter	of	2009,	CNA	redeemed	$250	million	of	the	2008	Senior	Preferred	at	the	issue	price	plus	accrued	dividends,	using	a	portion	of	the proceeds	from	the	issuance	of	$350	million	of	7.4%	ten-year	senior	notes,	leaving	$1.0	billion	of	the	2008	Senior	Preferred	outstanding	as	of	December	31,	2009. Dividends	of	$122	million	and	$19	million	on	the	2008	Senior	Preferred	were	declared	and	paid	for	the	years	ended	December	31,	2009	and	2008.	CNA	used	the majority	of	the	proceeds	from	the	2008	Senior	Preferred	to	increase

# Liquidity	and	Capital	Resources	–	CNA	Financial	–	(Continued)

the	statutory	surplus	of	its	principal	insurance	subsidiary,	CCC,	through	the	purchase	of	a	$1.0	billion	surplus	note	of	CCC.

# Liquidity

CNA	believes	that	its	present	cash	flows	from	operations,	investing	activities	and	financing	activities	are	sufficient	to	fund	its	working	capital	and	debt	obligation needs	and	CNA	does	not	expect	this	to	change	in	the	near	term	due	to	the	following	factors:

•	 CNA	does	not	anticipate	changes	in	its	core	property	and	casualty	commercial	insurance	operations	which	would	significantly	impact	liquidity	and	CNA continues	to	maintain	reinsurance	contracts	which	limit	the	impact	of	potential	catastrophic	events.

•	 CNA	has	entered	into	several	settlement	agreements	and	assumed	reinsurance	contracts	that	require	collateralization	of	future	payment	obligations	and assumed	reserves	if	CNA's	ratings	or	other	specific	criteria	fall	below	certain	thresholds.	The	ratings	triggers	are	generally	more	than	one	level	below	its current	ratings.	A	downgrade	below	CNA's	current	ratings	levels	would	also	result	in	additional	collateral	requirements	for	derivative	contracts	for	which CNA	is	in	a	liability	position	at	any	given	point	in	time.	The	maximum	potential	collateralization	requirements	are	approximately	$70	million.

•	 As	of	December	31,	2009,	CNA's	holding	company	held	short	term	investments	of	$395	million.	Additionally,	CNA	has	$100	million	available	through	a revolving	 credit	 facility	 as	 of	 December	 31,	 2009.	 CNA's	 holding	 company's	 ability	 to	 meet	 its	 debt	 service	 and	 other	 obligations	 is	 significantly dependent	on	receipt	of	dividends	from	its	subsidiaries.	The	payment	of	dividends	to	CNA	by	its	insurance	subsidiaries	without	prior	approval	of	the insurance	department	of	each	subsidiary's	domiciliary	jurisdiction	is	limited	by	formula.	Notwithstanding	this	limitation,	CNA	believes	that	its	holding company	has	sufficient	liquidity	to	fund	its	preferred	stock	dividend	and	debt	service	payments	through	2010.

CNA	has	an	effective	shelf	registration	statement	under	which	it	may	issue	$1,650	million	of	debt	or	equity	securities.

# Ratings

Ratings	are	an	important	factor	in	establishing	the	competitive	position	of	insurance	companies.	CNA's	insurance	company	subsidiaries	are	rated	by	major	rating agencies,	and	these	ratings	reflect	the	rating	agency's	opinion	of	the	insurance	company's	financial	strength,	operating	performance,	strategic	position	and	ability	to	meet its	obligations	to	policyholders.	Agency	ratings	are	not	a	recommendation	to	buy,	sell	or	hold	any	security,	and	may	be	revised	or	withdrawn	at	any	time	by	the	issuing organization.	Each	agency's	rating	should	be	evaluated	independently	of	any	other	agency's	rating.	One	or	more	of	these	agencies	could	take	action	in	the	future	to change	the	ratings	of	CNA's	insurance	subsidiaries.

The	table	below	reflects	the	various	group	ratings	issued	by	A.M.	Best	Company	("A.M.	Best"),	Moody's	Investors	Service,	Inc.	("Moody's")	and	Standard	and Poor's	 ("S&P")	 for	 the	 property	 and	 casualty	 and	 life	 companies.	 The	 table	 also	 includes	 the	 ratings	 for	 CNA	 senior	 debt	 and	 The	 Continental	 Corporation ("Continental")	senior	debt.

A.M.	Best,	Moody's	and	S&P	currently	maintain	a	stable	outlook	on	CNA.

If	CNA's	property	and	casualty	insurance	financial	strength	ratings	were	downgraded	below	current	levels,	CNA's	business	and	our	results	of	operations	could	be materially	adversely	affected.	The	severity	of	the	impact	on	CNA's

business	is	dependent	on	the	level	of	downgrade	and,	for	certain	products,	which	rating	agency	takes	the	rating	action.	Among	the	adverse	effects	in	the	event	of	such downgrades	would	be	the	inability	to	obtain	a	material	volume	of	business	from	certain	major	insurance	brokers,	the	inability	to	sell	a	material	volume	of	CNA's insurance	products	to	certain	markets	and	the	required	collateralization	of	certain	future	payment	obligations	or	reserves.

As	discussed	in	the	Liquidity	section	above,	additional	collateralization	may	be	required	for	certain	settlement	agreements	and	assumed	reinsurance	contracts,	as well	as	derivative	contracts,	if	CNA's	ratings	or	other	specific	criteria	fall	below	certain	thresholds.

In	addition,	it	is	possible	that	a	lowering	of	our	debt	ratings	by	certain	of	these	agencies	could	result	in	an	adverse	impact	on	CNA's	ratings,	independent	of	any change	in	CNA's	circumstances.	None	of	the	major	rating	agencies	which	rates	us	currently	maintain	a	negative	outlook	or	has	us	on	negative	Credit	Watch.

Cash	and	investments	totaled	$778	million	at	December	31,	2009	compared	to	$737	million	at	December	31,	2008.	In	2009,	Diamond	Offshore	paid	cash dividends	totaling	$1.1	billion,	consisting	of	special	cash	dividends	of	$1.0	billion	and	regular	quarterly	cash	dividends	of	$70	million.	In	February	of	2010,	Diamond Offshore	declared	a	special	dividend	of	$1.875	per	share	and	a	regular	quarterly	dividend	of	$0.125	per	share.

Diamond	Offshore's	cash	flows	from	operations	are	impacted	by	the	ability	of	its	customers	to	weather	the	continuing	global	financial	crisis	and	restrictions	in	the credit	market.	In	general,	before	working	for	a	customer	with	whom	Diamond	Offshore	has	not	had	a	prior	business	relationship	and/or	whose	financial	stability	may	be uncertain,	Diamond	Offshore	performs	a	credit	review	on	that	company.	Based	on	that	analysis,	Diamond	Offshore	may	require	that	the	customer	present	a	letter	of credit,	prepay	or	provide	other	credit	enhancements.	If	a	customer	is	unable	to	obtain	an	adequate	level	of	credit,	it	may	preclude	Diamond	Offshore	from	doing business	with	that	potential	customer.	The	global	financial	crisis	could	also	have	an	impact	on	its	existing	customers,	causing	them	to	fail	to	meet	their	obligations	to Diamond	Offshore.

Cash	provided	by	operating	activities	was	$1.5	billion	in	2009,	compared	to	$1.6	billion	in	2008.	The	decrease	in	cash	flows	from	operations	in	2009	is	primarily due	to	an	increase	in	cash	required	to	satisfy	working	capital	requirements	in	2009	compared	to	2008.	Diamond	Offshore's	working	capital	requirements	used	$286 million	during	2009	compared	to	$87	million	during	2008.	The	increase	in	cash	required	to	satisfy	working	capital	requirements	is	primarily	due	to	an	increase	in Diamond	Offshore's	outstanding	accounts	receivable	balances	at	December	31,	2009	compared	to	2008.

During	2009,	Diamond	Offshore	spent	approximately	$1	billion	towards	the	purchase	of	two	newbuild,	7,500	foot	semisubmersible	drilling	rigs,	the	Ocean Courage	and	Ocean	Valor,	and	the	completion	of	the	upgrade	of	the	Ocean	Monarch,	which	commenced	drilling	operations	late	in	the	first	quarter	of	2009.	Diamond Offshore	spent	an	additional	approximately	$355	million	in	2009	on	its	continuing	rig	capital	maintenance	program	(other	than	rig	upgrades	and	new	construction)	and to	meet	other	corporate	capital	expenditure	requirements.

Diamond	Offshore	has	budgeted	approximately	$365	million	on	capital	expenditures	for	2010	associated	with	 its	ongoing	rig	equipment	replacement	and enhancement	programs,	equipment	required	for	its	long-term	international	contracts	and	other	corporate	requirements.	In	addition,	Diamond	Offshore	expects	to	spend approximately	$75	million	in	2010	towards	the	commissioning	and	outfitting	for	service	of	the	recently	acquired	Ocean	Courage	and	Ocean	Valor. 	Diamond	Offshore expects	to	finance	its	2010	capital	expenditures	through	the	use	of	its	existing	cash	balances	or	internally	generated	funds.	From	time	to	time,	however,	Diamond Offshore	may	also	make	use	of	its	credit	facility	to	finance	capital	expenditures.

In	October	of	2009,	Diamond	Offshore	issued	$500	million	aggregate	principal	amount	of	5.7%	senior	notes	due	October	15,	2039.	In	May	of	2009,	Diamond Offshore	issued	$500	million	aggregate	principal	amount	of	5.9%	senior	notes	due	May	1,	2019.	The	net	proceeds	from	these	offerings	were	used	for	general	corporate purposes.

As	of	December	31,	2009,	there	were	no	loans	outstanding	under	Diamond	Offshore's	$285	million	credit	facility;	however,	$63	million	in	letters	of	credit	were issued	and	outstanding	under	the	credit	facility.

# Liquidity	and	Capital	Resources	–	Diamond	Offshore	–	(Continued)

Diamond	Offshore's	liquidity	and	capital	requirements	are	primarily	a	function	of	its	working	capital	needs,	capital	expenditures	and	debt	service	requirements. Cash	required	to	meet	Diamond	Offshore's	capital	commitments	is	determined	by	evaluating	the	need	to	upgrade	rigs	to	meet	specific	customer	requirements	and	by evaluating	Diamond	Offshore's	ongoing	rig	equipment	replacement	and	enhancement	programs,	including	water	depth	and	drilling	capability	upgrades.	It	is	the	opinion of	Diamond	Offshore's	management	that	its	operating	cash	flows	and	cash	reserves	will	be	sufficient	to	fund	its	ongoing	operations	and	capital	projects	over	the	next twelve	months;	however,	Diamond	Offshore	will	continue	to	make	periodic	assessments	based	on	industry	conditions	and	will	adjust	capital	spending	programs	if required.

At	December	31,	2009	and	2008,	cash	and	investments	amounted	to	$83	million	and	$47	million.	Net	cash	flows	provided	by	operating	activities	were	$325 million	and	$487	million	in	2009	and	2008.	Key	drivers	of	net	operating	cash	flows	are	commodity	prices,	production	volumes	and	operating	costs.

The	primary	driver	of	cash	used	in	investing	activities	was	capital	spending,	inclusive	of	acquisitions.	Cash	used	in	investing	activities	for	2009	and	2008	was $174	million	and	$528	million	and	consisted	primarily	of	additions	to	HighMount's	property	and	equipment.	HighMount	spent	$120	million	and	$370	million	on	capital expenditures	for	its	drilling	program	in	2009	and	2008.	During	2008,	HighMount	experienced	a	higher	capital	cost	environment	attributable	to	increased	costs	for	casing, tubing	and	diesel	fuel.

At	December	31,	2009,	no	borrowings	were	outstanding	under	HighMount's	$400	million	revolving	credit	facility,	however,	$4	million	in	letters	of	credit	were issued.	The	available	capacity	under	the	facility	is	$366	million.

The	agreements	governing	HighMount's	$1.6	billion	term	loans	and	revolving	credit	facility	contain	financial	covenants	typical	for	these	types	of	agreements, including	a	maximum	debt	to	capitalization	ratio.	The	credit	agreement	also	contains	customary	restrictions	or	limitations	on	HighMount's	ability	to	enter	or	engage	in certain	transactions,	including	transactions	with	affiliates.	At	December	31,	2009,	HighMount	was	in	compliance	with	all	of	its	covenants	under	the	credit	agreement.

The	following	table	presents	the	estimate	of	total	capital	expenditures	and	the	amounts	invested	through	December	31,	2009,	for	the	remaining	pipeline	expansion projects,	including	expenditures	for	pipe	remediation	and	Boardwalk	Pipeline's	growth	projects:

| (In	millions) | Estimated	Total<br>Capital<br>Expenditures	(a) | through<br>December	31,<br>2009 |
| :--- | :--- | :--- |
| Southeast\tExpansion | $755 | $754 |
| Gulf\tCrossing\tProject | 1,765 | 1,649 |
| Fayetteville\tand\tGreenville\tLaterals | 1,215 | 1,000 |
| Pipe\tRemediation\t(b) | 130 | 82 |
| Haynesville\tProject | 185 | 16 |
| Clarence\tCompression | 30 |  |
| Total | $4,080 | $3,501 |

(a) The	estimated	total	capital	expenditures	are	based	on	internally	developed	financial	models	and	timelines.	Factors	in	the	estimates	include,	but	are	not	limited	to,	those	related	to	pipeline	costs	based	on	mileage, size	and	type	of	pipe,	materials	and	construction	and	engineering	costs.

(b) This	estimate	represents	the	cost	of	remediating	pipe	anomalies	on	the	East	Texas	Pipeline,	the	Southeast	Expansion,	the	Gulf	Crossing	Project	and	the	Fayetteville	and	Greenville	Laterals.

In	Boardwalk	Pipeline's	efforts	 to	obtain	 the	authority	from	PHMSA	 to	operate	 the	East	Texas	Pipeline,	Southeast	Expansion,	Gulf	Crossing	Project	and Fayetteville	Lateral	at	higher	than	normal	operating	pressures,	Boardwalk	Pipeline	has	incurred	costs	to	remediate	pipeline	anomalies.	Boardwalk	Pipeline	continues	to seek	authority	to	operate	the	Fayetteville	Lateral	at	higher	than	normal	operating	pressures	and	may	incur	additional	costs	to	inspect,	test	and	remediate	pipe	segments	on the	Fayetteville	Lateral	in	order	to	obtain	from	PHMSA	the	authority	to	increase	operating	pressures	to	higher	than	normal	levels	under	the	special	permit.

Boardwalk	Pipeline	expects	to	incur	up	to	$580	million	in	capital	expenditures	to	complete	its	expansion	and	growth	projects,	including	pipe	remediation	efforts for	the	Fayetteville	Lateral,	for	which	the	majority	of	expenditures	are	expected	to	occur	by	the	end	of	2010.	As	discussed	in	Boardwalk	Pipeline	-	Expansion	and Growth	Projects,	absent	authority	to	operate	the	Fayetteville	Lateral	at	higher	than	normal	operating	pressures,	Boardwalk	Pipeline	could	incur	additional	costs	for	other system	upgrades	on	that	project	to	increase	capacity	to	meet	contracted	volume	commitments.	Including	costs	associated	with	remediating	the	pipe	anomalies	and additional	cost	that	Boardwalk	Pipeline	could	incur	on	its	Fayetteville	Lateral,	Boardwalk	Pipeline	expects	the	total	cost	to	complete	its	expansion	projects	to	be	within the	previously	announced	cost	estimates.	Boardwalk	Pipeline's	cost	and	timing	estimates	for	these	projects	are	subject	to	a	variety	of	risks	and	uncertainties	as	discussed in	Item	1A,	Risk	Factors	-	Boardwalk	Pipeline	Partners,	LP.

Boardwalk	Pipeline	has	financed	its	expansion	capital	expenditures	through	the	issuance	of	equity	and	debt,	borrowings	under	its	revolving	credit	facility	and available	operating	cash	flows	in	excess	of	operating	needs.	Boardwalk	Pipeline	does	not	anticipate	the	need	to	raise	further	capital	in	order	to	complete	its	expansion and	growth	projects.

In	2009,	Boardwalk	Pipeline	received	net	cash	proceeds	of	approximately	$880	million	from	equity	and	debt	issuances,	including	$150	million	from	a	private placement	of	common	units	to	BPHC	and	$200	million	under	a	Subordinated	Loan	Agreement	with	BPHC.	These	proceeds	were	used	to	directly	and	indirectly	fund Boardwalk	Pipeline's	expansion	projects	through	the	reduction	of	borrowings	under	its	revolving	credit	facility	and,	in	the	case	of	Boardwalk	Pipeline's	debt	securities issuance,	to	reduce	borrowings	under	its	Subordinated	Loan	Agreement	by	$100	million.

# Liquidity	and	Capital	Resources	–	Boardwalk	Pipeline	–	(Continued)

Boardwalk	Pipeline	maintains	a	revolving	credit	facility,	which	has	aggregate	lending	commitments	of	$1.0	billion.	As	of	December	31,	2009,	Boardwalk Pipeline	had	$554	million	of	loans	outstanding	under	the	revolving	credit	facility	with	a	weighted-average	interest	rate	on	the	borrowings	of	0.5%	and	had	no	letters	of credit	issued.	As	of	February	12,	2010,	Boardwalk	Pipeline	had	borrowed	an	additional	$75	million,	which	increased	borrowings	to	$629	million.	Boardwalk	Pipeline was	in	compliance	with	all	covenant	requirements	under	its	credit	facility	at	December	31,	2009.	The	revolving	credit	facility	has	a	maturity	date	of	June	29,	2012, however,	all	outstanding	revolving	loans	on	such	date	may	be	converted	to	term	loans	having	a	maturity	date	of	June	29,	2013.

Approximately	$954	million	of	Boardwalk	Pipeline's	long-term	debt,	including	$629	million	borrowed	under	the	revolving	credit	facility	through	February	12, 2010,	will	mature	in	2012.	The	term	of	the	revolving	credit	facility	may	be	extended	to	2013	as	described	above.	Boardwalk	Pipeline	expects	to	refinance	the	debt through	the	issuance	and	sale	of	new	debt.

Maintenance	 capital	 expenditures	 were	 $59	 million,	 $51	 million	 and	 $47	 million in	 2009,	 2008	 and	 2007.	 Boardwalk	 Pipeline	 expects to fund its	 2010 maintenance	capital	expenditures	of	approximately	$70	million	from	operating	cash	flows.

During	the	year	ended	December	31,	2009,	Boardwalk	Pipeline	paid	cash	distributions	of	$361	million	to	its	various	ownership	interests,	of	which	$264	was received	by	the	Company.	In	February	of	2010,	Boardwalk	Pipeline	declared	a	quarterly	distribution	of	$0.50	per	common	unit.

Funds	from	operations	continue	to	exceed	operating	requirements.	Cash	and	investments	decreased	to	$63	million	at	December	31,	2009	from	$72	million	at December	31,	2008.

Parent	Company	cash	and	investments,	net	of	receivables	and	payables,	at	December	31,	2009	totaled	$3.0	billion,	as	compared	to	$2.3	billion	at	December	31, 2008.	The	increase	in	net	cash	and	investments	is	primarily	due	to	the	receipt	of	$954	million	in	dividends	from	subsidiaries,	the	receipt	of	$250	million	from	the repayment	of	senior	preferred	stock	by	CNA,	$175	million	of	investment	income	and	$100	million	from	the	repayment	of	subordinated	debt	by	Boardwalk	Pipeline. These	cash	inflows	were	partially	offset	by	the	purchase	of	treasury	stock	for	$348	million,	as	discussed	below,	the	$150	million	purchase	of	Boardwalk	Pipeline common	units	described	in	"Liquidity	and	Capital	Resources	–	Boardwalk	Pipeline,"	$200	million	in	subordinated	debt	provided	to	Boardwalk	Pipeline	and	$108 million	of	dividends	paid	to	our	shareholders.

In	February	of	2010,	the	Company	sold	10	million	Boardwalk	Pipeline	common	units	for	pretax	proceeds	of	approximately	$289	million.	The	Company's percentage	ownership	interest	declined	from	72%	to	67%	as	a	result	of	this	transaction.

As	of	December	31,	2009,	there	were	425,070,322	shares	of	Loews	common	stock	outstanding.	As	discussed	above,	effective	with	the	completion	of	the Separation	of	Lorillard,	the	former	Carolina	Group	and	former	Carolina	Group	stock	have	been	eliminated.	As	part	of	the	Separation,	we	exchanged	65,445,000	shares of	Lorillard	common	stock	for	93,492,857	shares	of	Loews	common	stock.

Depending	on	market	and	other	conditions,	we	may	purchase	shares	of	our	and	our	subsidiaries'	outstanding	common	stock	in	the	open	market	or	otherwise. During	the	year	ended	December	31,	2009,	we	purchased	10,523,800	shares	of	Loews	common	stock	at	an	aggregate	cost	of	$348	million	and	329,500	shares	of	CNA common	stock	at	an	aggregate	cost	of	$2	million.	From	January	1,	2010	to	February	12,	2010,	we	acquired	an	additional	2,663,000	shares	of	our	common	stock	for	$96 million.

We	have	an	effective	Registration	Statement	on	Form	S-3	registering	the	future	sale	of	an	unlimited	amount	of	our	debt	and	equity	securities.

# Liquidity	and	Capital	Resources	–	Corporate	and	Other	–	(Continued)

We	continue	to	pursue	conservative	financial	strategies	while	seeking	opportunities	for	responsible	growth.	These	include	the	expansion	of	existing	businesses, full	or	partial	acquisitions	and	dispositions,	and	opportunities	for	efficiencies	and	economies	of	scale.

# Off-Balance	Sheet	Arrangements

At	December	31,	2009	and	2008,	we	did	not	have	any	off-balance	sheet	arrangements.

# Contractual	Obligations

Our	contractual	payment	obligations	are	as	follows:

| December	31,	2009<br>(In	millions) | Total | Less	than<br>1	year | 1-3	years | 4-5	years | More	than<br>5	years |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Debt\t(a) | $13,668 | $534 | $4,199 | $1,696 | $7,239 |
| Operating\tleases | 282 | 67 | 115 | 62 | 38 |
| Claim\tand\tclaim\texpense\treserves\t(b) | \t 28,310 | 6,042 | 7,347 | 4,061 | 10,860 |
| Future\tpolicy\tbenefits\treserves\t(c) | \t 12,505 | 177 | 337 | 326 | 11,665 |
| Policyholder\tfunds\treserves\t(c) | 155 | 19 | 9 | 7 | 120 |
| Purchase\tand\tother\tobligations\t(d) | 88 | 70 | 13 | 5 |  |
| Pipeline\tcapacity\tagreements\t(e) | 80 | 12 | 21 | 21 | 26 |
| Total\t(f) | $55,088 | $6,921 | $12,041 | $6,178 | $29,948 |

(a) Includes	estimated	future	interest	payments.

(b) Claim	and	claim	adjustment	expense	reserves	are	not	discounted	and	represent	CNA's	estimate	of	the	amount	and	timing	of	the	ultimate	settlement	and	administration	of	gross	claims	based	on	its	assessment	of facts	and	circumstances	known	as	of	December	31,	2009.	See	the	Reserves	-	Estimates	and	Uncertainties	section	of	this	MD&A	for	further	information.	Claim	and	claim	adjustment	expense	reserves	of	$19 related	to	business	which	has	been	100%	ceded	to	unaffiliated	parties	in	connection	with	the	sale	of	the	individual	life	business	in	2004	are	not	included.

(c) Future	policy	benefits	and	policyholder	funds	reserves	are	not	discounted	and	represent	CNA's	estimate	of	the	ultimate	amount	and	timing	of	the	settlement	of	benefits	based	on	its	assessment	of	facts	and circumstances	known	as	of	December	31,	2009.	Future	policy	benefit	reserves	of	$777	and	policyholder	fund	reserves	of	$39	related	to	business	which	has	been	100%	ceded	to	unaffiliated	parties	in	connection with	the	sale	of	CNA's	individual	life	business	in	2004	are	not	included.	Additional	information	on	future	policy	benefits	and	policyholder	funds	reserves	is	included	in	Note	1	of	the	Notes	to	Consolidated Financial	Statements	included	under	Item	8.

(d) Includes	obligations	of	approximately	$48	related	to	Boardwalk	Pipeline's	expansion	and	growth	projects	as	further	discussed	in	Item	7,	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results of	Operations.

(e) The	commitments	related	to	pipeline	capacity	agreements	are	associated	with	various	pipeline	capacity	agreements	on	third-party	pipelines	that	allow	Boardwalk	Pipeline's	operating	subsidiaries	to	transport	gas	to off-system	markets	on	behalf	of	Boardwalk	Pipeline's	customers.

(f) Does	not	include	expected	contribution	of	approximately	$87	to	the	Company's	pension	and	postretirement	plans	in	2010.

Further	information	on	our	commitments,	contingencies	and	guarantees	is	provided	in	Notes	3,	5,	9,	12,	19	and	20	of	the	Notes	to	Consolidated	Financial Statements	included	under	Item	8.

Investment	activities	of	non-insurance	companies	include	investments	in	fixed	income	securities,	equity	securities	including	short	sales,	derivative	instruments and	short	term	investments,	and	are	carried	at	fair	value.	Securities	that	are	considered	part	of	our	trading	portfolio,	short	sales	and	certain	derivative	instruments	are marked	to	market	and	reported	as	Net	investment	income	in	the	Consolidated	Statements	of	Income.

								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

# Investments	–	(Continued)

procedures	include	senior	management	review	of	daily	detailed	reports	of	existing	positions	and	valuation	fluctuations	to	ensure	that	open	positions	are	consistent	with our	portfolio	strategy.

Credit	exposure	associated	with	non-performance	by	the	counterparties	to	derivative	instruments	is	generally	limited	to	the	uncollateralized	change	in	fair	value	of the	derivative	instruments	recognized	in	the	Consolidated	Balance	Sheets.	We	mitigate	the	risk	of	non-performance	by	monitoring	the	creditworthiness	of	counterparties and	diversifying	derivatives	to	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.

We	do	not	believe	that	any	of	the	derivative	instruments	we	use	are	unusually	complex,	nor	do	the	use	of	these	instruments,	in	our	opinion,	result	in	a	higher degree	of	risk.	Please	read	"Results	of	Operations,"	"Quantitative	and	Qualitative	Disclosures	about	Market	Risk"	and	Note	5	of	the	Notes	to	Consolidated	Financial Statements	included	under	Item	8	for	additional	information	with	respect	to	derivative	instruments,	including	recognized	gains	and	losses	on	these	instruments.

For	more	than	a	year,	capital	and	credit	markets	have	experienced	severe	levels	of	volatility,	illiquidity,	uncertainty	and	overall	disruption.	This	broader	market disruption	significantly	subsided	in	2009	in	most	asset	sectors.	The	U.S.	Government	has	initiated	programs	intended	to	stabilize	and	improve	markets	and	the	economy. While	the	ultimate	impact	of	these	programs	remains	uncertain	and	economic	conditions	in	the	U.S.	remain	challenging,	financial	markets	have	shown	improvement	in 2009.	Risk	free	interest	rates	continued	near	multi-year	lows	and	credit	spreads	narrowed	resulting	in	improvement	in	the	Company's	unrealized	position.	However,	fair values	in	the	asset-backed	sector	continue	to	be	depressed	primarily	due	to	continued	concerns	with	underlying	residential	and	commercial	collateral.	During	the	year, the	Company	took	advantage	of	favorable	market	conditions	to	reposition	the	portfolio	to	better	match	the	needs	of	the	business.	The	substantial	improvement	in	the unrealized	position	of	the	portfolio	not	only	reflects	the	broader	market	recovery,	but	also	these	actions	which	centered	around	reducing	non-investment	grade	corporate and	 non-agency	 residential	 and	 commercial	 mortgage-backed	 securities	 through	 net	 sales	 and	 principal	 repayments	 of	 $1,482	 million	 and	 $2,459	 million	 on	 an amortized	cost	basis.	In	addition,	CNA	had	net	purchases	of	$7,441	million	in	investment	grade	corporate	bonds	and	$2,041	million	in	agency	residential	mortgage- backed	securities.

# 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.

# Net	Investment	Income

The	significant	components	of	CNA's	net	investment	income	are	presented	in	the	following	table:

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Fixed\tmaturity\tsecurities | \t\t $1,941 | $1,984 | $2,047 |
| Short\tterm\tinvestments | 36 | 115 | 186 |
| Limited\tpartnerships | 315 | (379) | 183 |
| Equity\tsecurities | 49 | 80 | 25 |
| Trading\tportfolio | 23 | (149) | 10 |
| Other | 6 | 19 | 35 |
| Gross\tinvestment\tincome | \t 2,370 | \t 1,670 | \t 2,486 |
| Investment\texpense | (50) | (51) | (53) |
| Net\tinvestment\tincome | \t\t $2,320 | $1,619 | $2,433 |

Net	investment	income	increased	$701	million	in	2009	as	compared	with	2008.	Excluding	indexed	group	annuity	trading	portfolio	losses	of	$146	million	in	2008, net	investment	income	increased	$555	million	primarily	driven	by

Item	7.	Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations Investments	–	(Continued)

improved	results	from	 limited	partnership	 investments.	This	 increase	was	partially	offset	by	 the	 impact	of	 lower	risk	free	and	short	 term	 interest	rates.	Limited partnership	investments	generally	present	greater	volatility,	higher	illiquidity,	and	greater	risk	than	fixed	income	investments.	Limited	partnership	income	in	2009	was driven	by	improved	performance	across	many	limited	partnerships	and	included	individual	partnership	performance	that	ranged	from	a	positive	$120	million	to	a negative	$59	million.	The	limited	partnership	investments	are	managed	as	an	overall	portfolio	in	an	effort	to	mitigate	the	greater	levels	of	volatility,	illiquidity	and	risk that	are	present	in	the	individual	investments.	The	indexed	group	annuity	trading	portfolio	losses	in	2008	were	substantially	offset	by	a	corresponding	decrease	in	the policyholders'	funds	reserves	supported	by	the	trading	portfolio,	which	was	included	in	Insurance	claims	and	policyholders'	benefits	on	the	Consolidated	Statements	of Income.	CNA	exited	the	indexed	group	annuity	business	in	2008.

Net	investment	income	decreased	$814	million	in	2008	as	compared	with	2007.	The	decrease	was	primarily	driven	by	significant	losses	from	limited	partnerships and	the	indexed	group	annuity	trading	portfolio	in	2008,	and	a	decline	in	short	term	interest	rates.

The	fixed	maturity	investment	portfolio	and	short	term	investments	provided	a	pretax	effective	income	yield	of	5.1%,	5.6%	and	5.8%	for	the	years	ended December	31,	2009,	2008,	and	2007.

# Net	Realized	Investment	Gains	(Losses)

The	components	of	CNA's	net	realized	investment	results	are	presented	in	the	following	table:

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Realized\tinvestment\tgains\t(losses): |  |  |  |
| Fixed\tmaturity\tsecurities: |  |  |  |
| U.S.\tTreasury\tsecurities\tand\tobligations\tof\tgovernment\tagencies | $(53) | $235 | $86 |
| Corporate\tand\tother\ttaxable\tbonds | (306) | (643) | (183) |
| States,\tmunicipalities\tand\tpolitical\tsubdivisions-tax-exempt\tsecurities | (21) | 53 | 3 |
| Asset-backed\tsecurities | (778) | (476) | (343) |
| Redeemable\tpreferred\tstock | (9) |  | (41) |
| Total\tfixed\tmaturity\tsecurities | (1,167) | (831) | (478) |
| Equity\tsecurities | 243 | (490) | 117 |
| Derivative\tsecurities | 51 | (19) | 32 |
| Short\tterm\tinvestments | 10 | 34 | 7 |
| Other | 6 | 9 | 12 |
| Total\trealized\tinvestment\tlosses | (857) | (1,297) | (310) |
| Income\ttax\tbenefit | 296 | 456 | 108 |
| Net\trealized\tinvestment\tlosses | (561) | (841) | (202) |
| Amounts\tattributable\tto\tnoncontrolling\tinterests | 56 | 85 | 22 |
| Net\trealized\tinvestment\tlosses\tattributable\tto\tLoews\tCorporation | $(505) | $(756) | $(180) |

Net	realized	investment	losses	decreased	$251	million	for	2009	as	compared	with	2008,	driven	by	a	realized	investment	gain	related	to	a	common	stock	holding	as discussed	below	and	decreased	OTTI	losses	recognized	in	earnings.	Further	information	on	CNA's	realized	gains	and	losses,	including	our	OTTI	losses	and	impairment decision	process,	is	set	forth	in	Note	3	of	the	Notes	to	Consolidated	Financial	Statements	included	under	Item	8.	During	the	second	quarter	of	2009,	the	Company adopted	updated	accounting	guidance,	which	amended	the	OTTI	loss	model	for	fixed	maturity	securities,	as	discussed	in	Note	1	of	the	Notes	to	Consolidated	Financial Statements	included	under	Item	8.

Included	in	the	2009	realized	investment	gains	for	equity	securities	was	$370	million	related	to	the	sale	of	CNA's	holdings	of	Verisk	Analytics	Inc.,	which	began trading	on	October	7,	2009	after	an	initial	public	offering.	Since	CNA's	cost	basis	in	this	position	was	zero,	the	entire	amount	was	recognized	as	a	pretax	realized investment	gain	in	the	fourth	quarter	of	2009.

Net	realized	investment	losses	increased	$576	million	for	2008	as	compared	with	2007.	The	increase	was	primarily	driven	by	an	increase	in	OTTI	losses recognized	in	earnings.

CNA's	fixed	maturity	portfolio	consists	primarily	of	high	quality	bonds,	90.3%	and	91.1%	of	which	were	rated	as	investment	grade	(rated	BBB-	or	higher)	at December	31,	2009	and	2008.	The	classification	between	investment	grade	and	non-investment	grade	is	based	on	a	ratings	methodology	that	takes	into	account	ratings from	the	three	major	providers,	S&P,	Moody's	and	Fitch	Ratings	("Fitch")	in	that	order	of	preference.	If	a	security	is	not	rated	by	any	of	the	three,	CNA	formulates	an internal	rating.	For	securities	with	credit	support	from	third	party	guarantees,	the	rating	reflects	the	greater	of	the	underlying	rating	of	the	issuer	or	the	insured	rating.

The	following	table	summarizes	the	ratings	of	CNA's	fixed	maturity	portfolio	at	carrying	value:

| U.S.	Government	and	Agencies | $3,705 | 10.4% | $4,611 | 16.0% |
| :--- | :--- | :--- | :--- | :--- |
| AAA\trated | 5,855 | 16.5 | 8,494 | 29.4 |
| AA\tand\tA\trated | \t 12,464 | 35.0 | 8,166 | 28.2 |
| BBB\trated | \t 10,122 | 28.4 | 5,029 | 17.4 |
| Non\tinvestment-grade | 3,466 | 9.7 | 2,587 | 9.0 |
| Total | \t\t $35,612\t\t 100.0% | \t\t $35,612\t\t 100.0% | $28,887\t\t 100.0% | $28,887\t\t 100.0% |

Non-investment	grade	fixed	maturity	securities,	as	presented	in	the	table	below,	include	high-yield	securities	rated	below	BBB-	by	bond	rating	agencies	and	other unrated	securities	that,	according	to	CNA's	analysis,	are	below	investment	grade.	Non-investment	grade	securities	generally	involve	a	greater	degree	of	risk	than investment	grade	securities.	Although	CNA	has	focused	efforts	to	reduce	exposure	to	non-investment	grade	securities	through	net	dispositions,	its	non-investment	grade securities	increased	primarily	due	to	price	appreciation	and	downgrades	of	$1,126	million	of	asset-backed	securities	and	$333	million	of	other	fixed	maturity	securities on	an	amortized	cost	basis	that	were	previously	investment	grade.	The	amortized	cost	of	CNA's	non-investment	grade	fixed	maturity	bond	portfolio	was	$3,637	million and	$3,709	million	at	December	31,	2009	and	2008.	The	following	table	summarizes	the	ratings	of	this	portfolio	at	carrying	value.

| (In	millions	of	dollars) | December	31,	2009 | December	31,	2009 | December	31,	2008 | December	31,	2008 |
| :--- | :--- | :--- | :--- | :--- |
| BB | \t\t $1,352 | 39.0% | $1,585 | 61.3% |
| B | 1,255 | 36.2 | 754 | 29.1 |
| CCC-C | 761 | 22.0 | 232 | 9.0 |
| D | 98 | 2.8 | 16 | 0.6 |
| Total | \t\t $3,466 | 100.0% | $2,587 | 100.0% |

Included	within	the	fixed	maturity	portfolio	are	securities	that	contain	credit	support	from	third	party	guarantees	from	mono-line	insurers.	At	December	31,	2009, $487	million	of	the	carrying	value	of	the	fixed	maturity	portfolio	had	a	third	party	guarantee	that	increased	the	underlying	average	rating	of	those	securities	from	AA-	to AAA.	Of	this	amount,	over	99.0%	was	within	the	tax-exempt	bond	segment.	This	third	party	credit	support	on	tax-exempt	bonds	is	provided	by	five	mono-line	insurers, the	largest	exposure	based	on	fair	value	being	Assured	Guaranty	Ltd.	at	94.0%.

At	December	31,	2009	and	2008,	approximately	99.0%	and	97.0%	of	the	fixed	maturity	portfolio	was	issued	by	U.S.	Government	and	agencies	or	was	rated	by S&P	or	Moody's.	The	remaining	bonds	were	rated	by	other	rating	agencies	or	internally.

The	 carrying	 value	 of	 fixed	 maturity	 and	 equity	 securities	 that	 are	 either	 subject	 to	 trading	 restrictions	 or	 trade	 in	 illiquid	 private	 placement	 markets	 at December	31,	2009	was	$154	million,	which	represents	less	than	0.4%	of	CNA's	total	investment	portfolio.	These	securities	were	in	a	net	unrealized	gain	position	of	$5 million	at	December	31,	2009.

The	following	table	provides	the	composition	of	available-for-sale	fixed	maturity	securities	in	a	gross	unrealized	loss	position	at	December	31,	2009	by	maturity profile.	Securities	not	due	at	a	single	date	are	allocated	based	on	weighted	average	life.

|  | Percent	of<br>Fair	Value | Percent	of<br>Unrealized<br>Loss |
| :--- | :--- | :--- |
| Due\tin\tone\tyear\tor\tless | 3.0% | 4.0% |
| Due\tafter\tone\tyear\tthrough\tfive\tyears | 20.0 | 12.0 |
| Due\tafter\tfive\tyears\tthrough\tten\tyears | 36.0 | 36.0 |
| Due\tafter\tten\tyears | 41.0 | 48.0 |
| Total | 100.0% | 100.0% |

# Duration

A	primary	objective	in	the	management	of	the	fixed	maturity	and	equity	portfolios	is	to	optimize	return	relative	to	underlying	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,	and the	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	the	investment	portfolio	is	the	characteristics	of	the	underlying	liabilities	and	the	ability	to	align	the	duration	of	the portfolio	to	those	liabilities	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	liabilities	primarily	in	the	Life	&	Group	Non-Core	segment	including	annuities,	structured	benefit	settlements	and	long	term care	products.

The	effective	durations	of	fixed	maturity	securities,	short	term	investments,	non-redeemable	preferred	stocks	and	interest	rate	derivatives	are	presented	in	the table	below.	CNA's	short	term	investments	are	net	of	securities	lending	collateral	and	accounts	payable	and	receivable	amounts	for	securities	purchased	and	sold,	but	not yet	settled.

|  | December	31,	2009 | December	31,	2009 | December	31,	2008 | December	31,	2008 |
| :--- | :--- | :--- | :--- | :--- |
| (In\tmillions\tof\tdollars) | Fair\tValue | Effective\tDuration\n(Years) | Fair\tValue | Effective\tDuration\n(Years) |
| Segregated\tinvestments | $10,376 | 11.2 | $8,168 | 9.9 |
| Other\tinterest\tsensitive\tinvestments | 29,665 | \t\t4.0 | 25,194 | 4.5 |
| Total | $40,041 | \t\t5.8 | $33,362 | 5.8 |

The	investment	portfolio	is	periodically	analyzed	for	changes	in	duration	and	related	price	change	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	Item	7A	–	Quantitative	and	Qualitative	Disclosures	About	Market	Risk	included	herein.

# Short	Term	Investments

| December	31<br>(In	millions) | 2009 | 2008 |
| :--- | :--- | :--- |
| Short\tterm\tinvestments\tavailable-for-sale: |  |  |
| Commercial\tpaper | \t\t $185\t\t $ | 563 |
| U.S.\tTreasury\tsecurities | \t 3,025 | \t 2,258 |
| Money\tmarket\tfunds | 179 | 329 |
| Other | 560 | 384 |
| Total\tshort\tterm\tinvestments | \t\t $3,949\t\t $3,534 | \t\t $3,949\t\t $3,534 |

There	was	no	cash	collateral	held	related	to	securities	lending	at	December	31,	2009	and	2008.

# Separate	Accounts

The	following	table	summarizes	the	bond	ratings	of	the	investments	supporting	CNA's	separate	account	products	which	guarantee	principal	and	a	minimum	rate of	interest,	for	which	additional	amounts	may	be	recorded	in	Policyholders'	funds	should	the	aggregate	contract	value	exceed	the	fair	value	of	the	related	assets supporting	the	business	at	any	point	in	time.

| U.S.	Government	Agencies | $67 | 17.6% | $67 | 19.5% |
| :--- | :--- | :--- | :--- | :--- |
| AAA\trated | 17 | 4.5 | 53 | 15.5 |
| AA\tand\tA\trated | \t 176 | 46.3 | \t 148 | 43.1 |
| BBB\trated | 93 | 24.5 | 74 | 21.6 |
| Non\tinvestment-grade | 27 | 7.1 | 1 | 0.3 |
| Total | $380 | 100.0% | $343 | 100.0% |

At	December	31,	2009	and	2008,	approximately	97.0%	of	the	separate	account	portfolio	was	issued	by	U.S.	Government	and	affiliated	agencies	or	was	rated	by S&P	or	Moody's.	The	remaining	bonds	were	rated	by	other	rating	agencies	or	internally.

# Asset-backed	Exposure

The	following	table	provides	detail	of	the	Company's	exposure	to	asset-backed	and	sub-prime	mortgage	related	securities:

| December	31,	2009<br>(In	millions) | RMBS	(a) | CMBS	(b) | Other<br>ABS	(c) | Total |
| :--- | :--- | :--- | :--- | :--- |
| U.S.\tGovernment\tAgencies | $3,405 |  |  | $3,405 |
| AAA | 1,821 | $345 | $626 | \t 2,792 |
| AA | 307 | 92 | 69 | 468 |
| A | 250 | 81 | 35 | 366 |
| BBB | 226 | 44 | 102 | 372 |
| Non-investment\tgrade\tand\tequity\ttranches | 1,105 | 22 |  | \t 1,127 |
| Total\tfair\tvalue | $7,114 | $584 | $832 | $8,530 |
| Total\tamortized\tcost | $7,646 | $709 | $858 | $9,213 |
| Sub-prime\t(included\tabove) |  |  |  |  |
| Fair\tvalue | $602 |  |  | $602 |
| Amortized\tcost | 709 |  |  | 709 |
| Alt-A\t(included\tabove) |  |  |  |  |
| Fair\tvalue | $650 |  |  | $650 |
| Amortized\tcost | 775 |  |  | 775 |

(a) Residential	mortgage-backed	securities	("RMBS")

(b) Commercial	mortgage-backed	securities	("CMBS")

(c) Other	asset-backed	securities	("Other	ABS")

The	exposure	to	sub-prime	residential	mortgage	("sub-prime")	collateral	and	Alternative	A	residential	mortgages	that	have	lower	than	normal	standards	of	loan documentation	("Alt-A")	collateral	is	measured	by	the	original	deal	structure.	Of	the	securities	with	sub-prime	exposure,	approximately	66.0%	were	rated	investment grade,	while	78.0%	of	the	Alt-A	securities	were	rated	investment	grade.	At	December	31,	2009,	$7	million	of	the	carrying	value	of	the	sub-prime	and	Alt-A	securities carried	a	third-party	guarantee.

Pretax	OTTI	losses	of	$435	million	for	securities	with	sub-prime	and	Alt-A	exposure	were	included	in	the	$685	million	of	pretax	OTTI	losses	related	to	asset- backed	securities	recognized	in	earnings	on	the	Consolidated	Statements	of	Income	for	the	year	ended	December	31,	2009.	Continued	deterioration	in	the	underlying collateral	beyond	our	current	expectations	may	cause	us	to	reconsider	and	recognize	additional	OTTI	losses	in	earnings.	See	Note	3	of	the	Notes	to	Consolidated Financial	Statements	included	under	Item	8	for	additional	information	related	to	unrealized	losses	on	asset-backed	securities.

