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
 
 
 
 
 
 10-Q
 ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
 September 30, 2020
 
 ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
 
 1-5823
 
 CNA FINANCIAL CORPORATION
 
 Delaware36-6169860(State or other jurisdiction ofincorporation or organization)(I.R.S. EmployerIdentification No.)
 151 N. Franklin60606Chicago,Illinois(Zip Code)(Address of principal executive offices)
 312
  822-5000
 
 
 
 
 Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock, Par value $2.50"CNA"New York Stock ExchangeChicago Stock Exchange
 
 Yes
 
 Yes
 
 Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐
 
 ☐
 271,388,678
 
  
 
 Item NumberPageNumberPART I1.Condensed Consolidated Financial Statements:3Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (Unaudited)3Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019 (Unaudited)4Condensed Consolidated Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 20195Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (Unaudited)6Condensed Consolidated Statements of Stockholders' Equity for the three and nine months ended September 30, 2020 and 2019 (Unaudited)7Notes to Condensed Consolidated Financial Statements (Unaudited)82.Management's Discussion and Analysis of Financial Condition and Results of Operations453.Quantitative and Qualitative Disclosures About Market Risk684.Controls and Procedures68PART II1.Legal Proceedings691A.Risk Factors696.Exhibits72
 
 
  
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 Periods ended September 30Three MonthsNine Months(In millions, except per share data)2020201920202019RevenuesNet earned premiums$1,953$1,890$5,672$5,517Net investment income5174871,3801,573Net investment gains (losses)277(120)20Non-insurance warranty revenue317292926858Other revenues691922Total revenues2,8202,6857,8777,990Claims, Benefits and ExpensesInsurance claims and policyholders’ benefits1,6161,6144,6834,323Amortization of deferred acquisition costs3603451,0461,025Non-insurance warranty expense293278859801Other operating expenses269289852853Interest323294100Total claims, benefits and expenses2,5702,5587,5347,102Income before income tax250127343888Income tax expense(37)(20)(40)(161)Net income$213$107$303$727Basic earnings per share$0.79$0.39$1.12$2.68Diluted earnings per share$0.79$0.39$1.11$2.67Weighted Average Outstanding Common Stock and Common Stock EquivalentsBasic271.7271.6271.6271.6Diluted272.3272.6272.3272.5
 
 
 
 
  
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 Periods ended September 30Three MonthsNine Months(In millions)2020201920202019Comprehensive IncomeNet income$213$107$303$727Other Comprehensive Income, net of taxChanges in:Net unrealized gains and losses on investments with an allowance for credit losses6—(3)—Net unrealized gains and losses on other investments207413541,007Net unrealized gains and losses on investments213413511,007Foreign currency translation adjustment37(29)(16)(12)Pension and postretirement benefits772522Other comprehensive income, net of tax257193601,017Total comprehensive income$470$126$663$1,744
 
 
 
  
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 (In millions, except share data)September 30, 2020 (Unaudited)December 31, 2019AssetsInvestments:Fixed maturity securities at fair value (amortized cost of $38,969 and $38,126, less allowance for credit loss of $47 and $-)$43,901$42,207Equity securities at fair value (cost of $927 and $820)919865Limited partnership investments1,5671,752Other invested assets6965Mortgage loans (less allowance for uncollectible receivables of $21 and $-)1,088994Short term investments1,4621,861Total investments49,00647,744Cash442242Reinsurance receivables (less allowance for uncollectible receivables of $24 and $25)4,3704,179Insurance receivables (less allowance for uncollectible receivables of $32 and $32)2,5272,449Accrued investment income401395Deferred acquisition costs697662Deferred income taxes144199Property and equipment at cost (less accumulated depreciation of $224 and $215)256282Goodwill146147Deferred non-insurance warranty acquisition expense2,9982,840Other assets (includes $- and $21 due from Loews Corporation)1,7881,473Total assets$62,775$60,612LiabilitiesInsurance reserves:Claim and claim adjustment expenses$22,534$21,720Unearned premiums5,0204,583Future policy benefits12,97812,311Long term debt2,7762,679Deferred non-insurance warranty revenue3,9513,779Other liabilities (includes $47 and $21 due to Loews Corporation)3,4953,325Total liabilities50,75448,397Commitments and contingencies (Notes C and F)Stockholders' EquityCommon stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 271,387,058 and 271,412,591 shares outstanding)683683Additional paid-in capital2,2022,203Retained earnings8,7969,348Accumulated other comprehensive income41151Treasury stock (1,653,185 and 1,627,652 shares), at cost(71)(70)Total stockholders’ equity12,02112,215Total liabilities and stockholders' equity$62,775$60,612
 