# 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 Financial	Statements	included	under	Item	8.

# FORWARD-LOOKING	STATEMENTS

Investors	are	cautioned	that	certain	statements	contained	in	this	Report	as	well	as	some	statements	in	periodic	press	releases	and	some	oral	statements	made	by our	officials	and	our	subsidiaries	during	presentations	about	us,	are	"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	may	project,	indicate	or	imply	future	results,	events,	performance	or achievements,	and	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,	which	may	be	provided	by	management	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.	These	risks	and	uncertainties	include, among	others:

# Risks	and	uncertainties	primarily	affecting	us	and	our	insurance	subsidiaries

•conditions	in	the	capital	and	credit	markets	including	severe	levels	of	volatility,	illiquidity,	uncertainty	and	overall	disruption,	as	well	as	sharply	reduced economic	activity,	that	may	impact	the	returns,	types,	liquidity	and	valuation	of	CNA's	investments;

•the	impact	of	competitive	products,	policies	and	pricing	and	the	competitive	environment	in	which	CNA	operates,	including	changes	in	CNA's	book	of business;

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

•development	of	claims	and	the	impact	on	loss	reserves,	including	changes	in	claim	settlement	policies;

•the	performance	of	reinsurance	companies	under	reinsurance	contracts	with	CNA;

•regulatory	limitations,	impositions	and	restrictions	upon	CNA,	including	the	effects	of	assessments	and	other	surcharges	for	guaranty	funds	and	second- injury	funds,	other	mandatory	pooling	arrangements	and	future	assessments	levied	on	insurance	companies	and	other	financial	industry	participants	under the	Emergency	Economic	Stabilization	Act	of	2008	recoupment	provisions;

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

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

•	 man-made	disasters,	including	the	possible	occurrence	of	terrorist	attacks	and	the	effect	of	the	absence	or	insufficiency	of	applicable	terrorism	legislation	on coverages;

•the	unpredictability	of	the	nature,	targets,	severity	or	frequency	of	potential	terrorist	events,	as	well	as	the	uncertainty	as	to	CNA's	ability	to	contain	its terrorism	exposure	effectively,	notwithstanding	the	extension	through	December	31,	2014	of	the	Terrorism	Risk	Insurance	Act	of	2002;

•the	occurrence	of	epidemics;

Forward-Looking	Statements	–	(Continued)

•exposure	to	liabilities	due	to	claims	made	by	insureds	and	others	relating	to	asbestos	remediation	and	health-based	asbestos	impairments,	as	well	as exposure	to	liabilities	for	environmental	pollution,	construction	defect	claims	and	exposure	to	liabilities	due	to	claims	made	by	insureds	and	others	relating to	lead-based	paint	and	other	mass	torts;

•the	assertion	of	"public	nuisance"	theories	of	liability,	pursuant	to	which	plaintiffs	seek	to	recover	monies	spent	to	administer	public	health	care	programs and/or	to	abate	hazards	to	public	health	and	safety;

•regulatory	limitations	and	restrictions,	including	limitations	upon	CNA's	ability	to	receive	dividends	from	its	insurance	subsidiaries	imposed	by	state regulatory	agencies	and	minimum	risk-based	capital	standards	established	by	the	National	Association	of	Insurance	Commissioners;

•the	risks	and	uncertainties	associated	with	CNA's	loss	reserves	as	outlined	under	"Results	of	Operations	by	Business	Segment	–	CNA	Financial	–	Reserves –	Estimates	and	Uncertainties"	in	the	MD&A	portion	of	this	Report,	including	the	sufficiency	of	the	reserves	and	the	possibility	for	future	increases;

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

•the	effects	of	 the	mergers	and	failures	of	a	number	of	prominent	financial	 institutions	and	government	sponsored	entities,	as	well	as	 the	effects	of accounting	and	financial	reporting	scandals	and	other	major	failures	in	internal	controls	and	governance,	on	capital	and	credit	markets,	as	well	as	on	the markets	for	directors	and	officers	and	errors	and	omissions	coverages;

•general	economic	and	business	conditions,	including	recessionary	conditions	that	may	decrease	the	size	and	number	of	CNA's	insurance	customers	and create	additional	losses	to	CNA's	lines	of	business,	especially	those	that	provide	management	and	professional	liability	insurance,	as	well	as	surety	bonds, to	businesses	engaged	in	real	estate,	financial	services	and	professional	services,	and	inflationary	pressures	on	medical	care	costs,	construction	costs	and other	economic	sectors	that	increase	the	severity	of	claims;

•the	effectiveness	of	current	initiatives	by	claims	management	to	reduce	the	loss	and	expense	ratios	through	more	efficacious	claims	handling	techniques; and

•conditions	in	the	capital	and	credit	markets	that	may	limit	CNA's	ability	to	raise	significant	amounts	of	capital	on	favorable	terms,	as	well	as	restrictions	on the	ability	or	willingness	of	the	Company	to	provide	additional	capital	support	to	CNA;

# Risks	and	uncertainties	primarily	affecting	us	and	our	energy	subsidiaries

•the	impact	of	changes	in	worldwide	demand	for	oil	and	natural	gas	and	oil	and	gas	price	fluctuations	on	E&P	activity,	including	possible	write	downs	of	the carrying	value	of	natural	gas	and	NGL	properties	and	impairments	of	goodwill;

•costs	and	timing	of	rig	upgrades;

•	 market	conditions	in	the	offshore	oil	and	gas	drilling	industry,	including	utilization	levels	and	dayrates;

•timing	and	duration	of	required	regulatory	inspections	for	offshore	oil	and	gas	drilling	rigs;

•the	risk	of	physical	damage	to	rigs	and	equipment	caused	by	named	windstorms	in	the	U.S.	Gulf	of	Mexico;

•the	availability	and	cost	of	insurance;

•regulatory	issues	affecting	natural	gas	transmission,	including	ratemaking	and	other	proceedings	particularly	affecting	our	gas	transmission	subsidiaries;

•the	ability	of	Boardwalk	Pipeline	to	obtain	and	maintain	authority	to	operate	its	expansion	project	pipelines	at	higher	than	normal	operating	pressures;

•the	successful	completion,	timing,	cost,	scope	and	future	financial	performance	of	planned	expansion	projects	as	well	as	the	financing	of	such	projects;

•the	ability	of	Boardwalk	Pipeline	to	maintain	or	replace	expiring	customer	contracts	on	favorable	terms;	and

•the	development	of	additional	natural	gas	reserves	and	changes	in	reserve	estimates.

# Risks	and	uncertainties	affecting	us	and	our	subsidiaries	generally

# •general	economic	and	business	conditions;

•changes	in	domestic	and	foreign	political,	social	and	economic	conditions,	including	the	impact	of	the	global	war	on	terrorism,	the	war	in	Iraq,	the	future outbreak	of	hostilities	and	future	acts	of	terrorism;

•potential	changes	 in	accounting	policies	by	 the	Financial	Accounting	Standards	Board,	 the	SEC	or	regulatory	agencies	for	any	of	our	subsidiaries' industries	which	may	cause	us	or	our	subsidiaries	to	revise	their	financial	accounting	and/or	disclosures	in	the	future,	and	which	may	change	the	way analysts	measure	our	and	our	subsidiaries'	business	or	financial	performance;

•the	impact	of	regulatory	initiatives	and	compliance	with	governmental	regulations,	judicial	rulings	and	jury	verdicts;

•the	results	of	financing	efforts;	by	us	and	our	subsidiaries,	including	any	additional	investments	by	us	in	our	subsidiaries;

•the	ability	of	customers	and	suppliers	to	meet	their	obligations	to	us	and	our	subsidiaries;

•the	closing	of	any	contemplated	transactions	and	agreements;

•the	successful	integration,	transition	and	management	of	acquired	businesses;

•the	outcome	of	pending	or	future	litigation,	including	any	tobacco-related	suits	to	which	we	are	or	may	become	a	party;	and

•the	availability	of	indemnification	by	Lorillard	and	its	subsidiaries	for	any	tobacco-related	liabilities	that	we	may	incur	as	a	result	of	tobacco-related lawsuits	or	otherwise,	as	provided	in	the	Separation	Agreement.

Developments	in	any	of	these	areas,	which	are	more	fully	described	elsewhere	in	this	Report,	could	cause	our	results	to	differ	materially	from	results	that	have been	or	may	be	anticipated	or	projected.	Forward-looking	statements	speak	only	as	of	the	date	of	this	Report	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	7A.	Quantitative	and	Qualitative	Disclosures	about	Market	Risk.

We	are	a	large	diversified	holding	company.	As	such,	we	and	our	subsidiaries	have	significant	amounts	of	financial	instruments	that	involve	market	risk.	Our measure	of	market	risk	exposure	represents	an	estimate	of	the	change	in	fair	value	of	our	financial	instruments.	Changes	in	the	trading	portfolio	are	recognized	in	the Consolidated	Statements	of	Income.	Market	risk	exposure	is	presented	for	each	class	of	financial	instrument	held	by	us	at	December	31,	assuming	immediate	adverse market	movements	of	the	magnitude	described	below.	We	believe	that	the	various	rates	of	adverse

market	movements	represent	a	measure	of	exposure	 to	 loss	under	hypothetically	assumed	adverse	conditions.	The	estimated	market	risk	exposure	represents	 the hypothetical	loss	to	future	earnings	and	does	not	represent	the	maximum	possible	loss	nor	any	expected	actual	loss,	even	under	adverse	conditions,	because	actual adverse	fluctuations	would	likely	differ.	In	addition,	since	our	investment	portfolio	is	subject	to	change	based	on	our	portfolio	management	strategy	as	well	as	in response	to	changes	in	the	market,	these	estimates	are	not	necessarily	indicative	of	the	actual	results	which	may	occur.

Exposure	to	market	risk	is	managed	and	monitored	by	senior	management.	Senior	management	approves	our	overall	investment	strategy	and	has	responsibility	to ensure	that	the	investment	positions	are	consistent	with	that	strategy	with	an	acceptable	level	of	risk.	We	may	manage	risk	by	buying	or	selling	instruments	or	entering into	offsetting	positions.

Interest	Rate	Risk	–	We	have	exposure	to	interest	rate	risk	arising	from	changes	in	the	level	or	volatility	of	interest	rates.	We	attempt	to	mitigate	our	exposure	to interest	rate	risk	by	utilizing	instruments	such	as	interest	rate	swaps,	interest	rate	caps,	commitments	to	purchase	securities,	options,	futures	and	forwards.	We	monitor our	sensitivity	to	interest	rate	changes	(inclusive	of	credit	spread)	by	revaluing	financial	assets	and	liabilities	using	a	variety	of	different	interest	rates.	The	Company	uses duration	and	convexity	at	the	security	level	to	estimate	the	change	in	fair	value	that	would	result	from	a	change	in	each	security's	yield.	Duration	measures	the	price sensitivity	of	an	asset	to	changes	in	the	yield	rate.	Convexity	measures	how	the	duration	of	the	asset	changes	with	interest	rates.	The	duration	and	convexity	analysis takes	into	account	the	unique	characteristics	(e.g.,	call	and	put	options	and	prepayment	expectations)	of	each	security,	in	determining	the	hypothetical	change	in	fair value.	The	analysis	is	performed	at	the	security	level	and	is	aggregated	up	to	the	asset	category	level.

The	evaluation	is	performed	by	applying	an	instantaneous	change	in	the	yield	rates	by	varying	magnitudes	on	a	static	balance	sheet	to	determine	the	effect	such	a change	in	rates	would	have	on	the	recorded	market	value	of	our	investments	and	the	resulting	effect	on	shareholders'	equity.	The	analysis	presents	the	sensitivity	of	the market	value	of	our	financial	instruments	to	selected	changes	in	market	rates	and	prices	which	we	believe	are	reasonably	possible	over	a	one-year	period.

The	sensitivity	analysis	estimates	the	change	in	the	fair	value	of	our	interest	sensitive	assets	and	liabilities	that	were	held	on	December	31,	2009	and	2008	due	to an	instantaneous	change	in	the	yield	of	the	security	at	the	end	of	the	period	of	100	basis	points,	with	all	other	variables	held	constant.

The	interest	rates	on	certain	types	of	assets	and	liabilities	may	fluctuate	in	advance	of	changes	in	market	interest	rates,	while	interest	rates	on	other	types	may	lag behind	changes	in	market	rates.	Accordingly,	the	analysis	may	not	be	indicative	of,	is	not	intended	to	provide,	and	does	not	provide	a	precise	forecast	of	the	effect	of changes	of	market	interest	rates	on	our	earnings	or	shareholders'	equity.	Further,	the	computations	do	not	contemplate	any	actions	we	could	undertake	in	response	to changes	in	interest	rates.

Our	debt	is	denominated	in	U.S.	Dollars	and	has	been	primarily	issued	at	fixed	rates,	therefore,	interest	expense	would	not	be	impacted	by	interest	rate	shifts.	The impact	of	a	100	basis	point	increase	in	interest	rates	on	fixed	rate	debt	would	result	in	a	decrease	in	market	value	of	$429	million	and	$303	million	at	December	31,	2009 and	2008.	The	impact	of	a	100	basis	point	decrease	would	result	in	an	increase	in	market	value	of	$464	million	and	$328	million	at	December	31,	2009	and	2008. HighMount	has	entered	into	interest	rate	swaps	for	a	notional	amount	of	$1.6	billion	to	hedge	its	exposure	to	fluctuations	in	LIBOR.	These	swaps	effectively	fix	the interest	rate	at	5.8%.	Gains	or	losses	from	derivative	instruments	used	for	hedging	purposes,	to	the	extent	realized,	will	generally	be	offset	by	recognition	of	the	hedged transaction.

Equity	Price	Risk	–	We	have	exposure	to	equity	price	risk	as	a	result	of	our	investment	in	equity	securities	and	equity	derivatives.	Equity	price	risk	results	from changes	in	the	level	or	volatility	of	equity	prices	which	affect	the	value	of	equity	securities	or	instruments	that	derive	their	value	from	such	securities	or	indexes.	Equity price	risk	was	measured	assuming	an	instantaneous	25.0%	decrease	in	the	underlying	reference	price	or	index	from	its	level	at	December	31,	2009	and	2008,	with	all other	variables	held	constant.	A	model	was	developed	to	analyze	the	observed	changes	in	the	value	of	limited	partnerships	held	by	the	Company	over	a	multiple	year period	along	with	the	corresponding	changes	in	various	equity	indices.	The	result	of	the	model	allowed	us	to	estimate	the	change	in	value	of	limited	partnerships	when equity	markets	decline	by	25.0%.

Foreign	Exchange	Rate	Risk	–	Foreign	exchange	rate	risk	arises	from	the	possibility	that	changes	in	foreign	currency	exchange	rates	will	impact	the	value	of financial	instruments.	We	have	foreign	exchange	rate	exposure	when	we	buy	or	sell	foreign	currencies	or	financial	instruments	denominated	in	a	foreign	currency.	This exposure	is	mitigated	by	our	asset/liability	matching	strategy	and	through	the	use	of	futures	for	those	instruments	which	are	not	matched.	Our	foreign	transactions	are primarily	denominated	in	Australian	dollars,	Canadian	dollars,	British	pounds,	Japanese	yen	and	the	European	Monetary	Unit.	The	sensitivity	analysis	assumes	an instantaneous	20.0%	decrease	in	the	foreign	currency	exchange	rates	versus	the	U.S.	dollar	from	their	levels	at	December	31,	2009	and	2008,	with	all	other	variables held	constant.

Commodity	Price	Risk	–	We	have	exposure	to	price	risk	as	a	result	of	our	investments	in	commodities.	Commodity	price	risk	results	from	changes	in	the	level	or volatility	of	commodity	prices	that	impact	instruments	which	derive	their	value	from	such	commodities.	Commodity	price	risk	was	measured	assuming	an	instantaneous increase	of	20.0%	from	their	levels	at	December	31,	2009	and	2008.	The	impact	of	a	change	in	commodity	prices	on	the	Company's	non-trading	commodity-based financial	derivative	instruments	at	a	point	in	time	is	not	necessarily	representative	of	the	results	that	will	be	realized	when	such	contracts	are	ultimately	settled.	Net	losses from	commodity	derivative	instruments	used	for	hedging	purposes,	to	the	extent	realized,	will	generally	be	offset	by	recognition	of	the	underlying	hedged	transaction, such	as	revenue	from	sales.

Credit	Risk	–	We	are	exposed	to	credit	risk	relating	to	the	risk	of	loss	resulting	from	the	nonperformance	by	a	customer	of	its	contractual	obligations.	Although nearly	all	of	the	Company's	customers	pay	for	its	services	on	a	timely	basis,	the	Company	actively	monitors	the	credit	exposure	to	its	customers.	Certain	of	the Company's	subsidiaries	may	perform	credit	reviews	of	customers	and	may	require	customers	to	provide	cash	collateral,	post	a	letter	of	credit,	prepay	for	services	or provide	other	credit	enhancements.

Boardwalk	Pipeline	has	established	credit	policies	in	the	pipeline	tariffs	which	are	intended	to	minimize	credit	risk	in	accordance	with	FERC	policies	and	actively monitors	this	portion	of	its	business.	Boardwalk	Pipeline's	credit	exposure	generally	relates	to	receivables	for	services	provided,	as	well	as	volumes	owed	by	customers for	imbalances	or	gas	lent	by	Boardwalk	Pipeline	to	them,	generally	under	PAL	and	no-notice	services.	Natural	gas	price	volatility	can	materially	increase	credit	risk related	to	gas	loaned	to	customers.	If	any	significant	customer	of	Boardwalk	Pipeline	should	have	credit	or	financial	problems	resulting	in	a	delay	or	failure	to	repay	the gas	they	owe	to	Boardwalk	Pipeline,	this	could	have	a	material	adverse	effect	on	Boardwalk	Pipeline's	business,	financial	condition,	results	of	operations	and	cash flows.	As	of	December	31,	2009,	the	amount	of	gas	loaned	out	by	Boardwalk	Pipeline	or	owed	to	Boardwalk	Pipeline	due	to	gas	imbalances	was	approximately	14.9 trillion	British	thermal	units	(TBtu).	Assuming	an	average	market	price	during	December	of	2009	of	$5.36	per	million	British	thermal	unit	(MMBtu),	the	market	value of	this	gas	at	December	31,	2009,	would	have	been	approximately	$80	million.	As	of	December	31,	2008,	the	amount	of	gas	loaned	out	by	Boardwalk	Pipeline	or	owed to	Boardwalk	Pipeline	due	to	gas	imbalances	was	approximately	34.4	TBtu.	Assuming	an	average	market	price	during	December	2008	of	$5.85	per	MMBtu,	the	market value	of	this	gas	at	December	31,	2008,	would	have	been	approximately	$201	million.

The	following	tables	present	our	market	risk	by	category	(equity	markets,	interest	rates,	foreign	currency	exchange	rates	and	commodity	prices)	on	the	basis	of those	entered	into	for	trading	purposes	and	other	than	trading	purposes.

# Trading	portfolio:

| Trading	portfolio: |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- |
| Category\tof\trisk\texposure: | Fair\tValue\tAsset\t(Liability) | Fair\tValue\tAsset\t(Liability) | Market\tRisk | Market\tRisk |
| December\t31 | 2009 | 2008 | 2009 | 2008 |
| (In\tmillions) |  |  |  |  |
| Equity\tmarkets\t(1): |  |  |  |  |
| Equity\tsecurities | $318 | $246 | $(79) | $(61) |
| Options\t–\tpurchased | 45 | 66 | 7 | 3 |
| \t\t\t\t\t\t\t\t\t\t\t\t\t\t–\twritten | (9) | (62) | (7) | (2) |
| Short\tsales | (78) | (106) | 19 | 27 |
| Interest\trate\t(2): |  |  |  |  |
| Futures\t–\tlong |  |  |  | (6) |
| Fixed\tmaturities\t–\tlong | 377 | 565 | (19) | (6) |
| Short\tterm\tinvestments | 1,990 | 1,022 |  |  |
| Other\tderivatives |  | (4) | 19 |  |

Note: The	calculation	of	estimated	market	risk	exposure	is	based	on	assumed	adverse	changes	in	the	underlying	reference	price	or	index	of	(1)	a	decrease	in	equity	prices	of	25.0%	and	(2)	an	increase	in	yield	rates	of 100	basis	points.	Adverse	changes	on	options	which	differ	from	those	presented	above	would	not	necessarily	result	in	a	proportionate	change	to	the	estimated	market	risk	exposure.

# Other	than	trading	portfolio:

| Category	of	risk	exposure: | Fair	Value	Asset	(Liability) | Fair	Value	Asset	(Liability) | Market	Risk | Market	Risk |
| :--- | :--- | :--- | :--- | :--- |
| December\t31 | 2009 | 2008 | 2009 | 2008 |
| (In\tmillions) |  |  |  |  |
| Equity\tmarkets\t(1): |  |  |  |  |
| Equity\tsecurities: |  |  |  |  |
| General\taccounts\t(a) | $644 | $873 | $(161) | $(218) |
| Separate\taccounts | 32 | 27 | (8) | (7) |
| Limited\tpartnership\tinvestments | 1,996 | 1,781 | (200) | (118) |
| Interest\trate\t(2): |  |  |  |  |
| Fixed\tmaturities\t(a)(b) | 35,439 | 28,886 | (2,082) | (1,919) |
| Short\tterm\tinvestments\t(a) | 5,221 | 5,007 | (12) | (17) |
| Other\tinvested\tassets | 4 | 4 |  |  |
| Interest\trate\tswaps\tand\tother\t(c) | (135) | (183) | 45 | 61 |
| Other\tderivative\tsecurities | (11) | (88) |  | 90 |
| Separate\taccounts\t(a): |  |  |  |  |
| Fixed\tmaturities | 380 | 343 | (15) | (17) |
| Short\tterm\tinvestments | 6 | 7 |  |  |
| Foreign\texchange\t(3): |  |  |  |  |
| Forwards\t–\tshort | 3 | (37) | (21) | (33) |
| Commodities\t(4): |  |  |  |  |
| Forwards\t–\tshort\t(c) | 11 | 157 | (134) | (69) |
| Options\t–\twritten | 2 | 4 | (1) | (2) |

Note: The	calculation	of	estimated	market	risk	exposure	is	based	on	assumed	adverse	changes	in	the	underlying	reference	price	or	index	of	(1)	a	decrease	in	equity	prices	of	25.0%,	(2)	an	increase	in	yield	rates	of	100 basis	points,	(3)	a	decrease	in	the	foreign	currency	exchange	rates	versus	the	U.S.	dollar	of	20.0%	and	(4)	an	increase	in	commodity	prices	of	20.0%.

(a) Certain	securities	are	denominated	in	foreign	currencies.	An	assumed	20.0%	decline	in	the	underlying	exchange	rates	would	result	in	an	aggregate	foreign	currency	exchange	rate	risk	of	$(330)	and $(225)	at	December	31,	2009	and	2008.

(b) At	December	31,	2008,	certain	fixed	maturities	positions	include	options	embedded	in	convertible	debt	securities.	A	decrease	in	underlying	equity	prices	of	25.0%	would	result	in	market	risk	amounting to	$(5)	at	December	31,	2008.

(c) The	market	risk	at	December	31,	2009	and	2008	will	generally	be	offset	by	recognition	of	the	underlying	hedged	transaction.

# Item	8.	FinancialStatements	and	Supplementary	Data.

      Financial	Statements	and	Supplementary	Data	are	comprised	of	the	following	sections:

| Financial	Statements	and	Supplementary	Data	are	comprised	of	the	following	sections: |  |
| :--- | :--- |
|  | Page\nNo. |
| Consolidated\tBalance\tSheets | \t\t 112 |
| Consolidated\tStatements\tof\tIncome | \t\t 114 |
| Consolidated\tStatements\tof\tComprehensive\tIncome | \t\t 116 |
| Consolidated\tStatements\tof\tEquity | \t\t 117 |
| Consolidated\tStatements\tof\tCash\tFlows | \t\t 119 |
| Notes\tto\tConsolidated\tFinancial\tStatements: | \t\t 121 |
| Summary\tof\tSignificant\tAccounting\tPolicies\n\t\t1. | \t\t 121 |
| Acquisition/Divestitures\n\t\t2. | \t\t 130 |
| Investments\n\t\t3. | \t\t 131 |
| Fair\tValue\n\t\t4. | \t\t 139 |
| Derivative\tFinancial\tInstruments\n\t\t5. | \t\t 144 |
| Earnings\tPer\tShare\n\t\t6. | \t\t 149 |
| Receivables\n\t\t7. | \t\t 150 |
| Property,\tPlant\tand\tEquipment\n\t\t8. | \t\t 151 |
| Claim\tand\tClaim\tAdjustment\tExpense\tReserves\n\t\t9. | \t\t 152 |
| Leases\n10. | \t\t 162 |
| Income\tTaxes\n11. | \t\t 163 |
| Debt\n12. | \t\t 165 |
| Comprehensive\tIncome\t(Loss)\n13. | \t\t 168 |
| Statutory\tAccounting\tPractices\t(Unaudited)\n14. | \t\t 168 |
| Supplemental\tNatural\tGas\tand\tOil\tInformation\t(Unaudited)\n15. | \t\t 170 |
| Benefit\tPlans\n16. | \t\t 174 |
| Reinsurance\n17. | \t\t 180 |
| Quarterly\tFinancial\tData\t(Unaudited)\n18. | \t\t 183 |
| Legal\tProceedings\n19. | \t\t 184 |
| Commitments\tand\tContingencies\n20. | \t\t 185 |
| Discontinued\tOperations\n21. | \t\t 185 |
| Business\tSegments\n22. | \t\t 187 |
| Consolidating\tFinancial\tInformation\n23. | \t\t 190 |

# Loews	Corporation	and	Subsidiaries

# CONSOLIDATED	BALANCE	SHEETS

See	Notes	to	Consolidated	Financial	Statements.

| December	31<br>(Dollar	amounts	in	millions,	except	per	share	data) | 2009 | 2008 |
| :--- | :--- | :--- |
| Insurance\treserves\t(Notes\t1\tand\t9): |  |  |
| Claim\tand\tclaim\tadjustment\texpense | \t\t $26,816 | $27,593 |
| Future\tpolicy\tbenefits | 7,981 | 7,529 |
| Unearned\tpremiums | 3,274 | 3,405 |
| Policyholders'\tfunds | 192 | 243 |
| Total\tinsurance\treserves | \t 38,263 | \t 38,770 |
| Payable\tto\tbrokers\t(Note\t5) | 540 | 679 |
| Short\tterm\tdebt\t(Notes\t4\tand\t12) | 10 | 71 |
| Long\tterm\tdebt\t(Notes\t4\tand\t12) | 9,475 | 8,187 |
| Reinsurance\tbalances\tpayable\t(Notes\t1\tand\t17) | 281 | 316 |
| Other\tliabilities\t(Notes\t1,\t4\tand\t16) | 3,993 | 4,328 |
| Separate\taccount\tbusiness\t(Notes\t1,\t4\tand\t5) | 423 | 384 |
| Total\tliabilities | \t 52,985 | \t 52,735 |
| Commitments\tand\tcontingent\tliabilities\n(Notes\t1,\t3,\t5,\t9,\t11,\t12,\t13,\t14,\t16,\t17,\t19\tand\t20) |  |  |
| Shareholders'\tequity\t(Notes\t1,\t2,\t3,\t6\tand\t13): |  |  |
| Preferred\tstock,\t$0.10\tpar\tvalue: |  |  |
| Authorized\t-\t100,000,000\tshares |  |  |
| Common\tstock,\t$0.01\tpar\tvalue: |  |  |
| Authorized\t–\t1,800,000,000\tshares |  |  |
| Issued\t425,497,522\tand\t435,091,667\tshares | 4 | 4 |
| Additional\tpaid-in\tcapital | 3,637 | 3,340 |
| Retained\tearnings | \t 13,693 | \t 13,375 |
| Accumulated\tother\tcomprehensive\tloss | (419) | (3,586) |
|  | \t 16,915 | \t 13,133 |
| Less\ttreasury\tstock,\tat\tcost\t(427,200\tshares) | (16) |  |
| Total\tshareholders'\tequity | \t 16,899 | \t 13,133 |
| Noncontrolling\tinterests | 4,186 | 4,002 |
| Total\tequity | \t 21,085 | \t 17,135 |
| Total\tliabilities\tand\tequity | \t\t $74,070 | $69,870 |

# CONSOLIDATED	STATEMENTS	OF	INCOME

| Year	Ended	December	31<br>(In	millions,	except	per	share	data) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Revenues\t(Note\t1): |  |  |  |
| Insurance\tpremiums\t(Note\t17) | $6,721 | $7,150 | $7,482 |
| Net\tinvestment\tincome\t(Note\t3) | 2,499 | 1,581 | 2,785 |
| Investment\tgains\t(losses)\t(Note\t3): |  |  |  |
| Other-than-temporary\timpairment\tlosses | (1,657) | (1,484) | (741) |
| Portion\tof\tother-than-temporary\timpairment\tlosses\trecognized\tin\tOther\tcomprehensive\tincome | 305 |  |  |
| Net\timpairment\tlosses\trecognized\tin\tearnings | (1,352) | (1,484) | (741) |
| Transactional\trealized\tinvestment\tgains | 499 | 188 | 465 |
| Total\tinvestment\tlosses | (853) | (1,296) | (276) |
| Gain\ton\tissuance\tof\tsubsidiary\tstock\t(Notes\t2\tand\t3) |  | 2 | 141 |
| Contract\tdrilling\trevenues | 3,537 | 3,476 | 2,506 |
| Other | 2,213 | 2,334 | 1,664 |
| Total | \t 14,117 | \t 13,247 | \t 14,302 |
| Expenses\t(Note\t1): |  |  |  |
| Insurance\tclaims\tand\tpolicyholders'\tbenefits\t(Notes\t9\tand\t17) | 5,290 | 5,723 | 6,009 |
| Amortization\tof\tdeferred\tacquisition\tcosts | 1,417 | 1,467 | 1,520 |
| Contract\tdrilling\texpenses | 1,224 | 1,185 | 1,004 |
| Impairment\tof\tnatural\tgas\tand\toil\tproperties\t(Notes\t1\tand\t8) | 1,036 | 691 |  |
| Impairment\tof\tgoodwill\t(Note\t1) |  | 482 |  |
| Other\toperating\texpenses | 2,972 | 2,767 | 2,256 |
| Interest | 448 | 345 | 319 |
| Total | \t 12,387 | \t 12,660 | \t 11,108 |
| Income\tbefore\tincome\ttax | 1,730 | 587 | 3,194 |
| Income\ttax\texpense\t(Note\t11) | 345 | 7 | 995 |
| Income\tfrom\tcontinuing\toperations | 1,385 | 580 | 2,199 |
| Discontinued\toperations,\tnet:\t(Notes\t1,\t2\tand\t21) |  |  |  |
| Results\tof\toperations | (2) | 351 | 901 |
| Gain\ton\tdisposal |  | 4,362 |  |
| Net\tincome | 1,383 | 5,293 | 3,100 |
| Amounts\tattributable\tto\tnoncontrolling\tinterests | (819) | (763) | (612) |
| Net\tincome\tattributable\tto\tLoews\tCorporation | $564 | $4,530 | $2,488 |
| Net\tincome\t(loss)\tattributable\tto\t(Note\t6): |  |  |  |
| Loews\tcommon\tstock: |  |  |  |
| Income\t(loss)\tfrom\tcontinuing\toperations | $566 | $(182) | $1,586 |
| Discontinued\toperations,\tnet | (2) | 4,501 | 369 |
| Loews\tcommon\tstock | 564 | 4,319 | 1,955 |
| Former\tCarolina\tGroup\tstock-\tdiscontinued\toperations,\tnet |  | 211 | 533 |
| Total | $564 | $4,530 | $2,488 |

| Year	Ended	December	31<br>(In	millions,	except	per	share	data) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Basic\tnet\tincome\t(loss)\tper\tLoews\tcommon\tshare\t(Note\t6): |  |  |  |
| Income\t(loss)\tfrom\tcontinuing\toperations | $1.31 | $(0.38) | $2.97 |
| Discontinued\toperations,\tnet | (0.01) | 9.43 | 0.69 |
| Net\tincome | $1.30 | $9.05 | $3.66 |
| Basic\tnet\tincome\tper\tformer\tCarolina\tGroup\tshare\t(Note\t6): |  |  |  |
| Discontinued\toperations,\tnet | $- | $1.95 | $4.92 |
| Diluted\tnet\tincome\t(loss)\tper\tLoews\tcommon\tshare\t(Note\t6): |  |  |  |
| Income\t(loss)\tfrom\tcontinuing\toperations | $1.31 | $(0.38) | $2.96 |
| Discontinued\toperations,\tnet | (0.01) | 9.43 | 0.69 |
| Net\tincome | $1.30 | $9.05 | $3.65 |
| Diluted\tnet\tincome\tper\tformer\tCarolina\tGroup\tshare\t(Note\t6): |  |  |  |
| Discontinued\toperations,\tnet | $- | $1.95 | $4.91 |
| Basic\tweighted\taverage\tnumber\tof\tshares\toutstanding: |  |  |  |
| Loews\tcommon\tstock | \t 432.81 | \t 477.23 | \t 534.79 |
| Former\tCarolina\tGroup\tstock | - | \t 108.47 | \t 108.43 |
| Diluted\tweighted\taverage\tnumber\tof\tshares\toutstanding: |  |  |  |
| Loews\tcommon\tstock | \t 433.45 | \t 477.23 | \t 536.00 |
| Former\tCarolina\tGroup\tstock | - | \t 108.60 | \t 108.57 |

# CONSOLIDATED	STATEMENTS	OF	COMPREHENSIVE	INCOME

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Net\tincome | \t\t $1,383 | $5,293 | $3,100 |
| Other\tcomprehensive\tincome\t(loss) |  |  |  |
| Changes\tin: |  |  |  |
| Net\tunrealized\tlosses\ton\tinvestments\twith\tother-than-temporary\timpairments | (95) |  |  |
| Net\tother\tunrealized\tgains\t(losses)\ton\tinvestments | 3,711 | (3,528) | (572) |
| Total\tunrealized\tgains\t(losses)\ton\tavailable-for-sale\tinvestments | 3,616 | (3,528) | (572) |
| Unrealized\tgains\t(losses)\ton\tcash\tflow\thedges | (67) | 41 | (65) |
| Foreign\tcurrency | 117 | (161) | 35 |
| Pension\tliability | 6 | (354) | 100 |
| Other\tcomprehensive\tincome\t(loss) | 3,672 | (4,002) | (502) |
| Comprehensive\tincome | 5,055 | 1,291 | \t 2,598 |
| Amounts\tattributable\tto\tnoncontrolling\tinterests | (1,215) | (335) | (562) |
| Total\tcomprehensive\tincome\tattributable\tto\tLoews\tCorporation | \t\t $3,840 | $956 | $2,036 |

# CONSOLIDATED	STATEMENTS	OF	EQUITY

| (In	millions) | Total | Loews<br>Common<br>Stock | Former<br>Carolina<br>Group<br>Stock | Additional<br>Paid-in<br>Capital | Retained<br>Earnings | Accumulated<br>Other<br>Comprehensive<br>Income	(Loss) | Common<br>Stock<br>Held	in<br>Treasury | Noncontrolling<br>Interests |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Balance\tJanuary\t1,\t2007,\tas\treported | \t\t$19,387\t\t\t $ | 5\t\t\t $ | 1\t\t\t $ | 4,018\t\t\t $ 12,096\t\t\t $ | 4,018\t\t\t $ 12,096\t\t\t $ | 387\t\t\t $ | (8)\t\t $ | 2,888 |
| Adjustment\tto\tinitially\tapply\tupdated\tguidance\ton |  |  |  |  |  |  |  |  |
| accounting\tfor\tconvertible\tdebt\tinstruments\tthat\tmay |  |  |  |  |  |  |  |  |
| be\tsettled\tin\tcash\tupon\tconversion | 49 |  |  | 57 | (45) |  |  | 37 |
| Balance\tJanuary\t1,\t2007,\tas\trestated | \t\t\t 19,436 | 5 | 1 | 4,075 | 12,051 | 387 | (8) | 2,925 |
| Issuance\tof\tequity\tsecurities\tby\tsubsidiary | 853 |  |  |  |  |  |  | 853 |
| Net\tincome | 3,100 |  |  |  | 2,488 |  |  | 612 |
| Other\tcomprehensive\tloss | (502) |  |  |  |  | (452) |  | (50) |
| Dividends\tpaid | (785) |  |  |  | (331) |  |  | (454) |
| Purchase\tof\tLoews\ttreasury\tstock | (672) |  |  |  |  |  | (672) |  |
| Retirement\tof\ttreasury\tstock |  |  |  | (111) | (561) |  | 672 |  |
| Issuance\tof\tLoews\tcommon\tstock | 5 |  |  | 5 |  |  |  |  |
| Issuance\tof\tformer\tCarolina\tGroup\tstock | 3 |  |  | 3 |  |  |  |  |
| Stock-based\tcompensation | 28 |  |  | 23 |  |  |  | 5 |
| Other | 7 |  |  |  | (5) |  |  | 12 |
| Tax\tbenefit\trelated\tto\tsettlement\tof\timputed\tinterest\ton |  |  |  |  |  |  |  |  |
| convertible\tdebentures | 29 |  |  | 29 |  |  |  |  |
| Balance,\tDecember\t31,\t2007 | \t\t\t 21,502 | 5 | 1 | 4,024 | 13,642 | (65) | (8) | 3,903 |
| Purchase\tof\tsubsidiary\tshares\tfrom\tnoncontrolling |  |  |  |  |  |  |  |  |
| interests | (111) |  |  |  |  |  |  | (111) |
| Issuance\tof\tequity\tsecurities\tby\tsubsidiary | 247 |  |  |  |  |  |  | 247 |
| Adjustments\trelated\tto\tpurchase\tof\tsubsidiary\tunits | 131 |  |  |  |  |  |  | 131 |
| Net\tincome | 5,293 |  |  |  | 4,530 |  |  | 763 |
| Other\tcomprehensive\tloss | (4,002) |  |  |  |  | (3,574) |  | (428) |
| Dividends\tpaid | (732) |  |  |  | (219) |  |  | (513) |
| Purchase\tof\tLoews\ttreasury\tstock | (33) |  |  |  |  |  | (33) |  |
| Issuance\tof\tLoews\tcommon\tstock | 4 |  |  | 4 |  |  |  |  |
| Redemption\tof\tformer\tCarolina\tGroup\tstock | (542) |  | (1) |  | (602) | 53 | 8 |  |
| Exchange\tof\tLorillard\tcommon\tstock\tfor\tLoews\tcommon |  |  |  |  |  |  |  |  |
| stock | (4,650) |  |  |  |  |  | (4,650) |  |
| Stock-based\tcompensation | 26 |  |  | 22 |  |  |  | 4 |
| Retirement\tof\ttreasury\tstock | - | (1) |  | (710) | (3,972) |  | 4,683 |  |
| Other | 2 |  |  |  | (4) |  |  | 6 |
| Balance,\tDecember\t31,\t2008 | \t\t$17,135\t\t\t $ | 4\t\t\t $ | -\t\t\t $ | 3,340\t\t\t $ 13,375\t\t\t $ | 3,340\t\t\t $ 13,375\t\t\t $ | (3,586)\t\t $ | -\t\t\t $ | 4,002 |

# Loews	Corporation	Shareholders

| (In	millions) | Total | Loews<br>Common<br>Stock | Additional<br>Paid-in<br>Capital | Retained<br>Earnings | Accumulated<br>Other<br>Comprehensive<br>Income	(Loss) | Common<br>Stock<br>Held	in<br>Treasury | Noncontrolling<br>Interests |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Balance,\tDecember\t31,\t2008 | \t\t$17,135\t\t\t $ | 4\t\t$ | 3,340\t\t\t $ | 13,375\t\t\t $ | (3,586)\t\t $ | -\t\t\t $ | 4,002 |
| Adjustment\tto\tinitially\tapply\tupdated\taccounting\tguidance\ton |  |  |  |  |  |  |  |
| reporting\tnoncontrolling\tinterests\tin\tConsolidated\tFinancial |  |  |  |  |  |  |  |
| Statements | (206) |  | 330 |  |  |  | (536) |
| Balance,\tJanuary\t1,\t2009,\tas\tadjusted | \t\t\t 16,929 | 4 | 3,670 | 13,375 | (3,586) | - | 3,466 |
| Adjustment\tto\tinitially\tapply\tupdated\taccounting\tguidance |  |  |  |  |  |  |  |
| which\tamended\tthe\tother-than-temporary\timpairment\tloss |  |  |  |  |  |  |  |
| model\tfor\tfixed\tmaturity\tsecurities |  |  |  | 109 | (109) |  |  |
| Purchase\tof\tsubsidiary\tshares\tfrom\tnoncontrolling\tinterests | (7) |  | 10 |  |  |  | (17) |
| Issuance\tof\tequity\tsecurities\tby\tsubsidiary | 169 |  | 18 |  |  |  | 151 |
| Net\tincome | 1,383 |  |  | 564 |  |  | 819 |
| Other\tcomprehensive\tincome | 3,672 |  |  |  | 3,276 |  | 396 |
| Dividends\tpaid | (756) |  |  | (108) |  |  | (648) |
| Issuance\tof\tLoews\tcommon\tstock | 8 |  | 8 |  |  |  |  |
| Purchase\tof\tLoews\ttreasury\tstock | (348) |  |  |  |  | (348) |  |
| Retirement\tof\ttreasury\tstock | - |  | (86) | (246) |  | 332 |  |
| Stock-based\tcompensation | 22 |  | 18 |  |  |  | 4 |
| Other | 13 |  | (1) | (1) |  |  | 15 |
| Balance,\tDecember\t31,\t2009 | \t\t$21,085\t\t\t $ | 4\t\t$ | 3,637\t\t\t $ | 13,693\t\t\t $ | (419)\t\t $ | (16)\t\t $ | 4,186 |

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Operating\tActivities: |  |  |  |
| Net\tincome | $1,383 | $5,293 | $3,100 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\t(used)\tby\toperating\tactivities: |  |  |  |
| (Income)\tloss\tfrom\tdiscontinued\toperations | 2 | (4,713) | (901) |
| Investment\tlosses | 853 | 1,294 | 135 |
| Undistributed\tearnings | (220) | 451 | (107) |
| Amortization\tof\tinvestments | (199) | (299) | (266) |
| Depreciation,\tdepletion\tand\tamortization | 784 | 692 | 471 |
| Impairment\tof\tnatural\tgas\tand\toil\tproperties | 1,036 | 691 |  |
| Impairment\tof\tgoodwill |  | 482 |  |
| Provision\tfor\tdeferred\tincome\ttaxes | 139 | (378) | 18 |
| Other\tnon-cash\titems | 39 | (41) | (1) |
| Changes\tin\toperating\tassets\tand\tliabilities-net: |  |  |  |
| Reinsurance\treceivables | 829 | 928 | 1,258 |
| Other\treceivables | (76) | (86) | 13 |
| Federal\tincome\ttax | (62) | (308) | (18) |
| Deferred\tacquisition\tcosts | 17 | 36 | 29 |
| Insurance\treserves | (612) | (590) | (830) |
| Reinsurance\tbalances\tpayable | (35) | (85) | (138) |
| Other\tliabilities | (95) | (131) | 241 |
| Trading\tsecurities | 760 | (84) | 1,797 |
| Other,\tnet | 71 | 77 | (26) |
| Net\tcash\tflow\toperating\tactivities\t-\tcontinuing\toperations | 4,614 | 3,229 | 4,775 |
| Net\tcash\tflow\toperating\tactivities\t-\tdiscontinued\toperations | (23) | 142 | 896 |
| Net\tcash\tflow\toperating\tactivities\t-\ttotal | 4,591 | 3,371 | 5,671 |
| Investing\tActivities: |  |  |  |
| Purchases\tof\tfixed\tmaturities | (24,189) | (48,404) | (73,157) |
| Proceeds\tfrom\tsales\tof\tfixed\tmaturities | 19,245 | 41,749 | 69,012 |
| Proceeds\tfrom\tmaturities\tof\tfixed\tmaturities | 3,448 | 4,092 | 4,744 |
| Purchases\tof\tequity\tsecurities | (269) | (210) | (236) |
| Proceeds\tfrom\tsales\tof\tequity\tsecurities | 905 | 221 | 340 |
| Purchases\tof\tproperty,\tplant\tand\tequipment | (2,529) | (3,997) | (2,247) |
| Proceeds\tfrom\tsales\tof\tproperty,\tplant\tand\tequipment | 85 | 87 | 37 |
| Change\tin\tcollateral\ton\tloaned\tsecurities\tand\tderivatives | (5) | (57) | (3,539) |
| Change\tin\tshort\tterm\tinvestments | (1,620) | 2,942 | 2,151 |
| Acquisition\tof\tbusiness,\tnet\tof\tcash\tacquired |  |  | (4,029) |
| Other,\tnet | 43 | (260) | (214) |
| Net\tcash\tflow\tinvesting\tactivities\t-\tcontinuing\toperations | (4,886) | (3,837) | (7,138) |
| Net\tcash\tflow\tinvesting\tactivities\t-\tdiscontinued\toperations,\tincluding\tproceeds\tfrom\tdispositions | 23 | 623 | 323 |
| Net\tcash\tflow\tinvesting\tactivities\t-\ttotal | (4,863) | (3,214) | (6,815) |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Financing\tActivities: |  |  |  |
| Dividends\tpaid | $(108) | $(219) | $(331) |
| Dividends\tpaid\tto\tnoncontrolling\tinterests | (648) | (513) | (454) |
| Purchases\tof\ttreasury\tshares | (334) | (33) | (672) |
| Purchases\tof\tsubsidiary\ttreasury\tshares | (2) | (70) |  |
| Issuance\tof\tcommon\tstock | 8 | 4 | 8 |
| Proceeds\tfrom\tsubsidiaries'\tequity\tissuances | 180 | 247 | 535 |
| Principal\tpayments\ton\tdebt | (902) | (1,282) | (5) |
| Issuance\tof\tdebt | \t 2,128 | 2,285 | 2,142 |
| Receipts\tof\tinvestment\tcontract\taccount\tbalances | 4 | 3 | 3 |
| Return\tof\tinvestment\tcontract\taccount\tbalances | (15) | (608) | (122) |
| Excess\ttax\tbenefits\tfrom\tshare-based\tpayment\tarrangements | 2 | 3 | 7 |
| Other,\tnet | 8 | 10 | 11 |
| Net\tcash\tflow\tfinancing\tactivities\t-\tcontinuing\toperations | 321 | (173) | 1,122 |
| Net\tcash\tflow\tfinancing\tactivities\t-\tdiscontinued\toperations |  |  | 3 |
| Net\tcash\tflow\tfinancing\tactivities\t-\ttotal | 321 | (173) | 1,125 |
| Effect\tof\tforeign\texchange\trate\ton\tcash\t-\tcontinuing\toperations | 10 | (13) | 5 |
| Net\tchange\tin\tcash | 59 | (29) | (14) |
| Net\tcash\ttransactions\tfrom: |  |  |  |
| Continuing\toperations\tto\tdiscontinued\toperations |  | 785 | 1,259 |
| Discontinued\toperations\tto\tcontinuing\toperations |  | (785) | (1,259) |
| Cash,\tbeginning\tof\tyear | 131 | 160 | 174 |
| Cash,\tend\tof\tyear | $190 | $131 | $160 |
| Cash,\tend\tof\tyear: |  |  |  |
| Continuing\toperations | $190 | $131 | $140 |
| Discontinued\toperations |  |  | 20 |
| Total | $190 | $131 | $160 |

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# Note	1.	Summary	of	Significant	Accounting	Policies

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"),	a	90%	owned	subsidiary);	the	operation	of	offshore	oil	and	gas	drilling	rigs	(Diamond	Offshore	Drilling,	Inc. ("Diamond	Offshore"),	a	50.4%	owned	subsidiary);	exploration,	production	and	marketing	of	natural	gas	and	natural	gas	liquids	(HighMount	Exploration	&	Production LLC	("HighMount"),	a	wholly	owned	subsidiary);	the	operation	of	interstate	natural	gas	pipeline	systems	(Boardwalk	Pipeline	Partners,	LP	("Boardwalk	Pipeline"),	a 72%	owned	subsidiary);	and	the	operation	of	hotels	(Loews	Hotels	Holding	Corporation	("Loews	Hotels"),	a	wholly	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	(loss)	–	Loews" used	herein	means	Net	income	(loss)	attributable	to	Loews	Corporation.	The	Company's	management	evaluated	subsequent	events	through	February	24,	2010.

In	June	of	2008,	the	Company	disposed	of	its	entire	ownership	interest	in	its	wholly	owned	subsidiary,	Lorillard,	Inc.	("Lorillard").	The	Consolidated	Financial Statements	have	been	reclassified	to	reflect	Lorillard	as	a	discontinued	operation.	Accordingly,	Lorillard's	assets,	liabilities,	revenues,	expenses	and	cash	flows	have been	excluded	from	the	respective	captions	in	the	Consolidated	Balance	Sheets,	Consolidated	Statements	of	Income,	and	Consolidated	Statements	of	Cash	Flows	and have	been	included	in	Assets	and	Liabilities	of	discontinued	operations,	Discontinued	operations,	net	and	Net	cash	flows	-	discontinued	operations.

Principles	of	consolidation	–	The	Consolidated	Financial	Statements	include	all	significant	subsidiaries	and	all	material	intercompany	accounts	and	transactions have	been	eliminated.	The	equity	method	of	accounting	is	used	for	investments	in	associated	companies	in	which	the	Company	generally	has	an	interest	of	20%	to	50%.

Accounting	estimates	–	The	preparation	of	financial	statements	in	conformity	with	accounting	principles	generally	accepted	in	the	United	States	of	America ("GAAP")	requires	management	to	make	estimates	and	assumptions	that	affect	the	amounts	reported	in	the	consolidated	financial	statements	and	the	related	notes. Actual	results	could	differ	from	those	estimates.

Accounting	changes	 – In	 December	 of	 2007,	 the	 Financial	Accounting	 Standards	 Board	 ("FASB")	 issued	 updated	 accounting	 guidance	 on	 reporting	 of Noncontrolling	Interests	in	Consolidated	Financial	Statements.	The	updated	accounting	guidance	requires	all	entities	to	report	noncontrolling	(minority)	interests	in subsidiaries	as	a	component	of	equity	in	the	Consolidated	Financial	Statements.	Therefore,	the	Noncontrolling	interest	in	the	equity	section	includes	the	appropriate reclassification	of	balances	for	CNA,	Diamond	Offshore	and	Boardwalk	Pipeline	formerly	recognized	as	Minority	interest	liability	on	the	Consolidated	Balance	Sheets. Moreover,	the	updated	accounting	guidance	requires	that	transactions	between	an	entity	and	noncontrolling	interests	be	treated	as	equity	transactions.	Upon	adoption	of the	updated	accounting	guidance,	the	Company	recorded	an	increase	in	Additional	paid-in	capital	of	$330	million	(net	of	$206	million	of	deferred	tax)	related	to	the issuances	of	Boardwalk	Pipeline	common	units,	which	were	previously	included	as	a	deferred	gain	in	Minority	interest	liability	in	the	Consolidated	Balance	Sheets.	Prior to	the	adoption	of	the	updated	accounting	guidance,	the	Company	recorded	a	gain	on	the	sale	of	common	equity	of	a	subsidiary	equal	to	the	amount	of	proceeds	received in	excess	of	the	carrying	value	of	the	units	sold	in	the	Consolidated	Statements	of	Income.	Accordingly,	the	Company	recognized	a	gain	in	2007	of	$143	million	($93 million	after	provision	for	deferred	income	taxes)	upon	the	conversion	of	Diamond	Offshore	convertible	debentures	into	Diamond	Offshore	common	stock.

In	February	of	2008,	the	FASB	delayed	the	effective	date	of	applying	updated	accounting	guidance	in	regards	to	nonrecurring	fair	value	measurements	of nonfinancial	assets	and	nonfinancial	liabilities	until	the	fiscal	year	beginning	after	November	15,	2008.	As	of	January	1,	2009,	the	Company	adopted	the	updated accounting	guidance	as	it	relates	to	reporting	units	and	indefinite-lived	intangible	assets	measured	at	fair	value	for	 the	purposes	of	 impairment	 testing	and	asset retirement	obligations.	The	adoption	of	these	provisions	had	no	impact	on	the	Company's	financial	condition	or	results	of	operations.

# Note	1.	Summary	of	Significant	Accounting	Policies	–	(Continued)

In	March	of	2008,	the	FASB	issued	updated	accounting	guidance	for	disclosures	about	derivative	instruments	and	hedging	activities.	The	updated	accounting guidance	is	intended	to	improve	financial	reporting	about	derivative	instruments	and	hedging	activities	by	requiring	enhanced	disclosures	to	enable	investors	to	better understand	their	effects	on	an	entity's	financial	position,	financial	performance	and	cash	flows.	The	Company's	adoption	of	the	updated	accounting	guidance	had	no impact	on	its	financial	condition	or	results	of	operations.	See	Note	5.

In	May	of	2008,	the	FASB	issued	updated	accounting	guidance	on	accounting	for	convertible	debt	instruments	that	may	be	settled	in	cash	upon	conversion.	The updated	accounting	guidance	specifies	that	issuers	of	such	instruments	should	separately	account	for	the	liability	and	equity	components	in	a	manner	that	will	reflect	the entity's	nonconvertible	debt	borrowing	rate	when	interest	cost	is	recognized	in	subsequent	periods.	As	required,	the	Company's	Consolidated	Financial	Statements	have been	retrospectively	adjusted	to	reflect	the	effect	of	adoption	of	the	updated	accounting	guidance.	The	adoption	of	the	updated	accounting	guidance	increased	Property, plant	and	equipment	$16	million,	Total	assets	$13	million	and	Total	equity	$13	million	and	decreased	Deferred	income	taxes	$3	million	at	January	1,	2009	and	2008. The	adoption	of	the	updated	accounting	guidance	had	no	impact	on	previously	stated	basic	and	diluted	earnings	per	share.

Effective	December	31,	2009,	the	Securities	and	Exchange	Commission	("SEC")	revised	its	oil	and	gas	reporting	requirements	to,	among	other	things:	(i)	permit the	use	of	new	technologies	to	determine	proved	reserves	if	those	technologies	have	been	demonstrated	empirically	to	lead	to	reliable	conclusions	about	reserves volumes;	(ii)	permit	disclosure	of	probable	and	possible	reserves,	whereas	previous	rules	limited	disclosure	to	proved	reserves;	(iii)	require	disclosure	regarding	the objectivity	and	qualifications	of	a	reserves	preparer	or	auditor,	if	the	company	represents	that	it	has	enlisted	a	third	party	to	conduct	a	reserves	audit,	and	that	the company	file	a	report	of	such	third	party	as	an	exhibit	to	the	relevant	registration	statement	or	report;	and	(iv)	revise	the	pricing	mechanism	for	oil	and	gas	reserves	by using	a	12-month	average	price,	rather	than	a	single-day	quarter	end	price,	to	increase	the	comparability	of	oil	and	gas	reserves	disclosures	among	companies	and	to mitigate	 the	 additional	 volatility	 that	 a	 single	 day	 price	 may	 have	 on	 reserve	 estimates.	The	 adoption	 of	 the	 new	 SEC	 requirements	 resulted	 in	 a	 reduction	 of HighMount's	proved	reserves	by	145.3	MMcfe	(unaudited).	The	reduction	in	reserves	resulted	in	a	lower	full	cost	pool	limit	under	the	ceiling	test,	however	it	did	not cause	HighMount's	net	capitalized	costs	to	exceed	the	ceiling	test	at	December	31,	2009.	See	Note	15.

In	December	of	2008,	the	FASB	issued	updated	accounting	guidance	which	requires	enhanced	disclosures	regarding	postretirement	benefit	plan	assets	and	how investment	allocations	are	made,	including	the	factors	that	are	pertinent	to	an	understanding	of	investment	policies	and	procedures,	the	major	categories	of	plan	assets, the	inputs	and	valuation	techniques	used	to	measure	the	fair	value	of	plan	assets,	the	effect	of	fair	value	measurements	using	significant	unobservable	inputs	on	changes in	plan	assets	for	the	period,	and	significant	concentrations	of	risk	within	plan	assets.	The	adoption	of	this	updated	accounting	guidance	as	of	December	31,	2009	had	no impact	on	the	Company's	financial	condition	or	results	of	operations.	The	Company	has	complied	with	the	disclosure	requirements	related	to	plan	assets	in	Note	16.

In	April	of	2009,	the	FASB	issued	updated	accounting	guidance	which	amended	the	other-than-temporary	impairment	("OTTI")	loss	model	for	fixed	maturity securities.	A	fixed	maturity	security	is	impaired	if	the	fair	value	of	the	security	is	less	than	its	amortized	cost	basis,	which	is	its	cost	adjusted	for	accretion,	amortization and	previously	recorded	OTTI	losses.	The	updated	accounting	guidance	requires	an	OTTI	loss	equal	to	the	difference	between	fair	value	and	amortized	cost	to	be recognized	in	earnings	if	the	Company	intends	to	sell	the	fixed	maturity	security	or	if	it	is	more	likely	than	not	the	Company	will	be	required	to	sell	the	fixed	maturity security	before	recovery	of	its	amortized	cost	basis.

The	remaining	fixed	maturity	securities	in	an	unrealized	loss	position	are	evaluated	to	determine	if	a	credit	loss	exists.	If	the	Company	does	not	expect	to	recover the	entire	amortized	cost	basis	of	a	fixed	maturity	security,	the	security	is	deemed	to	be	other-than-temporarily	impaired	for	credit	reasons.	For	these	securities,	the updated	accounting	guidance	requires	the	bifurcation	of	OTTI	losses	into	a	credit	component	and	a	non-credit	component.	The	credit	component	is	recognized	in earnings	and	represents	the	difference	between	the	present	value	of	the	future	cash	flows	that	the	Company	expects	to	collect	and	a	fixed	maturity	security's	amortized cost	basis.	The	non-credit	component	is	recognized	in	other	comprehensive	income	("OCI")	and	represents	the	difference	between	fair	value	and	the	present	value	of	the future	cash	flows	that	the	Company	expects	to	collect.

Prior	to	the	adoption	of	the	updated	accounting	guidance,	OTTI	losses	were	not	bifurcated	between	credit	and	non-credit	components.	The	difference	between	fair value	and	amortized	cost	was	recognized	in	earnings	for	all	securities	for	which	the	Company	did	not	expect	to	recover	the	amortized	cost	basis,	or	for	which	the Company	did	not	have	the	ability	and	intent	to	hold	until	recovery	of	fair	value	to	amortized	cost.

The	adoption	of	the	updated	accounting	guidance	as	of	April	1,	2009	resulted	in	a	cumulative	effect	adjustment	of	$109	million,	after	tax	and	noncontrolling interests,	reclassified	to	Accumulated	other	comprehensive	income	(loss)	("AOCI")	from	Retained	earnings	on	the	Consolidated	Statements	of	Equity.	The	cumulative effect	adjustment	represents	the	non-credit	component	of	those	previously	impaired	fixed	maturity	securities	that	are	still	considered	OTTI,	and	the	entire	amount previously	recorded	as	an	OTTI	loss	on	fixed	maturity	securities	no	longer	considered	OTTI	as	of	April	1,	2009.

Investments	–	The	Company	classifies	its	fixed	maturity	securities	and	its	equity	securities	as	either	available-for-sale	or	trading,	and	as	such,	they	are	carried	at fair	value.	Changes	in	fair	value	of	trading	securities	are	reported	within	Net	investment	income	on	the	Consolidated	Statements	of	Income.	Changes	in	fair	value	related to	available-for-sale	securities	are	reported	as	a	component	of	Other	comprehensive	income.	The	amortized	cost	of	fixed	maturity	securities	classified	as	available-for- sale	is	adjusted	for	amortization	of	premiums	and	accretion	of	discounts	to	maturity,	which	are	included	in	Net	investment	income	on	the	Consolidated	Statements	of Income.	Investment	valuations	are	adjusted	and	losses	may	be	recognized	in	the	Consolidated	Statements	of	Income	when	a	decline	in	value	is	determined	by	the Company	to	be	other-than-temporary.

For	asset-backed	securities	included	in	fixed	maturity	securities,	the	Company	recognizes	income	using	an	effective	yield	based	on	anticipated	prepayments	and the	estimated	economic	life	of	the	securities.	When	estimates	of	prepayments	change,	the	effective	yield	is	recalculated	to	reflect	actual	payments	to	date	and	anticipated future	payments.	The	net	investment	in	the	securities	is	adjusted	to	the	amount	that	would	have	existed	had	the	new	effective	yield	been	applied	since	the	acquisition	of the	securities.	Such	adjustments	are	reflected	in	Net	investment	income	on	the	Consolidated	Statements	of	Income.	Interest	income	on	lower	rated	beneficial	interests	in securitized	financial	assets	is	determined	using	the	prospective	yield	method.

The	Company's	carrying	value	of	investments	in	limited	partnerships	is	its	share	of	the	net	asset	value	of	each	partnership,	as	determined	by	the	General	Partner. Certain	partnerships	for	which	results	are	not	available	on	a	timely	basis	are	reported	on	a	lag,	primarily	one	month.	Changes	in	net	asset	values	are	accounted	for	under the	equity	method	and	recorded	within	Net	investment	income	on	the	Consolidated	Statements	of	Income.

# Short	term	investments	are	generally	carried	at	fair	value.

Investments	in	derivative	securities	are	carried	at	fair	value	with	changes	in	fair	value	reported	as	a	component	of	Investment	gains	(losses),	Income	(loss)	from trading	portfolio,	or	Other	comprehensive	income	(loss),	depending	on	their	hedge	designation.	A	derivative	is	typically	defined	as	an	instrument	whose	value	is "derived"	from	an	underlying	instrument,	index	or	rate,	has	a	notional	amount,	requires	little	or	no	initial	investment	and	can	be	net	settled.	Derivatives	include,	but	are not	limited	to,	the	following	types	of	investments:	interest	rate	swaps,	interest	rate	caps	and	floors,	put	and	call	options,	warrants,	futures,	forwards,	commitments	to purchase	securities,	credit	default	swaps	and	combinations	of	the	foregoing.	Derivatives	embedded	within	non-derivative	instruments	(such	as	call	options	embedded	in convertible	bonds)	must	be	split	from	the	host	instrument	when	the	embedded	derivative	is	not	clearly	and	closely	related	to	the	host	instrument.

The	Company	formally	documents	all	relationships	between	hedging	instruments	and	hedged	items,	as	well	as	its	risk-management	objective	and	strategy	for undertaking	various	hedging	transactions.	The	Company	also	formally	assesses	(both	at	the	hedge's	inception	and	on	an	ongoing	basis)	whether	the	derivatives	that	are used	in	hedging	transactions	have	been	highly	effective	in	offsetting	changes	in	fair	value	or	cash	flows	of	hedged	items	and	whether	those	derivatives	may	be	expected to	remain	highly	effective	in	future	periods.	When	it	is	determined	that	a	derivative	for	which	hedge	accounting	has	been	designated	is	not	(or	ceases	to	be)	highly effective,	the	Company	discontinues	hedge	accounting	prospectively.	See	Note	5	for	additional	information	on	the	Company's	use	of	derivatives.

Securities	lending	activities	–	The	Company	lends	securities	to	unrelated	parties,	primarily	major	brokerage	firms,	through	an	internally	managed	program	and an	external	program	managed	by	the	Company's	lead	custodial	bank	as	agent.	The	securities	lending	program	is	for	the	purpose	of	enhancing	income.	The	Company does	not	lend	securities	for	operating	or	financing	purposes.	Borrowers	of	these	securities	must	initially	deposit	collateral	with	the	Company	of	at	least	102%	and maintain	collateral	of	no	less	than	100%	of	the	fair	value	of	the	securities	loaned,	regardless	of	whether	the	collateral	is	cash	or	securities.	Only	cash	collateral	is accepted	for	the	Company's	internally	managed	program	and	is	typically	invested	in	the	highest	quality	commercial	paper	with	maturities	of	less	than	7	days.	U.S. Government,	agencies	or	Government	National	Mortgage	Association	securities	are	accepted	as	non-cash	collateral	for	the	external	program.	The	Company	maintains effective	control	over	all	loaned	securities	and,	therefore,	continues	to	report	such	securities	as	Fixed	maturity	securities	on	the	Consolidated	Balance	Sheets.

The	lending	programs	are	matched-book	programs	where	the	collateral	is	invested	to	substantially	match	the	term	of	the	loan	which	limits	risk.	In	accordance with	the	Company's	lending	agreements,	securities	on	loan	are	returned	immediately	to	the	Company	upon	notice.	Cash	collateral	received	on	these	transactions	is invested	in	short	term	investments	with	an	offsetting	liability	recognized	for	the	obligation	to	return	the	collateral.	Non-cash	collateral,	such	as	securities	received	by	the Company,	is	not	reflected	as	an	asset	of	the	Company	as	there	exists	no	right	to	sell	or	repledge	the	collateral.	There	was	no	cash	collateral	held	related	to	securities lending	included	in	Short	term	investments	on	the	Consolidated	Balance	Sheets	at	December	31,	2009	and	2008.	The	fair	value	of	non-cash	collateral	was	$348	million at	December	31,	2008.	There	was	no	non-cash	collateral	held	at	December	31,	2009.

Revenue	 recognition	–	Insurance	premiums	on	property	and	casualty	insurance	contracts	are	recognized	in	proportion	to	the	underlying	risk	insured	which principally	are	earned	ratably	over	the	duration	of	the	policies.	Premiums	on	accident	and	health	insurance	contracts	are	earned	ratably	over	the	policy	year	in	which	they are	due.	The	reserve	for	unearned	premiums	on	these	contracts	represents	the	portion	of	premiums	written	relating	to	the	unexpired	terms	of	coverage.

Insurance	receivables	are	presented	net	of	an	estimated	allowance	for	doubtful	accounts,	which	is	recorded	on	the	basis	of	periodic	evaluations	of	balances	due currently	or	in	the	future	from	insureds,	including	amounts	due	from	insureds	related	to	losses	under	high	deductible	policies,	management's	experience	and	current economic	conditions.

Property	and	casualty	contracts	that	are	retrospectively	rated	contain	provisions	that	result	in	an	adjustment	to	the	initial	policy	premium	depending	on	the contract	provisions	and	loss	experience	of	the	insured	during	the	experience	period.	For	such	contracts,	CNA	estimates	the	amount	of	ultimate	premiums	that	CNA	may earn	upon	completion	of	the	experience	period	and	recognizes	either	an	asset	or	a	liability	for	the	difference	between	the	initial	policy	premium	and	the	estimated ultimate	premium.	CNA	adjusts	such	estimated	ultimate	premium	amounts	during	the	course	of	the	experience	period	based	on	actual	results	to	date.	The	resulting adjustment	is	recorded	as	either	a	reduction	of	or	an	increase	to	the	earned	premiums	for	the	period.

Contract	drilling	revenue	from	dayrate	drilling	contracts	is	recognized	as	services	are	performed.	In	connection	with	such	drilling	contracts,	Diamond	Offshore may	receive	fees	(either	lump-sum	or	dayrate)	for	the	mobilization	of	equipment.	These	fees	are	earned	as	services	are	performed	over	the	initial	term	of	the	related drilling	contracts.	Absent	a	contract,	mobilization	costs	are	recognized	currently.	From	time	to	time,	Diamond	Offshore	may	receive	fees	from	its	customers	for	capital improvements	to	their	rigs.	Diamond	Offshore	defers	such	fees	received	and	recognizes	these	fees	into	revenue	on	a	straight-line	basis	over	the	period	of	the	related drilling	contract.	Diamond	Offshore	capitalizes	the	costs	of	such	capital	improvements	and	depreciates	them	over	the	estimated	useful	life	of	the	improvement.

HighMount's	natural	gas	and	natural	gas	liquids	("NGLs")	production	revenue	is	recognized	based	on	actual	volumes	of	natural	gas	and	NGLs	sold	to	purchasers. Sales	require	delivery	of	the	product	to	the	purchaser,	passage	of	title	and	probability	of	collection	of	purchaser	amounts	owed.	Natural	gas	and	NGL	production	revenue includes	sales	of	natural	gas	and	NGLs	by	HighMount.	Natural	gas	and	NGL	production	revenue	is	reported	net	of	royalties.	HighMount	uses	the	sales	method	of accounting	for	gas	imbalances.	An	imbalance	is	created	when	the	volumes	of	gas	sold	by	HighMount	pertaining	to	a	property	do	not	equate	to	the	volumes	produced	to which	HighMount	is	entitled	based	on	its	interest	in	the	property.	An	asset	or	liability	is	recognized	to	the	extent	that	HighMount	has	an	imbalance	in	excess	of	the remaining	reserves	on	the	underlying	properties.

Revenues	from	the	transportation	of	natural	gas	are	recognized	in	the	period	the	service	is	provided	based	on	contractual	terms	and	the	related	transported volumes.	Revenues	from	storage	services	are	recognized	over	the	term	of	the	contract.	Boardwalk	Pipeline's	operating	subsidiaries	are	subject	to	Federal	Energy Regulatory	Commission	("FERC")	regulations	and,	accordingly,	certain	revenues	collected	may	be	subject	to	possible	refunds	to	its	customers.	An	estimated	refund liability	is	recorded	considering	regulatory	proceedings,	advice	of	counsel	and	estimated	total	exposure.

Claim	and	claim	adjustment	expense	reserves	–	Claim	and	claim	adjustment	expense	reserves,	except	reserves	for	structured	settlements	not	associated	with asbestos	and	environmental	pollution	("A&E"),	workers'	compensation	lifetime	claims,	accident	and	health	claims	and	certain	claims	associated	with	discontinued operations,	are	not	discounted	and	are	based	on	(i)	case	basis	estimates	for	losses	reported	on	direct	business,	adjusted	in	the	aggregate	for	ultimate	loss	expectations; (ii)	estimates	of	incurred	but	not	reported	losses;	(iii)	estimates	of	losses	on	assumed	reinsurance;	(iv)	estimates	of	future	expenses	to	be	incurred	in	the	settlement	of claims;	 (v)	 estimates	 of	 salvage	 and	 subrogation	 recoveries	 and	 (vi)	 estimates	 of	 amounts	 due	 from	 insureds	 related	 to	 losses	 under	 high	 deductible	 policies. Management	considers	current	conditions	and	trends	as	well	as	past	CNA	and	industry	experience	in	establishing	these	estimates.	The	effects	of	inflation,	which	can	be significant,	are	implicitly	considered	in	the	reserving	process	and	are	part	of	the	recorded	reserve	balance.	Ceded	claim	and	claim	adjustment	expense	reserves	are reported	as	a	component	of	Receivables	on	the	Consolidated	Balance	Sheets.	See	Note	21	for	further	information	on	claim	and	claim	adjustment	expense	reserves	for discontinued	operations.

Claim	and	claim	adjustment	expense	reserves	are	presented	net	of	anticipated	amounts	due	from	insureds	related	to	losses	under	deductible	policies	of	$1.5	billion and	$2.0	billion	as	of	December	31,	2009	and	2008.	A	significant	portion	of	these	amounts	is	supported	by	collateral.	CNA	also	has	an	allowance	for	uncollectible deductible	amounts,	which	is	presented	as	a	component	of	the	allowance	for	doubtful	accounts	included	in	Receivables	on	the	Consolidated	Balance	Sheets.	See	Note	7. In	2008,	the	amount	due	from	policyholders	related	to	losses	under	deductible	policies	within	CNA	Commercial	was	reduced	by	$90	million	for	insolvent	insureds.	The reduction	of	this	amount,	which	is	reflected	as	unfavorable	net	prior	year	reserve	development,	had	no	effect	on	results	of	operations	as	CNA	had	previously	recognized provisions	in	prior	years.	These	impacts	were	reported	in	Insurance	claims	and	policyholders'	benefits	in	the	Consolidated	Statements	of	Income.

Structured	settlements	have	been	negotiated	for	certain	property	and	casualty	insurance	claims.	Structured	settlements	are	agreements	to	provide	fixed	periodic payments	 to	 claimants.	 Certain	 structured	 settlements	 are	 funded	 by	 annuities	 purchased	 from	 Continental	Assurance	 Company	 ("CAC"),	 a	 wholly	 owned	 and consolidated	subsidiary	of	CNA,	for	which	the	related	annuity	obligations	are	reported	in	future	policy	benefits	reserves.	Obligations	for	structured	settlements	not funded	by	annuities	are	included	in	claim	and	claim	adjustment	expense	reserves	and	carried	at	present	values	determined	using	interest	rates	ranging	from	4.6%	to	7.5% at	both	December	31,	2009	and	2008.	At	December	31,	2009	and	2008,	the	discounted	reserves	for	unfunded	structured	settlements	were	$746	million	and	$756	million, net	of	discount	of	$1.1	billion	in	both	periods.

Workers'	 compensation	 lifetime	 claim	 reserves	 are	 calculated	 using	 mortality	 assumptions	 determined	 through	 statutory	 regulation	 and	 economic	 factors. Accident	and	health	claim	reserves	are	calculated	using	mortality	and	morbidity	assumptions	based	on	CNA	and	industry	experience.	Workers'	compensation	lifetime claim	reserves	and	accident	and	health	claim	reserves	are	discounted	at	interest	rates	that	range	from	3.0%	to	6.5%	for	the	years	ended	December	31,	2009	and	2008.	At December	31,	2009	and	2008,	such	discounted	reserves	totaled	$1.7	billion	and	$1.6	billion,	net	of	discount	of	$482	million	for	both	periods.

Future	 policy	 benefits	 reserves	–	 Reserves	 for long	 term	 care	 products	 are	 computed	 using	 the	 net	 level	 premium	 method,	 which	 incorporates	 actuarial assumptions	as	to	interest	rates,	mortality,	morbidity,	persistency,	withdrawals	and	expenses.	Actuarial	assumptions	generally	vary	by	plan,	age	at	issue	and	policy duration,	and	include	a	margin	for	adverse	deviation.	Interest	rates	range	from	6.0%	to	8.6%	at	December	31,	2009	and	2008,	and	mortality,	morbidity	and	withdrawal assumptions	are	based	on	CNA	and	industry	experience	prevailing	at	the	time	of	issue.	Expense	assumptions	include	the	estimated	effects	of	inflation	and	expenses	to	be incurred	beyond	the	premium	paying	period.

Policyholders'	funds	reserves	–	Policyholders'	funds	reserves	primarily	include	reserves	for	investment	contracts	without	life	contingencies.	For	these	contracts, policyholder	liabilities	are	equal	to	the	accumulated	policy

account	values,	which	consist	of	an	accumulation	of	deposit	payments	plus	credited	interest,	less	withdrawals	and	amounts	assessed	through	the	end	of	the	period. During	2008,	CNA	exited	the	indexed	group	annuity	portion	of	its	pension	deposit	business	and	settled	the	related	liabilities	with	policyholders	with	no	material	impact to	results	of	operations.	Cash	flows	related	to	the	settlement	of	the	liabilities	with	policyholders	are	presented	on	the	Consolidated	Statements	of	Cash	Flows	in	Cash flows	from	financing	activities,	as	Return	of	investment	contract	account	balances.	Cash	flows	related	to	proceeds	from	the	liquidation	of	the	related	assets	supporting the	policyholder	liabilities	are	presented	on	the	Consolidated	Statements	of	Cash	Flows	in	Cash	flows	from	operating	activities,	as	Trading	securities.

Guaranty fund	 and	 other insurance-related	 assessments	–	 Liabilities for	 guaranty	 fund	 and	 other	 insurance-related	 assessments	 are	 accrued	 when	 an assessment	is	probable,	when	it	can	be	reasonably	estimated,	and	when	the	event	obligating	the	entity	to	pay	an	imposed	or	probable	assessment	has	occurred.	Liabilities for	guaranty	funds	and	other	insurance-related	assessments	are	not	discounted	and	are	included	as	part	of	Other	liabilities	on	the	Consolidated	Balance	Sheets.	As	of December	31,	2009	and	2008,	 the	 liability	balances	were	$167	million	and	$170	million.	As	of	December	31,	2009	and	2008,	 included	 in	Other	assets	on	 the Consolidated	Balance	Sheets	were	$5	million	and	$6	million	of	related	assets	for	premium	tax	offsets.	This	asset	is	limited	to	the	amount	that	is	able	to	be	offset	against premium	tax	on	future	premium	collections	from	business	written	or	committed	to	be	written.

Reinsurance	–	Amounts	recoverable	from	reinsurers	are	estimated	in	a	manner	consistent	with	claim	and	claim	adjustment	expense	reserves	or	future	policy benefits	reserves	and	are	reported	as	Receivables	on	the	Consolidated	Balance	Sheets.	See	Note	17.	The	cost	of	reinsurance	is	primarily	accounted	for	over	the	life	of	the underlying	reinsured	policies	using	assumptions	consistent	with	those	used	to	account	for	the	underlying	policies	or	over	the	reinsurance	contract	period.	The	ceding	of insurance	does	not	discharge	the	primary	liability	of	CNA.	An	estimated	allowance	for	doubtful	accounts	is	recorded	on	the	basis	of	periodic	evaluations	of	balances	due from	reinsurers,	reinsurer	solvency,	management's	experience	and	current	economic	conditions.	The	expenses	incurred	related	to	uncollectible	reinsurance	receivables are	presented	as	a	component	of	Insurance	claims	and	policyholders'	benefits	on	the	Consolidated	Statements	of	Income.

Reinsurance	contracts	that	do	not	effectively	transfer	the	underlying	economic	risk	of	loss	on	policies	written	by	CNA	are	recorded	using	the	deposit	method	of accounting,	which	requires	that	premium	paid	or	received	by	the	ceding	company	or	assuming	company	be	accounted	for	as	a	deposit	asset	or	liability.	At	December	31, 2009	and	2008,	CNA	had	$21	million	and	$25	million	recorded	as	deposit	assets	and	$112	million	and	$110	million	recorded	as	deposit	liabilities.

Income	on	reinsurance	contracts	accounted	for	under	the	deposit	method	is	recognized	using	an	effective	yield	based	on	the	anticipated	timing	of	payments	and the	remaining	life	of	the	contract.	When	the	anticipated	timing	of	payments	changes,	the	effective	yield	is	recalculated	to	reflect	actual	payments	to	date	and	the estimated	timing	of	future	payments.	The	deposit	asset	or	liability	is	adjusted	to	the	amount	that	would	have	existed	had	the	new	effective	yield	been	applied	since	the inception	of	the	contract.	This	adjustment	is	reflected	in	Other	revenues	or	Other	operating	expenses	on	the	Consolidated	Statements	of	Income	as	appropriate.

Participating insurance	–	Policyholder	dividends	are	accrued	using	an	estimate	of	the	amount	to	be	paid	based	on	underlying	contractual	obligations	under policies	and	applicable	state	laws.	Limitations	exist	on	the	amount	of	income	from	participating	life	insurance	contracts	that	may	be	distributed	to	shareholders,	and therefore	the	share	of	income	on	these	policies	that	cannot	be	distributed	to	shareholders	is	excluded	from	Shareholders'	Equity	by	a	charge	to	Operations	and	other comprehensive	income	and	the	establishment	of	a	corresponding	liability.

Deferred	acquisition	costs	–	Acquisition	costs	include	commissions,	premium	taxes	and	certain	underwriting	and	policy	issuance	costs	which	vary	with	and	are related	primarily	to	the	acquisition	of	business.	Such	costs	related	to	property	and	casualty	business	are	deferred	and	amortized	ratably	over	the	period	the	related premiums	are	earned.

Deferred	acquisition	costs	related	to	accident	and	health	insurance	are	amortized	over	the	premium-paying	period	of	the	related	policies	using	assumptions consistent	with	those	used	for	computing	future	policy	benefit	reserves	for	such	contracts.	Assumptions	as	to	anticipated	premiums	are	made	at	the	date	of	policy issuance	or	acquisition	and	are	consistently	applied	during	the	lives	of	the	contracts.	Deviations	from	estimated	experience	are	included	in

results	of	operations	when	they	occur.	For	these	contracts,	the	amortization	period	is	typically	the	estimated	life	of	the	policy.

CNA	evaluates	deferred	acquisition	costs	for	recoverability.	Anticipated	investment	income	is	considered	in	the	determination	of	the	recoverability	of	deferred acquisition	costs.	Adjustments,	if	necessary,	are	recorded	in	current	results	of	operations.	Deferred	acquisition	costs	are	presented	net	of	ceding	commissions	and	other ceded	acquisition	costs.	Unamortized	deferred	acquisition	costs	relating	to	contracts	that	have	been	substantially	changed	by	a	modification	in	benefits,	features,	rights or	coverages	that	were	not	anticipated	in	the	original	contract	are	not	deferred	and	are	included	as	a	charge	to	operations	in	the	period	during	which	the	contract modification	occurred.

Investments	in	life	settlement	contracts	and	related	revenue	recognition	–	Prior	to	2002,	CNA	purchased	investments	in	life	settlement	contracts.	A	life settlement	contract	is	a	contract	between	the	owner	of	a	life	insurance	policy	(the	policy	owner)	and	a	third-party	investor	(investor).	Under	a	life	settlement	contract, CNA	obtained	the	ownership	and	beneficiary	rights	of	an	underlying	life	insurance	policy.

CNA	accounts	for	its	investments	in	life	settlement	contracts	using	the	fair	value	method.	Under	the	fair	value	method,	each	life	settlement	contract	is	carried	at	its fair	value	at	the	end	of	each	reporting	period.	The	change	in	fair	value,	life	insurance	proceeds	received	and	periodic	maintenance	costs,	such	as	premiums,	necessary	to keep	the	underlying	policy	in	force,	are	recorded	in	Other	revenues	on	the	Consolidated	Statements	of	Income.	CNA's	investments	in	life	settlement	contracts	were	$130 million	and	$129	million	at	December	31,	2009	and	2008,	and	are	included	in	Other	assets	on	the	Consolidated	Balance	Sheets.	The	cash	receipts	and	payments	related to	life	settlement	contracts	are	included	in	Cash	flows	from	operating	activities	on	the	Consolidated	Statements	of	Cash	Flows.

The	following	table	details	the	values	for	life	settlement	contracts.	The	determination	of	fair	value	is	discussed	in	Note	4.

| (Dollar	amounts	in	millions) | Number	of	Life<br>Settlement<br>Contracts | Fair	Value	of	Life<br>Settlement<br>Contracts | Face	Amount	of<br>Life	Insurance<br>Policies |
| :--- | :--- | :--- | :--- |
| Estimated\tmaturity\tduring: |  |  |  |
| 2010 | \t\t\t100 | $\t\t\t17 | $\t\t53 |
| 2011 | \t\t\t\t\t90 | \t\t\t\t15 | \t\t\t\t49 |
| 2012 | \t\t\t\t\t90 | \t\t\t\t13 | \t\t\t\t46 |
| 2013 | \t\t\t\t\t80 | \t\t\t\t11 | \t\t\t\t44 |
| 2014 | \t\t\t\t\t80 | \t\t\t\t10 | \t\t\t\t41 |
| Thereafter | \t\t\t817 | \t\t\t\t64 | \t\t443 |
| Total | 1,257 | $130 | $676 |

CNA	uses	an	actuarial	model	to	estimate	the	aggregate	face	amount	of	life	insurance	that	is	expected	to	mature	in	each	future	year	and	the	corresponding	fair value.	This	model	projects	the	likelihood	of	the	insured's	death	for	each	in	force	policy	based	upon	CNA's	estimated	mortality	rates,	which	may	vary	due	to	the relatively	small	size	of	the	portfolio	of	life	settlement	contracts.	The	number	of	life	settlement	contracts	presented	in	the	table	above	is	based	upon	the	average	face amount	of	in	force	policies	estimated	to	mature	in	each	future	year.

The	increase	in	fair	value	recognized	for	the	years	ended	December	31,	2009,	2008	and	2007	on	contracts	still	being	held	was	$10	million,	$17	million	and	$12 million.	The	gain	recognized	during	the	years	ended	December	31,	2009,	2008	and	2007	on	contracts	that	matured	was	$24	million,	$30	million	and	$38	million.

Separate	Account	Business	–	Separate	account	assets	and	liabilities	represent	contract	holder	funds	related	to	investment	and	annuity	products	for	which	the policyholder	assumes	substantially	all	the	risk	and	reward.	The	assets	are	segregated	into	accounts	with	specific	underlying	investment	objectives	and	are	legally segregated	from	CNA.	All	assets	of	the	separate	account	business	are	carried	at	fair	value	with	an	equal	amount	recorded	for	separate	account	liabilities.	Certain	of	the separate	account	investment	contracts	related	to	CNA's	pension	deposit	business

guarantee	principal	and	an	annual	minimum	rate	of	interest,	for	which	additional	amounts	may	be	recorded	in	Policyholders'	funds	should	the	aggregate	contract	value exceed	the	fair	value	of	the	related	assets	supporting	the	business	at	any	point	in	time.	Most	of	these	contracts	are	subject	to	a	fair	value	adjustment	if	terminated	by	the policyholder.	During	2008,	CNA	recorded	$68	million	of	additional	Policyholders'	funds	liabilities	due	to	declines	in	the	value	of	the	related	separate	account	assets.	If the	fair	value	of	the	related	assets	supporting	the	business	increase	to	a	level	that	exceeds	the	aggregate	contract	value,	the	amount	of	any	such	increase	will	accrue	to CNA's	benefit	to	the	extent	of	any	remaining	additional	liability	in	Policyholders'	funds	included	in	Insurance	reserves	in	the	Consolidated	Balance	Sheets.	Accordingly, during	 2009,	 CNA	 released	 a	 portion	 of	 the	 additional	 amounts	 originally	 recorded	 in	 2008,	 leaving	 $26	 million	 of	 additional	 Policyholders'	 funds	 liability	 at December	31,	2009.	Fee	income	accruing	to	CNA	related	to	separate	accounts	is	primarily	included	within	Other	revenue	on	the	Consolidated	Statements	of	Income.

Goodwill	–	Goodwill	represents	the	excess	of	purchase	price	over	fair	value	of	net	assets	of	acquired	entities.	Goodwill	is	tested	for	impairment	annually	or	when certain	triggering	events	require	additional	tests.	Impairment	losses,	if	any,	are	included	in	the	Consolidated	Statements	of	Income.	As	a	result	of	recording	ceiling	test impairments	of	natural	gas	and	oil	properties	(see	Note	8),	which	were	caused	by	declines	in	commodity	prices,	HighMount	tested	its	goodwill	for	impairment	at December	31,	2008	and	March	31,	2009.	As	a	result,	a	non-cash	impairment	charge	of	$482	million	($314	million	after	tax)	was	recorded	in	2008.	No	impairment charge	was	needed	in	2009.

Property,	 plant	 and	 equipment	–	Property,	plant	and	equipment	 is	carried	at	cost	 less	accumulated	depreciation,	depletion	and	amortization	("DD&A"). Depreciation	 is	 computed	 principally	 by	 the	 straight-line	 method	 over	 the	 estimated	 useful	 lives	 of	 the	 various	 classes	 of	 properties.	 Leaseholds	 and	 leasehold improvements	are	depreciated	or	amortized	over	 the	 terms	of	 the	related	 leases	(including	optional	renewal	periods	where	appropriate)	or	 the	estimated	 lives	of improvements,	if	less	than	the	lease	term.

The	principal	service	lives	used	in	computing	provisions	for	depreciation	are	as	follows:

HighMount	follows	the	full	cost	method	of	accounting	for	natural	gas	and	NGL	exploration	and	production	activities	prescribed	by	the	SEC.	Under	the	full	cost method,	all	direct	costs	of	property	acquisition,	exploration	and	development	activities	are	capitalized.	These	capitalized	costs	are	subject	to	a	quarterly	ceiling	test. Under	the	ceiling	test,	amounts	capitalized	are	limited	to	the	present	value	of	estimated	future	net	revenues	to	be	derived	from	the	anticipated	production	of	proved natural	gas	and	NGL	reserves,	assuming	an	average	price	during	the	twelve	month	period	adjusted	for	cash	flow	hedges	in	place.	If	net	capitalized	costs	exceed	the ceiling	test	at	the	end	of	any	quarterly	period,	then	a	permanent	write-down	of	the	assets	must	be	recognized	in	that	period.	A	write-down	may	not	be	reversed	in	future periods,	even	though	higher	natural	gas	and	NGL	prices	may	subsequently	increase	the	ceiling.	Approximately	5.2%	(unaudited)	of	HighMount's	total	proved	reserves as	of	December	31,	2009	is	hedged	by	qualifying	cash	flow	hedges,	for	which	hedge	adjusted	prices	were	used	to	calculate	estimated	future	net	revenue.	Future	cash flows	associated	with	settling	asset	retirement	obligations	that	have	been	accrued	in	the	Consolidated	Balance	Sheets	are	excluded	from	HighMount's	calculations	of discounted	cash	flows	under	the	full	cost	ceiling	test.	See	Note	15.

Depletion	of	natural	gas	and	NGL	producing	properties	is	computed	using	the	units-of-production	method.	Under	the	full	cost	method,	the	depletable	base	of	costs subject	to	depletion	also	includes	estimated	future	costs	to	be	incurred	in	developing	proved	natural	gas	and	NGL	reserves,	as	well	as	capitalized	asset	retirement	costs, net	of	projected	salvage	values.	The	costs	of	investments	in	unproved	properties	including	associated	exploration-related	costs	are	initially	excluded	from	the	depletable base.	Until	the	properties	are	evaluated,	a	ratable	portion	of	the	capitalized	costs	is	periodically	reclassified	to	the	depletable	base,	determined	on	a	property	by	property basis,	over	terms	of	underlying	leases.	Once	a	property	has	been	evaluated,	any	remaining	capitalized	costs	are	then	transferred	to	the	depletable	base.	In	addition, proceeds	from	the	sale	or	other	disposition	of	natural	gas	and	NGL	properties	are

accounted	for	as	reductions	of	capitalized	cost,	unless	the	sale	would	significantly	alter	the	relationship	between	capitalized	costs	and	proved	reserves,	in	which	case,	a gain	or	loss	is	recognized.

Impairment	of	long-lived	assets	–	The	Company	reviews	its	long-lived	assets	for	impairment	when	changes	in	circumstances	indicate	that	the	carrying	amount of	an	asset	may	not	be	recoverable.	Long-lived	assets	and	intangibles	with	finite	lives,	under	certain	circumstances,	are	reported	at	the	lower	of	carrying	amount	or	fair value.	Assets	to	be	disposed	of	and	assets	not	expected	to	provide	any	future	service	potential	to	the	Company	are	recorded	at	the	lower	of	carrying	amount	or	fair	value less	cost	to	sell.

Income	taxes	–	The	Company	and	its	eligible	subsidiaries	file	a	consolidated	tax	return.	The	Company	accounts	for	taxes	under	the	asset	and	liability	method. Under	this	method,	deferred	income	taxes	are	recognized	for	temporary	differences	between	the	financial	statement	and	tax	return	bases	of	assets	and	liabilities.	Future tax	benefits	are	recognized	to	the	extent	that	realization	of	such	benefits	is	more	likely	than	not,	and	a	valuation	allowance	is	established	for	any	portion	of	a	deferred	tax asset	that	management	believes	may	not	be	realized.

The	Company	recognizes	uncertain	tax	positions	that	it	has	taken	or	expects	to	take	on	a	tax	return.	The	tax	benefit	of	a	qualifying	position	is	the	largest	amount of	tax	benefit	that	is	greater	than	50.0%	likely	of	being	realized	upon	ultimate	settlement	with	a	taxing	authority	having	full	knowledge	of	all	relevant	information.	See Note	11	for	additional	information	on	the	provision	for	income	taxes.

Pension	and	postretirement	benefits	–	The	Company	recognizes	the	overfunded	or	underfunded	status	of	its	defined	benefit	plans	in	Other	assets	or	Other liabilities	in	the	Consolidated	Balance	Sheets.	Changes	in	funded	status	related	to	prior	service	costs	and	actuarial	gains	and	losses	are	recognized	in	the	year	in	which the	changes	occur	through	Accumulated	other	comprehensive	income	(loss).	The	Company	measures	its	benefit	plan	assets	and	obligations	at	December	31st.

Stock	option	plans	–	The	Company	records	compensation	expense	upon	issuance	of	share-based	payment	awards	for	all	awards	it	grants,	modifies,	repurchases or	cancels	primarily	on	a	straight-line	basis	over	the	requisite	service	period,	generally	four	years.	The	share-based	payment	awards	are	valued	using	the	Black-Scholes option	pricing	model.	The	application	of	this	valuation	model	involves	assumptions	that	are	judgmental	and	highly	sensitive	in	the	valuation	of	stock	options.	These assumptions	include	the	term	that	the	options	are	expected	to	be	outstanding,	an	estimate	of	the	volatility	of	the	underlying	stock	price,	applicable	risk-free	interest	rates and	the	dividend	yield	of	the	Company's	stock.

The	Company	recognized	compensation	expense	that	decreased	net	income	attributable	to	Loews	common	stock	by	$12	million,	$12	million	and	$9	million,	after tax	and	noncontrolling	interests,	for	the	years	ended	December	31,	2009,	2008	and	2007.	Several	of	the	Company's	subsidiaries	also	maintain	their	own	stock	option plans.	The	amounts	reported	above	include	the	Company's	share	of	expense	related	to	its	subsidiaries'	plans	as	well.

Foreign	currency	–	Foreign	currency	translation	gains	and	losses	are	reflected	in	Shareholders'	equity	as	a	component	of	Accumulated	other	comprehensive income	(loss).	The	Company's	foreign	subsidiaries'	balance	sheet	accounts	are	translated	at	the	exchange	rates	in	effect	at	each	year	end	and	income	statement	accounts are	translated	at	the	average	exchange	rates.	Foreign	currency	transaction	losses	of	$2	million,	$101	million	and	$7	million	were	included	in	the	Consolidated	Statements of	Income	for	the	years	ended	December	31,	2009,	2008	and	2007.

Regulatory	accounting	–	FERC	regulates	the	operations	of	Boardwalk	Pipeline.	GAAP	for	regulated	entities	requires	Texas	Gas	Transmission,	LLC	("Texas Gas"),	a	wholly	owned	subsidiary	of	Boardwalk	Pipeline,	to	report	certain	assets	and	liabilities	consistent	with	the	economic	effect	of	the	manner	in	which	independent third	party	regulators	establish	rates.	Accordingly,	certain	costs	and	benefits	are	capitalized	as	regulatory	assets	and	liabilities	in	order	to	provide	for	recovery	from	or refund	to	customers	in	future	periods.

Supplementary	cash	flow	information	–	Cash	payments	made	for	interest	on	long	term	debt,	net	of	capitalized	interest,	amounted	to	$442	million,	$429	million and	$299	million	for	the	years	ended	December	31,	2009,	2008	and	2007.	Cash	payments	(refunds)	for	federal,	foreign,	state	and	local	income	taxes	amounted	to	$(34) million,	$655	million	and	$974	million	for	the	years	ended	December	31,	2009,	2008	and	2007.	Investing	activities	include	previously	accrued	capital	expenditures	of $235	million	for	the	year	ended	December	31,	2009.	For	the	years	ended

December	31,	2008	and	2007,	investing	activities	exclude	$29	million	and	$185	million	of	accrued	capital	expenditures.

Updated accounting guidance	 not yet adopted	– In	 June	 of	 2009,	 the	 FASB	 issued	 updated	 accounting	 guidance	 that	 amends	 the	 requirements	 for determination	of	the	primary	beneficiary	of	a	variable	interest	entity,	requires	an	ongoing	assessment	of	whether	an	entity	is	the	primary	beneficiary	and	requires enhanced	interim	and	annual	disclosures	that	will	provide	users	of	financial	statements	information	regarding	an	enterprise's	involvement	in	a	variable	interest	entity. The	updated	accounting	guidance	is	effective	for	annual	reporting	periods	beginning	after	November	15,	2009.	The	Company	is	currently	evaluating	the	impact	of adopting	this	guidance	on	its	consolidated	financial	statements.