 
 
  
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 Nine months ended September 30(In millions)20202019Cash Flows from Operating ActivitiesNet income$303$727Adjustments to reconcile net income to net cash flows provided by operating activities:Deferred income tax benefit(41)(72)Trading portfolio activity2(1)Net investment losses (gains)120(20)Equity method investees1248Net amortization of investments(51)(64)Depreciation and amortization4652Changes in:Receivables, net(271)207Accrued investment income(6)(18)Deferred acquisition costs(36)(37)Insurance reserves1,479337Other, net(149)(179)Net cash flows provided by operating activities1,408980Cash Flows from Investing ActivitiesDispositions:Fixed maturity securities - sales5,0234,872Fixed maturity securities - maturities, calls and redemptions2,7062,116Equity securities275171Limited partnerships281417Mortgage loans41109Purchases:Fixed maturity securities(8,466)(7,053)Equity securities(373)(140)Limited partnerships(144)(167)Mortgage loans(154)(193)Change in other investments(4)(8)Change in short term investments403(180)Purchases of property and equipment(16)(20)Other, net2116Net cash flows used by investing activities(407)(60)Cash Flows from Financing ActivitiesDividends paid to common stockholders(850)(834)Proceeds from the issuance of debt495496Repayment of debt(419)(520)Purchase of treasury stock(18)(18)Other, net(9)(11)Net cash flows used by financing activities(801)(887)Effect of foreign exchange rate changes on cash—(3)Net change in cash20030Cash, beginning of year242310Cash, end of period$442$340
 
 
 
  
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 Periods ended September 30Three MonthsNine Months(In millions)2020201920202019Common StockBalance, beginning of period$683$683$683$683Balance, end of period683683683683Additional Paid-in CapitalBalance, beginning of period2,1962,1902,2032,192Stock-based compensation67(1)5Balance, end of period2,2022,1972,2022,197Retained EarningsBalance, beginning of period, as previously reported8,6839,1599,3489,277Cumulative effect adjustments from changes in accounting guidance, net of tax——(5)—Balance, beginning of period, as adjusted8,6839,1599,3439,277Dividends to common stockholders ($0.37, $0.35, $3.11 and $3.05 per share)(100)(95)(850)(833)Net income213107303727Balance, end of period8,7969,1718,7969,171Accumulated Other Comprehensive IncomeBalance, beginning of period15412051(878)Other comprehensive income257193601,017Balance, end of period411139411139Treasury StockBalance, beginning of period(71)(65)(70)(57)Stock-based compensation——178Purchase of treasury stock—(2)(18)(18)Balance, end of period(71)(67)(71)(67)Total stockholders' equity$12,021$12,123$12,021$12,123
 
 
 
 
  