# Note	2.	Acquisition/Divestitures

# HighMount	Acquisition

On	 July	 31,	 2007,	 HighMount	 acquired,	 through	 its	 subsidiaries,	 certain	 exploration	 and	 production	 assets	 and	 assumed	 certain	 related	 obligations,	 from subsidiaries	of	Dominion	Resources,	Inc.	for	$4.0	billion,	funded	with	approximately	$2.4	billion	in	cash	and	$1.6	billion	of	debt.	The	acquired	business	consisted primarily	of	natural	gas	exploration	and	production	operations	located	in	the	Permian	Basin	in	Texas,	the	Antrim	Shale	in	Michigan	and	the	Black	Warrior	Basin	in Alabama,	with	estimated	proved	reserves	totaling	approximately	2.5	trillion	cubic	feet	equivalent	(unaudited)	at	the	date	of	acquisition.	These	properties	produce predominantly	natural	gas	and	related	natural	gas	liquids	and	are	characterized	by	long	reserve	lives	and	high	well	completion	success	rates.	The	amount	of	tax deductible	goodwill	was	$1.0	billion.

The	allocation	of	purchase	price	to	the	assets	and	liabilities	acquired	was	as	follows:

(In	millions)

Subsequent	to	the	acquisition,	as	a	result	of	recording	ceiling	test	impairments	on	natural	gas	and	oil	properties,	the	Company	tested	its	goodwill	for	impairment.

As	a	result,	a	non-cash	impairment	charge	of	$482	million	($314	million	after	tax)	was	recorded	in	2008.	See	Note	8	for	additional	information.

The	Company	disposed	of	Lorillard	through	the	following	two	integrated	transactions,	collectively	referred	to	as	the	"Separation":

•	 On	June	10,	2008,	the	Company	distributed	108,478,429	shares,	or	approximately	62%,	of	the	outstanding	common	stock	of	Lorillard	in	exchange	for	and in	redemption	of	all	of	the	108,478,429	outstanding	shares	of	the	Company's	former	Carolina	Group	stock,	in	accordance	with	the	Company's	Restated Certificate	of	Incorporation	(the	"Redemption");	and

•	 On	June	16,	2008,	the	Company	distributed	the	remaining	65,445,000	shares,	or	approximately	38%,	of	the	outstanding	common	stock	of	Lorillard	in exchange	for	93,492,857	shares	of	Loews	common	stock,	reflecting	an	exchange	ratio	of	0.70	(the	"Exchange	Offer").

As	a	result	of	the	Separation,	Lorillard	is	no	longer	a	subsidiary	of	Loews	and	Loews	no	longer	owns	any	interest	in	the	outstanding	stock	of	Lorillard.	As	of	the completion	of	the	Redemption,	the	former	Carolina	Group	and	former	Carolina	Group	stock	have	been	eliminated.	In	addition,	at	that	time	all	outstanding	stock	options and	stock

Note	2.	Acquisition/Divestitures	–	(Continued)

appreciation	rights	("SARs")	awarded	under	the	Company's	former	Carolina	Group	2002	Stock	Option	Plan	were	assumed	by	Lorillard	and	converted	into	stock	options and	SARs	which	are	exercisable	for	shares	of	Lorillard	common	stock.

The	Loews	common	stock	acquired	by	the	Company	in	the	Exchange	Offer	was	recorded	as	a	decrease	in	Shareholders'	equity,	reflecting	the	market	value	of	the shares	of	Loews	common	stock	delivered	in	the	Exchange	Offer.	This	decline	was	offset	by	a	$4.3	billion	gain	to	the	Company	from	the	Exchange	Offer,	which	was reported	as	a	gain	on	disposal	of	the	discontinued	business.

Prior	to	the	Redemption,	the	Company	had	a	two	class	common	stock	structure:	Loews	common	stock	and	former	Carolina	Group	stock.	Former	Carolina	Group stock,	commonly	called	a	tracking	stock,	was	intended	to	reflect	the	performance	of	a	defined	group	of	Loews's	assets	and	liabilities	referred	to	as	the	former	Carolina Group.	The	principal	assets	and	liabilities	attributable	to	the	former	Carolina	Group	were	Loews's	100%	ownership	of	Lorillard,	including	all	dividends	paid	by	Lorillard to	Loews,	and	any	and	all	liabilities,	costs	and	expenses	arising	out	of	or	relating	to	tobacco	or	tobacco-related	businesses.	Immediately	prior	to	the	Separation, outstanding	former	Carolina	Group	stock	represented	an	approximately	62%	economic	interest	in	the	performance	of	the	former	Carolina	Group.	The	Loews	Group consisted	of	all	of	Loews's	assets	and	liabilities	other	than	those	allocated	to	the	former	Carolina	Group,	including	an	approximately	38%	economic	interest	in	the former	Carolina	Group.	See	Note	21.

The	Company	sold	Bulova	Corporation	for	approximately	$263	million	in	January	of	2008.	See	Note	21.

# Note	3.		Investments

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Net\tinvestment\tincome\tconsisted\tof: |  |  |  |
| Fixed\tmaturity\tsecurities | \t\t $1,941 | $1,984 | $2,047 |
| Short\tterm\tinvestments | 42 | 162 | 303 |
| Limited\tpartnerships | 324 | (379) | 183 |
| Equity\tsecurities | 49 | 80 | 25 |
| Income\t(loss)\tfrom\tTrading\tportfolio | 187 | (234) | 207 |
| Other | 6 | 19 | 73 |
| Total\tinvestment\tincome | 2,549 | 1,632 | \t 2,838 |
| Investment\texpenses | (50) | (51) | (53) |
| Net\tinvestment\tincome | \t\t $2,499 | $1,581 | $2,785 |
| Investment\tgains\t(losses)\tare\tas\tfollows: |  |  |  |
| Fixed\tmaturity\tsecurities | \t\t $(1,167) | $(831) | $(478) |
| Equity\tsecurities | 243 | (490) | 117 |
| Derivative\tinstruments | 51 | (19) | 64 |
| Short\tterm\tinvestments | 14 | 35 | 9 |
| Other | 6 | 9 | 12 |
| Investment\tlosses\t(a) | \t\t $(853) | $(1,296) | $(276) |

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Net\tchange\tin\tunrealized\tgains\t(losses)\tin\tinvestments\tis\tas\tfollows: |  |  |  |
| Fixed\tmaturity\tsecurities | $5,278 | $(5,137) | $(847) |
| Equity\tsecurities | 156 | (347) | (47) |
| Other | (4) | 5 | 2 |
| Total\tnet\tchange\tin\tunrealized\tgains\t(losses)\ton\tinvestments | $5,430 | $(5,479) | $(892) |

The	components	of	OTTI	losses	recognized	in	earnings	by	asset	type	are	as	follows:

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Fixed\tmaturity\tsecurities\tavailable-for-sale: |  |  |  |
| U.S.\tTreasury\tsecurities\tand\tobligations\tof\tgovernment\tagencies |  | $29 | $53 |
| Asset-backed\tsecurities: |  |  |  |
| Residential\tmortgage-backed\tsecurities | \t\t $461 | 222 | \t 209 |
| Commercial\tmortgage-backed\tsecurities | 193 | 208 | 65 |
| Other\tasset-backed\tsecurities | 31 | 35 | 37 |
| Total\tasset-backed\tsecurities | 685 | 465 | \t 311 |
| States,\tmunicipalities\tand\tpolitical\tsubdivisions-tax-exempt\tsecurities | 79 | 1 | 50 |
| Corporate\tand\tother\ttaxable\tbonds | 357 | 585 | \t 260 |
| Redeemable\tpreferred\tstock | 9 | 1 | 42 |
| Total\tfixed\tmaturities\tavailable-for-sale | \t 1,130 | \t 1,081 | \t 716 |
| Equity\tsecurities\tavailable-for-sale: |  |  |  |
| Common\tstock | 5 | 140 | 24 |
| Preferred\tstock | 217 | 263 | 1 |
| Total\tequity\tsecurities\tavailable-for-sale | 222 | 403 | 25 |
| Net\tOTTI\tlosses\trecognized\tin\tearnings | \t\t $1,352 | $1,484 | $741 |

A	security	is	impaired	if	the	fair	value	of	the	security	is	less	than	its	cost	adjusted	for	accretion,	amortization	and	previously	recorded	OTTI	losses,	otherwise defined	as	an	unrealized	loss.	When	a	security	is	impaired,	the	impairment	is	evaluated	to	determine	whether	it	is	temporary	or	other-than-temporary.

Significant	judgment	is	required	in	the	determination	of	whether	an	OTTI	loss	has	occurred	for	a	security.	CNA	follows	a	consistent	and	systematic	process	for determining	and	recording	an	OTTI	loss.	CNA	has	established	a	committee	responsible	for	the	OTTI	process.	This	committee,	referred	to	as	the	Impairment	Committee, is	made	up	of	three	officers	appointed	by	CNA's	Chief	Financial	Officer.	The	Impairment	Committee	is	responsible	for	evaluating	securities	in	an	unrealized	loss position	on	at	least	a	quarterly	basis.

The	Impairment	Committee's	assessment	of	whether	an	OTTI	 loss	has	occurred	 incorporates	both	quantitative	and	qualitative	 information.	Fixed	maturity securities	that	CNA	intends	to	sell,	or	it	more	likely	than	not	will	be	required	to	sell	before	recovery	of	amortized	cost,	are	considered	to	be	other-than-temporarily impaired	and	the	entire	difference	between	the	amortized	cost	basis	and	fair	value	of	the	security	is	recognized	as	an	OTTI	loss	in	earnings.	The	remaining	fixed	maturity securities	in	an	unrealized	loss	position	are	evaluated	to	determine	if	a	credit	loss	exists.	In	order	to	determine	if	a	credit	loss	exists,	the	factors	considered	by	the Impairment	Committee	include	(i)	the	financial	condition	and	near	term	prospects	of	the	issuer,	(ii)	whether	the	debtor	is	current	on	interest	and

Notes	to	Consolidated	Financial	Statements Note	3.	Investments	–	(Continued)

principal	payments,	(iii)	credit	ratings	of	the	securities	and	(iv)	general	market	conditions	and	industry	or	sector	specific	outlook.	CNA	also	considers	results	and analysis	of	cash	flow	modeling	for	asset-backed	securities,	and	when	appropriate,	other	fixed	maturity	securities.	The	focus	of	the	analysis	for	asset-backed	securities	is on	assessing	the	sufficiency	and	quality	of	underlying	collateral	and	timing	of	cash	flows	based	on	scenario	tests.	If	the	present	value	of	the	modeled	expected	cash	flows equals	or	exceeds	the	amortized	cost	of	a	security,	no	credit	loss	is	judged	to	exist	and	the	asset-backed	security	is	deemed	to	be	temporarily	impaired.	If	the	present value	of	the	expected	cash	flows	is	less	than	amortized	cost,	the	security	is	judged	to	be	other-than-temporarily	impaired	for	credit	reasons	and	that	shortfall,	referred	to as	the	credit	component,	is	recognized	as	an	OTTI	loss	in	earnings.	The	difference	between	the	adjusted	amortized	cost	basis	and	fair	value,	referred	to	as	the	non-credit component,	is	recognized	as	an	OTTI	loss	in	Other	comprehensive	income.

CNA	performs	the	discounted	cash	flow	analysis	using	distressed	scenarios	to	determine	future	expectations	regarding	recoverability.	For	asset-backed	securities significant	assumptions	enter	into	these	cash	flow	projections	including	delinquency	rates,	probable	risk	of	default,	loss	severity	upon	a	default,	over	collateralization	and interest	coverage	triggers,	credit	support	from	lower	level	tranches	and	impacts	of	rating	agency	downgrades.	The	discount	rate	utilized	is	either	the	yield	at	acquisition or,	for	lower	rated	structured	securities,	the	current	yield.

CNA	applies	the	same	impairment	model	as	described	above	for	the	majority	of	the	non-redeemable	preferred	stock	securities	on	the	basis	that	these	securities possess	characteristics	similar	to	debt	securities	and	that	the	issuers	maintain	their	ability	to	pay	dividends.	For	all	other	equity	securities,	in	determining	whether	the security	is	other-than-temporarily	impaired,	the	Impairment	Committee	considers	a	number	of	factors	including,	but	not	limited	to:	(i)	the	length	of	time	and	the	extent to	which	the	fair	value	has	been	less	than	amortized	cost,	(ii)	the	financial	condition	and	near	term	prospects	of	the	issuer,	(iii)	the	intent	and	ability	of	CNA	to	retain	its investment	for	a	period	of	time	sufficient	to	allow	for	an	anticipated	recovery	in	value	and	(iv)	general	market	conditions	and	industry	or	sector	specific	outlook.

Prior	to	the	adoption	of	the	updated	accounting	guidance	related	to	OTTI	in	the	second	quarter	of	2009	as	further	discussed	in	Note	1,	CNA	applied	the impairment	model	described	in	the	paragraph	above	to	both	fixed	maturity	and	equity	securities.

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

| December	31,	2009<br>(In	millions) | Cost	or<br>Amortized<br>Cost | Gross<br>Unrealized<br>Gains | Gross	Unrealized	Losses<br>Less	Than<br>12	Months | 12	Months<br>or	Greater | Estimated<br>Fair	Value | Unrealized<br>OTTI<br>Losses |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Fixed\tmaturity\tsecurities: |  |  |  |  |  |  |
| U.S.\tTreasury\tsecurities\tand\tobligations\tof\tgovernment |  |  |  |  |  |  |
| agencies | $184 | $16 | $1 |  | $199 |  |
| Asset-backed\tsecurities: |  |  |  |  |  |  |
| Residential\tmortgage-backed\tsecurities | 7,470 | 72 | 43 | $561 | 6,938 | $246 |
| Commercial\tmortgage-backed\tsecurities | 709 | 10 | 1 | 134 | 584 | 3 |
| Other\tasset-backed\tsecurities | 858 | 14 | 1 | 39 | 832 |  |
| Total\tasset-backed\tsecurities | 9,037 | 96 | 45 | 734 | 8,354 | 249 |
| States,\tmunicipalities\tand\tpolitical\tsubdivisions-tax-exempt |  |  |  |  |  |  |
| securities | 7,142 | 201 | 25 | 325 | 6,993 |  |
| Corporate\tand\tother\ttaxable\tbonds | 19,015 | 1,123 | 50 | 249 | 19,839 | 26 |
| Redeemable\tpreferred\tstock | 51 | 4 |  | 1 | 54 |  |
| Fixed\tmaturities\tavailable-for-sale | 35,429 | 1,440 | 121 | 1,309 | 35,439 | 275 |
| Fixed\tmaturities,\ttrading | 395 | 3 |  | 21 | 377 |  |
| Total\tfixed\tmaturities | 35,824 | 1,443 | 121 | 1,330 | 35,816 | 275 |
| Equity\tsecurities: |  |  |  |  |  |  |
| Common\tstock | 61 | 14 | 1 | 1 | 73 |  |
| Preferred\tstock | 572 | 40 |  | 41 | 571 |  |
| Equity\tsecurities\tavailable-for-sale | 633 | 54 | 1 | 42 | 644 | – |
| Equity\tsecurities,\ttrading | 310 | 109 | 10 | 46 | 363 |  |
| Total\tequity\tsecurities | 943 | 163 | 11 | 88 | 1,007 | – |
| Total | $36,767 | $1,606 | $132 | $1,418 | $36,823 | $275 |

# Note	3.	Investments	–	(Continued)

|  | Cost	or | Gross | Gross	Unrealized	Losses | Gross	Unrealized	Losses |  |
| :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31,\t2008\n(In\tmillions) | Amortized\nCost | Unrealized\nGains | Less\tThan\n12\tMonths | 12\tMonths\nor\tGreater | Estimated\nFair\tValue |
| Fixed\tmaturity\tsecurities: |  |  |  |  |  |
| U.S.\tTreasury\tsecurities\tand\tobligations\tof\tgovernment\tagencies | $2,862 | $69 | $1 |  | $2,930 |
| Asset-backed\tsecurities | 9,670 | 24 | 961 | $969 | 7,764 |
| States,\tmunicipalities\tand\tpolitical\tsubdivisions-tax-exempt\tsecurities | 8,557 | 90 | 609 | 623 | 7,415 |
| Corporate\tand\tother\ttaxable\tbonds | 12,993 | 275 | 1,164 | 1,374 | 10,730 |
| Redeemable\tpreferred\tstock | 72 | 1 | 23 | 3 | 47 |
| Fixed\tmaturities\tavailable-for-sale | 34,154 | 459 | 2,758 | 2,969 | 28,886 |
| Fixed\tmaturities,\ttrading | 613 | 1 | 19 | 30 | 565 |
| Total\tfixed\tmaturities | 34,767 | 460 | 2,777 | 2,999 | 29,451 |
| Equity\tsecurities: |  |  |  |  |  |
| Equity\tsecurities\tavailable-for-sale | 1,018 | 195 | 16 | 324 | 873 |
| Equity\tsecurities,\ttrading | 384 | 52 | 78 | 46 | 312 |
| Total\tequity\tsecurities | 1,402 | 247 | 94 | 370 | 1,185 |
| Total | $36,169 | $707 | $2,871 | $3,369 | $30,636 |

Activity	for	the	period	from	April	1,	2009	to	December	31,	2009	related	to	the	pretax	fixed	maturity	credit	loss	component	reflected	within	Retained	earnings	for securities	still	held	at	December	31,	2009	was	as	follows:

| (In	millions) | Period	from<br>April	1,	2009	to<br>December	31,<br>2009 |
| :--- | :--- |
| Beginning\tbalance\tof\tcredit\tlosses\ton\tfixed\tmaturity\tsecurities | \t$192 |
| Additional\tcredit\tlosses\tfor\twhich\tan\tOTTI\tloss\twas\tpreviously\trecognized | \t\t\t\t\t93 |
| Additional\tcredit\tlosses\tfor\twhich\tan\tOTTI\tloss\twas\tnot\tpreviously\trecognized | \t\t\t183 |
| Reductions\tfor\tsecurities\tsold\tduring\tthe\tperiod | \t\t(239) |
| Reductions\tfor\tsecurities\tthe\tCompany\tintends\tto\tsell\tor\tmore\tlikely\tthan\tnot\twill\tbe\trequired\tto\tsell | \t\t\t\t(65) |
| Ending\tbalance\tof\tcredit\tlosses\ton\tfixed\tmaturity\tsecurities | \t$164 |

Based	on	current	facts	and	circumstances,	the	Company	has	determined	that	no	additional	OTTI	losses	related	to	the	securities	in	an	unrealized	loss	position presented	in	the	December	31,	2009	summary	of	fixed	maturity	and	equity	securities	table	above	are	required	to	be	recorded.	A	discussion	of	some	of	the	factors reviewed	in	making	that	determination	is	presented	below.

The	market	disruption	that	emerged	during	2008	has	significantly	subsided	in	2009.	The	U.S.	government	has	initiated	programs	intended	to	stabilize	and improve	markets	and	the	economy.	While	the	ultimate	impact	of	these	programs	remains	uncertain	and	economic	conditions	in	the	U.S.	remain	challenging,	financial markets	have	shown	 improvement	 in	2009.	Risk	free	 interest	rates	continued	near	multi-year	 lows	and	credit	spreads	narrowed	resulting	 in	 improvement	 in	 the Company's	unrealized	position.	However,	fair	values	in	the	asset-backed	sector	continue	to	be	depressed	primarily	due	to	continued	concerns	with	underlying	residential and	commercial	collateral.

The	classification	between	investment	grade	and	non-investment	grade	presented	in	the	discussion	below	is	based	on	a	ratings	methodology	that	takes	into account	ratings	from	the	three	major	providers,	S&P,	Moody's,	and	Fitch	in	that	order	of	preference.	If	a	security	is	not	rated	by	any	of	the	three,	the	Company formulates	an	internal	rating.	For	securities	with	credit	support	from	third	party	guarantees,	the	rating	reflects	the	greater	of	the	underlying	rating	of	the	issuer	or	the insured	rating.

# Asset-Backed	Securities

The	fair	value	of	total	asset-backed	holdings	at	December	31,	2009	was	$8,354	million	which	was	comprised	of	2,126	different	asset-backed	structured	securities. The	fair	value	of	these	securities	does	not	tend	to	be	influenced	by	the	credit	of	the	issuer	but	rather	the	characteristics	and	projected	cash	flows	of	the	underlying collateral.	Each	security	has	deal-specific	tranche	structures,	credit	support	that	results	from	the	unique	deal	structure,	particular	collateral	characteristics	and	other distinct	security	terms.	As	a	result,	seemingly	common	factors	such	as	delinquency	rates	and	collateral	performance	affect	each	security	differently.	Of	these	securities, 196	have	underlying	collateral	that	is	either	considered	sub-prime	or	Alt-A	in	nature.	The	exposure	to	sub-prime	residential	mortgage	collateral	and	Alternative	A residential	mortgages	that	have	lower	than	normal	standards	of	loan	documentation	collateral	is	measured	by	the	original	deal	structure.

Residential	mortgage-backed	securities	include	286	structured	securities	in	a	gross	unrealized	loss	position.	In	addition,	there	were	66	agency	mortgage-backed pass-through	securities	which	are	guaranteed	by	agencies	of	the	U.S.	Government	in	a	gross	unrealized	loss	position.	The	aggregate	severity	of	the	gross	unrealized	loss was	approximately	10.7%	of	amortized	cost.

Commercial	 mortgage-backed	 securities	 include	 39	 securities	 in	 a	 gross	 unrealized	 loss	 position.	The	 aggregate	 severity	 of	 the	 gross	 unrealized	 loss	 was approximately	22.0%	of	amortized	cost.	Other	asset-backed	securities	include	28	securities	in	a	gross	unrealized	loss	position.	The	aggregate	severity	of	the	gross unrealized	loss	was	approximately	12.4%	of	amortized	cost.

The	asset-backed	securities	in	a	gross	unrealized	loss	position	by	ratings	distribution	are	as	follows:

| December	31,	2009<br>(In	millions) | Amortized<br>Cost | Estimated<br>Fair	Value | Unrealized<br>Losses |
| :--- | :--- | :--- | :--- |
| U.S.\tGovernment\tAgencies | $1,814 | $1,782 | $32 |
| AAA | 2,350 | 2,052 | 298 |
| AA | 475 | 389 | 86 |
| A | 391 | 325 | 66 |
| BBB | 349 | 279 | 70 |
| Non-investment\tgrade\tand\tequity\ttranches | 1,180 | 953 | 227 |
| Total | $6,559 | $5,780 | $779 |

The	Company	believes	the	unrealized	losses	are	primarily	attributable	to	broader	economic	conditions,	liquidity	concerns	and	wider	than	historical	bid/ask spreads,	and	is	not	indicative	of	the	quality	of	the	underlying	collateral.	The	Company	has	no	current	intent	to	sell	these	securities,	nor	is	it	more	likely	than	not	that	it will	be	required	to	sell	prior	to	recovery	of	amortized	cost.	Generally,	non-investment	grade	securities	consist	of	investments	which	were	investment	grade	at	the	time	of purchase	but	have	subsequently	been	downgraded	and	primarily	consist	of	holdings	senior	to	the	equity	tranche.	Additionally,	the	Company	believes	that	the	unrealized losses	on	these	securities	were	not	due	to	factors	regarding	the	ultimate	collection	of	principal	and	interest,	collateral	shortfalls,	or	substantial	changes	in	future	cash	flow expectations;	accordingly,	the	Company	has	determined	that	there	are	no	additional	OTTI	losses	to	be	recorded	at	December	31,	2009.

# States,	Municipalities	and	Political	Subdivisions	–	Tax-Exempt	Securities

The	tax-exempt	portfolio	consists	primarily	of	special	revenue	and	assessment	bonds,	representing	81.3%	of	the	overall	portfolio,	followed	by	general	obligation political	subdivision	bonds	at	14.0%	and	state	general	obligation	bonds	at	4.7%.

The	unrealized	losses	on	the	Company's	investments	in	tax-exempt	municipal	securities	are	due	to	market	conditions	in	certain	sectors	or	states	that	continue	to	lag behind	the	broader	municipal	market	recovery.	Market	conditions	in	the	tax-exempt	sector	have	improved	during	2009.	However,	yields	for	certain	issuers	and	types	of

securities,	such	as	auction	rate	and	tobacco	securitizations,	continue	to	be	higher	than	historical	norms	relative	to	after	tax	returns	on	other	fixed	income	alternatives.	The holdings	for	all	tax-exempt	securities	in	this	category	include	340	securities	in	a	gross	unrealized	loss	position.	The	aggregate	severity	of	the	total	gross	unrealized	losses was	approximately	10.4%	of	amortized	cost.

The	tax-exempt	securities	in	a	gross	unrealized	loss	position	by	ratings	distribution	are	as	follows:

| December	31,	2009<br>(In	millions) | Amortized<br>Cost | Estimated<br>Fair	Value | Unrealized<br>Losses |
| :--- | :--- | :--- | :--- |
| AAA | $1,344 | $1,280 | $64 |
| AA | 985 | 849 | 136 |
| A | 492 | 464 | 28 |
| BBB | 519 | 399 | 120 |
| Non-investment\tgrade | 22 | 20 | 2 |
| Total | $3,362 | $3,012 | $350 |

The	largest	exposures	at	December	31,	2009,	measured	by	gross	unrealized	losses,	were	special	revenue	bonds	issued	by	several	states	backed	by	tobacco settlement	funds	with	gross	unrealized	losses	of	$109	million	and	several	separate	issues	of	Puerto	Rico	sales	tax	revenue	bonds	with	gross	unrealized	losses	of	$79 million.	All	of	these	securities	are	investment	grade.

The	Company	has	no	current	intent	to	sell	these	securities,	nor	is	it	more	likely	than	not	that	it	will	be	required	to	sell	prior	to	recovery	of	amortized	cost. Additionally,	the	Company	believes	that	the	unrealized	losses	on	these	securities	were	not	due	to	factors	regarding	the	ultimate	collection	of	principal	and	interest; accordingly,	the	Company	has	determined	that	there	are	no	additional	OTTI	losses	to	be	recorded	at	December	31,	2009.

# Corporate	and	Other	Taxable	Bonds

The	holdings	in	this	category	include	505	securities	in	a	gross	unrealized	loss	position.	The	aggregate	severity	of	the	gross	unrealized	losses	was	6.1%	of amortized	cost.

The	corporate	and	other	taxable	bonds	in	a	gross	unrealized	loss	position	across	industry	sectors	and	by	ratings	distribution	are	as	follows:

| December	31,	2009<br>(In	millions) | Amortized<br>Cost | Estimated<br>Fair	Value | Gross<br>Unrealized<br>Losses |
| :--- | :--- | :--- | :--- |
| Industry\tsectors: |  |  |  |
| Communications | $333 | $327 | $6 |
| Consumer,\tCyclical | 409 | 386 | 23 |
| Consumer,\tNon-cyclical | 425 | 412 | 13 |
| Energy | 271 | 259 | 12 |
| Financial | 1,918 | 1,752 | 166 |
| Industrial | 364 | 350 | 14 |
| Utilities | 654 | 614 | 40 |
| Other | 539 | 514 | 25 |
| Total | $4,913 | $4,614 | $299 |

| December	31,	2009<br>(In	millions) | Amortized<br>Cost | Estimated<br>Fair	Value | Unrealized<br>Losses |
| :--- | :--- | :--- | :--- |
| Ratings\tdistributions: |  |  |  |
| AAA | $191 | $183 | $8 |
| AA | 344 | 339 | 5 |
| A | 1,161 | 1,103 | 58 |
| BBB | 2,287 | 2,150 | 137 |
| Non-investment\tgrade | 930 | 839 | 91 |
| Total | $4,913 | $4,614 | $299 |

The	unrealized	losses	on	corporate	and	other	taxable	bonds	are	primarily	attributable	to	lingering	impacts	of	the	broader	credit	market	deterioration	throughout 2008	that	resulted	in	widening	of	credit	spreads	over	risk	free	interest	rates	beyond	historical	norms.	These	conditions	continue	in	certain	sectors,	such	as	financial,	that the	market	continues	to	view	as	out	of	favor.	Overall	conditions	in	the	corporate	bond	market	have	significantly	improved	throughout	2009	resulting	in	improvement	in the	Company's	unrealized	position.	The	Company	has	no	current	intent	to	sell	these	securities,	nor	is	it	more	likely	than	not	that	it	will	be	required	to	sell	prior	to recovery	of	amortized	cost.	Additionally,	the	Company	believes	that	the	unrealized	losses	were	not	due	to	factors	regarding	the	ultimate	collection	of	principal	and interest;	accordingly,	the	Company	has	determined	that	there	are	no	additional	OTTI	losses	to	be	recorded	at	December	31,	2009.

The	Company	has	invested	in	securities	with	characteristics	of	both	debt	and	equity	investments,	often	referred	to	as	hybrid	debt	securities.	Such	securities	are typically	debt	instruments	issued	with	long	or	extendable	maturity	dates,	may	provide	for	the	ability	to	defer	interest	payments	without	defaulting	and	are	usually	lower in	the	capital	structure	of	the	issuer	than	traditional	bonds.	The	financial	industry	sector	presented	above	includes	hybrid	debt	securities	with	an	aggregate	fair	value	of $637	million	and	an	aggregate	amortized	cost	of	$722	million.

# Contractual	Maturity

The	following	table	summarizes	available-for-sale	fixed	maturity	securities	by	contractual	maturity	at	December	31,	2009	and	2008.	Actual	maturities	may	differ from	contractual	maturities	because	certain	securities	may	be	called	or	prepaid	with	or	without	call	or	prepayment	penalties.	Securities	not	due	at	a	single	date	are allocated	based	on	weighted	average	life.

|  | 2009 | 2009 | 2008 | 2008 |
| :--- | :--- | :--- | :--- | :--- |
| December\t31\n(In\tmillions) | Amortized\nCost | Estimated\nFair\tValue | Amortized\nCost | Estimated\nFair\tValue |
| Due\tin\tone\tyear\tor\tless | $1,240 | $1,219 | $3,105 | $2,707 |
| Due\tafter\tone\tyear\tthrough\tfive\tyears | 10,046 | 10,244 | 10,295 | 9,210 |
| Due\tafter\tfive\tyears\tthrough\tten\tyears | 10,647 | 10,539 | 5,929 | 4,822 |
| Due\tafter\tten\tyears | 13,496 | 13,437 | 14,825 | 12,147 |
| Total | $35,429 | $35,439 | $34,154 | $28,886 |

As	of	December	31,	2009,	the	Company	held	three	non-income	producing	fixed	maturity	securities	aggregating	$1.0	million	of	fair	value.	As	of	December	31, 2008,	 the	 Company	 did	 not	 hold	 any	 non-income	 producing	 fixed	 maturity	 securities.	As	 of	 December	 31,	 2009	 and	 2008,	 no	 investments	 exceeded	 10.0%	 of shareholders'	equity	other	than	investments	in	U.S.	Treasury	and	U.S.	Government	agency	securities.

# Auction	Rate	Securities

The	investment	portfolio	includes	auction	rate	securities	which	are	primarily	issued	by	student	loan	agencies	from	ten	states	and	are	substantially	guaranteed	by the	Federal	Family	Education	Loan	Program.	The	fair	value	of	auction	rate	securities	held	at	December	31,	2009	was	$979	million,	with	no	gross	unrealized	gains	and gross	unrealized	losses	of	$71	million.	The	average	rating	on	these	holdings	was	AAA.	At	December	31,	2009,	all	auction	rate	securities	were	paying	the	applicable coupon	rate.

# Limited	Partnerships

The	carrying	value	of	limited	partnerships	as	of	December	31,	2009	and	2008	was	approximately	$2.0	billion	and	$1.8	billion	which	includes	undistributed earnings	of	$543	million	and	$334	million.	Limited	partnerships	comprising	53.3%	of	the	total	carrying	value	are	reported	on	a	current	basis	through	December	31,	2009 with	no	reporting	lag,	37.0%	are	reported	on	a	one	month	lag	and	the	remainder	are	reported	on	more	than	a	one	month	lag.	As	of	December	31,	2009	and	2008,	the Company	had	74	and	85	active	limited	partnership	investments.	The	number	of	limited	partnerships	held	and	the	strategies	employed	provide	diversification	to	the limited	partnership	portfolio	and	the	overall	invested	asset	portfolio.	The	Company	generally	does	not	invest	in	highly	leveraged	partnerships.

Of	the	limited	partnerships	held,	90.5%	at	December	31,	2009	and	89.5%	at	December	31,	2008,	employ	strategies	that	generate	returns	through	investing	in securities	that	are	marketable	while	engaging	in	various	management	techniques	primarily	in	public	fixed	income	and	equity	markets.	These	hedge	fund	strategies include	both	long	and	short	positions	in	fixed	income,	equity	and	derivative	instruments.	The	hedge	fund	strategies	may	seek	to	generate	gains	from	mispriced	or undervalued	securities,	price	differentials	between	securities,	distressed	investments,	sector	rotation,	or	various	arbitrage	disciplines.	Within	hedge	fund	strategies, approximately	44.1%	are	equity	related,	32.7%	pursue	a	multi-strategy	approach,	18.4%	are	focused	on	distressed	investments	and	4.8%	are	fixed	income	related	at December	31,	2009.

Limited	partnerships	representing	6.4%	at	December	31,	2009	and	7.1%	at	December	31,	2008	were	invested	in	private	equity.	The	remaining	were	invested	in various	other	partnerships	including	real	estate.	The	ten	largest	limited	partnership	positions	held	totaled	$1,208	million	and	$915	million	as	of	December	31,	2009	and December	31,	2008.	Based	on	the	most	recent	information	available	regarding	the	Company's	percentage	ownership	of	the	individual	limited	partnerships,	the	carrying value	reflected	on	the	Consolidated	Balance	Sheets	represents	approximately	3.9%	and	3.4%	of	the	aggregate	partnership	equity	at	December	31,	2009	and	2008,	and the	related	income	reflected	on	the	Consolidated	Statements	of	Income	represents	4.4%	and	3.1%	of	the	changes	in	partnership	equity	for	all	limited	partnership investments	for	the	years	ended	December	31,	2009	and	2008.	The	largest	contributor	to	income	had	a	carrying	value	of	$165	million	at	December	31,	2009,	with related	income	of	$120	million.	The	Company	owned	7.0%	of	this	limited	partnership	at	December	31,	2009.

The	 risks	 associated	 with	 limited	 partnership	 investments	 may	 include	 losses	 due	 to leveraging,	 short-selling,	 derivatives	 or	 other	 speculative investment practices.	The	use	of	leverage	increases	volatility	generated	by	the	underlying	investment	strategies.

The	Company's	limited	partnerships	investments	contain	withdrawal	provisions	that	generally	limit	liquidity	for	a	period	of	thirty	days	up	to	one	year	and	in	some cases	do	not	permit	withdrawals.	Typically,	withdrawals	require	advanced	written	notice	of	up	to	90	days.

# Investment	Commitments

As	 of	 December	 31,	 2009,	 the	 Company	 had	 committed	 approximately	 $235	 million to future	 capital	 calls from	 various third-party limited	 partnership investments	in	exchange	for	an	ownership	interest	in	the	related	partnerships.

The	Company	invests	in	multiple	bank	loan	participations	as	part	of	its	overall	investment	strategy	and	has	committed	to	additional	future	purchases	and	sales. The	purchase	and	sale	of	these	investments	are	recorded	on	the	date	that	the	legal	agreements	are	finalized	and	cash	settlement	is	made.	As	of	December	31,	2009,	the Company	had	commitments	to	purchase	$304	million	and	sell	$172	million	of	various	bank	loan	participations.	When	loan

participation	purchases	are	settled	and	recorded	they	may	contain	both	funded	and	unfunded	amounts.	An	unfunded	loan	represents	an	obligation	by	the	Company	to provide	additional	amounts	under	the	terms	of	the	loan	participation.	The	funded	portions	are	reflected	on	the	Consolidated	Balance	Sheets,	while	any	unfunded	amounts are	not	recorded	until	a	draw	is	made	under	the	loan	facility.	As	of	December	31,	2009,	the	Company	had	obligations	on	unfunded	bank	loan	participations	in	the amount	of	$13	million.

# Investments	on	Deposit

CNA	may	from	time	to	time	invest	in	securities	that	may	be	restricted	in	whole	or	in	part.	As	of	December	31,	2009	and	2008,	CNA	did	not	hold	any	significant positions	in	investments	whose	sale	was	restricted	other	than	limited	partnerships.

Securities	with	carrying	values	of	approximately	$2.7	billion	and	$2.1	billion	were	deposited	by	CNA's	insurance	subsidiaries	under	requirements	of	regulatory authorities	as	of	December	31,	2009	and	2008.

Cash	and	securities	with	carrying	values	of	approximately	$9	million	and	$10	million	were	deposited	with	financial	institutions	as	collateral	for	letters	of	credit	as of	December	31,	2009	and	2008.	In	addition,	cash	and	securities	were	deposited	in	trusts	with	financial	institutions	to	secure	reinsurance	and	other	obligations	with various	third	parties.	The	carrying	values	of	these	deposits	were	approximately	$311	million	and	$284	million	as	of	December	31,	2009	and	2008.

# Note	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.

The	Company	attempts	to	establish	fair	value	as	an	exit	price	in	an	orderly	transaction	consistent	with	normal	settlement	market	conventions.	The	Company	is responsible	for	the	valuation	process	and	seeks	to	obtain	quoted	market	prices	for	all	securities.	When	quoted	market	prices	in	active	markets	are	not	available,	the Company	uses	a	number	of	methodologies	to	establish	fair	value	estimates,	including	discounted	cash	flow	models,	prices	from	recently	executed	transactions	of	similar securities	or	broker/dealer	quotes,	utilizing	market	observable	information	to	the	extent	possible.	In	conjunction	with	modeling	activities,	the	Company	may	use	external data	as	inputs.	The	modeled	inputs	are	consistent	with	observable	market	information,	when	available,	or	with	the	Company's	assumptions	as	to	what	market	participants would	use	to	value	the	securities.	The	Company	also	uses	pricing	services	as	a	significant	source	of	data.	The	Company	monitors	all	the	pricing	inputs	to	determine	if	the markets	from	which	the	data	is	gathered	are	active.	As	further	validation	of	the	Company's	valuation	process,	the	Company	samples	its	past	fair	value	estimates	and compares	the	valuations	to	actual	transactions	executed	in	the	market	on	similar	dates.

# Note	4.	Fair	Value	–	(Continued)

The	fair	values	of	CNA's	life	settlement	contracts	investments	are	included	in	Other	assets.	The	fair	values	of	discontinued	operations	investments	are	included	in Other	liabilities.	Assets	and	liabilities	measured	at	fair	value	on	a	recurring	basis	are	summarized	in	the	tables	below:

| December	31,	2009<br>(In	millions) | Level	1 | Level	2 | Level	3 | Total |
| :--- | :--- | :--- | :--- | :--- |
| Fixed\tmaturity\tsecurities: |  |  |  |  |
| U.S.\tTreasury\tsecurities\tand\tobligations\tof\tgovernment\tagencies | \t\t $145 | $54 |  | $199 |
| Asset-backed\tsecurities: |  |  |  |  |
| Residential\tmortgage-backed\tsecurities |  | 6,309 | $629 | 6,938 |
| Commercial\tmortgage-backed\tsecurities |  | 461 | 123 | 584 |
| Other\tasset-backed\tsecurities |  | 484 | 348 | 832 |
| Total\tasset-backed\tsecurities |  | 7,254 | 1,100 | 8,354 |
| States,\tmunicipalities\tand\tpolitical\tsubdivisions-tax-exempt\tsecurities |  | 6,237 | 756 | 6,993 |
| Corporate\tand\tother\ttaxable\tbonds | 139 | \t 19,091 | 609 | \t 19,839 |
| Redeemable\tpreferred\tstock | 3 | 49 | 2 | 54 |
| Fixed\tmaturities\tavailable-for-sale | 287 | \t 32,685 | 2,467 | \t 35,439 |
| Fixed\tmaturities,\ttrading | 102 | 78 | 197 | 377 |
| Total\tfixed\tmaturities | \t\t $389 | $32,763 | $2,664 | $35,816 |
| Equity\tsecurities: |  |  |  |  |
| Common\tstock | \t\t $51 | $11 | $11 | $73 |
| Preferred\tstock | 452 | 119 |  | 571 |
| Equity\tsecurities\tavailable-for-sale | 503 | 130 | 11 | 644 |
| Equity\tsecurities,\ttrading | 363 |  |  | 363 |
| Total\tequity\tsecurities | \t\t $866 | $130 | $11 | $1,007 |
| Short\tterm\tinvestments | \t\t $6,818 | $397 |  | $7,215 |
| Receivables |  | 53 | $2 | 55 |
| Life\tsettlement\tcontracts |  |  | 130 | 130 |
| Separate\taccount\tbusiness | 43 | 342 | 38 | 423 |
| Payable\tto\tbrokers | (87) | (135) | (50) | (272) |
| Discontinued\toperations\tinvestments | 19 | 106 | 16 | 141 |
| December\t31,\t2008 |  |  |  |  |
| Fixed\tmaturity\tsecurities | \t\t $2,358 | $24,383 | $2,710 | $29,451 |
| Equity\tsecurities | 881 | 94 | 210 | 1,185 |
| Short\tterm\tinvestments | 5,425 | 608 |  | 6,033 |
| Receivables |  | 182 | 40 | 222 |
| Life\tsettlement\tcontracts |  |  | 129 | 129 |
| Separate\taccount\tbusiness | 40 | 306 | 38 | 384 |
| Payable\tto\tbrokers | (168) | (260) | (112) | (540) |
| Discontinued\toperations\tinvestments | 83 | 59 | 15 | 157 |

The	tables	below	present	reconciliations	for	all	assets	and	liabilities	measured	at	fair	value	on	a	recurring	basis	using	significant	unobservable	inputs	(Level	3)	for the	years	ended	December	31,	2009	and	2008:

| 2009<br>(In	millions) | Balance,<br>January	1 | Net	Realized	Gains<br>(Losses)	and	Net	Change<br>in	Unrealized	Gains<br>(Losses)<br>Included	in<br>Net	Income | Included	in<br>OCI | Purchases,<br>Sales,<br>Issuances<br>and<br>Settlements | Transfers<br>into	Level	3 | Transfers<br>out	of<br>Level	3 | Balance,<br>December	31 | Unrealized<br>Gains	(Losses)<br>Recognized	in<br>Net	Income	on<br>Level	3	Assets<br>and	Liabilities<br>Held	at<br>December	31 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Fixed\tmaturity\tsecurities: |  |  |  |  |  |  |  |  |
| Asset-backed\tsecurities: |  |  |  |  |  |  |  |  |
| Residential\tmortgage-backed\tsecurities | \t\t$782\t\t\t$ | (32)\t\t$ | 117\t\t\t$ | (52)\t\t$ | 71\t\t$ | (257)\t\t$ | 629\t\t\t$ | (12) |
| Commercial\tmortgage-backed |  |  |  |  |  |  |  |  |
| securities | 186 | (170) | 185 | (24) | 28 | (82) | 123 | (175) |
| Other\tasset-backed\tsecurities | 139 | (26) | 56 | 180 | 153 | (154) | 348 |  |
| Total\tasset-backed\tsecurities | 1,107 | (228) | 358 | 104 | 252 | (493) | 1,100 | (187) |
| States,\tmunicipalities\tand\tpolitical |  |  |  |  |  |  |  |  |
| subdivisions-tax-exempt\tsecurities | 750 |  | 72 | (66) |  |  | 756 |  |
| Corporate\tand\tother\ttaxable\tbonds | 622 | (10) | 126 | 75 | 23 | (227) | 609 | (11) |
| Redeemable\tpreferred\tstock | 13 | (9) | 9 | 7 |  | (18) | 2 | (9) |
| Fixed\tmaturities\tavailable-for-sale | 2,492 | (247) | 565 | 120 | 275 | (738) | 2,467 | (207) |
| Fixed\tmaturities,\ttrading | 218 | 16 |  | (41) | 4 |  | 197 | 4 |
| Total\tfixed\tmaturities | \t\t$2,710\t\t\t$ | (231)\t\t$ | 565\t\t\t$ | 79\t\t\t$ | 279\t\t$ | (738)\t\t$ | 2,664\t\t\t$ | (203) |
| Equity\tsecurities: |  |  |  |  |  |  |  |  |
| Common\tstock | \t\t$191 | \t$(1)\t\t$ | \t$(1)\t\t$ | 5 | \t\t$(184)\t\t$ | \t\t$(184)\t\t$ | 11 |  |
| Preferred\tstock | 19 |  |  |  |  | (19) |  |  |
| Equity\tsecurities\tavailable-for-sale | \t\t$210\t\t\t$ | –\t\t\t$ | (1)\t\t$ | 5\t\t\t$ | –\t\t$ | (203)\t\t$ | 11\t\t\t$ | – |
| Short\tterm\tinvestments |  | \t$1\t\t\t$ | \t$1\t\t\t$ | 7 | \t\t$(8) | \t\t$(8) |  |  |
| Life\tsettlement\tcontracts | \t\t$129\t\t\t$ | 34 |  | (33) |  |  | \t$130\t\t\t$ | 10 |
| Separate\taccount\tbusiness | 38 | (1) | 5 | (1) |  | (3) | 38 |  |
| Discontinued\toperations\tinvestments | 15 | (4) | 7 | (2) |  |  | 16 |  |
| Derivative\tfinancial\tinstruments,\tnet | (72) | 16 | (51) | 59 |  |  | (48) | (10) |

|  |  | Net	Realized	Gains | Net	Realized	Gains |  |  |  |  | Unrealized |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | (Losses)\tand\tNet\tChange | (Losses)\tand\tNet\tChange |  |  |  |  | Gains\t(Losses) |
|  |  | in\tUnrealized\tGains | in\tUnrealized\tGains |  |  |  |  | Recognized\tin |
|  |  | (Losses) | (Losses) | Purchases, |  |  |  | Net\tIncome\ton |
| 2008\n(In\tmillions) | Balance,\nJanuary\t1 | Included\tin\nNet\tIncome | Included\tin\nOCI | Sales,\nIssuances\nand\nSettlements | Transfers\ninto\tLevel\t3 | Transfers\nout\tof\nLevel\t3 | Balance,\nDecember\t31 | Level\t3\tAssets\nand\tLiabilities\nHeld\tat\nDecember\t31 |
| Fixed\tmaturity\tsecurities | $2,909 | $(412) | $(505) | $(152) | $1,475 | $(605) | $2,710 | $(391) |
| Equity\tsecurities | 199 | (17) | 6 | 23 | 22 | (23) | 210 | (4) |
| Short\tterm\tinvestments | 85 |  |  |  |  | (85) | — |  |
| Life\tsettlement\tcontracts | 115 | 48 |  | (34) |  |  | 129 | 17 |
| Separate\taccount\tbusiness | 30 |  |  | (18) | 26 |  | 38 |  |
| Discontinued\toperations |  |  |  |  |  |  |  |  |
| investments | 42 | (1) | (5) | (4) |  | (17) | 15 |  |
| Derivative\tfinancial |  |  |  |  |  |  |  |  |
| instruments,\tnet | (19) | (16) | 36 | (73) |  |  | (72) | (89) |

Net	realized	and	unrealized	gains	and	losses	are	reported	in	Net	income	as	follows:

Fixed	maturity	securities,	trading

Equity	securities	available-for-sale

Investment	gains	(losses)

Equity	securities,	trading Net	investment	income Derivative	financial	instruments	held	in	a	trading	portfolio Net	investment	income Derivative	financial	instruments,	other Investment	gains	(losses)	and	Other	revenues Life	settlement	contracts Other	revenues

Securities	shown	in	the	Level	3	tables	may	be	transferred	in	or	out	based	on	the	availability	of	observable	market	information	used	to	verify	pricing	sources	or used	in	pricing	models.	The	availability	of	observable	market	information	varies	based	on	market	conditions	and	trading	volume	and	may	cause	securities	to	move	in	and out	of	Level	3	from	reporting	period	to	reporting	period.