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 General
 Basis of PresentationThe Condensed Consolidated Financial Statements include the accounts of CNA Financial Corporation (CNAF) and its subsidiaries.  Collectively, CNAF and its subsidiaries are referred to as CNA or the Company.  Loews Corporation (Loews) owned approximately89.6%of the outstanding common stock of CNAF as ofSeptember 30, 2020.The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP).  Intercompany amounts have been eliminated.  Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, including certain financial statement notes, is not required for interim reporting purposes and has been condensed or omitted.  These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in CNAF's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year endedDecember 31, 2019, including the summary of significant accounting policies in NoteA.  The preparation of Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period.  Actual results may differ from those estimates.The interim financial data as ofSeptember 30, 2020and for thethree and nine months ended September 30, 2020and2019is unaudited.  However, in the opinion of management, the interim data includes all adjustments, including normal recurring adjustments, necessary for a fair statement of the Company's results for the interim periods.  The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.Recently Adopted Accounting Standards Updates (ASU)ASU 2016-13:In June 2016 the Financial Accounting Standards Board (FASB) issued ASU No. 2016-13,Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.  The updated accounting guidance requires changes to the recognition of credit losses on financial instruments not accounted for at fair value through the Company’s results of operations.  For financial assets measured at cost, the expected credit loss model requires immediate recognition of estimated credit losses over the life of the asset and presentation of the asset at the net amount expected to be collected.  This new guidance applies to mortgage loan investments, reinsurance and insurance receivables and other financing receivables.  For available-for-sale fixed maturity securities carried at fair value, estimated credit losses will continue to be measured at the present value of expected cash flows, however, the other than temporary impairment (OTTI) concept has been eliminated.  Under the previous guidance, estimated credit impairments resulted in a write-down of amortized cost.  Under the new guidance, estimated credit losses are recognized through an allowance and reversals of the allowance are permitted if the estimate of credit losses declines.  For available-for-sale fixed maturity securities where the Company has an intent to sell, impairment will continue to result in a write-down of amortized cost.On January 1, 2020, the Company adopted the updated guidance using a modified retrospective method with a cumulative effect adjustment recorded to beginning Retained earnings.  Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance.  A prospective transition approach is required for available-for-sale fixed maturity securities that were purchased with credit deterioration (PCD assets) or have recognized an OTTI write-down prior to the effective date.  The cumulative effect of the accounting change resulted in a$5 milliondecrease in Retained earnings, with a corresponding$7 millionallowance for credit losses recorded for Mortgage loans partially offset by a$2 milliontax impact. 
 
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 The allowance for uncollectible insurance and reinsurance receivables was unchanged as a result of adopting the new guidance.  At adoption, an allowance for credit losses of$6 millionwas established for available-for-sale fixed maturity securities that were PCD assets, with a corresponding increase to amortized cost, resulting in no adjustment to the carrying value of the securities.  Below is a summary of the significant accounting policies impacted by the adoption of ASU 2016-13.The allowance for credit losses is a valuation account that is reported as a reduction of a financial asset’s cost basis and is measured on a pool basis when similar risk characteristics exist.  Management estimates the allowance using relevant available information from both internal and external sources.  Historical credit loss experience provides the basis for the estimation of expected credit losses and adjustments may be made to reflect current conditions and reasonable and supportable forecasts.  Adjustments to historical loss information are made for any additional factors that come to the Company’s attention.  This could include significant shifts in counterparty financial strength ratings, aging of past due receivables, amounts sent to collection agencies, or other underlying portfolio changes.  Amounts are considered past due when payments have not been received according to contractual terms.  The Company also considers current and forecast economic conditions, using a variety of economic metrics and forecast indices.  The sensitivity of expected credit losses relative to changes to these forecast economic conditions can vary by financial asset class.  The Company considers a reasonable and supportable forecast period to be up to 24 months from the balance sheet date. After the forecast period, the Company reverts to historical credit experience.  The Company uses collateral arrangements such as letters of credit and amounts held in beneficiary trusts to mitigate credit risk, which are considered in the estimate of net amount expected to be collected.The Company has made a policy election to present accrued interest balances separately from the amortized cost basis of assets and has elected the practical expedient to exclude the accrued interest from the tabular disclosures for mortgage loans and available-for-sale securities.  The Company has elected not to estimate an allowance for credit losses on accrued interest receivable.  The accrual of interest income is discontinued and the asset is placed on nonaccrual status within 90 days of the interest becoming delinquent.  Interest accrued but not received for assets on nonaccrual status is reversed through investment income.  Interest received for assets that are on nonaccrual status is recognized as payment is received.  The asset is returned to accrual status when the principal and interest amounts contractually due are brought current and future payments are expected.  Interest receivable is presented as a component of accrued investment income on the Condensed Consolidated Balance Sheet.See NoteCand NoteKto the Condensed Consolidated Financial Statements for additional information regarding credit losses.Accounting Standards Pending AdoptionIn August 2018, the FASB issued ASU 2018-12,Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long Duration Contracts.  The updated accounting guidance requires changes to the measurement and disclosure of long-duration contracts.  The guidance requires entities to annually update cash flow assumptions, including morbidity and persistency, and update discount rate assumptions quarterly using an upper-medium grade fixed-income instrument yield.  The effect of changes in cash flow assumptions will be recorded in the Company's results of operations and the effect of changes in discount rate assumptions will be recorded in Other comprehensive income.  This guidance is effective for interim and annual periods beginning after December 15, 2021, however the FASB has approved a one year deferral of the effective date.  Early adoption is permitted.  The Company may elect to apply the guidance using either a modified retrospective transition method or a full retrospective transition method.  The guidance requires restatement of prior periods presented.  The Company plans to adopt using the modified retrospective transition method and is currently evaluating the effect the updated guidance will have on its financial statements, including the increased disclosure requirements.  The annual updating of cash flow assumptions is expected to increase income statement volatility.  While the requirements of the new guidance represent a material change from existing GAAP, the underlying economics of the business and related cash flows will be unchanged. 
 
  
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 Earnings (Loss) Per Share
 Earnings (loss) per share is based on weighted average number of outstanding common shares.  Basic earnings (loss) per share excludes the impact of dilutive securities and is computed by dividing Net income (loss) by the weighted average number of common shares outstanding for the period.  Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.For thethree and nine months ended September 30, 2020, approximately620 thousandand730 thousandpotential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were included in the calculation of diluted earnings per share.  For those same periods,9 thousandpotential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were not included in the calculation of diluted earnings per share, because the effect would have been antidilutive.For thethree and nine months ended September 30, 2019, approximately1 millionand920 thousandpotential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were included in the calculation of diluted earnings per share.  For those same periods, less than1 thousandand approximately3 thousandpotential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were not included in the calculation of diluted earnings per share, because the effect would have been antidilutive.The Company repurchased435,376and415,695shares of CNAF common stock at an aggregate cost of$18 millionduring each of thenine months ended September 30, 2020and2019. 
 
  
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 Investments
 The significant components of Net investment income are presented in the following table.Periods ended September 30Three MonthsNine Months(In millions)2020201920202019Fixed maturity securities$432$452$1,300$1,362Equity securities18162462Limited partnership investments641238125Mortgage loans14134237Short term investments18927Trading portfolio42136Other——22Gross investment income5335031,4281,621Investment expense(16)(16)(48)(48)Net investment income$517$487$1,380$1,573During thethree and nine months ended September 30, 2020,$4 millionand$9 millionof Net investment income was recognized due to the change in fair value of common stock still held as ofSeptember 30, 2020.  During thethree and nine months ended September 30, 2019,$5 millionand$26 millionof Net investment income was recognized due to the change in fair value of common stock still held as ofSeptember 30, 2019.Net investment gains (losses) are presented in the following table.Periods ended September 30Three MonthsNine Months(In millions)2020201920202019Net investment gains (losses):Fixed maturity securities:Gross gains$44$34$175$98Gross losses(18)(31)(207)(104)Net investment gains (losses) on fixed maturity securities263(32)(6)Equity securities257(45)60Derivatives(2)(2)(7)(13)Mortgage loans(3)—(16)—Short term investments and other(19)(1)(20)(21)Net investment gains (losses)$27$7$(120)$20During thethree and nine months ended September 30, 2020,$25 millionof gains and $44million of losses were recognized in Net investment gains (losses) due to the change in fair value of non-redeemable preferred stock still held as ofSeptember 30, 2020.  During thethree and nine months ended September 30, 2019,$7 millionand$60 millionof gains were recognized in Net investment gains (losses) due to the change in fair value of non-redeemable preferred stock still held as ofSeptember 30, 2019.  Short term investments and other included a$20 millionloss for thethree and nine months ended September 30, 2020related to the third quarter2020redemption of the Company's$400 millionsenior notes due August 2021 and a$21 millionloss for thenine months ended September 30, 2019related to the second quarter2019redemption of the Company's$500 millionsenior notes due August 2020.For available-for-sale fixed maturity securities, a credit loss exists if the present value of cash flows expected to be collected is less than the amortized cost basis.  The allowance for credit loss related to available-for-sale fixed maturity securities is the difference between present value of cash flows expected to be collected and the amortized cost basis, limited by the amount that the fair value is less than the amortized cost basis.  The Company considers all available evidence when determining whether an investment requires a credit loss write-down or allowance to be recorded.  Examples of such evidence may include the financial condition and near term prospects of the issuer, whether the issuer is current with interest and principal payments, credit ratings on the security or changes in ratings 
 