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

# Fixed	Maturity	Securities

Level	1	securities	include	highly	liquid	government	bonds	within	the	U.S.	Treasury	securities	category	and	debt	securities	issued	by	foreign	governments,	which are	included	in	the	corporate	and	other	taxable	bond	category,	for	which	quoted	market	prices	are	available.	The	remaining	fixed	maturity	securities	are	valued	using pricing	for	similar	securities,	recently	executed	transactions,	cash	flow	models	with	yield	curves,	broker/dealer	quotes	and	other	pricing	models	utilizing	observable inputs.	The	valuation	for	most	fixed	maturity	securities	is	classified	as	Level	2.	Securities	within	Level	2	include	certain	corporate	bonds,	municipal	bonds,	asset-backed securities,	mortgage-backed	pass-through	securities	and	redeemable	preferred	stock.	Level	2	securities	may	also	include	securities	that	have	firm	sale	commitments	and prices	that	are	not	recorded	until	the	settlement	date.	Securities	are	generally	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.	These	securities	include	certain corporate	bonds,	asset-backed	securities,	municipal	bonds	and	redeemable	preferred	stock.	Within	corporate	bonds	and	municipal	bonds,	Level	3	securities	also	include tax-exempt	auction	rate	certificates.	Fair	value	of	auction	rate	securities	is	determined	utilizing	a	pricing	model	with	three	primary	inputs.	The	interest	rate	and	spread inputs	are	observable	from	like	instruments	while	the	maturity	date	assumption	is	unobservable	due	to	the	uncertain	nature	of	the	principal	prepayments	prior	to maturity.

# Equity	Securities

Level	1	securities	include	publicly	traded	securities	valued	using	quoted	market	prices.	Level	2	securities	are	primarily	non-redeemable	preferred	securities	and common	stocks	valued	using	pricing	for	similar	securities,	recently	executed	transactions,	broker/dealer	quotes	and	other	pricing	models	utilizing	observable	inputs. Level	3	securities	include	equity	securities	that	are	priced	using	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	include currency	forwards	valued	using	observable	market	forward	rates.	Over-the-counter	derivatives,	principally	interest	rate	swaps,	commodity	swaps,	credit	default	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.

The	valuation	of	securities	that	are	actively	traded	or	have	quoted	prices	are	classified	as	Level	1.	These	securities	include	money	market	funds	and	treasury	bills. Level	2	includes	commercial	paper,	for	which	all	inputs	are	observable.

# Life	Settlement	Contracts

The	fair	values	of	life	settlement	contracts	are	determined	as	the	present	value	of	the	anticipated	death	benefits	less	anticipated	premium	payments	based	on contract	terms	that	are	distinct	for	each	insured,	as	well	as	CNA's	own	assumptions	for	mortality,	premium	expense,	and	the	rate	of	return	that	a	buyer	would	require	on the	contracts,	as	no	comparable	market	pricing	data	is	available.

# Discontinued	Operations	Investments

Assets	relating	to	CNA's	discontinued	operations	include	fixed	maturity	securities	and	short	term	investments.	The	valuation	methodologies	for	these	asset	types have	been	described	above.

# Separate	Account	Business

Separate	account	business	includes	fixed	maturity	securities,	equities	and	short	term	investments.	The	valuation	methodologies	for	these	asset	types	have	been described	above.

# Assets	and	Liabilities	Not	Measured	at	Fair	Value

The	Company	did	not	have	any	financial	instrument	assets	which	are	not	measured	at	fair	value.	The	carrying	amount	and	estimated	fair	value	of	the	Company's financial	instrument	liabilities	which	are	not	measured	at	fair	value	on	the	Consolidated	Balance	Sheets	are	listed	in	the	table	below.

| December	31 | 2009 | 2009 | 2008 | 2008 |
| :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) | Carrying\nAmount | Estimated\nFair\tValue | Carrying\nAmount | Estimated\nFair\tValue |
| Financial\tliabilities: |  |  |  |  |
| Premium\tdeposits\tand\tannuity\tcontracts | $105 | $106 | $111 | $113 |
| Short\tterm\tdebt | 10 | 10 | 71 | 71 |
| Long\tterm\tdebt | 9,475 | 9,574 | 8,187 | 7,166 |

The	following	methods	and	assumptions	were	used	in	estimating	the	fair	value	of	these	financial	liabilities.

Premium	deposits	and	annuity	contracts	were	valued	based	on	cash	surrender	values,	estimated	fair	values	or	policyholder	liabilities,	net	of	amounts	ceded	related to	sold	business.

Fair	value	of	debt	was	based	on	quoted	market	prices	when	available.	When	quoted	market	prices	were	not	available,	the	fair	value	for	debt	was	based	on	quoted market	prices	of	comparable	instruments	adjusted	for	differences	between	the	quoted	instruments	and	the	instruments	being	valued	or	is	estimated	using	discounted	cash flow	analyses,	based	on	current	incremental	borrowing	rates	for	similar	types	of	borrowing	arrangements.

# Note	5.	Derivative	Financial	Instruments

The	 Company	 invests	 in	 certain	 derivative	 instruments	 for	 a	 number	 of	 purposes,	 including:	 (i)	 asset	 and	 liability	 management	 activities,	 (ii)	 income enhancements	for	its	portfolio	management	strategy,	and	(iii)	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	detailed	reports	of	existing	positions	and	valuation	fluctuations	to	ensure	that	open	positions are	consistent	with	the	Company's	portfolio	strategy.

The	Company	does	not	believe	that	any	of	the	derivative	instruments	utilized	by	it	are	unusually	complex,	nor	do	these	instruments	contain	embedded	leverage features	which	would	expose	the	Company	to	a	higher	degree	of	risk.

The	Company	uses	derivatives	in	the	normal	course	of	business,	primarily	in	an	attempt	to	reduce	its	exposure	to	market	risk	(principally	interest	rate	risk,	equity stock	price	risk,	commodity	price	risk	and	foreign	currency	risk)	stemming	from	various	assets	and	liabilities	and	credit	risk	(the	ability	of	an	obligor	to	make	timely payment	of	principal	and/or	interest).	The	Company's	principal	objective	under	such	risk	strategies	is	to	achieve	the	desired	reduction	in	economic	risk,	even	if	the position	does	not	receive	hedge	accounting	treatment.

# Note	5.	Derivative	Financial	Instruments	–	(Continued)

CNA's	use	of	derivatives	is	limited	by	statutes	and	regulations	promulgated	by	the	various	regulatory	bodies	to	which	it	is	subject,	and	by	its	own	derivative policy.	The	derivative	policy	limits	the	authorization	to	initiate	derivative	transactions	to	certain	personnel.	Derivatives	entered	into	for	hedging,	regardless	of	the	choice to	designate	hedge	accounting,	shall	have	a	maturity	that	effectively	correlates	to	the	underlying	hedged	asset	or	liability.	The	policy	prohibits	the	use	of	derivatives containing	greater	than	one-to-one	leverage	with	respect	to	changes	in	the	underlying	price,	rate	or	index.	The	policy	also	prohibits	the	use	of	borrowed	funds,	including funds	obtained	through	securities	lending,	to	engage	in	derivative	transactions.

The	Company	has	exposure	to	economic	losses	due	to	interest	rate	risk	arising	from	changes	in	the	level	of,	or	volatility	of,	interest	rates.	The	Company	attempts to	mitigate	its	exposure	to	interest	rate	risk	in	the	normal	course	of	portfolio	management,	which	includes	rebalancing	its	existing	portfolios	of	assets	and	liabilities.	In addition,	various	derivative	financial	instruments	are	used	to	modify	the	interest	rate	risk	exposures	of	certain	assets	and	liabilities.	These	strategies	include	the	use	of interest	rate	swaps,	interest	rate	caps	and	floors,	options,	futures,	forwards	and	commitments	to	purchase	securities.	These	instruments	are	generally	used	to	lock	interest rates	or	market	values,	to	shorten	or	lengthen	durations	of	fixed	maturity	securities	or	investment	contracts,	or	to	hedge	(on	an	economic	basis)	interest	rate	risks associated	with	investments	and	variable	rate	debt.	The	Company	infrequently	designates	these	types	of	instruments	as	hedges	against	specific	assets	or	liabilities.

The	Company	is	exposed	to	equity	price	risk	as	a	result	of	its	investment	in	equity	securities	and	equity	derivatives.	Equity	price	risk	results	from	changes	in	the level	or	volatility	of	equity	prices,	which	affect	the	value	of	equity	securities,	or	instruments	that	derive	their	value	from	such	securities.	The	Company	attempts	to mitigate	its	exposure	to	such	risks	by	limiting	its	investment	in	any	one	security	or	index.	The	Company	may	also	manage	this	risk	by	utilizing	instruments	such	as options,	swaps,	futures	and	collars	to	protect	appreciation	in	securities	held.

The	Company	has	exposure	to	credit	risk	arising	from	the	uncertainty	associated	with	a	financial	instrument	obligor's	ability	to	make	timely	principal	and/or interest	payments.	The	Company	attempts	to	mitigate	this	risk	by	limiting	credit	concentrations,	practicing	diversification,	and	frequently	monitoring	the	credit	quality	of issuers	and	counterparties.	In	addition,	the	Company	may	utilize	credit	derivatives	such	as	credit	default	swaps	("CDS")	to	modify	the	credit	risk	inherent	in	certain investments.	CDS	involve	a	transfer	of	credit	risk	from	one	party	to	another	in	exchange	for	periodic	payments.

Foreign	 exchange	 rate	 risk	 arises	 from	 the	 possibility	 that	 changes	 in	 foreign	 currency	 exchange	 rates	 will	 impact	 the	 fair	 value	 of	 financial	 instruments denominated	in	a	foreign	currency.	The	Company's	foreign	transactions	are	primarily	denominated	in	Australian	dollars,	Brazilian	reais,	British	pounds,	Canadian dollars	and	the	European	Monetary	Unit.	The	Company	typically	manages	this	risk	via	asset/liability	currency	matching	and	through	the	use	of	foreign	currency forwards.	In	May	of	2009,	Diamond	Offshore	began	a	hedging	strategy	and	designated	certain	of	its	qualifying	foreign	currency	forward	exchange	contracts	as	cash	flow hedges.

In	addition	to	the	derivatives	used	for	risk	management	purposes	described	above,	the	Company	may	also	use	derivatives	for	purposes	of	income	enhancement. Income	enhancement	transactions	are	entered	into	with	the	intention	of	providing	additional	income	or	yield	to	a	particular	portfolio	segment	or	instrument.	Income enhancement	transactions	are	limited	in	scope	and	primarily	involve	the	sale	of	covered	options	in	which	the	Company	receives	a	premium	in	exchange	for	selling	a	call or	put	option.

The	Company	will	also	use	CDS	to	sell	credit	protection	against	a	specified	credit	event.	In	selling	credit	protection,	CDS	are	used	to	replicate	fixed	income securities	when	credit	exposure	to	certain	issuers	is	not	available	or	when	it	is	economically	beneficial	to	transact	in	the	derivative	market	compared	to	the	cash	market alternative.	Credit	risk	includes	both	the	default	event	risk	and	market	value	exposure	due	to	fluctuations	in	credit	spreads.	In	selling	CDS	protection,	the	Company receives	a	periodic	premium	in	exchange	for	providing	credit	protection	on	a	single	name	reference	obligation	or	a	credit	derivative	index.	If	there	is	an	event	of	default as	defined	by	the	CDS	agreement,	the	Company	is	required	to	pay	the	counterparty	the	referenced	notional	amount	of	the	CDS	contract	and	in	exchange	the	Company	is entitled	to	receive	the	referenced	defaulted	security	or	the	cash	equivalent.

								The	tables	below	summarize	CDS	contracts	where	the	Company	sold	credit	protection	as	of	December	31,	2009	and	2008.	The	fair	value	of	the	contracts	represents the	amount	that	the	Company	would	have	to	pay	at	those	dates	to	exit	the	derivative	positions.	The	maximum	amount	of	future	payments	assumes	no	residual	value	in the	defaulted

securities	that	the	Company	would	receive	as	part	of	the	contract	terminations	and	is	equal	to	the	notional	value	of	the	CDS	contracts.

| December	31,	2009<br>(In	millions	of	dollars) | Fair	Value	of<br>Credit	Default<br>Swaps | Maximum	Amount	of<br>Future	Payments	under<br>Credit	Default	Swaps | Weighted<br>Average	Years<br>To	Maturity |
| :--- | :--- | :--- | :--- |
| B |  | $8 | 3.1 |
| Total | $- | $8 | 3.1 |
| December\t31,\t2008 |  |  |  |
| AAA/AA/A | $(8) | $40 | 12.3 |
| BBB | (4) | 55 | 3.1 |
| BB | (39) | 50 | 8.1 |
| B | (2) | 8 | 4.1 |
| CCC\tand\tlower | (29) | 45 | 4.5 |
| Total | $(82) | $198 | 6.6 |

Credit	exposure	associated	with	non-performance	by	the	counterparties	to	derivative	instruments	is	generally	limited	to	the	uncollateralized	fair	value	of	the	asset related	 to	 the	 instruments	 recognized	 on	 the	 Consolidated	 Balance	 Sheets.	 The	 Company	 attempts	 to	 mitigate	 the	 risk	 of	 non-performance	 by	 monitoring	 the creditworthiness	of	counterparties	and	diversifying	derivatives	to	multiple	counterparties.	The	Company	generally	requires	that	all	over-the-counter	derivative	contracts be	governed	by	an	International	Swaps	and	Derivatives	Association	("ISDA")	Master	Agreement,	and	exchanges	collateral	under	the	terms	of	these	agreements	with	its derivative	investment	counterparties	depending	on	the	amount	of	the	exposure	and	the	credit	rating	of	the	counterparty.	The	Company	does	not	offset	its	net	derivative positions	against	the	fair	value	of	the	collateral	provided.	The	fair	value	of	cash	collateral	provided	by	the	Company	was	$7	million	and	$99	million	at	December	31, 2009	and	2008.	The	fair	value	of	cash	collateral	received	from	counterparties	was	$1	million	and	$6	million	at	December	31,	2009	and	2008.

The	agreements	governing	HighMount's	derivative	instruments	contain	certain	covenants,	including	a	maximum	debt	to	capitalization	ratio	reviewed	quarterly.	If HighMount	does	not	comply	with	these	covenants,	the	counterparties	to	the	derivative	instruments	could	terminate	the	agreements	and	request	payment	on	those derivative	instruments	in	net	liability	positions.	The	aggregate	fair	value	of	HighMount's	derivative	instruments	that	are	in	a	liability	position	was	$174	million	at December	31,	2009.	HighMount	was	not	required	to	post	any	collateral	under	the	governing	agreements.	At	December	31,	2009	HighMount	is	in	compliance	with	all	of its	covenants	under	the	derivatives	agreements.

See	Note	4	for	information	regarding	the	fair	value	of	derivative	instruments.

A	summary	of	the	aggregate	contractual	or	notional	amounts	and	gross	estimated	fair	values	related	to	derivative	financial	instruments	follows.	Equity	options purchased	are	included	in	Equity	securities,	and	all	other	derivative	assets	are	reported	as	Receivables.	Derivative	liabilities	are	included	in	Payable	to	brokers	on	the Consolidated	Balance	Sheets.	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.

| December	31 |  | 2009 |  |  | 2008 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Contractual/ | Estimated\tFair\tValue | Estimated\tFair\tValue | Contractual/ | Estimated\tFair\tValue | Estimated\tFair\tValue |
| (In\tmillions) | Notional\nAmount | Asset | (Liability) | Notional\nAmount | Asset | (Liability) |
| With\thedge\tdesignation |  |  |  |  |  |  |
| Interest\trate\trisk: |  |  |  |  |  |  |
| Interest\trate\tswaps | $1,600 |  | $(135) | $1,600 |  | $(183) |
| Commodities: |  |  |  |  |  |  |
| Forwards\t–\tshort | 715 | $50 | (39) | 524 | $158 | (1) |
| Foreign\texchange: |  |  |  |  |  |  |
| Currency\tforwards\t–\tshort | 114 | 3 |  |  |  |  |
| Other | 13 | 2 |  | 31 | 4 |  |
| Without\thedge\tdesignation |  |  |  |  |  |  |
| Equity\tmarkets: |  |  |  |  |  |  |
| Options\t–\tpurchased | 242 | 45 |  | 199 | 66 |  |
| \t\t\t\t\t–\twritten | 282 |  | (9) | 304 |  | (62) |
| Index\tfutures\t–\tlong |  |  |  | 7 |  |  |
| \t\t–\tshort |  |  |  | 1 |  |  |
| Currency\tforwards\t–\tlong |  |  |  | 229 | 6 | (4) |
| \t\t–\tshort |  |  |  | 392 | 2 | (47) |
| Interest\trate\trisk: |  |  |  |  |  |  |
| Interest\trate\tswaps | 9 |  |  | 963 |  | (66) |
| Credit\tdefault\tswaps |  |  |  |  |  |  |
| –\tpurchased\tprotection | 116 |  | (11) | 455 | 59 | (3) |
| –\tsold\tprotection | 8 |  |  | 198 |  | (82) |
| Futures\t–\tlong |  |  |  | 1,132 |  |  |
| \t\t\t\t–\tshort | 132 |  |  | 68 |  |  |
| Other | 2 |  |  | 55 |  |  |
| Total | $3,233 | $100 | $(194) | $6,158 | $295 | $(448) |

Derivatives	without	hedge	designation	–	For	derivatives	not	held	in	a	trading	portfolio,	new	derivative	transactions	entered	into	totaled	approximately	$18.7 billion	in	notional	value	while	derivative	termination	activity	totaled	approximately	$20.3	billion	during	the	year	ended	December	31,	2009.	The	activity	during	the	year ended	December	31,	2009	was	primarily	attributable	to	interest	rate	futures,	interest	rate	options	and	interest	rate	swaps.

A	summary	of	the	recognized	gains	(losses)	related	to	derivative	financial	instruments	without	hedge	designation	follows.	The	derivatives	held	for	trading purposes	were	carried	at	fair	value	with	the	related	gains	and	losses	included	within	Net	investment	income	on	the	Consolidated	Statements	of	Income.

| Year	Ended	December	31 | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| (In\tmillions) |  |  |  |
| Included\tin\tNet\tinvestment\tincome: |  |  |  |
| Equity\tmarkets: |  |  |  |
| Options\t–\tpurchased | $(50) | $29 | $1 |
| \t\t\t\t\t–\twritten | 58 | (86) | 12 |
| Futures\t–\tlong | 14 | (162) | (1) |
| \t\t\t\t–\tshort |  | 152 | 28 |
| Currency\tforwards\t–\tlong | (8) | (11) | 45 |
| \t\t–\tshort | 15 | 33 | (40) |
| Interest\trate\trisk: |  |  |  |
| Credit\tdefault\tswaps\t–\tpurchased\tprotection | (8) | 17 | 26 |
| –\tsold\tprotection | 12 | (22) | (26) |
| Futures\t–\tlong | 5 | 52 | (3) |
| \t\t\t\t–\tshort | (24) | (25) | (9) |
| Other | 7 | 13 | 6 |
| Included\tin\tInvestment\tgains\t(losses): |  |  |  |
| Equity\toptions\t–\twritten | 15 |  |  |
| Interest\trate\trisk: |  |  |  |
| Interest\trate\tswaps | 59 | (59) | 11 |
| Credit\tdefault\tswaps\t–\tpurchased\tprotection | (47) | 86 | 95 |
| –\tsold\tprotection | 3 | (35) | (40) |
| Futures\t–\tlong |  |  | 7 |
| \t\t\t\t–\tshort | 21 | (11) | (38) |
| Commodities\tforwards\t–\tshort |  |  | 32 |
| Other |  | 1 | (3) |
| Included\tin\tOther\trevenues: |  |  |  |
| Currency\tforwards\t–\tshort | 9 | (54) | 8 |
| Total | $81 | $(82) | $111 |

Cash	flow	hedges	–	A	significant	portion	of	the	Company's	hedge	strategies	represents	cash	flow	hedges	of	the	variable	price	risk	associated	with	the	purchase and	sale	of	natural	gas	and	other	energy-related	products.	As	of	December	31,	2009,	approximately	106.8	billion	cubic	feet	of	natural	gas	equivalents	was	hedged	by qualifying	cash	flow	hedges.	The	effective	portion	of	these	commodity	hedges	is	reclassed	from	OCI	into	earnings	when	the	anticipated	transaction	affects	earnings. Approximately	63%	of	these	derivatives	have	settlement	dates	in	2010	and	33%	have	settlement	dates	in	2011.	As	of	December	31,	2009,	the	estimated	amount	of	net unrealized	gains	associated	with	commodity	contracts	that	will	be	reclassified	into	earnings	during	the	next	twelve	months	was	$23	million.	However,	these	amounts	are likely	to	vary	materially	as	a	result	of	changes	in	market	conditions.	Diamond	Offshore	uses	foreign	currency	forward	exchange	contracts	to	reduce	exposure	to	foreign currency	losses	on	future	foreign	currency	expenditures.	The	effective	portion	of	these	hedges	is	reclassified	from	OCI	into	earnings	when	the	hedged	transaction	affects earnings	or	it	is	determined	that	the	hedged	transaction	will	not	occur.	As	of	December	31,	2009,	the	estimated	amount	of	net	unrealized	gains	associated	with	these contracts	that	will	be	reclassified	into	earnings	over	the	next	twelve	months	was	$2	million.	The	Company	also	uses	interest	rate	swaps	to	hedge	its	exposure	to	variable interest	rates	or	risk	attributable	to	changes	in	interest	rates	on	long	term	debt.	The	effective	portion	of	the	hedges	is	amortized	to	interest	expense	over	the	term	of	the related	notes.	As	of	December	31,	2009,

the	estimated	amount	of	net	unrealized	losses	associated	with	interest	rate	swaps	that	will	be	reclassified	into	earnings	during	the	next	twelve	months	was	$75	million. However,	this	is	likely	to	vary	as	a	result	of	changes	in	the	LIBOR	rate.	For	each	of	the	years	ended	December	31,	2009,	2008,	and	2007,	the	net	amounts	recognized due	to	ineffectiveness	were	less	than	$1	million.

The	following	table	summarizes	the	effective	portion	of	the	net	derivative	gains	or	losses	included	in	OCI	and	the	amount	reclassified	into	Net	income	for derivatives	designated	as	cash	flow	hedges:

| Year	Ended	December	31,	2009<br>(In	millions) | Amount	of<br>Gain	(Loss)<br>Recognized	in	OCI | Location	of	Gain	(Loss)<br>Reclassified	from	OCI<br>into	Income | Amount	of	Gain	(Loss)<br>Reclassified	from	OCI<br>into	Income |
| :--- | :--- | :--- | :--- |
| Commodities | $98 | Other\trevenues | $250 |
| Foreign\texchange | 10 | Contract\tdrilling\texpenses | 7 |
| Interest\trate\trisks | (24) | Interest | (70) |
| Total | $84 |  | $187 |

The	Company	also	enters	into	short	sales	as	part	of	its	portfolio	management	strategy.	Short	sales	are	commitments	to	sell	a	financial	instrument	not	owned	at	the time	of	sale,	usually	done	in	anticipation	of	a	price	decline.	These	sales	resulted	in	proceeds	of	$66	million	and	$120	million	with	fair	value	liabilities	of	$78	million	and $106	million	at	December	31,	2009	and	2008.	These	positions	are	marked	to	market	and	investment	gains	or	losses	are	included	in	the	Consolidated	Statements	of Income.

# Note	6.	Earnings	Per	Share

Companies	with	complex	capital	structures	are	required	 to	present	basic	and	diluted	earnings	per	share.	Basic	earnings	per	share	excludes	dilution	and	 is computed	by	dividing	net	income	attributable	to	each	class	of	common	stock	by	the	weighted	average	number	of	common	shares	of	each	class	of	common	stock outstanding	for	the	period.	Diluted	earnings	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.

Prior	to	the	disposal	of	its	entire	ownership	interest	in	Lorillard,	the	Company	had	two	classes	of	common	stock:	former	Carolina	Group	stock,	a	tracking	stock intended	to	reflect	the	economic	performance	of	a	group	of	the	Company's	assets	and	liabilities,	called	the	former	Carolina	Group,	principally	consisting	of	Lorillard, Inc.	and	Loews	common	stock,	representing	the	economic	performance	of	the	Company's	remaining	assets,	including	the	interest	in	the	former	Carolina	Group	not represented	by	former	Carolina	Group	stock.

The	attribution	of	income	to	each	class	of	common	stock	was	as	follows:

| Year	Ended	December	31<br>(In	millions,	except	%) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Loews\tcommon\tstock: |  |  |  |
| Consolidated\tnet\tincome\t-\tLoews | $564 | $4,530 | $2,488 |
| Less\tincome\tattributable\tto\tformer\tCarolina\tGroup\tstock |  | 211 | 533 |
| Income\tattributable\tto\tLoews\tcommon\tstock | $564 | $4,319 | $1,955 |
| Former\tCarolina\tGroup\tstock: |  |  |  |
| Income\tavailable\tto\tformer\tCarolina\tGroup\tstock |  | $339 | $855 |
| Weighted\taverage\teconomic\tinterest\tof\tthe\tformer\tCarolina\tGroup |  | 62.4% | 62.4% |
| Income\tattributable\tto\tformer\tCarolina\tGroup\tstock | $- | $211 | $533 |

# Note	6.	Earnings	Per	Share	–	(Continued)

The	following	is	a	reconciliation	of	basic	weighted	shares	outstanding	to	diluted	weighted	shares:

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Loews\tcommon\tstock: |  |  |  |
| Weighted\taverage\tshares\toutstanding-basic | 432.81 | 477.23 | 534.79 |
| Stock\toptions\tand\tSARs | 0.64 |  | 1.21 |
| Weighted\taverage\tshares\toutstanding-diluted | 433.45 | 477.23 | 536.00 |
| Former\tCarolina\tGroup\tstock: |  |  |  |
| Weighted\taverage\tshares\toutstanding-basic |  | 108.47 | 108.43 |
| Stock\toptions\tand\tSARs |  | 0.13 | 0.14 |
| Weighted\taverage\tshares\toutstanding-diluted | - | 108.60 | 108.57 |

Certain	options	and	SARs	were	not	included	in	the	diluted	weighted	average	shares	amount	due	to	the	exercise	price	being	greater	than	the	average	stock	price	for the	respective	periods.	For	the	year	ended	December	31,	2008,	common	equivalent	shares,	consisting	solely	of	stock	options	and	SARs,	are	not	included	in	diluted weighted	average	shares	as	their	effects	are	antidilutive.	The	number	of	weighted	average	shares	not	included	in	the	diluted	computations	is	as	follows:

| Year	Ended	December	31 | 2009 | 2009 | 2008 | 2008 | 2007 | 2007 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) | DD&amp;A | Capital\nExpend. | DD&amp;A | Capital\nExpend. | DD&amp;A | Capital\nExpend. |
| CNA\tFinancial | $75 | $65 | $66 | $104 | $53 | $160 |
| Diamond\tOffshore | 350 | 1,355 | 291 | 683 | 241 | 647 |
| HighMount | 119 | 196 | 177 | 519 | 67 | 185 |
| Boardwalk\tPipeline | 207 | 588 | 127 | 2,812 | 80 | 1,214 |
| Loews\tHotels | 26 | 36 | 26 | 15 | 26 | 27 |
| Corporate\tand\tother | 7 | 2 | 5 | 30 | 4 | 14 |
| Total | $784 | $2,242 | $692 | $4,163 | $471 | $2,247 |

Capitalized	interest	related	to	the	construction	and	upgrade	of	qualifying	assets	amounted	to	approximately	$29	million,	$113	million	and	$56	million	for	the years	ended	December	31,	2009,	2008	and	2007.

# Diamond	Offshore	Acquisitions

During	2009,	Diamond	Offshore	acquired	the	Ocean	Courage	and	the	Ocean	Valor,	two	newbuild,	semisubmersible	drilling	rigs	for	an	aggregate	cost	of	$950 million,	exclusive	of	final	commissioning	and	initial	mobilization	costs,	drill	string	and	other	necessary	capital	spares.

# HighMount	Impairment	of	Natural	Gas	and	Oil	Properties

At	March	31,	2009	and	December	31,	2008,	HighMount	recorded	non-cash	ceiling	test	impairment	charges	of	$1,036	million	($660	million	after	tax)	and	$691 million	($440	million	after	tax),	related	to	its	carrying	value	of	natural	gas	and	oil	properties.	The	impairments	were	recorded	as	credits	to	Accumulated	depreciation, depletion,	 and	 amortization.	 The	 write-downs	 were	 the	 result	 of	 declines	 in	 commodity	 prices	 at	 March	 31,	 2009	 and	 December	 31,	 2008.	 Had	 the	 effects	 of HighMount's	cash	flow	hedges	not	been	considered	in	calculating	the	ceiling	limitation,	the	impairments	would	have	been	$1,230	million	($784	million	after	tax)	in 2009	and	$873	million	($555	million,	after	tax)	in	2008.	No	such	impairment	was	required	during	the	year	ended	December	31,	2007.

# Note	8.	Property,	Plant	and	Equipment	–	(Continued)

# Costs	Not	Being	Amortized

HighMount	excludes	from	amortization	the	cost	of	unproved	properties,	the	cost	of	exploratory	wells	in	progress,	and	major	development	projects	in	progress. Natural	gas	and	oil	property	and	equipment	costs	not	being	amortized	as	of	December	31,	2009,	are	as	follows,	by	the	year	in	which	such	costs	were	incurred:

| (In	millions) | Total | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- | :--- |
| Acquisition\tcosts | $295 | $5 | $6 | $284 |
| Exploration\tcosts | 9 | 5 | 3 | 1 |
| Capitalized\tinterest | 13 | 5 | 6 | 2 |
| Total\texcluded\tcosts | $317 | $15 | $15 | $287 |

# Boardwalk	Pipeline	Expansion	Projects

In	2009,	Boardwalk	Pipeline	placed	 in	service	 its	Gulf	Crossing	Project	and	Fayetteville	and	Greenville	Laterals	and	 the	remaining	compression	facilities associated	with	its	Southeast	Expansion	project.	Additionally,	Boardwalk	Pipeline	placed	into	service	the	remaining	portion	of	Phase	III	of	the	western	Kentucky	storage expansion	project.	As	a	result,	approximately	$2.5	billion	was	transferred	from	Construction	in	process	to	Pipeline	equipment.	The	assets	will	generally	be	depreciated over	a	term	of	35	years.

# Note	9.		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	claims	that	are	incurred	but	not	reported	("IBNR")	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	such	historical	patterns	as	field	reserving	trends and	claims	settlement	practices,	loss	payments,	pending	levels	of	unpaid	claims	and	product	mix,	as	well	as	court	decisions,	economic	conditions	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	all	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	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.

Catastrophes	are	an	inherent	risk	of	the	property	and	casualty	insurance	business	and	have	contributed	to	material	period-to-period	fluctuations	in	the	Company's results	 of	 operations	 and/or	 equity.	 CNA's	 reported	 catastrophe	 losses,	 net	 of	 reinsurance,	 of	 $89	 million,	 $358	 million	 and	 $78	 million	 for	 the	 years	 ended December	31,	2009,	2008	and	2007	for	events	occurring	in	those	years.	Catastrophe	losses	in	2009	related	primarily	to	tornadoes,	floods,	hail	and	wind.	The	catastrophe losses	in	2008	related	primarily	to	Hurricanes	Gustav	and	Ike.	There	can	be	no	assurance	that	CNA's's	ultimate	cost	for	catastrophes	will	not	exceed	current	estimates.

# Note	9.	Claim	and	Claim	Adjustment	Expense	Reserves	–	(Continued)

The	table	below	provides	a	reconciliation	between	beginning	and	ending	claim	and	claim	adjustment	expense	reserves,	including	claim	and	claim	adjustment expense	reserves	of	the	life	company.

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Reserves,\tbeginning\tof\tyear: |  |  |  |
| Gross | \t\t $27,593 | $28,588 | $29,636 |
| Ceded | 6,288 | 7,056 | 8,191 |
| Net\treserves,\tbeginning\tof\tyear | \t 21,305 | \t 21,532 | \t 21,445 |
| Net\tincurred\tclaim\tand\tclaim\tadjustment\texpenses: |  |  |  |
| Provision\tfor\tinsured\tevents\tof\tcurrent\tyear | 4,793 | 5,193 | 4,939 |
| (Decrease)\tincrease\tin\tprovision\tfor\tinsured\tevents\tof\tprior\tyears | (240) | (5) | 231 |
| Amortization\tof\tdiscount | 122 | 123 | 120 |
| Total\tnet\tincurred\t(a) | 4,675 | 5,311 | 5,290 |
| Net\tpayments\tattributable\tto: |  |  |  |
| Current\tyear\tevents | 917 | 1,034 | 867 |
| Prior\tyear\tevents | 3,942 | 4,328 | 4,447 |
| Reinsurance\trecoverable\tagainst\tnet\treserve\ttransferred |  |  |  |
| under\tretroactive\treinsurance\tagreements | (3) | (10) | (17) |
| Total\tnet\tpayments | 4,856 | 5,352 | 5,297 |
| Foreign\tcurrency\ttranslation\tadjustment | 98 | (186) | 94 |
| Net\treserves,\tend\tof\tyear | \t 21,222 | \t 21,305 | \t 21,532 |
| Ceded\treserves,\tend\tof\tyear | 5,594 | 6,288 | 7,056 |
| Gross\treserves,\tend\tof\tyear | \t\t $26,816 | $27,593 | $28,588 |

(a) Total	net	incurred	above	does	not	agree	to	Insurance	claims	and	policyholders'	benefits	as	reflected	in	the	Consolidated	Statements	of	Income	due	to	expenses	incurred	related	to	uncollectible	reinsurance	and	loss deductible	receivables	and	benefit	expenses	related	to	future	policy	benefits	and	policyholders'	funds	which	are	not	reflected	in	the	table	above.

The	changes	in	provision	for	insured	events	of	prior	years	(net	prior	year	claim	and	claim	adjustment	expense	reserve	development)	were	as	follows:

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Asbestos\tand\tenvironmental\tpollution | $155 | $110 | $7 |
| Other | (396) | (117) | \t 213 |
| Property\tand\tcasualty\treserve\tdevelopment | (241) | (7) | \t 220 |
| Life\treserve\tdevelopment\tin\tlife\tcompany | 1 | 2 | 11 |
| Total | $(240) | $(5) | $231 |

The	following	tables	summarize	the	gross	and	net	carried	reserves:

| December	31,	2009<br>(In	millions) | CNA<br>Specialty | CNA<br>Commercial | Group<br>Non-Core | Other<br>Insurance | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Gross\tCase\tReserves | $2,208 | $6,510 | $2,502 | $1,548 | $12,768 |
| Gross\tIBNR\tReserves | 4,714 | 6,495 | 381 | 2,458 | \t 14,048 |
| Total\tGross\tCarried\tClaim\tand\tClaim\nAdjustment\tExpense\tReserves | $6,922 | $13,005 | $2,883 | $4,006 | $26,816 |
| Net\tCase\tReserves | $1,781 | $5,269 | $1,765 | $972 | $9,787 |
| Net\tIBNR\tReserves | 4,085 | 5,580 | 255 | 1,515 | \t 11,435 |
| Total\tNet\tCarried\tClaim\tand\tClaim\nAdjustment\tExpense\tReserves | $5,866 | $10,849 | $2,020 | $2,487 | $21,222 |
| December\t31,\t2008 |  |  |  |  |  |
| Gross\tCase\tReserves | $2,105 | $6,772 | $2,473 | $1,823 | $13,173 |
| Gross\tIBNR\tReserves | 4,616 | 6,837 | 389 | 2,578 | \t 14,420 |
| Total\tGross\tCarried\tClaim\tand\tClaim\nAdjustment\tExpense\tReserves | $6,721 | $13,609 | $2,862 | $4,401 | $27,593 |
| Net\tCase\tReserves | $1,639 | $5,505 | $1,656 | $1,126 | $9,926 |
| Net\tIBNR\tReserves | 3,896 | 5,673 | 249 | 1,561 | \t 11,379 |
| Total\tNet\tCarried\tClaim\tand\tClaim\nAdjustment\tExpense\tReserves | $5,535 | $11,178 | $1,905 | $2,687 | $21,305 |

The	following	provides	discussion	of	CNA's	A&E	reserves.

Establishing	reserves	for	A&E	claim	and	claim	adjustment	expenses	is	subject	to	uncertainties	that	are	greater	than	those	presented	by	other	claims.	Traditional actuarial	methods	and	techniques	employed	to	estimate	the	ultimate	cost	of	claims	for	more	traditional	property	and	casualty	exposures	are	less	precise	in	estimating claim	and	claim	adjustment	expense	reserves	for	A&E,	particularly	in	an	environment	of	emerging	or	potential	claims	and	coverage	issues	that	arise	from	industry practices	and	legal,	judicial	and	social	conditions.	Therefore,	these	traditional	actuarial	methods	and	techniques	are	necessarily	supplemented	with	additional	estimating techniques	and	methodologies,	many	of	which	involve	significant	judgments	that	are	required	of	management.	Accordingly,	a	high	degree	of	uncertainty	remains	for CNA's	ultimate	liability	for	A&E	claim	and	claim	adjustment	expenses.

In	addition	to	the	difficulties	described	above,	estimating	the	ultimate	cost	of	both	reported	and	unreported	A&E	claims	is	subject	to	a	higher	degree	of	variability due	to	a	number	of	additional	factors,	including	among	others:	coverage	issues,	including	whether	certain	costs	are	covered	under	the	policies	and	whether	policy	limits apply;	allocation	of	liability	among	numerous	parties,	some	of	whom	may	be	in	bankruptcy	proceedings,	and	in	particular	the	application	of	"joint	and	several"	liability to	specific	insurers	on	a	risk;	inconsistent	court	decisions	and	developing	legal	theories;	continuing	aggressive	tactics	of	plaintiffs'	lawyers;	the	risks	and	lack	of predictability	inherent	in	major	litigation;	enactment	of	state	and	federal	legislation	to	address	asbestos	claims	and	challenges	to	such	litigation;	increases	and	decreases in	the	frequency	of	asbestos	and	environmental	pollution	claims	which

cannot	now	be	anticipated;	increases	and	decreases	in	costs	to	defend	asbestos	and	pollution	claims;	changing	liability	theories	against	CNA's	policyholders	in	asbestos and	environmental	matters;	possible	exhaustion	of	underlying	umbrella	and	excess	coverage;	and	future	developments	pertaining	to	CNA's	ability	to	recover	reinsurance for	asbestos	and	pollution	claims.

CNA	has	performed	actuarial	ground	up	reviews	of	all	open	A&E	claims	to	evaluate	the	adequacy	of	its	A&E	reserves.	In	performing	its	actuarial	ground	up analysis,	CNA	considers	input	from	its	professionals	with	direct	responsibility	for	the	claims,	inside	and	outside	counsel	with	responsibility	for	representation	of	CNA and	its	actuarial	staff.	These	professionals	review,	among	many	factors,	the	policyholder's	present	and	predicted	future	exposures,	including	such	factors	as	claims volume	and	severity,	trial	conditions,	prior	settlement	history,	settlement	demands	and	defense	costs;	the	impact	of	bankruptcies	of	other	parties	on	the	policyholder;	the policies	 issued	 by	 CNA,	 including	 such	 factors	 as	 aggregate	 or	 per	 occurrence	 limits,	 whether	 the	 policy	 is	 primary,	 umbrella	 or	 excess,	 and	 the	 existence	 of policyholder	retentions	and/or	deductibles;	the	existence	of	other	insurance;	and	reinsurance	arrangements.	In	the	past,	CNA's	actuarial	ground	up	reviews	of	all	open A&E	claims	have	been	completed	in	the	fourth	quarter.	Going	forward,	CNA	plans	to	perform	its	environmental	review	in	the	third	quarter	and	its	asbestos	review	in	the fourth	quarter.

The	following	table	provides	data	related	to	CNA's	A&E	claim	and	claim	adjustment	expense	reserves.

| December	31<br>(In	millions) | Asbestos | 2009<br>Environmental<br>Pollution | Asbestos | 2008<br>Environmental<br>Pollution |
| :--- | :--- | :--- | :--- | :--- |
| Gross\treserves | $2,046 | $\t\t\t482 | $2,112 | $\t\t\t392 |
| Ceded\treserves | (909) | \t\t\t\t(196) | \t\t\t\t(910) | \t\t\t\t(130) |
| Net\treserves | $1,137 | $\t\t\t286 | $1,202 | $\t\t\t262 |

CNA's	property	and	casualty	insurance	subsidiaries	have	exposure	to	asbestos-related	claims.	Estimation	of	asbestos-related	claim	and	claim	adjustment	expense reserves	involves	limitations	such	as	inconsistency	of	court	decisions,	specific	policy	provisions,	allocation	of	liability	among	insurers	and	insureds,	and	additional factors	such	as	missing	policies	and	proof	of	coverage.	Furthermore,	estimation	of	asbestos-related	claims	is	difficult	due	to,	among	other	reasons,	the	proliferation	of bankruptcy	proceedings	and	attendant	uncertainties,	the	targeting	of	a	broader	range	of	businesses	and	entities	as	defendants,	the	uncertainty	as	to	which	other	insureds may	be	targeted	in	the	future	and	the	uncertainties	inherent	in	predicting	the	number	of	future	claims.

In	its	most	recent	actuarial	ground	up	review,	CNA	noted	adverse	development	in	various	asbestos	accounts	due	to	increases	in	average	claim	severity	and defense	expense	arising	from	increased	trial	activity.	Additionally,	CNA	has	not	seen	a	decline	in	the	overall	emergence	of	new	accounts	during	the	last	few	years.	As	a result	of	these	factors,	CNA	recorded	$79	million	of	unfavorable	asbestos-related	net	claim	and	claim	adjustment	expense	reserve	development	for	the	year	ended December	31,	2009.

The	table	below	provides	a	reconciliation	between	CNA's	beginning	and	ending	net	reserves	for	asbestos:

| December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Beginning\tnet\treserves | $1,202 | $1,322 | $1,452 |
| Unfavorable\tnet\tprior\tyear\tclaim\tand\tclaim\tadjustment\texpense\treserve\tdevelopment\tclaim | 79 | 27 | 6 |
| Paid\tclaims,\tnet\tof\treinsurance\trecoveries | (144) | (147) | (136) |
| Ending\tnet\treserves | $1,137 | $1,202 | $1,322 |

The	ultimate	cost	of	reported	claims,	and	in	particular	A&E	claims,	is	subject	to	a	great	many	uncertainties,	including	future	developments	of	various	kinds	that CNA	does	not	control	and	that	are	difficult	or	impossible	to	foresee	accurately.	With	respect	to	the	litigation	identified,	pending	rulings	are	critical	to	the	evaluation	of the	ultimate	cost	to	CNA.	Accordingly,	the	extent	of	losses	beyond	any	amounts	that	may	be	accrued	are	not	readily	determinable	at	this	time.

Some	asbestos-related	defendants	have	asserted	that	their	insurance	policies	are	not	subject	to	aggregate	limits	on	coverage.	CNA	has	such	claims	from	a	number of	insureds.	Some	of	these	claims	involve	insureds	facing	exhaustion	of	products	liability	aggregate	limits	in	their	policies,	who	have	asserted	that	their	asbestos-related claims	fall	within	so-called	"non-products"	liability	coverage	contained	within	their	policies	rather	than	products	liability	coverage,	and	that	the	claimed	"non-products" coverage	is	not	subject	to	any	aggregate	limit.	It	is	difficult	to	predict	the	ultimate	size	of	any	of	the	claims	for	coverage	purportedly	not	subject	to	aggregate	limits	or predict	to	what	extent,	if	any,	the	attempts	to	assert	"non-products"	claims	outside	the	products	liability	aggregate	will	succeed.	CNA's	policies	also	contain	other	limits applicable	to	these	claims	and	CNA	has	additional	coverage	defenses	to	certain	claims.	CNA	has	attempted	to	manage	its	asbestos	exposure	by	aggressively	seeking	to settle	claims	on	acceptable	terms.	There	can	be	no	assurance	that	any	of	these	settlement	efforts	will	be	successful,	or	that	any	such	claims	can	be	settled	on	terms acceptable	to	CNA.	Where	CNA	cannot	settle	a	claim	on	acceptable	terms,	CNA	aggressively	litigates	the	claim.	However,	adverse	developments	with	respect	to	such matters	could	have	a	material	adverse	effect	on	the	Company's	results	of	operations	and/or	equity.

Certain	asbestos	claim	litigation	in	which	CNA	is	currently	engaged	is	described	below:

A.P.	Green:		On	February	13,	2003,	CNA	announced	it	had	resolved	asbestos-related	coverage	litigation	and	claims	involving	A.P.	Green	Industries,	A.P.	Green Services	and	Bigelow–Liptak	Corporation.	Under	the	agreement,	CNA	is	required	to	pay	$70	million,	net	of	reinsurance	recoveries,	over	a	ten	year	period	commencing after	the	final	approval	of	a	bankruptcy	plan	of	reorganization.	The	settlement	received	initial	bankruptcy	court	approval	on	August	18,	2003.	The	debtor's	plan	of reorganization	 includes	 an	 injunction	 to	 protect	 CNA	 from	 any	 future	 claims.	 The	 bankruptcy	 court	 issued	 an	 opinion	 on	 September	 24,	 2007	 recommending confirmation	of	that	plan.	On	July	25,	2008,	the	District	Court	affirmed	the	Bankruptcy	Court's	ruling.	Several	insurers	have	appealed	that	ruling	to	the	Third	Circuit Court	of	Appeals;	that	appeal	was	argued	on	May	21,	2009	and	the	parties	are	awaiting	the	court's	decision.

Direct	Action	Case	–	Montana:		On	March	22,	2002,	a	direct	action	was	filed	in	Montana	(Pennock,	et	al.	v.	Maryland	Casualty,	et	al.	First	Judicial	District Court	of	Lewis	&	Clark	County,	Montana)	by	eight	individual	plaintiffs	(all	employees	of	W.R.	Grace	&	Co.	(W.R.	Grace))	and	their	spouses	against	CNA,	Maryland Casualty	and	the	State	of	Montana.	This	action	alleges	that	the	carriers	failed	to	warn	of	or	otherwise	protect	W.R.	Grace	employees	from	the	dangers	of	asbestos	at	a W.R.	Grace	vermiculite	mining	facility	in	Libby,	Montana.	The	Montana	direct	action	is	currently	stayed	because	of	W.R.	Grace's	pending	bankruptcy.	On	April	7, 2008,	W.R.	Grace	announced	a	settlement	in	principle	with	the	asbestos	personal	injury	claimants	committee	subject	to	confirmation	of	a	plan	of	reorganization	by	the bankruptcy	court.	The	confirmation	hearing	is	held	in	two	phases.	The	first	phase	was	held	in	June	2009.	The	second	phase	concluded	in	January	2010.	The	settlement	in principle	with	the	asbestos	claimants	has	no	present	impact	on	the	stay	currently	imposed	on	the	Montana	direct	action	and	with	respect	to	such	claims,	numerous	factual and	legal	issues	remain	to	be	resolved	that	are	critical	to	the	final	result,	the	outcome	of	which	cannot	be	predicted	with	any	reliability.	These	factors	include:	(a)	the unclear	nature	and	scope	of	any	alleged	duties	owed	to	people	exposed	to	asbestos	and	the	resulting	uncertainty	as	to	the	potential	pool	of	potential	claimants;	(b)	the potential	application	of	Statutes	of	Limitation	to	many	of	the	claims	which	may	be	made	depending	on	the	nature	and	scope	of	the	alleged	duties;	(c)	the	unclear	nature of	the	required	nexus	between	the	acts	of	the	defendants	and	the	right	of	any	particular	claimant	to	recovery;	(d)	the	diseases	and	damages	claimed	by	such	claimants; (e)	 the	 extent	 that	 such	 liability	 would	 be	 shared	 with	 other	 potentially	 responsible	 parties;	 and	 (f)	 the	 impact	 of	 bankruptcy	 proceedings	 on	 claims	 resolution. Accordingly,	the	extent	of	losses	beyond	any	amounts	that	may	be	accrued	are	not	readily	determinable	at	this	time.

CNA	is	vigorously	defending	these	and	other	cases	and	believes	that	it	has	meritorious	defenses	to	the	claims	asserted.	However,	there	are	numerous	factual	and legal	issues	to	be	resolved	in	connection	with	these	claims,	and	it	is	extremely	difficult	to	predict	the	outcome	or	ultimate	financial	exposure	represented	by	these	matters. Adverse

developments	with	respect	 to	any	of these	matters	could	have	a	material	adverse	effect	on	CNA's	business, insurer	financial	strength	and	debt	ratings,	and the Company's	results	of	operations	and	equity.

In	its	most	recent	actuarial	ground	up	review,	CNA	noted	adverse	development	in	various	pollution	accounts	due	to	changes	in	the	liabilities	attributed	to	CNA's policyholders	and	adverse	changes	in	case	law	impacting	insurers'	coverage	obligations.	These	changes	in	turn	increased	CNA's	account	estimates	on	certain	accounts. In	addition,	the	frequency	of	environmental	pollution	claims	did	not	decline	at	the	rate	previously	anticipated.	As	a	result	of	these	factors,	CNA	recorded	$76	million	of unfavorable	environmental	pollution	net	claim	and	claim	adjustment	expense	reserve	development	for	the	year	ended	December	31,	2009.

The	table	below	provides	a	reconciliation	between	CNA's	beginning	and	ending	net	reserves	for	environmental	pollution:

| December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Beginning\tnet\treserves | $262 | $242 | $285 |
| Unfavorable\tnet\tprior\tyear\tclaim\tand\tclaim\tadjustment\texpense\treserve\tdevelopment | 76 | 83 | 1 |
| Paid\tclaims,\tnet\tof\treinsurance\trecoveries | (52) | (63) | (44) |
| Ending\tnet\treserves | $286 | $262 | $242 |

# Net	Prior	Year	Development

Changes	in	estimates	of	claim	and	allocated	claim	adjustment	expense	reserves	and	premium	accruals,	net	of	reinsurance,	for	prior	years	are	defined	as	net	prior year	development.	These	changes	can	be	favorable	or	unfavorable.	The	following	tables	and	discussion	include	the	net	prior	year	development	recorded	for	CNA Specialty,	CNA	Commercial	and	Other	Insurance	segments	for	the	years	ended	December	31,	2009,	2008	and	2007.	The	net	prior	year	development	presented	below includes	premium	development	due	to	its	direct	relationship	to	claim	and	claim	adjustment	expense	reserve	development.	The	net	prior	year	development	presented below	includes	the	impact	of	commutations,	but	excludes	the	impact	of	increases	or	decreases	in	the	allowance	for	uncollectible	reinsurance.	See	Note	17	for	further discussion	of	the	provision	for	uncollectible	reinsurance.

Favorable	net	prior	year	development	of	$53	million	was	recorded	in	the	Life	&	Group	Non-Core	segment	for	the	year	ended	December	31,	2009	compared	with unfavorable	net	prior	year	development	of	$15	million	and	$147	million	for	the	years	ended	December	31,	2008	and	2007.	Included	in	the	2009	favorable	development is	the	impact	of	a	settlement	reached	in	2009	with	Willis	Limited	that	resolved	litigation	related	to	the	placement	of	personal	accident	reinsurance	between	1997	and 1999	in	connection	with	the	IGI	Program.	Under	this	settlement	agreement,	Willis	Limited	agreed	to	pay	CNA	a	total	of	$130	million,	which	is	reported	as	a	loss recovery	of	$94	million,	net	of	reinsurance.	The	2007	unfavorable	net	prior	year	development	primarily	related	to	the	settlement	of	the	original	IGI	Program	contingency in	2007.	CNA	reached	agreement	in	2007	to	settle	the	arbitration	matter	for	a	one-time	payment	of	$250	million,	which	resulted	in	an	incurred	loss,	net	of	reinsurance,	of $167	million	pretax.	The	2009	settlement	represents	a	partial	recoupment	of	the	amounts	paid	by	CNA	in	2007.

| Year	Ended	December	31,	2009<br>(In	millions) | CNA<br>Specialty | CNA<br>Commercial | Other<br>Insurance | Total |
| :--- | :--- | :--- | :--- | :--- |
| Pretax\tunfavorable\t(favorable)\tnet\tprior\tyear\tclaim\tand\tallocated\tclaim\tadjustment |  |  |  |  |
| expense\treserve\tdevelopment |  |  |  |  |
| Core\t(Non-A&amp;E) | $(218) | $(255) | $29 | $(444) |
| A&amp;E |  |  | 155 | 155 |
| Pretax\tunfavorable\t(favorable)\tnet\tprior\tyear\tdevelopment\tbefore\timpact\tof\tpremium |  |  |  |  |
| development | (218) | (255) | 184 | (289) |
| Pretax\tfavorable\tpremium\tdevelopment | (6) | 87 |  | 81 |
| Total\tpretax\tunfavorable\t(favorable)\tnet\tprior\tyear\tdevelopment | $(224) | $(168) | $184 | $(208) |
| Year\tEnded\tDecember\t31,\t2008 |  |  |  |  |
| Pretax\tunfavorable\t(favorable)\tnet\tprior\tyear\tclaim\tand\tallocated\tclaim\tadjustment\texpense |  |  |  |  |
| reserve\tdevelopment |  |  |  |  |
| Core\t(Non-A&amp;E) | $(97) | $(101) | $13 | $(185) |
| A&amp;E | - | - | 110 | 110 |
| Pretax\tunfavorable\t(favorable)\tnet\tprior\tyear\tdevelopment\tbefore\timpact\tof\tpremium |  |  |  |  |
| development | (97) | (101) | 123 | (75) |
| Pretax\tfavorable\tpremium\tdevelopment | (9) | 5 | (1) | (5) |
| Total\tpretax\tunfavorable\t(favorable)\tnet\tprior\tyear\tdevelopment | $(106) | $(96) | $122 | $(80) |
| Year\tEnded\tDecember\t31,\t2007 |  |  |  |  |
| Pretax\tunfavorable\t(favorable)\tnet\tprior\tyear\tclaim\tand\tallocated\tclaim\tadjustment\texpense |  |  |  |  |
| reserve\tdevelopment |  |  |  |  |
| Core\t(Non-A&amp;E) | $35 | $(164) | $84 | $(45) |
| A&amp;E | - | - | 7 | 7 |
| Pretax\tunfavorable\t(favorable)\tnet\tprior\tyear\tdevelopment\tbefore\timpact\tof\tpremium |  |  |  |  |
| development | 35 | (164) | 91 | (38) |
| Pretax\tfavorable\tpremium\tdevelopment | (11) | (19) | (5) | (35) |
| Total\tpretax\tunfavorable\t(favorable)\tnet\tprior\tyear\tdevelopment | $24 | $(183) | $86 | $(73) |

# 2009	Net	Prior	Year	Development

The	favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	primarily	due	to	professional	liability	and	surety	coverages.

Approximately	$81	million	of	favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	recorded	for	professional	liability	coverages, primarily	financial	institutions,	accountants	and	lawyers,	directors	and	officers,	and	life	agents	coverages.	For	financial	institutions,	favorable	development	was	recorded due	to	favorable

experience	on	a	number	of	 large	claims	 in	accident	years	2003	and	prior	and	decreased	frequency	of	 large	claims	 in	accident	years	2007	and	prior.	Favorable development	was	recorded	in	accountants	and	lawyers	due	to	better	than	expected	large	claim	frequency	in	accident	years	2004	through	2006.	The	remaining	favorable development	was	recorded	in	directors	and	officers	and	life	agents	coverages	due	to	lower	than	expected	large	claim	frequency.

Favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	of	approximately	$66	million	for	medical	professional	liability	was	recorded primarily	due	to	better	than	expected	frequency	and	severity	in	accident	years	2005	and	prior,	including	claims	closing	favorable	to	expectations	and	favorable	changes on	individually	reviewed	accounts.

Favorable	 claim	 and	 allocated	 claim	 adjustment	 expense	 reserve	 development	 of	 $51	 million	 was recorded in	 surety	 programs	 driven	 by	 claim	 activity substantially	below	expectations,	primarily	in	accident	years	2004	through	2007.

Favorable	 claim	 and	 claim	 adjustment	 expense reserve	 development	 of	 $4	 million	 was recorded	 as	 a result	 of favorable	 outcomes	 on	 claims relating to catastrophes	in	accident	year	2005.

Additional	favorable	claim	development	of	approximately	$19	million	was	recorded	in	CNA	Specialty's	international	programs.	This	favorable	development	was primarily	due	to	favorable	emergence	relative	to	expectations	in	European	non-financial	directors	and	officers	and	errors	and	omissions	coverages.

The	favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	primarily	due	to	property,	general	liability	and	international	affiliate coverages,	partially	offset	by	unfavorable	experience	in	worker's	compensation	coverages.

Approximately	$149	million	of	favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	recorded	for	property	coverages.	Favorable catastrophe	claim	and	claim	adjustment	expense	reserve	development	of	approximately	$101	million	was	recorded,	driven	by	the	favorable	settlement	of	several	claims primarily	in	accident	years	2005	and	2007,	and	better	than	expected	frequency	and	severity	on	claims	in	accident	year	2008.	An	additional	$48	million	of	favorable claim	and	allocated	claim	adjustment	expense	reserve	development	was	due	to	non-catastrophe	related	losses,	primarily	on	large	property	and	marine	coverages	in accident	years	2007	and	2008.

Approximately	$103	million	of	favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	recorded	for	general	 liability	coverages. Favorable	development	of	approximately	$78	million	was	primarily	due	to	claims	closing	favorable	to	expectations	on	non-construction	defect	exposures	in	accident years	2006	and	prior.	An	additional	$25	million	of	favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	due	to	decreased	frequency	and severity	trends	related	to	construction	defect	exposures	in	accident	years	2003	and	prior.

Approximately	$35	million	of	unfavorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	related	to	increased	severity	of	indemnity losses	relative	to	expectations	on	workers'	compensation	claims	related	to	Defense	Base	Act	contractors	primarily	in	accident	years	2004	through	2008.

Approximately	$49	million	of	unfavorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	due	to	increased	paid	and	incurred	severity	on workers'	compensation	business	primarily	in	the	small	and	middle	markets	businesses	in	accident	years	2004,	2007	and	2008.

Approximately	$40	million	of	unfavorable	premium	development	was	related	to	changes	in	estimated	ultimate	premium	on	retrospectively	rated	coverages. Additional	 unfavorable	 premium	 development	 was	 due	 to	 an	 estimated	 liability	 for	 an	 assessment	 related	 to	 a	 reinsurance	 association	 driven	 by	 large	 workers' compensation	policies	and	less	premium	processing	on	auditable	policies	due	to	reduced	exposures	in	the	current	economic	environment.

The	remaining	favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	of	approximately	$80	million	was	recorded	in	CNA	Commercial's international	programs	primarily	due	to	favorable	loss	emergence	relative	to	expectations	across	several	accident	years	and	coverages.	Approximately	$33	million	of favorable

development	was	driven	by	European	property,	cargo,	and	personal	accident	and	travel	businesses	in	recognition	of	both	frequency	and	severity	emerging	favorably	to prior	expectations,	particularly	in	accident	years	2007	and	2008.	An	additional	$29	million	of	favorable	development	within	a	Hawaiian	affiliate	was	primarily	driven	by improved	frequency.	The	remaining	$18	million	of	favorable	development	was	due	to	Canadian	commercial	lines,	primarily	in	casualty	programs	and	primarily	driven by	severity	emerging	favorable	to	prior	expectations.

Unfavorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	recorded	related	to	asbestos	and	environmental	pollution,	as	discussed previously	in	this	Note	in	the	Asbestos	and	Environmental	Pollution	sections.	An	additional	$25	million	of	unfavorable	claim	and	allocated	claim	adjustment	expense reserve	development	was	recorded	due	to	higher	than	anticipated	litigation	costs	related	to	mass	tort	exposures,	primarily	in	accident	years	1997	and	prior.

The	favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	primarily	due	to	favorable	experience	in	medical	professional	liability, surety	business,	and	CNA	Specialty's	international	programs,	partially	offset	by	unfavorable	experience	in	professional	liability	coverages.

Favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	of	approximately	$52	million	for	medical	professional	liability	was	primarily	due	to better	than	expected	frequency	of	large	losses	in	accident	years	2005	and	2006	for	healthcare	facilities	and	medical	technology	firms.	Approximately	$16	million	of unfavorable	development	was	recorded	for	professional	liability	primarily	reflecting	an	increase	in	the	frequency	of	large	claims	related	to	large	law	firms	in	accident years	1998	through	2005	and	fidelity	claims	in	accident	year	2007,	partially	offset	by	favorable	development	related	to	favorable	outcomes	on	individual	claims	related to	small	accounting	firms	in	accident	years	2004	through	2006.	Favorable	development	of	approximately	$36	million	for	surety	coverages	was	due	to	better	than expected	frequency	in	accident	years	2002	through	2006.

Approximately	 $26	 million	 of	 favorable	 claim	 and	 allocated	 claim	 adjustment	 expense	 reserve	 development	 was	 primarily	 due	 to	 favorable	 incurred	 loss emergence	within	CNA	Specialty's	international	programs	in	accident	year	2006	and	prior.	This	favorability	was	driven	primarily	by	decreased	severity	in	the	overall book	of	business.

The	favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	primarily	due	to	favorable	experience	in	general	liability	and	property coverages	including	marine	exposures,	partially	offset	by	unfavorable	experience	in	workers'	compensation	(including	excess	workers'	compensation	coverages)	and large	account	business.

For	general	liability	excluding	construction	defect,	$259	million	in	favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	due	to decreased	frequency	and	severity	of	claims	across	multiple	accident	years.	The	improvement	was	due	to	underwriting	initiatives	and	favorable	outcomes	on	individual claims.	Favorable	development	of	$207	million	associated	with	construction	defect	exposures	was	due	to	lower	severity	resulting	from	various	claim	handling	initiatives and	lower	than	expected	frequency	of	claims,	primarily	in	accident	years	1999	and	prior.	Claim	handling	initiatives	have	resulted	in	an	increase	in	the	number	of	claims closed	without	payment	and	increased	recoveries	from	other	parties	involved	in	the	claims.	The	lower	construction	defect	frequency	is	due	to	underwriting	initiatives designed	to	limit	the	exposure	to	future	construction	defect	claims.	For	property	coverages	including	marine	exposures,	approximately	$150	million	of	favorable development	was	primarily	the	result	of	decreased	frequency	and	severity	in	recent	years.	The	$150	million	of	favorable	property	and	marine	development	includes approximately	$47	million	due	to	favorable	outcomes	on	claims	relating	to	catastrophes,	primarily	in	accident	year	2005.	Approximately	$30	million	of	favorable	claim and	allocated	claim	adjustment	expense	reserve	development	was	primarily	due	to	decreased	frequency	and	severity	of	claims	in	CNA's	excess	and	surplus	program covering	facilities	that	provide	services	to	developmentally	disabled	individuals	in	accident	years	2000	through

2004.	Approximately	 $34	 million	 of	 favorable	 claim	 and	 allocated	 claim	 adjustment	 expense	 reserve	 development	 was	 primarily	 due	 to	 favorable	 incurred	 loss emergence	within	CNA	Commercial's	international	programs	in	accident	years	2006	and	prior.	This	favorability	was	driven	primarily	by	decreased	severity	in	the overall	book	of	business.	The	remaining	favorable	development	was	primarily	the	result	of	favorable	experience	across	several	miscellaneous	coverages	in	CNA Commercial.

Unfavorable	development	of	$248	million	for	workers'	compensation	was	primarily	the	result	of	the	impact	of	claim	cost	inflation	on	lifetime	medical	and	home health	care	claims	in	accident	years	1999	and	prior.	The	changes	were	driven	by	increased	life	expectancy	due	to	advances	in	medical	care	and	increasing	medical inflation.	Unfavorable	development	of	$161	million	for	large	account	business	was	also	driven	primarily	by	workers'	compensation	claim	cost	inflation	primarily	in accident	years	2001	and	prior.	Unfavorable	development	of	$114	million	on	excess	workers'	compensation	was	due	 to	claims	 in	accident	years	2002	and	prior. Increasing	medical	inflation,	increased	life	expectancy	resulting	from	advances	in	medical	care,	and	reviews	of	individual	claims	have	resulted	in	higher	cost	estimates of	existing	claims	and	a	higher	estimate	of	the	number	of	claims	expected	to	reach	excess	layers.

In	2008,	the	amount	due	from	policyholders	related	to	losses	under	deductible	policies	within	CNA	Commercial	was	reduced	by	$90	million	for	insolvent insureds.	The	reduction	of	this	amount,	which	is	reflected	as	unfavorable	net	prior	year	reserve	development,	had	no	effect	on	2008	results	of	operations	as	the	CNA	had previously	recognized	provisions	in	prior	years.	These	impacts	were	reported	in	Insurance	claims	and	policyholders'	benefits	in	the	2008	Consolidated	Statement	of Income.

CNA	noted	adverse	development	in	various	pollution	accounts	due	to	changes	in	liability	and/or	coverage	circumstances.	These	changes	in	turn	increased	CNA's estimates	for	incurred	but	not	reported	claims.	As	a	result,	CNA	increased	pollution	reserves	by	$83	million	in	2008.

The	remainder	of	the	unfavorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	primarily	related	to	commutations	of	ceded	reinsurance arrangements.	The	unfavorable	development	was	substantially	offset	by	a	release	of	a	previously	established	allowance	for	uncollectible	reinsurance.

Approximately	$39	million	of	unfavorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	recorded	for	large	law	firm	exposures.	The change	was	due	to	increased	severity	estimates	on	large	claims	in	accident	years	2005	and	prior.	The	increase	in	severity	was	due	to	a	comprehensive	case	by	case	claim review	for	large	law	firm	exposures,	causing	an	overall	increase	in	estimated	ultimate	loss.

Approximately	$15	million	of	favorable	claim	and	allocated	claims	adjustment	expense	reserve	development	was	recorded	in	international	specialty	coverages. This	favorable	development	was	recorded	primarily	due	to	decreased	frequency	and	severity	in	accident	years	2003	through	2006.

Approximately	$37	million	of	favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	recorded	on	claims	for	healthcare	facilities	across several	accident	years.	This	was	primarily	due	to	decreased	severity	on	claims	within	the	general	liability	exposures	and	decreased	incurred	losses	as	a	result	of	changes in	individual	claims	reserve	estimates.

Approximately	 $67	 million	 of	 unfavorable	 claim	 and	 allocated	 claim	 adjustment	 expense	 reserve	 development	 was	 recorded	 on	 claims	 for	 architects	 and engineers.	This	unfavorable	development	was	primarily	due	to	large	loss	emergence	in	accident	years	1999	through	2004.

Approximately	$16	million	of	favorable	claim	and	claim	adjustment	expense	reserve	development	was	recorded	due	primarily	to	better	than	expected	loss experience	in	the	vehicle	warranty	coverages	in	accident	year	2006.	The

reserves	for	this	business	were	initially	estimated	based	on	the	loss	ratio	expected	for	the	business.	Subsequent	estimates	rely	more	heavily	on	the	actual	case	incurred losses,	which	have	been	significantly	lower	than	expected.

Approximately	$24	million	of	favorable	claim	and	claim	adjustment	expense	reserve	development	was	related	to	surety	business	resulting	from	better	than expected	salvage	and	subrogation	recoveries	from	older	accident	years	and	a	lack	of	emergence	of	large	claims	in	more	recent	accident	years.

Approximately	$184	million	of	favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	due	to	decreased	frequency	and	severity	on claims	within	the	general	liability	exposures	in	accident	years	2005	and	prior,	as	well	as	lower	frequency	in	accident	years	1997	and	prior	related	to	construction	defect. Additionally,	there	was	approximately	$17	million	of	favorable	premium	development	resulting	from	audits	on	general	liability	policies.

Approximately	$140	million	of	favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	due	to	decreased	frequency	and	severity	on claims	related	to	property	exposures,	primarily	in	accident	years	2005	and	2006.	Included	in	this	favorable	development	is	approximately	$39	million	related	to	the	2005 hurricanes.

Approximately	$44	million	of	favorable	claim	and	allocated	claims	adjustment	expense	reserve	development	was	recorded	in	international	commercial	coverages. This	favorable	development	was	recorded	primarily	due	to	decreased	frequency	and	severity	in	accident	years	2003	through	2006.

Approximately	$16	million	of	favorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	recorded	in	marine	exposures,	due	primarily	to decreased	frequency	in	accident	year	2006,	and	decreased	severity	in	accident	years	2005	and	prior.

Approximately	 $16	 million	 of	 unfavorable	 premium	 development	 was	 recorded	 related	 to	 the	 CNA's	 participation	 in	 involuntary	 pools.	This	 unfavorable development	was	partially	offset	by	approximately	$9	million	of	favorable	claim	and	allocated	claim	adjustment	expense	reserve	development.

Approximately	$257	million	of	unfavorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	recorded	due	to	increased	severity	in	workers' compensation	exposures,	primarily	on	large	claims	in	accident	years	2003	and	prior,	as	a	result	of	continued	claim	cost	inflation	in	older	accident	years,	driven	by increasing	medical	inflation	and	advances	in	medical	care.	This	was	partially	offset	by	approximately	$12	million	of	favorable	premium	development.

Approximately	$9	million	of	unfavorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	related	to	commutation	activity,	a	portion	of which	was	offset	by	a	release	of	a	previously	established	allowance	for	uncollectible	reinsurance.

Approximately	$70	million	of	unfavorable	claim	and	allocated	claim	adjustment	expense	reserve	development	was	recorded	due	to	higher	than	anticipated litigation	costs	related	to	miscellaneous	chemical	exposures,	primarily	in	accident	years	1997	and	prior.

# Note	10.	Leases

Leases	cover	office	facilities,	machinery	and	computer	equipment.	The	Company's	hotels	 in	some	 instances	are	constructed	on	 leased	 land.	Rent	expense amounted	to	$95	million,	$98	million	and	$79	million	for	the	years	ended	December	31,	2009,	2008	and	2007.	The	table	below	presents	the	future	minimum	lease payments	to	be	made	under	non-cancelable	operating	leases	along	with	lease	and	sublease	minimum	receipts	to	be	received	on	owned	and	leased	properties.

Note	10.	Leases	–	(Continued)

| Year	Ended	December	31<br>(In	millions) | Payments | Receipts |
| :--- | :--- | :--- |
| 2010 | $67 | $3 |
| 2011 | 62 | 3 |
| 2012 | 53 | 3 |
| 2013 | 42 | 2 |
| 2014 | 20 |  |
| Thereafter | 38 |  |
| Total | $282 | $11 |

# Note	11.	Income	Taxes

The	Company	and	its	eligible	subsidiaries	file	a	consolidated	federal	income	tax	return.	The	Company	has	entered	into	a	separate	tax	allocation	agreement	with CNA,	a	majority-owned	subsidiary	in	which	its	ownership	exceeds	80%.	The	agreement	provides	that	the	Company	will:	(i)	pay	to	CNA	the	amount,	if	any,	by	which the	Company's	consolidated	federal	income	tax	is	reduced	by	virtue	of	inclusion	of	CNA	in	the	Company's	return,	or	(ii)	be	paid	by	CNA	an	amount,	if	any,	equal	to	the federal	income	tax	that	would	have	been	payable	by	CNA	if	it	had	filed	a	separate	consolidated	return.	The	agreement	may	be	canceled	by	either	of	the	parties	upon thirty	days	written	notice.

Since	 2007,	 the	 Company	 has	 participated	 in	 the	 Compliance	Assurance	 Process	 ("CAP"),	 which	 is	 a	 voluntary	 program	 for	 a	 limited	 number	 of	 large corporations.	Under	CAP,	the	Internal	Revenue	Service	("IRS")	conducts	a	real-time	audit	and	works	contemporaneously	with	the	Company	to	resolve	any	issues	prior to	the	filing	of	the	tax	return.	The	Company	believes	this	approach	should	reduce	tax-related	uncertainties,	if	any.	The	Company's	2006	tax	year	remains	subject	to examination	and	 the	2008	 tax	year	 is	under	examination	by	 the	IRS.	Although	 the	outcome	of	 tax	audits	are	always	uncertain,	 the	Company	believes	 that	any adjustments	resulting	from	audits	will	not	have	a	material	impact	on	its	results	of	operations,	financial	position	and	cash	flows.	The	Company	and/or	its	subsidiaries	also file	income	tax	returns	in	various	state,	local	and	foreign	jurisdictions.	These	returns,	with	few	exceptions,	are	no	longer	subject	to	examination	by	the	various	taxing authorities	before	2005.

Diamond	Offshore,	which	is	not	included	in	the	Company's	consolidated	federal	income	tax	return,	files	income	tax	returns	in	the	U.S.	federal,	various	state	and foreign	jurisdictions.	Diamond	Offshore's	2007	and	2008	U.S.	federal	income	tax	returns	remain	subject	to	examination.	Tax	years	that	remain	subject	to	examination	by the	various	other	jurisdictions	include	years	2000	to	2008.

The	current	and	deferred	components	of	income	tax	expense	(benefit),	excluding	taxes	on	discontinued	operations,	are	as	follows:

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Income\ttax\texpense\t(benefit): |  |  |  |
| Federal: |  |  |  |
| Current | $3 | $195 | $876 |
| Deferred | \t 149 | (368) | 12 |
| State\tand\tcity: |  |  |  |
| Current | 7 | 22 | 22 |
| Deferred | (9) | (10) | 6 |
| Foreign | \t 195 | 168 | 79 |
| Total | $345 | $7 | $995 |

# Note	11.	Income	Taxes	–	(Continued)

A	reconciliation	between	the	federal	income	tax	expense	at	statutory	rates	and	the	actual	income	tax	expense	is	as	follows:

| Year	Ended	December	31 | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Income\tbefore\tincome\ttax: |  |  |  |
| U.S. | \t\t $989 | $29 | $2,772 |
| Foreign | 741 | 558 | 422 |
| Total | \t\t $1,730 | $587 | $3,194 |
| Income\ttax\texpense\tat\tstatutory\trate | \t\t $606 | $205 | $1,117 |
| Increase\t(decrease)\tin\tincome\ttax\texpense\tresulting\tfrom: |  |  |  |
| Exempt\tinvestment\tincome | (120) | (119) | (102) |
| Foreign\tearnings\tindefinitely\treinvested | (123) | (93) | (76) |
| Foreign\ttaxes\tand\tcredits | (72) |  |  |
| Taxes\trelated\tto\tdomestic\taffiliate | 49 | 46 | 30 |
| Partnership\tearnings\tnot\tsubject\tto\ttaxes | (16) | (31) | (19) |
| Taxes\trelated\tto\tforeign\tdistribution |  |  | 59 |
| Other | 21 | (1) | (14) |
| Income\ttax\texpense | \t\t $345 | $7 | $995 |

In	connection	with	a	non-recurring	distribution	of	$850	million	to	Diamond	Offshore	in	2007	from	a	foreign	subsidiary,	a	portion	of	which	consisted	of	earnings of	the	subsidiary	that	had	not	previously	been	subjected	to	U.S.	federal	income	tax,	Diamond	Offshore	recognized	$59	million	of	U.S.	federal	income	tax	expense	as	a result	of	the	distribution.	Except	for	certain	foreign	sourced	activities	which	Diamond	Offshore	plans	to	distribute,	it	is	Diamond	Offshore's	intention	to	indefinitely reinvest	future	earnings	of	the	subsidiary	to	finance	foreign	activities.

Provision	has	been	made	for	the	expected	U.S.	federal	income	tax	liabilities	applicable	to	undistributed	earnings	of	subsidiaries,	except	for	certain	subsidiaries	for which	the	Company	intends	to	invest	the	undistributed	earnings	indefinitely,	or	recover	such	undistributed	earnings	tax-free.	At	December	31,	2009,	the	Company	has not	provided	deferred	taxes	of	$180	million,	if	sold	through	a	taxable	sale,	on	$514	million	of	undistributed	earnings	related	to	a	domestic	affiliate.	The	determination	of the	amount	of	the	unrecognized	deferred	tax	liability	related	to	the	undistributed	earnings	of	foreign	subsidiaries	is	not	practicable.

A	reconciliation	of	the	beginning	and	ending	amount	of	unrecognized	tax	benefits	is	as	follows:

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 |
| :--- | :--- | :--- |
| Balance\tat\tJanuary\t1 | \t\t $24 | $20 |
| Additions\tbased\ton\ttax\tpositions\trelated\tto\tthe\tcurrent\tyear | 4 | 6 |
| Additions\tfor\ttax\tpositions\trelated\tto\tprior\tyears | 5 |  |
| Lapse\tof\tstatute\tof\tlimitations | (6) | (2) |
| Balance\tat\tDecember\t31 | \t\t $27 | $24 |

Certain	foreign	income	tax	returns	will	no	longer	be	subject	to	examination	and	as	a	result,	there	is	a	reasonable	possibility	that	the	amount	of	unrecognized	tax benefits	will	decrease	by	$1	million.	At	December	31,	2009,	there	were	$27	million	of	tax	benefits	that	if	recognized	would	affect	the	effective	rate.

The	Company	recognizes	interest	accrued	related	to:	(i)	unrecognized	tax	benefits	in	Interest	expense	and	(ii)	 tax	refund	claims	 in	Other	revenues	on	 the Consolidated	Statements	of	Income.	The	Company	recognizes	penalties	in	Income	tax	expense	on	the	Consolidated	Statements	of	Income.	During	2009,	the	Company recorded	approximately	$3	million	for	interest	income	and	$5	million	for	penalties.	As	of	December	31,	2009,	the	Company	recognized	a	liability	for	interest	of	$4 million	and	penalties	of	$13	million.

The	following	table	summarizes	deferred	tax	assets	and	liabilities.	The	amounts	presented	for	2008	have	been	corrected	from	amounts	previously	recorded.	These corrections	had	no	impact	on	the	net	deferred	tax	asset	at	December	31,	2008,	however,	individual	components	were	corrected	by	amounts	ranging	from	an	increase	of $194	million	to	a	decrease	of	$144	million.

| December	31<br>(In	millions) | 2009 | 2008 |
| :--- | :--- | :--- |
| Deferred\ttax\tassets: |  |  |
| Insurance\treserves: |  |  |
| Property\tand\tcasualty\tclaim\tand\tclaim\tadjustment\texpense\treserves | $606 | $694 |
| Unearned\tpremium\treserves | 111 | 90 |
| Receivables | 185 | 199 |
| Employee\tbenefits | 378 | 397 |
| Life\tsettlement\tcontracts | 72 | 73 |
| Investment\tvaluation\tdifferences | 316 | 496 |
| Net\tloss\tand\ttax\tcredits\tcarried\tforward | 63 | 28 |
| Net\tunrealized\tlosses | 36 | 1,988 |
| Basis\tdifferential\tin\tinvestment\tin\tsubsidiary | 32 | 43 |
| Other | 295 | 332 |
| Deferred\ttax\tassets | 2,094 | 4,340 |
| Deferred\ttax\tliabilities: |  |  |
| Deferred\tacquisition\tcosts | (297) | (301) |
| Property,\tplant\tand\tequipment | (427) | (568) |
| Basis\tdifferential\tin\tinvestment\tin\tsubsidiary | (521) | (301) |
| Other\tliabilities | (222) | (242) |
| Deferred\ttax\tliabilities | (1,467) | (1,412) |
| Net\tdeferred\ttax\tasset | $627 | $2,928 |

Although	realization	of	deferred	tax	assets	is	not	assured,	management	believes	it	is	more	likely	than	not	that	the	recognized	net	deferred	tax	asset	will	be	realized through	recoupment	of	ordinary	and	capital	taxes	paid	in	prior	carryback	years	and	through	future	earnings,	reversal	of	existing	temporary	differences,	and	available	tax planning	strategies.	As	a	result,	no	valuation	allowance	was	recorded	at	December	31,	2009	and	2008.

| December	31,	2009<br>(In	millions) | Principal | Unamortized<br>Discount | Net | Short	Term<br>Debt | Long	Term<br>Debt |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Loews\tCorporation | $875 | $\t\t8 | $867 |  | $867 |
| CNA\tFinancial | 2,317 | \t\t14 | \t 2,303 |  | 2,303 |
| Diamond\tOffshore | 1,504 | \t\t13 | \t 1,491 | $\t\t4 | 1,487 |
| HighMount | 1,600 |  | \t 1,600 |  | 1,600 |
| Boardwalk\tPipeline | 3,114 | \t\t14 | \t 3,100 |  | 3,100 |
| Loews\tHotels | 224 |  | 224 | \t\t\t\t6 | 218 |
| Elimination\tof\tintercompany\tdebt | (100) |  | (100) |  | (100) |
| Total | $9,534 | $49 | $9,485 | $10 | $9,475 |

(a) Redeemable	in	whole	or	in	part	at	the	greater	of	the	principal	amount	or	the	net	present	value	of	scheduled	payments	discounted	at	the	specified	treasury	rate	plus	a	margin.

In	November	of	2009,	CNA	issued	$350	million	aggregate	principal	amount	of	7.4%	senior	notes	due	2019	in	a	public	offering.	CNA	used	a	portion	of	the	net proceeds	to	redeem	$250	million	of	its	2008	senior	preferred	stock	held	by	the	Company.

On	August	1,	2007,	CNA	entered	into	a	credit	agreement	with	a	syndicate	of	banks	and	other	lenders.	The	credit	agreement	established	a	five	year	$250	million senior	unsecured	revolving	credit	facility	which	is	intended	to	be	used	for	general	corporate	purposes.	Borrowings	under	the	revolving	credit	facility	bear	interest	at	the London	Interbank	Offered	Rate	("LIBOR")	plus	CNA's	credit	risk	spread	of	0.54%,	which	was	equal	to	0.79%	at	December	31,	2009.

Under	the	credit	agreement,	CNA	is	required	to	pay	certain	fees,	including	a	facility	fee	and	a	utilization	fee,	both	of	which	would	adjust	automatically	in	the event	of	a	change	in	CNA's	financial	ratings.	The	credit	agreement	includes	covenants	regarding	maintenance	of	a	minimum	consolidated	net	worth	and	a	specified	ratio of	consolidated	indebtedness	to	consolidated	total	capitalization.	CNA's	remaining	debt	obligations	contain	customary	covenants	for	investment	grade	insurers.	As	of December	31,	2009,	CNA	was	in	compliance	with	all	covenants.

Diamond	 Offshore	 maintains	 a	 $285	 million	 syndicated,	 senior	 unsecured	 revolving	 credit	 facility,	 for	 general	 corporate	 purposes,	 including	 loans	 and performance	or	standby	letters	of	credit	which	bears	interest	at	a	rate	per	annum	equal	to,	at	its	election,	either;	(i)	the	higher	of	the	prime	rate	or	the	federal	funds	rate plus	50	basis	points	or	(ii)	LIBOR,	plus	an	applicable	margin,	based	on	Diamond	Offshore's	current	credit	ratings.	As	of	December	31,	2009,	there	were	no	loans outstanding	under	the	credit	facility,	however,	$63	million	in	letters	of	credit	were	issued	which	reduced	the	available	capacity	under	the	facility.	As	of	December	31, 2009,	Diamond	Offshore	was	in	compliance	with	all	covenants.

In	October	of	2009,	Diamond	Offshore	issued	$500	million	aggregate	principal	amount	of	5.7%	senior	notes	due	October	15,	2039	in	a	private	placement.	In	May of	2009,	Diamond	Offshore	issued	$500	million	aggregate	principal	amount	of	5.9%	senior	notes	due	2019	in	a	private	placement.	The	proceeds	from	these	offerings were	used	for	general	corporate	purposes.

HighMount	maintains	$1.6	billion	of	variable	rate	term	loans	which	bear	interest	at	LIBOR	plus	an	applicable	margin.	HighMount	has	entered	into	interest	rate swaps	for	a	notional	amount	of	$1.6	billion	to	hedge	its	exposure	to	fluctuations	in	LIBOR.	These	swaps	effectively	fix	the	interest	rate	at	5.8%.	The	loans	also	provide for	a	five	year,	$400	million	revolving	credit	facility.	Borrowings	under	the	credit	facility	bear	interest	at	LIBOR	plus	an	applicable	margin	or	a	base	rate	defined	as	the greater	of	the	prime	rate	or	the	federal	funds	rate	plus	50	basis	points.	Among	other	customary	covenants,	HighMount	cannot	exceed	a	predetermined	total	debt	to capitalization	ratio.	As	of	December	31,	2009,	no	debt	was	outstanding	under	the	revolving	facility,	however,	$4	million	in	letters	of	credit	were	issued.	At	December	31, 2009,	HighMount	is	in	compliance	with	all	of	its	debt	covenants	under	the	credit	agreement.

Boardwalk	Pipeline	maintains	aggregate	lending	commitments	of	a	$1.0	billion	revolving	credit	facility	under	which	Boardwalk	Pipeline	and	its	operating subsidiaries	each	may	borrow	funds,	up	to	applicable	sub-limits.	Borrowings	under	the	credit	facility	bear	interest	at	a	rate	per	annum	equal	to	at	its	election,	either; (i)	the	higher	of	the	prime	rate	or	the	Federal	funds	rate	plus	50	basis	points	or	(ii)	LIBOR	plus	an	applicable	margin.	Among	other	customary	covenants,	each	of	the borrowers	must	maintain	a	minimum	ratio,	as	of	the	last	day	of	each	fiscal	quarter,	of	consolidated	total	debt	to	consolidated	earnings	before	interest,	income	taxes	and depreciation	and	amortization	(as	defined	in	the	agreement),	measured	for	the	preceding	twelve	months,	of	not	more	than	five	to	one.

As	of	December	31,	2009,	Boardwalk	Pipeline	had	$554	million	of	loans	outstanding	under	the	revolving	credit	facility	with	a	weighted-average	interest	rate	on the	borrowings	of	0.5%	and	had	no	letters	of	credit	issued.	As	of	December	31,	2009,	Boardwalk	Pipeline	and	its	operating	subsidiaries	were	in	compliance	with	all covenant	requirements	under	the	credit	facility.	The	revolving	credit	facility	has	a	maturity	date	of	June	29,	2012,	however	all	outstanding	revolving	loans	on	such	date may	be	converted	to	term	loans	having	a	maturity	date	of	June	29,	2013.

In	August	of	2009,	Boardwalk	Pipeline	issued	$350	million	aggregate	principal	amount	of	5.8%	senior	notes	due	September	15,	2019	in	a	private	placement.	The proceeds	from	this	offering	were	used	to	repay	$100	million	of

borrowings	under	its	subordinated	loan	agreement	with	a	subsidiary	of	the	Company	and	to	fund	a	portion	of	the	cost	of	its	expansion	projects.

# Note	13.	Comprehensive	Income	(Loss)

The	components	of	Accumulated	other	comprehensive	income	(loss)	are	as	follows:

| (In	millions) | Unrealized<br>Gains	(Losses)<br>on	Investments | OTTI<br>Losses | Cash	Flow<br>Hedges | Foreign<br>Currency | Pension<br>Liability | Other<br>Comprehensive<br>Income	(Loss) |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Balance,\tJanuary\t1,\t2007 | $579 |  | $5 | $86 | $(283) | $387 |
| Unrealized\tholding\tlosses\ton\tinvestments,\tafter\ttax\tof\t$224\tand\t$34 | (413) |  | (65) |  |  | (478) |
| Adjustment\tfor\titems\tincluded\tin\tNet\tincome,\tafter\ttax\tof\t$87 | (159) |  |  |  |  | (159) |
| Foreign\tcurrency\ttranslation\tadjustment |  |  |  | 35 |  | 35 |
| Pension\tliability\tadjustment,\tafter\ttax\tof\t$(52) |  |  |  |  | 100 | 100 |
| Amounts\tattributable\tto\tnoncontrolling\tinterests | 61 |  | 4 | (4) | (11) | 50 |
| Balance,\tDecember\t31,\t2007 | 68 |  | (56) | 117 | (194) | (65) |
| Unrealized\tholding\tlosses\ton\tinvestments,\tafter\ttax\tof\t$1,949\tand |  |  |  |  |  |  |
| $15 | (3,558) |  | (29) |  |  | (3,587) |
| Adjustment\tfor\titems\tincluded\tin\tNet\tincome,\tafter\ttax\tof\t$(16), |  |  |  |  |  |  |
| $(39)\tand\t$(20) | 30 |  | 70 |  | 34 | 134 |
| Foreign\tcurrency\ttranslation\tadjustment |  |  |  | (161) |  | (161) |
| Pension\tliability\tadjustment,\tafter\ttax\tof\t$201 |  |  |  |  | (388) | (388) |
| Disposal\tof\tdiscontinued\toperations, |  |  |  |  |  |  |
| after\ttax\tof\t$(33) |  |  |  |  | 53 | 53 |
| Amounts\tattributable\tto\tnoncontrolling\tinterests | 368 |  | (1) | 16 | 45 | 428 |
| Balance,\tDecember\t31,\t2008 | (3,092) |  | (16) | (28) | (450) | (3,586) |
| Adjustment\tto\tinitially\tapply\taccounting\tguidance\tfor\tother- |  |  |  |  |  |  |
| than-temporary |  |  |  |  |  |  |
| impairment\tlosses,\tafter\ttax\tof\t$(31)\tand\t$(34) | (58) | $(64) |  |  |  | (122) |
| Unrealized\tholding\tgains\t(losses)\ton |  |  |  |  |  |  |
| investments,\tafter\ttax\tof\t$(1,756),\t$103\tand\t$(26) | 3,212 | (190) | 49 |  |  | 3,071 |
| Adjustment\tfor\titems\tincluded\tin\tNet\tincome,\tafter\ttax\tof |  |  |  |  |  |  |
| $(269),\t$(51)\tand\t$63 | 499 | 95 | (116) |  |  | 478 |
| Foreign\tcurrency\ttranslation\tadjustment |  |  |  | 117 |  | 117 |
| Pension\tliability\tadjustment,\tafter\ttax\tof\t$(7) |  |  |  |  | 6 | 6 |
| Amounts\tattributable\tto\tnoncontrolling\tinterests | (388) | 15 | 2 | (12) |  | (383) |
| Balance,\tDecember\t31,\t2009 | $173 | $(144) | $(81) | $77 | $(444) | $(419) |

# Note	14.	Statutory	Accounting	Practices	(Unaudited)

CNA's	 domestic	 insurance	 subsidiaries	 maintain	 their	 accounts	 in	 conformity	 with	 accounting	 practices	 prescribed	 or	 permitted	 by	 insurance	 regulatory authorities,	which	vary	in	certain	respects	from	GAAP.	In	converting	from	statutory	accounting	principles	to	GAAP,	the	more	significant	adjustments	include	deferral	of policy	acquisition	costs	and	the	inclusion	of	net	unrealized	holding	gains	or	losses	in	shareholders'	equity	relating	to	certain	fixed	maturity	securities.

CNA's	insurance	subsidiaries	are	domiciled	in	various	jurisdictions.	These	subsidiaries	prepare	statutory	financial	statements	in	accordance	with	accounting practices	prescribed	or	permitted	by	the	respective	jurisdictions'	insurance	regulators.	Prescribed	statutory	accounting	practices	are	set	forth	in	a	variety	of	publications of	the	National

# Note	14.	Statutory	Accounting	Practices	(Unaudited)	–	(Continued)

Association	of	Insurance	Commissioners	("NAIC")	as	well	as	state	laws,	regulations	and	general	administrative	rules.

At	December	31,	2009,	CCC	follows	a	permitted	practice	related	to	the	statutory	provision	for	reinsurance,	or	the	uncollectible	reinsurance	reserve.	This	permitted practice	allows	CCC	to	record	an	additional	uncollectible	reinsurance	reserve	amount	through	a	different	financial	statement	line	item	than	the	prescribed	statutory convention.	This	permitted	practice	had	no	effect	on	CCC's	statutory	surplus	at	December	31,	2009.

In	December	2009,	the	NAIC	modified	the	prescribed	statutory	accounting	guidance	allowing	a	greater	portion	of	deferred	tax	assets	to	be	admitted.	This	newly prescribed	guidance	resulted	in	an	approximate	$623	million	increase	in	the	combined	statutory	surplus	of	CCC	and	its	subsidiaries	at	December	31,	2009	as	compared to	the	amount	which	would	have	resulted	using	the	previously	prescribed	accounting	guidance.	CCC	had	previously	been	granted	a	permitted	practice	for	the	reporting periods	ending	December	31,	2008	through	September	30,	2009.	This	permitted	practice	allowed	CCC	to	admit	a	greater	portion	of	its	deferred	tax	assets	than	what	was allowed	under	the	prescribed	accounting	guidance.	This	permitted	practice	resulted	in	an	approximate	$700	million	increase	in	CCC's	statutory	surplus	at	December	31, 2008.

CNA's	ability	to	pay	dividends	and	other	credit	obligations	is	significantly	dependent	on	receipt	of	dividends	from	its	subsidiaries.	The	payment	of	dividends	to CNA	by	its	insurance	subsidiaries	without	prior	approval	of	the	insurance	department	of	each	subsidiary's	domiciliary	jurisdiction	is	limited	by	formula.	Dividends	in excess	of	these	amounts	are	subject	to	prior	approval	by	the	respective	state	insurance	departments.

Dividends	from	CCC	are	subject	to	the	insurance	holding	company	laws	of	the	State	of	Illinois,	the	domiciliary	state	of	CCC.	Under	these	laws,	ordinary dividends,	or	dividends	that	do	not	require	prior	approval	by	the	Illinois	Department	of	Insurance	(the	"Department"),	may	be	paid	only	from	earned	surplus,	which	is calculated	by	removing	unrealized	gains	from	unassigned	surplus.	As	of	December	31,	2009,	CCC	is	in	a	positive	earned	surplus	position,	enabling	CCC	to	pay approximately	$934	million	of	dividend	payments	during	2010	that	would	not	be	subject	to	the	Department's	prior	approval.	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.

CNA's	domestic	insurance	subsidiaries	are	subject	to	risk-based	capital	requirements.	Risk-based	capital	is	a	method	developed	by	the	NAIC	to	determine	the minimum	amount	of	statutory	capital	appropriate	for	an	insurance	company	to	support	its	overall	business	operations	in	consideration	of	its	size	and	risk	profile.	The formula	for	determining	the	amount	of	risk-based	capital	specifies	various	factors,	weighted	based	on	the	perceived	degree	of	risk,	which	are	applied	to	certain	financial balances	and	financial	activity.	The	adequacy	of	a	company's	actual	capital	is	evaluated	by	a	comparison	to	the	risk-based	capital	results,	as	determined	by	the	formula. Companies	below	minimum	risk-based	capital	requirements	are	classified	within	certain	levels,	each	of	which	requires	specified	corrective	action.	As	of	December	31, 2009	and	2008,	all	of	CNA's	domestic	insurance	subsidiaries	exceeded	the	minimum	risk-based	capital	requirements.

Subsidiaries	with	insurance	operations	outside	the	United	States	are	also	subject	to	regulation	in	the	countries	in	which	they	operate.	CNA	has	operations	in	the United	Kingdom,	Canada	and	other	countries.	CNA's	foreign	subsidiaries	met	or	exceeded	regulatory	capital	requirements.

Combined	statutory	capital	and	surplus	and	net	income	(loss),	determined	in	accordance	with	accounting	practices	prescribed	or	permitted	by	insurance	regulatory authorities	for	the	Combined	Continental	Casualty	Companies	and	the	life	company,	were	as	follows:

(a) Represents	the	combined	statutory	surplus	of	CCC	and	its	subsidiaries,	including	the	Life	company.

(b) Preliminary

# Note	15.	Supplemental	Natural	Gas	and	Oil	Information	(Unaudited)

Users	of	this	information	should	be	aware	that	the	process	of	estimating	quantities	of	proved	and	proved	developed	natural	gas,	NGLs	and	crude	oil	reserves	is very	complex,	requiring	significant	subjective	decisions	in	the	evaluation	of	all	available	geological,	engineering	and	economic	data	for	each	reservoir.	The	data	for	a given	reservoir	may	also	change	substantially	over	 time	as	a	result	of	numerous	factors	 including,	but	not	 limited	 to,	additional	development	activity,	evolving production	history	and	continual	reassessment	of	the	viability	of	production	under	varying	economic	conditions.	As	a	result,	revisions	to	existing	reserve	estimates	may occur	from	time	to	time.	Although	every	reasonable	effort	is	made	to	ensure	reserve	estimates	reported	represent	the	most	accurate	assessments	possible,	the	subjective decisions	and	variances	in	available	data	for	various	reservoirs	make	these	estimates	generally	less	precise	than	other	estimates	included	in	the	financial	statement disclosures.

Proved	reserves	represent	quantities	of	natural	gas,	NGLs	and	oil	which,	by	analysis	of	geoscience	and	engineering	data,	can	be	estimated	with	reasonable certainty	to	be	recoverable	in	the	future	from	known	reservoirs	under	existing	economic	conditions,	operating	methods	and	government	regulations.	Proved	developed reserves	are	proved	reserves	which	can	be	expected	to	be	recovered	through	existing	wells	with	existing	equipment,	infrastructure	and	operating	methods.

Estimates	of	reserves	as	of	December	31,	2009,	2008	and	2007	are	based	upon	studies	for	each	of	HighMount's	properties	prepared	by	HighMount	staff engineers.	Calculations	were	prepared	using	standard	geological	and	engineering	methods	generally	accepted	by	the	petroleum	industry	and	in	accordance	with	SEC guidelines.	Ryder	Scott	Company,	L.P.,	an	independent	third	party	petroleum	engineering	consulting	firm,	has	audited	HighMount's	reserve	estimates	in	accordance with	the	"Standards	Pertaining	to	the	Estimating	and	Auditing	of	Oil	and	Gas	Reserves	Information"	promulgated	by	the	Society	of	Petroleum	Engineers.	All	proved reserves	are	located	in	the	United	States	of	America.

Note	15.	Supplemental	Natural	Gas	and	Oil	Information	(Unaudited)	–	(Continued)

# Reserves

Estimated	net	quantities	of	proved	natural	gas	and	oil	(including	condensate	and	NGLs)	reserves	at	December	31,	2009,	2008	and	2007	and	changes	in	the reserves	during	2009,	2008	and	2007	are	shown	in	the	schedule	below:

|  | Natural | NGLs	and | Natural	Gas |
| :--- | :--- | :--- | :--- |
| Proved\tDeveloped\tand\tUndeveloped\tReserves | Gas(a) | Oil | Equivalents |
|  |  | (thousands |  |
|  | (Bcf) | of\tbarrels) | (Bcfe) |
| January\t1,\t2007 | - | - | - |
| Changes\tin\treserves: |  |  |  |
| Extensions,\tdiscoveries\tand\tother\tadditions | 62 | 3,877 | 85 |
| Revisions\tof\tprevious\testimates\t(b) | (51) | 2,164 | (38) |
| Production | (34) | (1,627) | (43) |
| Purchases\tof\treserves\tin\tplace | 1,919 | 91,868 | 2,470 |
| December\t31,\t2007 | 1,896 | 96,282 | 2,474 |
| Changes\tin\treserves: |  |  |  |
| Extensions,\tdiscoveries\tand\tother\tadditions | 56 | 3,140 | 75 |
| Revisions\tof\tprevious\testimates\t(c) | (185) | (10,925) | (251) |
| Production | (79) | (3,859) | (102) |
| Sales\tof\treserves\tin\tplace | (1) | (54) | (1) |
| Purchases\tof\treserves\tin\tplace | 7 | 243 | 8 |
| December\t31,\t2008 | 1,694 | 84,827 | 2,203 |
| Changes\tin\treserves: |  |  |  |
| Extensions,\tdiscoveries\tand\tother\tadditions | 39 | 2,278 | 53 |
| Revisions\tof\tprevious\testimates\t(d) | (141) | (6,669) | (181) |
| Production | (77) | (3,679) | (99) |
| Sales\tof\treserves\tin\tplace | (1) | (2,919) | (19) |
| Purchases\tof\treserves\tin\tplace | 7 |  | 7 |
| December\t31,\t2009 | 1,521 | 73,838 | 1,964 |
| Proved\tdeveloped\treserves\tat: |  |  |  |
| December\t31,\t2007 | 1,394 | 67,371 | 1,798 |
| December\t31,\t2008 | 1,310 | 64,175 | 1,695 |
| December\t31,\t2009 | 1,231 | 58,227 | 1,580 |

(a) Excludes	reserves	associated	with	Volumetric	Production	Payment	("VPP")	delivery	obligations.

(b) The	2007	revision	is	primarily	attributable	to	lower	than	expected	NGL	recovery	yield	on	some	of	HighMount's	gas	that	is	processed	by	third	parties,	as	well	as the	aggregate	result	of	revisions	to	individual	wells	based	upon	engineering	and	geologic	analyses.

(c) The	2008	revision	is	primarily	attributable	to	lower	commodity	prices	at	December	31,	2008	as	compared	to	December	31,	2007.	The	year	end	2008	pricing caused	the	reclassification	of	some	proven	undeveloped	reserves	to	a	non-proved	category	to	adhere	to	SEC	proved	reserve	requirements.	Additionally,	higher operating	costs	in	2008	resulted	in	a	reduction	of	the	remaining	proven	developed	producing	reserves.

(d) The	2009	revision	 is	primarily	attributable	 to	 lower	2009	average	prices	as	compared	 to	December	31,	2008.	The lower	2009	 average	 prices	 caused the reclassification	of	some	proven	undeveloped	reserves	to	a	non-proved	category	to	adhere	to	SEC	proved	reserve	requirements.

# Capitalized	Costs

The	aggregate	amounts	of	costs	capitalized	for	natural	gas	and	NGL	producing	activities,	and	related	aggregate	amounts	of	accumulated	depletion	follow:

# Standardized	Measure	of	Discounted	Future	Net	Cash	Flows	Relating	to	Proved	Natural	Gas	and	NGL	Reserves

The	following	table	represents	a	calculation	of	the	standardized	measure	of	discounted	future	net	cash	flows	relating	to	proved	natural	gas	and	NGL	reserve quantities	that	HighMount	owns:

| December	31,<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Future\tcash\tinflows\t(a)\t(b) | \t\t $7,171\t\t $10,120\t\t $17,235 | \t\t $7,171\t\t $10,120\t\t $17,235 | \t\t $7,171\t\t $10,120\t\t $17,235 |
| Less: |  |  |  |
| Future\tproduction\tcosts | \t 3,098 | 3,461 | 3,565 |
| Future\tdevelopment\tcosts | 538 | 986 | 1,159 |
| Future\tincome\ttax\texpense | 455 | 1,120 | 3,594 |
| Future\tcash\tflows | \t 3,080 | 4,553 | 8,917 |
| Less\tannual\tdiscount\t(10%\ta\tyear) | \t 1,982 | 2,990 | 5,907 |
| Standardized\tmeasure\tof\tdiscounted\tfuture\tnet\tcash\tflows | \t\t $1,098\t\t $ | 1,563\t\t $ | 3,010 |

(a) 2009,	2008	and	2007	amounts	exclude	the	effect	of	derivative	instruments	designated	as	hedges	of	future	sales	of	production	at	year	end.

(b) The	following	prices	were	used	in	the	determination	of	standardized	measure:

In	the	foregoing	determination	of	future	cash	inflows,	sales	prices	for	natural	gas	and	NGL	for	2009	represent	average	price	during	2009,	determined	as	an unweighted	arithmetic	average	of	the	first-day-of-the-month	price	for	each	month	within	2009,	changed	for	contractual	arrangements	with	customers.	The	2008	and	2007 prices	were	based	on	contractual	arrangements	or	market	prices	at	year	end.	Future	costs	of	developing	and	producing	the	proved	natural	gas	and	NGL	reserves	reported at	the	end	of	each	year	shown	were	based	on	costs	determined	at	each	such	year	end,	assuming	the	continuation	of	existing	economic	conditions.	Future	income	taxes were	computed	by	applying	the	appropriate	year	end	or	future	statutory	tax	rate	to	future	pretax	net	cash	flows,	less	the	tax	basis	of	the	properties	involved,	and	giving effect	to	tax	deductions,	permanent	differences	and	tax	credits.

It	is	not	intended	that	the	FASB's	standardized	measure	of	discounted	future	net	cash	flows	represent	the	fair	market	value	of	HighMount's	proved	reserves. HighMount	cautions	that	the	disclosures	shown	are	based	on	estimates	of	proved	reserve	quantities	and	future	production	schedules	which	are	inherently	imprecise	and subject	to	revision,	and	the	10%	discount	rate	prescribed	by	the	SEC.	In	addition,	costs	and	prices	as	of	the	measurement	date	are	used	in	the	determinations,	and	no value	was	assigned	to	probable	or	possible	reserves.

# Changes	in	Standardized	Measure	of	Discounted	Future	Net	Cash	Flows	Relating	to	Proved	Natural	Gas	and	NGL	Reserves

The	following	table	is	a	summary	of	changes	between	the	total	standardized	measure	of	discounted	future	net	cash	flows	at	the	beginning	and	end	of	each	year:

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Standardized\tmeasure,\tbeginning\tof\tperiod | \t\t $1,563 | $3,010 | $- |
| Changes\tin\tthe\tyear\tresulting\tfrom: |  |  |  |
| Sales\tand\ttransfers\tof\tnatural\tgas\tand\tNGL\tproduced\tduring\tthe\tyear,\tless\tproduction\tcosts | (466) | (594) | (209) |
| Net\tchanges\tin\tprices\tand\tdevelopment\tcosts | (443) | (2,205) |  |
| Extensions,\tdiscoveries\tand\tother\tadditions,\tless\tproduction\tand\tdevelopment\tcosts | 46 | 69 | 177 |
| Previously\testimated\tdevelopment\tcosts\tincurred\tduring\tthe\tperiod | 41 | 170 |  |
| Revisions\tof\tprevious\tquantity\testimates | 19 | (94) | (230) |
| Net\tchanges\tin\tpurchases\tand\tsales\tof\tproved\treserves\tin\tplace | (42) | 11 | 4,184 |
| Accretion\tof\tdiscount | 182 | 408 | 166 |
| Income\ttaxes | 220 | 821 | (1,078) |
| Net\tchanges\tin\tproduction\trates\tand\tother | (22) | (33) |  |
| Standardized\tmeasure,\tend\tof\tperiod | \t\t $1,098 | $1,563 | $3,010 |

# Note	16.	Benefit	Plans

Pension	Plans	–	The	Company	has	several	non-contributory	defined	benefit	plans	for	eligible	employees.	Benefits	for	certain	plans	are	determined	annually	based on	a	specified	percentage	of	annual	earnings	(based	on	the	participant's	age	or	years	of	service)	and	a	specified	interest	rate	(which	is	established	annually	for	all participants)	applied	to	accrued	balances.	The	benefits	for	another	plan	which	covers	salaried	employees	are	based	on	formulas	which	include,	among	others,	years	of service	and	average	pay.	The	Company's	funding	policy	is	to	make	contributions	in	accordance	with	applicable	governmental	regulatory	requirements.

Other	Postretirement	Benefit	Plans	–	The	Company	has	several	postretirement	benefit	plans	covering	eligible	employees	and	retirees.	Participants	generally become	eligible	after	reaching	age	55	with	required	years	of	service.	Actual	requirements	for	coverage	vary	by	plan.	Benefits	for	retirees	who	were	covered	by bargaining	units	vary	by	each	unit	and	contract.	Benefits	for	certain	retirees	are	in	the	form	of	a	Company	health	care	account.

Benefits	for	retirees	reaching	age	65	are	generally	integrated	with	Medicare.	Other	retirees,	based	on	plan	provisions,	must	use	Medicare	as	their	primary coverage,	with	the	Company	reimbursing	a	portion	of	the	unpaid	amount;	or	are	reimbursed	for	the	Medicare	Part	B	premium	or	have	no	Company	coverage.	The benefits	provided	by	the	Company	are	basically	health	and,	for	certain	retirees,	life	insurance	type	benefits.

The	Company	funds	certain	of	these	benefit	plans	and	accrues	postretirement	benefits	during	the	active	service	of	those	employees	who	would	become	eligible	for such	benefits	when	they	retire.	The	Company	uses	December	31	as	the	measurement	date	for	its	plans.

Weighted-average	assumptions	used	to	determine	benefit	obligations:

|  | Pension	Benefits | Pension	Benefits | Pension	Benefits | Other	Postretirement	Benefits | Other	Postretirement	Benefits | Other	Postretirement	Benefits |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| December\t31 | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 |
| Discount\trate | 5.7% | 6.3% | 6.0% | 5.6% | 6.3% | 6.0% |
| Rate\tof\tcompensation\tincrease | 3.0%\tto\t5.5% | 3.0%\tto\t5.8% | 4.0%\tto\t7.0% |  |  |  |

Weighted-average	assumptions	used	to	determine	net	periodic	benefit	cost:

|  | Pension	Benefits | Pension	Benefits | Pension	Benefits | Other	Postretirement	Benefits | Other	Postretirement	Benefits | Other	Postretirement	Benefits |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Year\tEnded\tDecember\t31 | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 |
| Discount\trate | 6.3% | 6.0% | 5.7% | 6.3% | 5.9% | 5.6% |
| Expected\tlong\tterm\trate\tof\treturn\ton\tplan\tassets | 7.5%\tto\t8.0% | 7.5%\tto\t8.0% | 7.0%\tto\t8.0% | 5.4% | 6.2% | 6.2% |
| Rate\tof\tcompensation\tincrease | 3.0%\tto\t5.8% | 4.0%\tto\t7.0% | 4.0%\tto\t7.0% |  |  |  |

The	long	term	rate	of	return	for	plan	assets	is	determined	based	on	widely-accepted	capital	market	principles,	long	term	return	analysis	for	global	fixed	income and	equity	markets	as	well	as	the	active	total	return	oriented	portfolio	management	style.	Long	term	trends	are	evaluated	relative	to	market	factors	such	as	inflation, interest	rates	and	fiscal	and	monetary	policies,	in	order	to	assess	the	capital	market	assumptions	as	applied	to	the	plan.	Consideration	of	diversification	needs	and rebalancing	is	maintained.

Assumed	health	care	cost	trend	rates:

# Note	16.	Benefit	Plans	–	(Continued)

Assumed	health	care	cost	trend	rates	have	a	significant	effect	on	the	amounts	reported	for	the	health	care	plans.	A	one-percentage-point	change	in	assumed	health care	cost	trend	rates	would	have	the	following	effects:

|  | One	Percentage	Point |  |
| :--- | :--- | :--- |
| (In\tmillions) | Increase | Decrease |
| Effect\ton\ttotal\tof\tservice\tand\tinterest\tcost | $(1) | $(1) |
| Effect\ton\tpostretirement\tbenefit\tobligation | $6 | (9) |

|  | Pension	Benefits | Pension	Benefits | Pension	Benefits | Other	Postretirement	Benefits | Other	Postretirement	Benefits | Other	Postretirement	Benefits |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Year\tEnded\tDecember\t31\n(In\tmillions) | 2009 | 2008 | 2007 | 2009 | 2008 | 2007 |
| Service\tcost | $26 | $30 | $32 | $2 | $2 | $3 |
| Interest\tcost | 171 | 165 | 162 | 13 | 13 | 13 |
| Expected\treturn\ton\tplan\tassets | (156) | (194) | (189) | (2) | (5) | (4) |
| Amortization\tof\tunrecognized\tnet\tloss | 30 | 6 | 13 | (15) | 1 | 3 |
| Amortization\tof\tunrecognized\tprior\tservice\tcost |  |  | 2 | (8) | (24) | (26) |
| Special\ttermination\tbenefit |  |  | 4 |  |  |  |
| Settlement\tloss |  |  | 4 |  |  |  |
| Regulatory\tasset\t(increase)\tdecrease | (1) |  | (2) | 5 | 5 | 6 |
| Net\tperiodic\tbenefit\tcost | $70 | $7 | $26 | $(5) | $(8) | $(5) |

The	following	provides	a	reconciliation	of	benefit	obligations:

|  | Pension	Benefits | Pension	Benefits | Other	Postretirement	Benefits | Other	Postretirement	Benefits |
| :--- | :--- | :--- | :--- | :--- |
| (In\tmillions) | 2009 | 2008 | 2009 | 2008 |
| Change\tin\tbenefit\tobligation: |  |  |  |  |
| Benefit\tobligation\tat\tJanuary\t1 | $ 2,821 | $2,804 | $214 | $231 |
| Service\tcost | 26 | 30 | 2 | 2 |
| Interest\tcost | 171 | 165 | 13 | 13 |
| Plan\tparticipants'\tcontributions |  |  | 8 | 8 |
| Amendments |  | 5 |  |  |
| Actuarial\t(gain)\tloss | 177 |  | 6 | (17) |
| Benefits\tpaid\tfrom\tplan\tassets | (172) | (161) | (23) | (23) |
| Foreign\texchange | 6 | (21) | 1 |  |
| Settlement |  | (1) |  |  |
| Benefit\tobligation\tat\tDecember\t31 | 3,029 | 2,821 | 221 | 214 |
| Change\tin\tplan\tassets: |  |  |  |  |
| Fair\tvalue\tof\tplan\tassets\tat\tJanuary\t1 | 2,037 | 2,521 | 67 | 84 |
| Actual\treturn\ton\tplan\tassets | 348 | (380) | 9 | (16) |
| Company\tcontributions | 84 | 80 | 12 | 14 |
| Plan\tparticipants'\tcontributions |  |  | 8 | 8 |
| Benefits\tpaid\tfrom\tplan\tassets | (172) | (161) | (23) | (23) |
| Foreign\texchange | 6 | (22) |  |  |
| Settlement |  | (1) |  |  |
| Fair\tvalue\tof\tplan\tassets\tat\tDecember\t31 | 2,303 | 2,037 | 73 | 67 |
| Funded\tstatus | $(726) | $(784) | $(148) | $(147) |
| Amounts\trecognized\tin\tthe\tConsolidated\tBalance\tSheets\tconsist\tof: |  |  |  |  |
| Other\tassets | $2 | $2 | $20 | $14 |
| Other\tliabilities | (728) | (786) | (168) | (161) |
| Net\tamount\trecognized | $(726) | $(784) | $(148) | $(147) |
| Amounts\trecognized\tin\tAccumulated\tother\tcomprehensive\tincome\t(loss),\tnot\tyet\trecognized\nin\tnet\tperiodic\t(benefit)\tcost: |  |  |  |  |
| Prior\tservice\tcost\t(credit) | $3 | $3 | $(144) | $(168) |
| Net\tactuarial\tloss | 824 | 869 | 50 | 51 |
| Net\tamount\trecognized | $827 | $872 | $(94) | $(117) |

Information	for	pension	plans	with	an	accumulated	benefit	obligation	in	excess	of	plan	assets:

| December	31<br>(In	millions) | 2009 | 2008 |
| :--- | :--- | :--- |
| Projected\tbenefit\tobligation | $327 | $292 |
| Accumulated\tbenefit\tobligation | \t 2,798 | \t 2,579 |
| Fair\tvalue\tof\tplan\tassets | \t 2,185 | \t 1,946 |

								The	Company	employs	a	total	return	approach	whereby	a	mix	of	equity	and	fixed	maturity	securities	are	used	to	maximize	the	long	term	return	of	plan	assets	for	a prudent	level	of	risk	and	manage	cash	flows	according	to	plan	requirements.	The	intent	of	this	strategy	is	to	minimize	plan	expenses	by	outperforming	plan	liabilities over	the	long	run.	Risk	tolerance	is	established	through	careful	consideration	of	the	plan	liabilities,	plan	funded	status	and	corporate	financial	conditions.	The	investment portfolio	contains	a	diversified	blend	of	fixed	maturity	equity	and	short	term	securities.	Alternative	investments,	including	limited	partnerships,	are	used	to	enhance	risk adjusted	long

term	returns	while	improving	portfolio	diversification.	At	December	31,	2009,	the	Company	had	committed	$62	million	to	future	capital	calls	from	various	third-party limited	partnership	investments	in	exchange	for	an	ownership	interest	in	the	related	partnerships.	Derivatives	may	be	used	to	gain	market	exposure	in	an	efficient	and timely	manner.	Investment	risk	is	measured	and	monitored	on	an	ongoing	basis	through	annual	liability	measurements,	periodic	asset/liability	studies	and	quarterly investment	portfolio	reviews.

The	table	below	presents	the	estimated	amounts	to	be	recognized	from	Accumulated	other	comprehensive	income	into	net	periodic	benefit	cost	during	2010.

| (In	millions) | Pension<br>Benefits | Postretirement<br>Benefits |
| :--- | :--- | :--- |
| Amortization\tof\tnet\tactuarial\tloss | $27 | $2 |
| Amortization\tof\tprior\tservice\tcost\t(benefit) |  | (23) |
| Total\testimated\tamounts\tto\tbe\trecognized | $27 | $(21) |

The	table	below	presents	the	estimated	future	minimum	benefit	payments	at	December	31,	2009.

| Expected	future	benefit	payments<br>(In	millions) | Pension<br>Benefits | Postretirement<br>Benefits |
| :--- | :--- | :--- |
| 2010 | $197 | $16 |
| 2011 | 195 | 17 |
| 2012 | 199 | 17 |
| 2013 | 205 | 17 |
| 2014 | 211 | 17 |
| Thereafter | 1,147 | 85 |
|  | $2,154 | $169 |

In	2010,	it	is	expected	that	contributions	of	approximately	$75	million	will	be	made	to	pension	plans	and	$12	million	to	postretirement	healthcare	and	life insurance	benefit	plans.

Pension	plan	assets	measured	at	fair	value	on	a	recurring	basis	are	summarized	below.

| December	31,	2009<br>(In	millions) | Level	1 | Level	2 | Level	3 | Total |
| :--- | :--- | :--- | :--- | :--- |
| Fixed\tmaturity\tsecurities: |  |  |  |  |
| Asset-backed\tsecurities |  | $212 | $57 | $269 |
| Corporate\tand\tother\ttaxable\tbonds | $17 | 424 |  | 441 |
| States,\tmunicipalities\tand\tpolitical\tsubdivisions\t- |  |  |  |  |
| tax-exempt\tsecurities |  | 10 |  | 10 |
| Total\tfixed\tmaturity\tsecurities | 17 | 646 | 57 | 720 |
| Equity\tsecurities | 365 | 54 | 5 | 424 |
| Short\tterm\tinvestments | 214 |  |  | 214 |
| Limited\tpartnerships\tand\tother\tinvested\tassets |  | 502 | 432 | 934 |
| Derivatives | 2 |  |  | 2 |
| Investment\tcontracts\twith\tinsurance\tcompany |  |  | 9 | 9 |
| Total | $598 | $1,202 | $503 | $2,303 |

Limited	partnership	investments	consist	primarily	of	hedge	funds.	The	limited	partnership	investments	are	recorded	at	fair	value,	which	represents	the	plans'	share of	the	net	asset	value	of	each	partnership,	as	determined	by	the	General	Partner.	Limited	partnerships	comprising	53.3%	of	the	total	carrying	value	are	reported	on	a current	basis	through	December	31,	2009	with	no	reporting	lag,	41.6%	are	reported	on	a	one	month	lag	and	the	remainder	are	reported	on	more	than	a	one	month	lag. Level	2	includes	limited	partnership	investments	which	can	be	redeemed	at	net	asset	value	in	90	days	or	less.	Level	3	includes	limited	partnership	investments	with withdrawal	provisions	greater	than	90	days,	or	for	which	withdrawals	are	not	permitted.	The	classification	of	Level	2	limited	partnership	investments	is	based	on	updated accounting	guidance	effective	December	31,	2009,	which	requires	an	evaluation	of	withdrawal	provisions	in	the	determination	of	a	partnership's	classification	within	the fair	value	hierarchy.	Prior	to	the	updated	accounting	guidance	all	limited	partnership	investments	were	classified	as	Level	3	investments	and	the	change	resulted	in	a transfer	of	$502	million	on	December	31,	2009.

The	fair	value	of	the	guaranteed	investment	contracts	is	an	estimate	of	the	amount	that	would	be	received	in	an	orderly	sale	to	a	market	participant	at	the measurement	date.	The	amount	the	plan	would	receive	from	the	contract	holder	if	the	contracts	were	terminated	is	the	primary	input	and	is	unobservable.	The	guaranteed investment	contracts	are	therefore	classified	as	Level	3	investments.

For	a	discussion	of	the	valuation	methodologies	used	to	measure	fixed	maturity	securities,	equities,	and	short	term	investments,	see	Note	4	of	the	Notes	to Consolidated	Financial	Statements	included	under	Item	8.

The	table	below	presents	a	reconciliation	of	all	pension	plan	assets	measured	at	fair	value,	on	a	recurring	basis,	using	significant	unobservable	inputs	(Level	3)	for the	year	ended	December	31,	2009:

| Level	3<br>(In	millions) | Balance	at<br>January	1,<br>2009 | Actual	Return<br>on	Assets	Still<br>Held	at<br>December	31,<br>2009 | on	Assets	Sold<br>during	the<br>Year	Ended<br>December	31,<br>2009 | Net<br>Purchases,<br>Sales,	and<br>Settlements | Net<br>Transfers<br>In	(Out)	of<br>Level	3 | Balance	at<br>December	31,<br>2009 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Fixed\tmaturity\tsecurities | $\t\t54 |  | $\t\t9 | $(6) |  | $\t\t57 |
| Equity\tsecurities | 2 |  |  | 5 | $\t\t\t\t\t(2) | 5 |
| Limited\tpartnerships\tand\tother\tinvested |  |  |  |  |  |  |
| assets | 683 | $182 | 1 | 68 | (502) | 432 |
| Investment\tcontracts\twith\tinsurance |  |  |  |  |  |  |
| company | 8 | 1 |  |  |  | 9 |
| Total | $747 | $183 | $10 | $67 | $(504) | $503 |

Other	postretirement	benefits	plan	assets	measured	at	fair	value	on	a	recurring	basis	are	summarized	below.

| December	31,	2009<br>(In	millions) | Level	1 | Level	2 | Level	3 | Total |
| :--- | :--- | :--- | :--- | :--- |
| Fixed\tmaturity\tsecurities: |  |  |  |  |
| Asset-backed\tsecurities |  | $2 |  | $2 |
| Corporate\tand\tother\ttaxable\tbonds |  | 17 |  | 17 |
| States\tmunicipalities\tand\tpolitical\tsubdivisions\t-\ttax-exempt\tsecurities |  | 28 |  | 28 |
| Total\tfixed\tmaturity\tsecurities | $- | 47 | $- | 47 |
| Short\tterm\tinvestments | 9 |  |  | 9 |
| Limited\tpartnerships |  |  | 16 | 16 |
| Total | $9 | $47 | $16 | $72 |

| Level	3<br>(In	millions) | Balance	at<br>January	1,<br>2009 | Actual	Return<br>on	Assets	Still<br>Held	at<br>December	31,<br>2009 | on	Assets	Sold<br>during	the<br>Year	Ended<br>December	31,<br>2009 | Net<br>Purchases,<br>Sales,	and<br>Settlements | Net<br>Transfers<br>In	(Out)	of<br>Level	3 | Balance	at<br>December	31,<br>2009 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Limited\tpartnerships | $23 | $4 |  | $(11) |  | $16 |
| Total | $23 | $4 | $- | $(11) | $- | $16 |

Savings	Plans	–	The	Company	and	its	subsidiaries	have	several	contributory	savings	plans	which	allow	employees	to	make	regular	contributions	based	upon	a percentage	of	their	salaries.	Matching	contributions	are	made	up	to	specified	percentages	of	employees'	contributions.	The	contributions	by	the	Company	and	its subsidiaries	to	these	plans	amounted	to	$98	million,	$91	million	and	$68	million	for	the	years	ended	December	31,	2009,	2008	and	2007.

Stock	Option	Plans	–	In	2005,	shareholders	approved	the	amended	and	restated	Loews	Corporation	2000	Stock	Option	Plan	(the	"Loews	Plan").	The	aggregate number	of	shares	of	Loews	common	stock	for	which	options	or	SARs	may	be	granted	under	the	Loews	Plan	is	12,000,000	shares,	and	the	maximum	number	of	shares of	Loews	common	stock	with	respect	to	which	options	or	SARs	may	be	granted	to	any	individual	in	any	calendar	year	is	1,200,000	shares.	The	exercise	price	per	share may	not	be	less	than	the	fair	market	value	of	the	common	stock	on	the	date	of	grant.	Generally,	options	and	SARs	vest	ratably	over	a	four-year	period	and	expire	in	ten years.

A	summary	of	the	stock	option	and	SAR	transactions	for	the	Loews	Plan	follows:

|  | 2009 | 2009 | 2008 | 2008 |
| :--- | :--- | :--- | :--- | :--- |
|  | Number\tof\nAwards | Weighted\nAverage\nExercise\nPrice | Number\tof\nAwards | Weighted\nAverage\nExercise\nPrice |
| Awards\toutstanding,\tJanuary\t1 | 5,375,400 | $30.836 | 4,787,041 | $28.085 |
| Granted | 1,017,500 | 27.896 | 980,000 | 43.629 |
| Exercised | (506,154) | 16.549 | (226,695) | 19.958 |
| Canceled | (228,750) | 39.336 | (164,946) | 41.964 |
| Awards\toutstanding,\tDecember\t31 | 5,657,996 | 31.242 | 5,375,400 | 30.836 |
| Awards\texercisable,\tDecember\t31 | 3,635,066 | $28.442 | 3,262,981 | $24.098 |
| Shares\tavailable\tfor\tgrant,\tDecember\t31 | 3,447,947 |  | 4,236,697 |  |

The	following	table	summarizes	information	about	the	Company's	stock	options	and	SARs	outstanding	in	connection	with	the	Loews	Plan	at	December	31,	2009:

|  | Awards	Outstanding | Awards	Outstanding | Awards	Outstanding | Awards	Exercisable | Awards	Exercisable |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Range\tof\texercise\tprices | Number\tof\nShares | Weighted\nAverage\nRemaining\nContractual\nLife | Weighted\nAverage\nExercise\nPrice | Number\tof\nShares | Weighted\nAverage\nExercise\nPrice |
| $\t10.01-20.00 | 1,325,701 | 2.8 | $17.417 | 1,325,701 | $17.417 |
| \t\t\t20.01-30.00 | 1,365,584 | 7.1 | 24.612 | 691,459 | 23.894 |
| \t\t\t30.01-40.00 | 1,493,336 | 6.8 | 34.948 | 932,675 | 34.472 |
| \t\t\t40.01-50.00 | 1,265,250 | 7.5 | 45.246 | 567,609 | 45.132 |
| \t\t\t50.01-60.00 | 208,125 | 7.0 | 51.080 | 117,622 | 51.080 |

In	2009,	the	Company	awarded	SARs	totaling	1,017,500	shares.	In	accordance	with	the	Loews	Plan,	the	Company	has	the	ability	to	settle	SARs	in	shares	or	cash and	has	the	intention	to	settle	in	shares.	The	SARs	balance	at	December	31,	2009	was	3,500,298	shares.

The	weighted	average	remaining	contractual	terms	of	awards	outstanding	and	exercisable	as	of	December	31,	2009,	were	6.1	years	and	5.0	years.	The	aggregate intrinsic	values	of	awards	outstanding	and	exercisable	at	December	31,	2009	were	$44	million	and	$36	million.	The	total	intrinsic	value	of	awards	exercised	during	2009 was	$8	million.

The	Company	recorded	stock-based	compensation	expense	of	$13	million,	$11	million	and	$8	million	related	to	the	Loews	Plan	for	the	years	ended	December	31, 2009,	2008	and	2007.	The	related	income	tax	benefits	recognized	were	$4	million,	$4	million	and	$3	million.	At	December	31,	2009,	the	compensation	cost	related	to nonvested	awards	not	yet	recognized	was	$17	million,	and	the	weighted	average	period	over	which	it	is	expected	to	be	recognized	is	2.3	years.

The	fair	value	of	granted	options	and	SARs	for	the	Loews	Plan	were	estimated	at	the	grant	date	using	the	Black-Scholes	pricing	model	with	the	following assumptions	and	results:

| Year	Ended	December	31 | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Loews\tPlan: |  |  |  |
| Expected\tdividend\tyield | 0.9% | 0.6% | 0.5% |
| Expected\tvolatility | 47.4% | 40.2% | 24.0% |
| Weighted\taverage\trisk-free\tinterest\trate | 1.9% | 2.9% | 4.6% |
| Expected\tholding\tperiod\t(in\tyears) | 5.0 | 5.0 | 5.0 |
| Weighted\taverage\tfair\tvalue\tof\tawards | $10.77 | $16.10 | $13.45 |

# Note	17.	Reinsurance

CNA	cedes	insurance	to	reinsurers	to	limit	its	maximum	loss,	provide	greater	diversification	of	risk,	minimize	exposures	on	larger	risks	and	to	exit	certain	lines	of business.	The	ceding	of	insurance	does	not	discharge	the	primary	liability	of	CNA.	Therefore,	a	credit	exposure	exists	with	respect	to	property	and	casualty	and	life reinsurance	ceded	to	the	extent	that	any	reinsurer	is	unable	to	meet	its	obligations	or	to	the	extent	that	the	reinsurer	disputes	the	liabilities	assumed	under	reinsurance agreements.	Property	and	casualty	reinsurance	coverages	are	tailored	to	the	specific	risk	characteristics	of	each	product	line	and	CNA's	retained	amount	varies	by	type of	coverage.	Reinsurance	contracts	are	purchased	to	protect	specific	lines	of	business	such	as	property	and	workers'	compensation.	Corporate	catastrophe	reinsurance	is also	purchased	for	property	and	workers'	compensation	exposure.	Most	reinsurance	contracts	are	purchased	on	an	excess	of	loss	basis.	CNA	also	utilizes	facultative reinsurance	in	certain	lines.	In	addition,	CNA	assumes	reinsurance	as	a	member	of	various	reinsurance	pools	and	associations.

Note	17.	Reinsurance	–	(Continued)

Reinsurance	accounting	allows	for	contractual	cash	flows	to	be	reflected	as	premiums	and	losses,	as	compared	to	deposit	accounting,	which	requires	cash	flows	to be	reflected	as	assets	and	liabilities.	To	qualify	for	reinsurance	accounting,	reinsurance	agreements	must	include	risk	transfer.	To	meet	risk	transfer	requirements,	a reinsurance	contract	must	include	both	insurance	risk,	consisting	of	underwriting	and	timing	risk,	and	a	reasonable	possibility	of	a	significant	loss	for	the	assuming entity.

The	following	table	summarizes	the	amounts	receivable	from	reinsurers:

| Ceded	claim	and	claim	adjustment	expense | $5,594		 $6,288 | $5,594		 $6,288 |
| :--- | :--- | :--- |
| Ceded\tfuture\tpolicy\tbenefits | 859 | 903 |
| Ceded\tpolicyholders'\tfunds | 39 | 39 |
| Reinsurance\treceivables\trelated\tto\tpaid\tlosses | 440 | 531 |
| Reinsurance\treceivables | \t 6,932 | \t 7,761 |
| Less\tallowance\tfor\tuncollectible\treinsurance | 351 | 366 |
| Reinsurance\treceivables,\tnet\tof\tallowance\tfor\tuncollectible\treinsurance | \t\t $6,581\t\t $7,395 | \t\t $6,581\t\t $7,395 |

CNA	has	established	an	allowance	for	uncollectible	reinsurance	receivables.	The	expense	(release)	for	uncollectible	reinsurance	was	$4	million,	$(47)	million	and $1	million	for	the	years	ended	December	31,	2009,	2008	and	2007.	Changes	in	the	allowance	for	uncollectible	reinsurance	receivables	are	presented	as	a	component	of Insurance	claims	and	policyholders'	benefits	on	the	Consolidated	Statements	of	Income.

CNA	attempts	to	mitigate	its	credit	risk	related	to	reinsurance	by	entering	into	reinsurance	arrangements	with	reinsurers	that	have	credit	ratings	above	certain levels	and	by	obtaining	collateral.	The	primary	methods	of	obtaining	collateral	are	through	reinsurance	trusts,	letters	of	credit	and	funds	withheld	balances.	Such collateral	was	approximately	$1.9	billion	and	$2.1	billion	at	December	31,	2009	and	2008.	On	a	more	limited	basis,	CNA	may	enter	into	reinsurance	agreements	with reinsurers	that	are	not	rated,	primarily	captive	reinsurers.

CNA's	largest	recoverables	from	a	single	reinsurer	at	December	31,	2009,	including	prepaid	reinsurance	premiums,	were	approximately	$1,350	million	from subsidiaries	of	Swiss	Re	Group,	$850	million	from	subsidiaries	of	Munich	Re	Group	and	$600	million	from	subsidiaries	of	Hartford	Insurance	Group.

The	effects	of	reinsurance	on	earned	premiums	are	shown	in	the	following	table:

| (In	millions) | Direct | Assumed | Ceded | Net | Net	% |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Year\tEnded\tDecember\t31,\t2009 |  |  |  |  |  |
| Property\tand\tcasualty | $8,028 | $67 | $1,968 | $6,127 | 1.1% |
| Accident\tand\thealth | 550 | 51 | 7 | 594 | 8.6 |
| Life | 84 |  | 84 |  |  |
| Earned\tpremiums | $8,662 | $118 | $2,059 | $6,721 | 1.8% |
| Year\tEnded\tDecember\t31,\t2008 |  |  |  |  |  |
| Property\tand\tcasualty | $8,496 | $164 | $2,121 | $6,539 | 2.5% |
| Accident\tand\thealth | 592 | 46 | 28 | 610 | 7.5 |
| Life | 99 |  | 98 | 1 |  |
| Earned\tpremiums | $9,187 | $210 | $2,247 | $7,150 | 2.9% |
| Year\tEnded\tDecember\t31,\t2007 |  |  |  |  |  |
| Property\tand\tcasualty | $9,097 | $118 | $2,349 | $6,866 | 1.7% |
| Accident\tand\thealth | 658 | 76 | 119 | 615 | 12.4 |
| Life | 76 |  | 75 | 1 |  |
| Earned\tpremiums | $9,831 | $194 | $2,543 | $7,482 | 2.6% |

Included	in	the	direct	and	ceded	earned	premiums	for	the	years	ended	December	31,	2009,	2008	and	2007	are	$1,385	million,	$1,326	million	and	$1,429	million related	to	business	that	is	100%	reinsured	as	a	result	of	a	significant	captive	program.

Life	and	accident	and	health	premiums	are	primarily	from	long	duration	contracts;	property	and	casualty	premiums	are	primarily	from	short	duration	contracts.

Insurance	claims	and	policyholders'	benefits	reported	on	the	Consolidated	Statements	of	Income	are	net	of	reinsurance	recoveries	of	$1,297	million,	$1,781 million	and	$1,383	million	for	the	years	ended	December	31,	2009,	2008	and	2007	including	$897	million,	$893	million,	and	$542	million	related	to	the	significant captive	program	discussed	above.

The	impact	of	reinsurance	on	life	insurance	inforce	is	shown	in	the	following	table:

| December	31<br>(In	millions) | Direct | Assumed | Ceded | Net |
| :--- | :--- | :--- | :--- | :--- |
| 2009 | $9,159 |  | $9,144 | $15 |
| 2008 | \t 10,805 |  | \t 10,790 | \t 15 |
| 2007 | \t 14,089 | $1 | \t 14,071 | \t 19 |

As	of	December	31,	2009	and	2008,	CNA	has	ceded	$1,409	million	and	$1,541	million	of	claim	and	claim	adjustment	expense	reserves,	future	policy	benefits and	policyholders'	funds	as	a	result	of	business	operations	sold	in	prior	years.	Subject	to	certain	exceptions,	the	purchasers	assumed	the	credit	risk	of	the	sold	business that	was	primarily	reinsured	to	other	carriers.

# Note	18.	Quarterly	Financial	Data	(Unaudited)

| 2009	Quarter	Ended<br>(In	millions,	except	per	share	data) | Dec.	31 | Sept.	30 | June	30 | March	31 |
| :--- | :--- | :--- | :--- | :--- |
| Total\trevenues | $3,822 | $3,738 | $3,534 | $3,023 |
| Income\t(loss)\tattributable\tto: |  |  |  |  |
| Loews\tcommon\tstock: |  |  |  |  |
| Income\t(loss)\tfrom\tcontinuing\toperations | 403 | 469 | 341 | (647) |
| Per\tshare-basic | 0.94 | 1.08 | 0.79 | (1.49) |
| Per\tshare-diluted | 0.94 | 1.08 | 0.78 | (1.49) |
| Discontinued\toperations,\tnet | - | (1) | (1) | - |
| Per\tshare-basic | - | - | - | - |
| Per\tshare-diluted | - | - | - | - |
| Net\tincome\t(loss)\t(a) | 403 | 468 | 340 | (647) |
| Per\tshare-basic | 0.94 | 1.08 | 0.79 | (1.49) |
| Per\tshare-diluted | 0.94 | 1.08 | 0.78 | (1.49) |
| 2008\tQuarter\tEnded |  |  |  |  |
| Total\trevenues | $2,743 | $2,970 | $3,922 | $3,612 |
| Income\tattributable\tto: |  |  |  |  |
| Loews\tcommon\tstock: |  |  |  |  |
| Income\tfrom\tcontinuing\toperations | (958) | (144) | 511 | 409 |
| Per\tshare-basic | (2.20) | (0.33) | 1.00 | 0.77 |
| Per\tshare-diluted | (2.20) | (0.33) | 1.00 | 0.77 |
| Discontinued\toperations,\tnet | - | 7 | 4,348 | 146 |
| Per\tshare-basic | - | 0.02 | 8.56 | 0.28 |
| Per\tshare-diluted | - | 0.02 | 8.54 | 0.28 |
| Net\tincome\t(b) | (958) | (137) | 4,859 | 555 |
| Per\tshare-basic | (2.20) | (0.31) | 9.56 | 1.05 |
| Per\tshare-diluted | (2.20) | (0.31) | 9.54 | 1.05 |
| Former\tCarolina\tGroup\tstock: |  |  |  |  |
| Discontinued\toperations,\tnet | - | - | 104 | 107 |
| Per\tshare-basic | - | - | 0.97 | 0.98 |
| Per\tshare-diluted | - | - | 0.96 | 0.98 |

The	sum	of	the	quarterly	per	share	amounts	may	not	equal	per	share	amounts	reported	for	year-to-date	periods.	This	is	due	to	changes	in	the	number	of	weighted average	shares	outstanding	and	the	effects	of	rounding	for	each	period.

(a) Net	income	attributable	to	Loews	common	stock	for	the	fourth	quarter	of	2009	includes	an	investment	gain	at	CNA	of	$217	(after	tax	and	noncontrolling	interest)	related	to	the	sale	of	its	holdings	of	Verisk Analytics	Inc.	Additionally,	CNA	recognized	OTTI	losses	of	$114	(after	tax	and	noncontrolling	interest)	in	earnings	primarily	in	the	asset-backed	bonds,	tax-exempt	and	corporate	and	other	taxable	bond	sectors.

(b) Net	loss	attributable	to	Loews	common	stock	for	the	fourth	quarter	of	2008	includes	a	$440	after	tax	non-cash	impairment	charge	related	to	the	carrying	value	of	HighMount's	natural	gas	and	oil	properties reflecting	commodity	prices	at	December	31,	2008,	a	$314	after	tax	non-cash	goodwill	impairment	charge	related	to	HighMount	and	OTTI	losses	at	CNA	of	$377	(after	tax	and	noncontrolling	interest)	primarily	in the	corporate	and	other	taxable	bonds	and	asset-backed	bonds	sectors	and	losses	of	$181	(after	tax	and	noncontrolling	interest)	related	to	limited	partnerships.

# Note	19.	Legal	Proceedings

On	August	1,	2005,	CNA	and	certain	insurance	subsidiaries	were	joined	as	defendants,	along	with	other	insurers	and	brokers,	in	multidistrict	litigation	pending	in the	United	States	District	Court	for	the	District	of	New	Jersey,	In	re	Insurance	Brokerage	Antitrust	Litigation,	Civil	No.	04-5184	(FSH).	The	plaintiffs	allege	bid	rigging and	improprieties	in	the	payment	of	contingent	commissions	in	connection	with	the	sale	of	insurance	that	violated	federal	and	state	antitrust	laws,	the	federal	Racketeer Influenced	and	Corrupt	Organizations	("RICO")	Act	and	state	common	law.	After	discovery,	the	District	Court	dismissed	the	federal	antitrust	claims	and	the	RICO claims,	and	declined	to	exercise	supplemental	jurisdiction	over	the	state	law	claims.	The	plaintiffs	have	appealed	the	dismissal	of	their	complaint	to	the	Third	Circuit Court	of	Appeals.	The	parties	have	filed	their	briefs	on	the	appeal.	Oral	argument	was	held	on	April	21,	2009,	and	the	Court	took	the	matter	under	advisement.	CNA believes	it	has	meritorious	defenses	to	this	action	and	intends	to	defend	the	case	vigorously.

The	extent	of	losses	beyond	any	amounts	that	may	be	accrued	are	not	readily	determinable	at	this	time.	However,	based	on	facts	and	circumstances	presently known,	in	the	opinion	of	management,	an	unfavorable	outcome	will	not	materially	affect	the	equity	of	the	Company,	although	results	of	operations	may	be	adversely affected.

CNA	is	also	a	party	to	litigation	and	claims	related	to	A&E	cases	arising	in	the	ordinary	course	of	business.	See	Note	9	for	further	discussion.

The	Company	has	been	named	as	a	defendant	in	the	following	three	cases	alleging	substantial	damages	based	on	alleged	health	effects	caused	by	smoking cigarettes,	exposure	to	tobacco	smoke	or	exposure	to	asbestos	fibers	incorporated	into	filter	material	used	in	one	brand	of	cigarette	that	ceased	manufacture	more	than	50 years	ago,	all	of	which	also	name	a	former	subsidiary,	Lorillard	or	one	of	its	subsidiaries,	as	a	defendant.	In	Cypret	vs.	The	American	Tobacco	Company,	Inc.	et	al. (1998,	Circuit	Court,	Jackson	County,	Missouri),	the	Company	would	contest	jurisdiction	and	make	use	of	all	available	defenses	in	the	event	it	receives	personal	service of	this	action.	In	Clalit	vs.	Philip	Morris,	Inc.,	et	al.	(1998,	Jerusalem	District	Court	of	Israel),	the	court	initially	permitted	plaintiff	to	serve	the	Company	outside	the jurisdiction	but	it	cancelled	the	leave	of	service	in	response	to	the	Company's	application,	and	plaintiff's	appeal	is	pending.	In	Young	vs.	The	American	Tobacco Company,	Inc.	et	al.	(1997,	Civil	District	Court,	Orleans	Parish,	Louisiana),	the	Company	filed	an	exception	for	lack	of	personal	jurisdiction	during	2000,	which	remains pending.	 The	 Company	 was	 voluntarily	 dismissed	 from two	 other	 cases,	Burns	 v.	 Hollingsworth	 &	 Vose	 Co.,	 et	 al. (2009,	 Superior	 Court,	 Middlesex	 County, Massachusetts)	and	Hartzell	v.	Hollingsworth	&	Vose	Co.,	et	al.	(2009,	Superior	Court,	Middlesex	County,	Massachusetts),	during	2010.

The	Company	does	not	believe	it	is	a	proper	defendant	in	any	tobacco	related	cases	and	as	a	result,	does	not	believe	the	outcome	will	have	a	material	affect	on	the Company's	results	of	operations	or	equity.	Further,	pursuant	to	the	Separation	Agreement	dated	May	7,	2008	between	the	Company	and	Lorillard	and	its	subsidiaries, Lorillard	and	its	subsidiaries	have	agreed	to	indemnify	and	hold	the	Company	harmless	from	all	costs	and	expenses	based	upon	or	arising	out	of	the	operation	or	conduct of	Lorillard's	business,	including	among	other	things,	smoking	and	health	claims	and	litigation	such	as	the	three	cases	described	above.

While	the	Company	intends	to	defend	vigorously	all	tobacco	products	liability	litigation,	it	is	not	possible	to	predict	the	outcome	of	any	of	this	litigation. Litigation	is	subject	to	many	uncertainties.	It	is	possible	that	one	or	more	of	the	pending	actions	could	be	decided	unfavorably.

The	Company	and	its	subsidiaries	are	also	parties	to	other	litigation	arising	in	the	ordinary	course	of	business.	The	outcome	of	this	other	litigation	will	not,	in	the opinion	of	management,	materially	affect	the	Company's	results	of	operations	or	equity.

# Note	20.	Commitments	and	Contingencies

# Guarantees

In	the	course	of	selling	business	entities	and	assets	to	third	parties,	CNA	has	agreed	to	indemnify	purchasers	for	losses	arising	out	of	breaches	of	representation and	warranties	with	respect	to	the	business	entities	or	assets	being	sold,	including,	in	certain	cases,	losses	arising	from	undisclosed	liabilities	or	certain	named	litigation. Such	indemnification	provisions	generally	survive	for	periods	ranging	from	nine	months	following	the	applicable	closing	date	to	the	expiration	of	the	relevant	statutes of	limitation.	As	of	December	31,	2009,	the	aggregate	amount	of	quantifiable	indemnification	agreements	in	effect	for	sales	of	business	entities,	assets	and	third	party loans	was	$819	million.

In	addition,	CNA	has	agreed	to	provide	indemnification	to	third	party	purchasers	for	certain	losses	associated	with	sold	business	entities	or	assets	that	are	not limited	by	a	contractual	monetary	amount.	As	of	December	31,	2009,	CNA	had	outstanding	unlimited	indemnifications	in	connection	with	the	sales	of	certain	of	its business	entities	or	assets	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.	These	indemnification	agreements	survive	until	the	applicable statutes	of	limitation	expire,	or	until	the	agreed	upon	contract	terms	expire.

# Boardwalk	Pipeline	Purchase	Commitments

Boardwalk	Pipeline	is	engaged	in	expansion	and	growth	projects	that	will	require	the	investment	of	significant	capital	resources.	As	of	December	31,	2009, Boardwalk	Pipeline	had	capital	commitments	representing	binding	commitments	under	purchase	orders	for	materials	ordered	but	not	received	and	firm	commitments under	binding	construction	contracts	of	$48	million.

# Note	21.	Discontinued	Operations

The	results	of	discontinued	operations	are	as	follows:

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Revenues: |  |  |  |
| Net\tinvestment\tincome | $6 | $22 | $120 |
| Manufactured\tproducts |  | \t 1,750 | \t 4,176 |
| Investment\tgains |  | 3 | 9 |
| Other |  |  | 1 |
| Total\t(a) | 6 | \t 1,775 | \t 4,306 |
| Expenses: |  |  |  |
| Insurance\trelated\texpenses | 8 | 10 | 25 |
| Cost\tof\tmanufactured\tproducts\tsold |  | \t 1,039 | \t 2,408 |
| Other\toperating\texpenses |  | 175 | 478 |
| Total | 8 | \t 1,224 | \t 2,911 |
| Income\t(loss)\tbefore\tincome\ttax | (2) | 551 | \t 1,395 |
| Income\ttax\texpense |  | (200) | (494) |
| Results\tof\tdiscontinued\toperations | (2) | 351 | 901 |
| Gain\ton\tdisposal\t(after\ttax\tof\t$51) |  | \t 4,362 |  |
| Net\tincome\t(loss)\tfrom\tdiscontinued\toperations | (2) | \t 4,713 | 901 |
| Amounts\tattributable\tto\tnoncontrolling\tinterests |  | (1) | 1 |
| Net\tincome\t(loss)\tfrom\tdiscontinued\toperations\t-\tLoews | $(2) | $4,712 | $902 |

(a) Lorillard's	revenues	amounted	to	99.4%	and	94.7%	of	total	revenues	of	discontinued	operations	for	the	years	ended	December	31,	2008	and	2007.	Lorillard's	pretax	income	amounted	to	100%	and	99.1%	of	total pretax	income	of	discontinued	operations	for	the	years	ended	December	31,	2008	and	2007.

# Note	21.	Discontinued	Operations	–	(Continued)

Net	liabilities	of	discontinued	operations	included	in	Other	liabilities	in	the	Consolidated	Balance	Sheets	are	as	follows:

| December	31<br>(In	millions) | 2009 | 2008 |
| :--- | :--- | :--- |
| Assets: |  |  |
| Investments | \t\t $141 | $157 |
| Receivables | 4 | 6 |
| Other\tassets | 2 | 1 |
| Total\tAssets | \t\t $147 | $164 |
| Liabilities: |  |  |
| Insurance\treserves | \t\t $140 | $162 |
| Other\tliabilities | 8 | 8 |
| Total\tLiabilities | \t 148 | \t 170 |
| Net\tliabilities\tof\tdiscontinued\toperations\t(a) | \t\t $(1) | $(6) |

(a) The	net	liabilities	of	CNA's	discontinued	operations	totaling	$1	million	and	$6	million	as	of	December	31,	2009	and	December	31,	2008	are	included	in	Other	liabilities	in	the	Consolidated	Balance	Sheets.	At December	31,	2009	and	December	31,	2008,	the	insurance	reserves	are	net	of	discounts	of	$56	million	and	$75	million.

# Lorillard

As	discussed	in	Note	2,	in	June	of	2008,	the	Company	disposed	of	its	entire	ownership	interest	in	Lorillard.	The	Consolidated	Financial	Statements	have	been reclassified	to	reflect	Lorillard	as	a	discontinued	operation.	Accordingly,	revenues	and	expenses	and	cash	flows	of	Lorillard	have	been	excluded	from	the	respective captions	in	the	Consolidated	Statements	of	Income,	and	Consolidated	Statements	of	Cash	Flows,	and	have	been	included	in	Discontinued	operations,	net	and	Net	cash flows	-	discontinued	operations.

CNA	has	discontinued	operations,	which	consist	of	run-off	insurance	and	reinsurance	operations	acquired	in	its	merger	with	The	Continental	Corporation	in	1995. As	of	December	31,	2009,	 the	remaining	run-off	business	 is	administered	by	Continental	Reinsurance	Corporation	International,	Ltd.,	a	wholly	owned	Bermuda subsidiary.	The	business	consists	of	facultative	property	and	casualty,	treaty	excess	casualty	and	treaty	pro-rata	reinsurance	with	underlying	exposure	to	a	diverse,	multi- line	domestic	and	international	book	of	business	encompassing	property,	casualty	and	marine	liabilities.

The	income	(loss)	from	discontinued	operations	reported	above	related	to	CNA	primarily	represents	the	net	investment	income,	realized	investment	gains	and losses,	foreign	currency	gains	and	losses,	effects	of	the	accretion	of	the	loss	reserve	discount	and	re-estimation	of	the	ultimate	claim	and	claim	adjustment	expense	of	the discontinued	operations.

On	May	4,	2007,	CNA	sold	Continental	Management	Services	Limited	("CMS"),	its	United	Kingdom	discontinued	operations	subsidiary.	During	2008,	CNA recognized	a	change	in	estimate	of	the	tax	benefit	related	to	the	CMS	sale.

# Bulova

The	Company	sold	Bulova	for	approximately	$263	million	in	January	of	2008.	The	Company	recorded	a	gain	of	approximately	$126	million,	$75	million	after tax,	for	the	year	ended	December	31,	2008.

# Note	22.	Business	Segments

The	Company's	reportable	segments	are	primarily	based	on	its	individual	operating	subsidiaries.	Each	of	the	principal	operating	subsidiaries	are	headed	by	a	chief executive	officer	who	is	responsible	for	the	operation	of	its	business	and	has	the	duties	and	authority	commensurate	with	that	position.	Investment	gains	(losses)	and	the related	income	taxes,	excluding	those	of	CNA	Financial,	are	included	in	the	Corporate	and	other	segment.

As	a	result	of	the	realignment	of	management	responsibilities,	CNA	has	revised	its	property	and	casualty	segments	in	the	fourth	quarter	of	2009.	There	was	no change	in	CNA's	Life	&	Group	Non-Core	and	Other	Insurance	segments.	Prior	period	segment	disclosures	have	been	conformed	to	the	current	year	presentation.	The new	segment	structure	reflects	the	way	management	currently	reviews	results	and	makes	business	decisions.

CNA's	 core	 property	 and	 casualty	 commercial	 insurance	 operations	 are	 reported	 in	 two	 business	 segments:	 CNA	 Specialty	 and	 CNA	 Commercial.	 CNA Specialty	provides	a	broad	array	of	professional,	financial	and	specialty	property	and	casualty	products	and	services,	primarily	through	insurance	brokers	and	managing general	underwriters.	CNA	Commercial	includes	property	and	casualty	coverages	sold	to	small	businesses	and	middle	market	entities	and	organizations	primarily through	an	independent	agency	distribution	system.	CNA	Commercial	also	includes	commercial	insurance	and	risk	management	products	sold	to	large	corporations primarily	through	insurance	brokers.	Previously,	CNA's	international	operations	were	treated	as	a	separate	business	unit	within	CNA	Specialty.	The	products	sold through	CNA's	international	operations	are	now	reflected	within	CNA	Specialty	and	CNA	Commercial	in	a	manner	that	aligns	with	the	products	within	each	segment. Additionally,	CNA's	excess	and	surplus	lines,	which	were	previously	included	in	CNA	Specialty,	are	now	included	in	CNA	Commercial,	as	part	of	CNA	Select	Risk.

CNA's	non-core	operations	are	managed	in	two	segments:	Life	&	Group	Non-Core	and	Other	Insurance.	Life	&	Group	Non-Core	primarily	includes	the	results	of the	life	and	group	lines	of	business	that	are	in	run-off.	Other	Insurance	primarily	includes	certain	corporate	expenses,	including	interest	on	corporate	debt,	and	the	results of	certain	property	and	casualty	business	primarily	in	run-off,	including	CNA	Re.	This	segment	also	includes	the	results	related	to	the	centralized	adjusting	and settlement	of	A&E.

Diamond	Offshore's	business	primarily	consists	of	operating	47	offshore	drilling	rigs	that	are	chartered	on	a	contract	basis	for	fixed	terms	by	companies	engaged in	exploration	and	production	of	hydrocarbons.	Offshore	rigs	are	mobile	units	that	can	be	relocated	based	on	market	demand.	On	December	31,	2009,	these	rigs	were located	offshore	in	12	countries	in	addition	to	the	United	States.

HighMount's	business	consists	primarily	of	natural	gas	exploration	and	production	operations	located	in	the	Permian	Basin	in	Texas,	the	Antrim	Shale	in Michigan,	and	the	Black	Warrior	Basin	in	Alabama,	with	estimated	proved	reserves	totaling	approximately	2.0	trillion	cubic	feet	equivalent.

Boardwalk	Pipeline	is	engaged	in	the	interstate	transportation	and	storage	of	natural	gas.	This	segment	consists	of	three	interstate	natural	gas	pipeline	systems originating	in	the	Gulf	Coast	area	and	running	north	and	east	through	Texas,	Louisiana,	Mississippi,	Alabama,	Florida,	Arkansas,	Tennessee,	Kentucky,	Indiana,	Ohio, Illinois	and	Oklahoma	with	approximately	14,200	miles	of	pipeline.

Loews	Hotels	owns	and/or	operates	18	hotels,	16	of	which	are	in	the	United	States	and	two	are	in	Canada.

The	 Corporate	 and	 other	 segment	 consists	 primarily	 of	 corporate investment income, including investment	 gains	 (losses)	 from	 non-insurance	 subsidiaries, corporate	interest	expense	and	other	unallocated	expenses.

The	accounting	policies	of	the	segments	are	the	same	as	those	described	in	the	summary	of	significant	accounting	policies.	In	addition,	CNA	does	not	maintain	a distinct	investment	portfolio	for	each	of	its	insurance	segments,	and	accordingly,	allocation	of	assets	to	each	segment	is	not	performed.	Therefore,	net	investment income	and	investment	gains	(losses)	are	allocated	based	on	each	segment's	carried	insurance	reserves,	as	adjusted.

# Note	22.	Business	Segments	–	(Continued)

The	following	tables	set	forth	the	Company's	consolidated	revenues,	income	and	assets	by	business	segment:

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Revenues\t(a): |  |  |  |
| CNA\tFinancial: |  |  |  |
| CNA\tSpecialty | \t\t $3,242 | $3,071 | $3,368 |
| CNA\tCommercial | 4,061 | 3,937 | 4,999 |
| Life\t&amp;\tGroup\tNon-Core | 1,035 | 761 | 1,220 |
| Other\tInsurance | 134 | 30 | 299 |
| Total\tCNA\tFinancial | 8,472 | 7,799 | 9,886 |
| Diamond\tOffshore | 3,653 | 3,486 | 2,617 |
| HighMount | 620 | 770 | 274 |
| Boardwalk\tPipeline | 910 | 848 | 671 |
| Loews\tHotels | 284 | 380 | 384 |
| Corporate\tand\tother | 178 | (36) | 470 |
| Total | \t\t $14,117 | $13,247 | $14,302 |
| Income\t(loss)\tbefore\tincome\ttax\tand\tnoncontrolling\tinterest\t(a)(b): |  |  |  |
| CNA\tFinancial: |  |  |  |
| CNA\tSpecialty | \t\t $732 | $404 | $757 |
| CNA\tCommercial | 378 | (114) | 873 |
| Life\t&amp;\tGroup\tNon-Core | (325) | (587) | (351) |
| Other\tInsurance | (234) | (253) | (45) |
| Total\tCNA\tFinancial | 551 | (550) | 1,234 |
| Diamond\tOffshore | 1,864 | 1,843 | 1,238 |
| HighMount | (839) | (890) | 92 |
| Boardwalk\tPipeline | 157 | 292 | 229 |
| Loews\tHotels | (52) | 62 | 60 |
| Corporate\tand\tother | 49 | (170) | 341 |
| Total | \t\t $1,730 | $587 | $3,194 |
| Net\tincome\t(loss)\t(a)(b): |  |  |  |
| CNA\tFinancial: |  |  |  |
| CNA\tSpecialty | \t\t $422 | $222 | $426 |
| CNA\tCommercial | 247 | (41) | 526 |
| Life\t&amp;\tGroup\tNon-Core | (152) | (309) | (174) |
| Other\tInsurance | (118) | (140) | (8) |
| Total\tCNA\tFinancial | 399 | (268) | 770 |
| Diamond\tOffshore | 643 | 612 | 395 |
| HighMount | (537) | (575) | 57 |
| Boardwalk\tPipeline | 67 | 125 | 106 |
| Loews\tHotels | (34) | 40 | 36 |
| Corporate\tand\tother | 28 | (116) | 222 |
| Income\t(loss)\tfrom\tcontinuing\toperations | 566 | (182) | 1,586 |
| Discontinued\toperations,\tnet | (2) | 4,712 | 902 |
| Total | \t\t $564 | $4,530 | $2,488 |

| Year	Ended	December	31 | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Revenues\tand\tincome\t(loss)\tbefore\tincome\ttax\tand\tnoncontrolling\tinterest: |  |  |  |
| CNA\tFinancial: |  |  |  |
| CNA\tSpecialty | \t\t $(186) | $(257) | $(70) |
| CNA\tCommercial | (354) | (519) | (160) |
| Life\t&amp;\tGroup\tNon-Core | (235) | (363) | (56) |
| Other\tInsurance | (82) | (158) | (24) |
| Total\tCNA\tFinancial | (857) | (1,297) | (310) |
| Corporate\tand\tother | 4 | 3 | 175 |
| Total | \t\t $(853) | $(1,294) | $(135) |
| Net\tincome\t(loss): |  |  |  |
| CNA\tFinancial: |  |  |  |
| CNA\tSpecialty | \t\t $(110) | $(150) | $(41) |
| CNA\tCommercial | (209) | (302) | (93) |
| Life\t&amp;\tGroup\tNon-Core | (138) | (212) | (33) |
| Other\tInsurance | (48) | (92) | (13) |
| Total\tCNA\tFinancial | (505) | (756) | (180) |
| Corporate\tand\tother | 2 | 2 | 113 |
| Total | \t\t $(503) | $(754) | $(67) |

| Year	Ended	December	31 | 2009<br>Income<br>Taxes | Interest<br>Expense | 2008<br>Income<br>Taxes | Interest<br>Expense | 2007<br>Income<br>Taxes | Interest<br>Expense |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| CNA\tFinancial: |  |  |  |  |  |  |
| CNA\tSpecialty | $218 | $1 | $115 | $2 | $243 | $3 |
| CNA\tCommercial | 88 | 3 | (82) |  | 269 |  |
| Life\t&amp;\tGroup\tNon-Core | (156) | 23 | (243) | 23 | (155) | 23 |
| Other\tInsurance | (89) | 101 | (96) | 109 | (36) | 114 |
| Total\tCNA\tFinancial | 61 | 128 | (306) | 134 | 321 | 140 |
| Diamond\tOffshore | 540 | 50 | 582 | 10 | 429 | 20 |
| HighMount | (302) | 80 | (315) | 76 | 46 | 32 |
| Boardwalk\tPipeline | 44 | 132 | 79 | 58 | 68 | 61 |
| Loews\tHotels | (18) | 9 | 22 | 11 | 24 | 11 |
| Corporate\tand\tother | 20 | 49 | (55) | 56 | 107 | 55 |
| Total | $345 | $448 | $7 | $345 | $995 | $319 |

| CNA	Financial | $41,996		 $34,980		 $ | $41,996		 $34,980		 $ | 9,104		 $10,290		 $55,241		 $51,624 | 9,104		 $10,290		 $55,241		 $51,624 | 9,104		 $10,290		 $55,241		 $51,624 | 9,104		 $10,290		 $55,241		 $51,624 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Diamond\tOffshore | 739 | 701 | 794 | 575 | 6,254 | 4,971 |
| HighMount | 80 | 46 | 97 | 225 | 3,225 | 4,012 |
| Boardwalk\tPipeline | 46 | 313 | 110 | 92 | 7,014 | 6,817 |
| Loews\tHotels | 61 | 70 | 27 | 23 | 474 | 496 |
| Corporate\tand\teliminations | 3,112 | 2,340 | 80 | 467 | 1,862 | 1,950 |
| Total | \t\t $46,034\t\t $38,450\t\t $10,212\t\t $11,672\t\t $74,070\t\t $69,870 | \t\t $46,034\t\t $38,450\t\t $10,212\t\t $11,672\t\t $74,070\t\t $69,870 | \t\t $46,034\t\t $38,450\t\t $10,212\t\t $11,672\t\t $74,070\t\t $69,870 | \t\t $46,034\t\t $38,450\t\t $10,212\t\t $11,672\t\t $74,070\t\t $69,870 | \t\t $46,034\t\t $38,450\t\t $10,212\t\t $11,672\t\t $74,070\t\t $69,870 | \t\t $46,034\t\t $38,450\t\t $10,212\t\t $11,672\t\t $74,070\t\t $69,870 |

# Note	23.	Consolidating	Financial	Information

The	following	schedules	present	the	Company's	consolidating	balance	sheet	information	at	December	31,	2009	and	2008,	and	consolidating	statements	of	income information	for	the	years	ended	December	31,	2009,	2008	and	2007.	These	schedules	present	the	individual	subsidiaries	of	the	Company	and	their	contribution	to	the consolidated	financial	statements.	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.	In	addition,	many	of	the	Company's	subsidiaries	use	a	classified	balance	sheet	which also	leads	to	differences	in	amounts	reported	for	certain	line	items.

The	 Corporate	 and	 Other	 column	 primarily	 reflects	 the	 parent	 company's	 investment	 in	 its	 subsidiaries,	 invested	 cash	 portfolio,	 assets	 and	 liabilities	 of discontinued	operations	of	Lorillard	and	Bulova	and	corporate	long	term	debt.	The	elimination	adjustments	are	for	intercompany	assets	and	liabilities,	interest	and dividends,	the	parent	company's	investment	in	capital	stocks	of	subsidiaries,	and	various	reclasses	of	debit	or	credit	balances	to	the	amounts	in	consolidation.	Purchase accounting	adjustments	have	been	pushed	down	to	the	appropriate	subsidiary.

Note	23.	Consolidating	Financial	Information	–	(Continued)

# Consolidating	Balance	Sheet	Information

| December	31,	2009<br>(In	millions) | CNA<br>Financial | Diamond<br>Offshore | HighMount | Boardwalk<br>Pipeline | Loews<br>Hotels | Corporate<br>and	Other | Eliminations | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Assets: |  |  |  |  |  |  |  |  |
| Investments | $41,996 | $739 | $80 | $46 | $61 | $3,112 |  | $46,034 |
| Cash | 140 | 39 | 3 | 4 | 2 | 2 |  | 190 |
| Receivables | 9,104 | 794 | 97 | 110 | 27 | 202 | $(122) | \t 10,212 |
| Property,\tplant\tand\tequipment | 304 | 4,442 | 1,778 | 6,348 | 362 | 40 |  | \t 13,274 |
| Deferred\tincome\ttaxes | 1,368 |  | 636 |  |  |  | (1,377) | 627 |
| Goodwill | 86 | 20 | 584 | 163 | 3 |  |  | 856 |
| Investments\tin\tcapital\tstocks\tof\tsubsidiaries |  |  |  |  |  | 15,276 | (15,276) | - |
| Other\tassets | 712 | 220 | 47 | 343 | 19 | 5 |  | 1,346 |
| Deferred\tacquisition\tcosts\tof\tinsurance\tsubsidiaries | 1,108 |  |  |  |  |  |  | 1,108 |
| Separate\taccount\tbusiness | 423 |  |  |  |  |  |  | 423 |
| Total\tassets | $55,241 | $6,254 | $3,225 | $7,014 | $474 | $18,637 | $(16,775) | $74,070 |
| Liabilities\tand\tEquity: |  |  |  |  |  |  |  |  |
| Insurance\treserves | $38,263 |  |  |  |  |  |  | $38,263 |
| Payable\tto\tbrokers | 253 |  | $196 |  |  | $91 |  | 540 |
| Short\tterm\tdebt |  | $4 |  |  | $6 |  |  | 10 |
| Long\tterm\tdebt | 2,303 | 1,487 | 1,600 | $3,100 | 218 | 867 | $(100) | 9,475 |
| Reinsurance\tbalances\tpayable | 281 |  |  |  |  |  |  | 281 |
| Deferred\tincome\ttaxes |  | 539 |  | 369 | 38 | 431 | (1,377) | - |
| Other\tliabilities | 2,608 | 560 | 112 | 416 | 38 | 281 | (22) | 3,993 |
| Separate\taccount\tbusiness | 423 |  |  |  |  |  |  | 423 |
| Total\tliabilities | 44,131 | 2,590 | 1,908 | 3,885 | 300 | 1,670 | (1,499) | \t 52,985 |
| Total\tshareholders'\tequity | 9,674 | 1,864 | 1,317 | 2,179 | 174 | 16,967 | (15,276) | \t 16,899 |
| Noncontrolling\tinterests | 1,436 | 1,800 |  | 950 |  |  |  | 4,186 |
| Total\tequity | 11,110 | 3,664 | 1,317 | 3,129 | 174 | 16,967 | (15,276) | \t 21,085 |
| Total\tliabilities\tand\tequity | $55,241 | $6,254 | $3,225 | $7,014 | $474 | $18,637 | $(16,775) | $74,070 |

| December	31,	2008<br>(In	millions) | CNA<br>Financial | Diamond<br>Offshore | HighMount | Boardwalk<br>Pipeline | Loews<br>Hotels | Corporate<br>and	Other | Eliminations | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Assets: |  |  |  |  |  |  |  |  |
| Investments | $34,980 | $701 | $46 | $313 | $70 | $2,340 |  | $38,450 |
| Cash | 85 | 36 | 1 | 2 | 2 | 5 |  | 131 |
| Receivables | 10,290 | 575 | 225 | 92 | 23 | 482 | $(15) | \t 11,672 |
| Property,\tplant\tand\tequipment | 327 | 3,429 | 2,771 | 5,972 | 350 | 43 |  | \t 12,892 |
| Deferred\tincome\ttaxes | 3,532 |  | 306 |  |  |  | (910) | 2,928 |
| Goodwill | 86 | 20 | 584 | 163 | 3 |  |  | 856 |
| Investments\tin\tcapital\tstocks\tof\tsubsidiaries |  |  |  |  |  | 11,980 | (11,980) | – |
| Other\tassets | 815 | 210 | 79 | 275 | 48 | 6 | (1) | 1,432 |
| Deferred\tacquisition\tcosts\tof\tinsurance\tsubsidiaries | 1,125 |  |  |  |  |  |  | 1,125 |
| Separate\taccount\tbusiness | 384 |  |  |  |  |  |  | 384 |
| Total\tassets | $51,624 | $4,971 | $4,012 | $6,817 | $496 | $14,856 | $(12,906) | $69,870 |
| Liabilities\tand\tEquity: |  |  |  |  |  |  |  |  |
| Insurance\treserves | $38,771 |  |  |  |  |  | $(1) | $38,770 |
| Payable\tto\tbrokers | 124 | $37 | $191 |  | $1 | $326 |  | 679 |
| Short\tterm\tdebt |  |  |  |  | 71 |  |  | 71 |
| Long\tterm\tdebt | 2,058 | 504 | 1,715 | $2,889 | 155 | 866 |  | 8,187 |
| Reinsurance\tbalances\tpayable | 316 |  |  |  |  |  |  | 316 |
| Deferred\tincome\ttaxes |  | 453 |  | 103 | 46 | 308 | (910) | – |
| Other\tliabilities | 2,738 | 579 | 188 | 571 | 12 | 255 | (15) | 4,328 |
| Separate\taccount\tbusiness | 384 |  |  |  |  |  |  | 384 |
| Total\tliabilities | 44,391 | 1,573 | 2,094 | 3,563 | 285 | 1,755 | (926) | \t 52,735 |
| Total\tshareholders'\tequity | 6,281 | 1,732 | 1,918 | 1,870 | 211 | 13,101 | (11,980) | \t 13,133 |
| Noncontrolling\tinterests | 952 | 1,666 |  | 1,384 |  |  |  | 4,002 |
| Total\tequity | 7,233 | 3,398 | 1,918 | 3,254 | 211 | 13,101 | (11,980) | \t 17,135 |
| Total\tliabilities\tand\tequity | $51,624 | $4,971 | $4,012 | $6,817 | $496 | $14,856 | $(12,906) | $69,870 |

# Consolidating	Statement	of	Income	Information

| Year	Ended	December	31,	2009<br>(In	millions) | CNA<br>Financial | Diamond<br>Offshore | HighMount | Boardwalk<br>Pipeline | Loews<br>Hotels | Corporate<br>and	Other | Eliminations | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Revenues: |  |  |  |  |  |  |  |  |
| Insurance\tpremiums | $6,721 |  |  |  |  |  |  | $6,721 |
| Net\tinvestment\tincome | 2,320 | $4 |  |  |  | $175 |  | 2,499 |
| Intercompany\tinterest\tand\tdividends |  |  |  |  |  | 954 | $(954) |  |
| Investment\tgains\t(losses) | (857) | 1 |  |  |  | 3 |  | (853) |
| Contract\tdrilling\trevenues |  | 3,537 |  |  |  |  |  | 3,537 |
| Other | 288 | 112 | $620 | $910 | $284 | (1) |  | 2,213 |
| Total | 8,472 | 3,654 | 620 | 910 | 284 | 1,131 | (954) | \t 14,117 |
| Expenses: |  |  |  |  |  |  |  |  |
| Insurance\tclaims\tand\tpolicyholders' |  |  |  |  |  |  |  |  |
| benefits | 5,290 |  |  |  |  |  |  | 5,290 |
| Amortization\tof\tdeferred\tacquisition |  |  |  |  |  |  |  |  |
| costs | 1,417 |  |  |  |  |  |  | 1,417 |
| Contract\tdrilling\texpenses |  | 1,224 |  |  |  |  |  | 1,224 |
| Impairment\tof\tnatural\tgas\tand\toil |  |  |  |  |  |  |  |  |
| properties |  |  | 1,036 |  |  |  |  | 1,036 |
| Other\toperating\texpenses | 1,086 | 515 | 343 | 621 | 327 | 80 |  | 2,972 |
| Interest | 128 | 50 | 80 | 132 | 9 | 56 | (7) | 448 |
| Total | 7,921 | 1,789 | 1,459 | 753 | 336 | 136 | (7) | \t 12,387 |
| Income\t(loss)\tbefore\tincome\ttax | 551 | 1,865 | (839) | 157 | (52) | 995 | (947) | 1,730 |
| Income\ttax\t(expense)\tbenefit | (61) | (540) | 302 | (44) | 18 | (20) |  | (345) |
| Income\t(loss)\tfrom\tcontinuing |  |  |  |  |  |  |  |  |
| operations | 490 | 1,325 | (537) | 113 | (34) | 975 | (947) | 1,385 |
| Discontinued\toperations,\tnet | (2) |  |  |  |  |  |  | (2) |
| Net\tincome\t(loss) | 488 | 1,325 | (537) | 113 | (34) | 975 | (947) | 1,383 |
| Amounts\tattributable\tto\tnoncontrolling |  |  |  |  |  |  |  |  |
| interests | (91) | (682) |  | (46) |  |  |  | (819) |
| Net\tincome\t(loss)\tattributable\tto\tLoews |  |  |  |  |  |  |  |  |
| Corporation | $397 | $643 | $(537) | $67 | $(34) | $975 | $(947) | $564 |

| Year	Ended	December	31,	2008<br>(In	millions) | CNA<br>Financial | Diamond<br>Offshore | HighMount | Boardwalk<br>Pipeline | Loews<br>Hotels | Corporate<br>and	Other | Eliminations | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Revenues: |  |  |  |  |  |  |  |  |
| Insurance\tpremiums | $7,151 |  |  |  |  |  | $(1) | $7,150 |
| Net\tinvestment\tincome | 1,619 | $12 |  | $3 | $1 | $(54) |  | 1,581 |
| Intercompany\tinterest\tand\tdividends |  |  |  |  |  | 1,263 | (1,263) | - |
| Investment\tgains\t(losses) | (1,297) | 1 |  |  |  |  |  | (1,296) |
| Gain\ton\tissuance\tof\tsubsidiary\tstock |  |  |  |  |  | 2 |  | 2 |
| Contract\tdrilling\trevenues |  | 3,476 |  |  |  |  |  | 3,476 |
| Other | 326 | (2) | $770 | 845 | 379 | 16 |  | 2,334 |
| Total | 7,799 | 3,487 | 770 | 848 | 380 | 1,227 | (1,264) | \t 13,247 |
| Expenses: |  |  |  |  |  |  |  |  |
| Insurance\tclaims\tand\tpolicyholders'\tbenefits | 5,723 |  |  |  |  |  |  | 5,723 |
| Amortization\tof\tdeferred\tacquisition\tcosts | 1,467 |  |  |  |  |  |  | 1,467 |
| Contract\tdrilling\texpenses |  | 1,185 |  |  |  |  |  | 1,185 |
| Impairment\tof\tnatural\tgas\tand\toil\tproperties |  |  | 691 |  |  |  |  | 691 |
| Impairment\tof\tgoodwill |  |  | 482 |  |  |  |  | 482 |
| Other\toperating\texpenses | 1,025 | 448 | 411 | 498 | 307 | 79 | (1) | 2,767 |
| Interest | 134 | 10 | 76 | 58 | 11 | 56 |  | 345 |
| Total | 8,349 | 1,643 | 1,660 | 556 | 318 | 135 | (1) | \t 12,660 |
| Income\t(loss)\tbefore\tincome\ttax | (550) | 1,844 | (890) | 292 | 62 | 1,092 | (1,263) | 587 |
| Income\ttax\t(expense)\tbenefit | 306 | (582) | 315 | (79) | (22) | 55 |  | (7) |
| Income\t(loss)\tfrom\tcontinuing\toperations | (244) | 1,262 | (575) | 213 | 40 | 1,147 | (1,263) | 580 |
| Discontinued\toperations,\tnet | 10 |  |  |  |  | 4,703 |  | 4,713 |
| Net\tincome\t(loss) | (234) | 1,262 | (575) | 213 | 40 | 5,850 | (1,263) | 5,293 |
| Amounts\tattributable\tto\tnoncontrolling |  |  |  |  |  |  |  |  |
| interests | (25) | (650) |  | (88) |  |  |  | (763) |
| Net\tincome\t(loss)\tattributable\tto |  |  |  |  |  |  |  |  |
| Loews\tCorporation | $(259) | $612 | $(575) | $125 | $40 | $5,850 | $(1,263) | $4,530 |

| Year	Ended	December	31,	2007<br>(In	millions) | CNA<br>Financial | Diamond<br>Offshore | HighMount | Boardwalk<br>Pipeline | Loews<br>Hotels | Corporate<br>and	Other | Eliminations | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Revenues: |  |  |  |  |  |  |  |  |
| Insurance\tpremiums | $7,484 |  |  |  |  |  | $(2) | $7,482 |
| Net\tinvestment\tincome | 2,433 | $34 |  | $21 | $2 | $295 |  | 2,785 |
| Intercompany\tinterest\tand\tdividends |  |  |  |  |  | 1,844 | (1,844) | - |
| Investment\tgains\t(losses) | (310) | 2 | $32 |  |  |  |  | (276) |
| (Loss)\tgain\ton\tissuance\tof\tsubsidiary\tstock |  | (3) |  |  |  | 144 |  | 141 |
| Contract\tdrilling\trevenues |  | 2,506 |  |  |  |  |  | 2,506 |
| Other | 279 | 77 | 274 | 650 | 382 | 2 |  | 1,664 |
| Total | 9,886 | 2,616 | 306 | 671 | 384 | 2,285 | (1,846) | \t 14,302 |
| Expenses: |  |  |  |  |  |  |  |  |
| Insurance\tclaims\tand\tpolicyholders'\tbenefits | 6,009 |  |  |  |  |  |  | 6,009 |
| Amortization\tof\tdeferred\tacquisition\tcosts | 1,520 |  |  |  |  |  |  | 1,520 |
| Contract\tdrilling\texpenses |  | 1,004 |  |  |  |  |  | 1,004 |
| Other\toperating\texpenses | 983 | 355 | 150 | 381 | 313 | 76 | (2) | 2,256 |
| Interest | 140 | 20 | 32 | 61 | 11 | 55 |  | 319 |
| Total | 8,652 | 1,379 | 182 | 442 | 324 | 131 | (2) | \t 11,108 |
| Income\tbefore\tincome\ttax | 1,234 | 1,237 | 124 | 229 | 60 | 2,154 | (1,844) | 3,194 |
| Income\ttax\texpense | (321) | (429) | (46) | (68) | (24) | (107) |  | (995) |
| Income\tfrom\tcontinuing\toperations | 913 | 808 | 78 | 161 | 36 | 2,047 | (1,844) | 2,199 |
| Discontinued\toperations,\tnet | (6) |  |  |  |  | 907 |  | 901 |
| Net\tincome | 907 | 808 | 78 | 161 | 36 | 2,954 | (1,844) | 3,100 |
| Amounts\tattributable\tto\tnoncontrolling\tinterests | (142) | (415) |  | (55) |  |  |  | (612) |
| Net\tincome\tattributable\tto\tLoews\tCorporation | $765 | $393 | $78 | $106 | $36 | $2,954 | $(1,844) | $2,488 |

# This	Page	Intentionally	Left	Blank

# Item	9.	Changes	in	and	Disagreements	with	Accountants	on	Accounting	and	Financial	Disclosure.

# Item	9A.	Controls	and	Procedures.

# Disclosure	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 federal	securities	laws,	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	principal	executive	officer	("CEO")	and	principal	financial	officer	("CFO")	undertook	an	evaluation	of	the	Company's	disclosure	controls	and procedures	(as	defined	in	Exchange	Act	Rules	13a-15(e)	and	15d-15(e))	as	of	the	end	of	the	period	covered	by	this	Report.	The	CEO	and	CFO	have	concluded	that	the Company's	controls	and	procedures	were	effective	as	of	December	31,	2009.

# Internal	Control	Over	Financial	Reporting

Pursuant	to	Section	404	of	the	Sarbanes-Oxley	Act	of	2002,	and	the	implementing	rules	of	the	Securities	and	Exchange	Commission,	the	Company	included	a report	of	management's	assessment	of	the	design	and	effectiveness	of	its	internal	controls	as	part	of	this	Annual	Report	on	Form	10-K	for	the	year	ended	December	31, 2009.	The	independent	registered	public	accounting	firm	of	the	Company	reported	on	the	effectiveness	of	internal	control	over	financial	reporting	as	of	December	31, 2009.	 Management's	 report	 and	 the	 independent	 registered	 public	 accounting	 firm's	 report	 are	 included	 in	 Item	 5	 of	 this	 Report	 under	 the	 captions	 entitled "Management's	Report	on	Internal	Control	Over	Financial	Reporting"	and	"Report	of	Independent	Registered	Public	Accounting	Firm"	and	are	incorporated	herein	by reference.

There	were	no	other	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) identified	in	connection	with	the	foregoing	evaluation	that	occurred	during	the	quarter	ended	December	31,	2009,	that	have	materially	affected	or	that	are	reasonably likely	to	materially	affect	the	Company's	internal	control	over	financial	reporting.

# Item	9B.	Other	Information.

Except	as	set	forth	below	and	under	Executive	Officers	of	the	Registrant	in	Part	I	of	this	Report,	the	information	called	for	by	Part	III	(Items	10,	11,	12,	13	and 14)	has	been	omitted	as	Registrant	intends	to	include	such	information	in	its	definitive	Proxy	Statement	to	be	filed	with	the	Securities	and	Exchange	Commission	not later	than	120	days	after	the	close	of	its	fiscal	year.

# Item	15. Exhibits	and	Financial	Statement	Schedules.

# (a) 1.	Financial	Statements:

The	financial	statements	above	appear	under	Item	8.	The	following	additional	financial	data	should	be	read	in	conjunction	with	those	financial	statements. Schedules	not	included	with	these	additional	financial	data	have	been	omitted	because	they	are	not	applicable	or	the	required	information	is	shown	in	the	consolidated financial	statements	or	notes	to	consolidated	financial	statements.

# (4) Instruments	Defining	the	Rights	of	Security	Holders,	Including	Indentures

The	Registrant	hereby	agrees	to	furnish	to	the	Commission	upon	request	copies	of	instruments	with	respect	to	long-term	debt,	pursuant	to	Item 601(b)(4)(iii)	of	Regulation	S-K

# (10) Material	Contracts

** The	documents	formatted	 in	XBRL	(Extensible	Business	Reporting	Language)	and	attached	as	Exhibit	101	 to	 this	Report	are	deemed	not	filed	or	part	of	a registration	statement	or	prospectus	for	purposes	of	sections	11	or	12	of	the	Securities	Act,	are	deemed	not	filed	for	purposes	of	section	18	of	the	Exchange	Act,	and otherwise,	not	subject	to	liability	under	these	sections.

# SIGNATURES

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

(Peter	W.	Keegan,	Senior	Vice	President	and

Chief	Financial	Officer)

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	Report	has	been	signed	below	by	the	following	persons	on	behalf	of	the Registrant	and	in	the	capacities	and	on	the	dates	indicated.

(Joseph	L.	Bower,	Director)

(Jonathan	M.	Tisch,	Director)

# SCHEDULE	I

# Condensed	Financial	Information	of	Registrant

# BALANCE	SHEETS

# (Continued)

| Year	Ended	December	31<br>(In	millions) | 2009 | 2008 | 2007 |
| :--- | :--- | :--- | :--- |
| Operating\tActivities: |  |  |  |
| Net\tincome | $564 | $4,530 | $2,488 |
| Adjustments\tto\treconcile\tnet\tincome\tto\tnet\tcash\tprovided\t(used)\tby\toperating\tactivities: |  |  |  |
| Income\tfrom\tdiscontinued\toperations |  | (4,712) | (902) |
| Undistributed\tlosses\tof\taffiliates | 418 | 1,312 | 460 |
| Investment\tgains | (4) | (2) | (144) |
| Provision\tfor\tdeferred\tincome\ttaxes | 101 | (62) | 8 |
| Changes\tin\toperating\tassets\tand\tliabilities–net: |  |  |  |
| Receivables | 21 | (2) | 20 |
| Accounts\tpayable\tand\taccrued\tliabilities | 34 | 5 | (661) |
| Federal\tincome\ttaxes | (84) | 40 | (74) |
| Trading\tsecurities | 924 | (728) | 1,180 |
| Other,\tnet | 24 | 5 | 10 |
|  | 1,998 | 386 | 2,385 |
| Investing\tActivities: |  |  |  |
| Investments\tand\tadvances\tto\tsubsidiaries | (218) | (2,548) | (2,440) |
| Change\tin\tinvestments,\tprimarily\tshort\tterm | (1,599) | 2,156 | 1,810 |
| Change\tin\tcollateral\ton\tloaned\tsecurities |  |  | (751) |
| Redemption\tof\tCNA\tpreferred\tstock | 250 |  |  |
| Proceeds\tfrom\tsale\tof\tbusiness |  | 263 |  |
| Other | (4) | (3) | (13) |
|  | (1,571) | (132) | (1,394) |
| Financing\tActivities: |  |  |  |
| Dividends\tpaid | (108) | (219) | (331) |
| Issuance\tof\tcommon\tstock | 8 | 4 | 8 |
| Purchases\tof\ttreasury\tshares | (334) | (33) | (672) |
| Excess\ttax\tbenefits\tfrom\tshare-based\tpayment\tarrangements | 2 | 2 | 6 |
|  | (432) | (246) | (989) |
| Net\tchange\tin\tcash | (5) | 8 | 2 |
| Cash,\tbeginning\tof\tyear | 10 | 2 |  |
| Cash,\tend\tof\tyear | $5 | $10 | $2 |

# SCHEDULE	II

# Valuation	and	Qualifying	Accounts

| Column	A<br>Description<br>(In	millions) | Column	B<br>Balance	at<br>Beginning<br>of	Period | Column	C<br>Additions<br>Charged	to<br>Costs	and<br>Expenses | Charged<br>to	Other<br>Accounts | Column	D<br>Deductions | Column	E<br>Balance	at<br>End	of<br>Period |
| :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | For\tthe\tYear\tEnded\tDecember\t31,\t2009 | For\tthe\tYear\tEnded\tDecember\t31,\t2009 | For\tthe\tYear\tEnded\tDecember\t31,\t2009 |  |
| Deducted\tfrom\tassets:\nAllowance\tfor\tdoubtful\taccounts | $650 | $14 | $9 | $59 | $614 |
| Total | $650 | $14 | $9 | $59 | $614 |
|  |  | For\tthe\tYear\tEnded\tDecember\t31,\t2008 | For\tthe\tYear\tEnded\tDecember\t31,\t2008 | For\tthe\tYear\tEnded\tDecember\t31,\t2008 |  |
| Deducted\tfrom\tassets:\nAllowance\tfor\tdoubtful\taccounts | $798 | $10 |  | $158 | $650 |
| Total | $798 | $10 | $- | $158 | $650 |
|  |  | For\tthe\tYear\tEnded\tDecember\t31,\t2007 | For\tthe\tYear\tEnded\tDecember\t31,\t2007 | For\tthe\tYear\tEnded\tDecember\t31,\t2007 |  |
| Deducted\tfrom\tassets:\nAllowance\tfor\tdoubtful\taccounts | $859 | $32 | $2 | $95 | $798 |
| Total | $859 | $32 | $2 | $95 | $798 |

# SCHEDULE	V

# Supplemental	Information	Concerning	Property	and	Casualty	Insurance	Operations

# Consolidated	Property	and	Casualty	Operations



Question: what is the return on investment for s&p500 from 2007 to 2008?
Calculation: snp_500_return = 80.74
loews_return = 128.16
answer = (snp_500_return - loews_return) / loews_return * 100
Answer: -37.0%