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 over time, general market conditions and industry, sector or other specific factors and whether it is likely that the Company will recover its amortized cost through the collection of cash flows. Changes in the allowance since acquisition are presented as a component of Net investment gains (losses) on the Condensed Consolidated Statements of Operations.The following tables present the activity related to the allowance on available-for-sale securities with credit impairments and PCD assets.  Accrued interest receivable on available-for-sale fixed maturity securities totaled$390 millionand is excluded from the estimate of expected credit losses and the amortized cost basis in the tables included within this Note.Three months ended September 30(In millions)Corporate and other bondsAsset-backedTotalAllowance for credit losses:Beginning balance$39$12$51Additions to the allowance for credit losses:For securities for which credit losses were not previously recorded4—4For available-for-sale securities accounted for as PCD assets1—1Reductions to the allowance for credit losses:Securities sold during the period (realized)9—9Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis———Write-offs charged against the allowance———Recoveries of amounts previously written off———Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period(1)1—Ending balance as of September 30, 2020$34$13$47Nine months ended September 30(In millions)Corporate and other bondsAsset-backedTotalAllowance for credit losses:Beginning balance$—$—$—Additions to the allowance for credit losses:Impact of adopting ASC 3266—6For securities for which credit losses were not previously recorded621274For available-for-sale securities accounted for as PCD assets3—3Reductions to the allowance for credit losses:Securities sold during the period (realized)15—15Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis1—1Write-offs charged against the allowance———Recoveries of amounts previously written off———Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period(21)1(20)Ending balance as of September 30, 2020$34$13$47 
 
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 The components of available-for-sale impairment losses recognized in earnings by asset type are presented in the following table.  The table includes losses on securities with an intention to sell and changes in the allowance for credit losses on securities since acquisition date.Periods ended September 30Three MonthsNine Months(In millions)2020201920202019Fixed maturity securities available-for-sale:Corporate and other bonds$4$12$94$24Asset-backed121410Impairment losses recognized in earnings$5$14$108$34 
 
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 The following tables present a summary of fixed maturity securities.September 30, 2020Cost orAmortizedCostGrossUnrealizedGainsGrossUnrealizedLossesAllowance for Credit Losses(1)EstimatedFairValue(In millions)Fixed maturity securities available-for-sale:Corporate and other bonds$20,734$3,047$89$34$23,658States, municipalities and political subdivisions9,4591,7661—11,224Asset-backed:Residential mortgage-backed3,7961531—3,948Commercial mortgage-backed2,0488570132,050Other asset-backed2,0977619—2,154Total asset-backed7,94131490138,152U.S. Treasury and obligations of government-sponsored enterprises34741—350Foreign government48129——510Redeemable preferred stock—————Total fixed maturity securities available-for-sale38,9625,1601814743,894Total fixed maturity securities trading7———7Total fixed maturity securities$38,969$5,160$181$47$43,901(1)    As of January 1, 2020, the Company adopted ASU 2016-13,Financial Instruments-Credit Losses (Topic 326):Measurement of Credit Losses on Financial Instruments.TheUnrealized OTTI Losses (Gains)column that tracked subsequent valuation changes on securities for which a credit loss had previously been recorded has been replaced with theAllowance for Credit Lossescolumn.December 31, 2019Cost orAmortizedCostGrossUnrealizedGainsGrossUnrealizedLossesEstimatedFairValueUnrealizedOTTILosses (Gains)(In millions)Fixed maturity securities available-for-sale:Corporate and other bonds$19,789$2,292$32$22,049$—States, municipalities and political subdivisions9,0931,559—10,652—Asset-backed:Residential mortgage-backed4,38713314,519(17)Commercial mortgage-backed2,2658652,3461Other asset-backed1,9254141,962(3)Total asset-backed8,577260108,827(19)U.S. Treasury and obligations of government-sponsored enterprises14612145—Foreign government491141504—Redeemable preferred stock10——10—Total fixed maturity securities available-for-sale38,1064,1264542,187$(19)Total fixed maturity securities trading20——20Total fixed maturity securities$38,126$4,126$45$42,207The net unrealized gains on investments included in the tables above are recorded as a component of Accumulated other comprehensive income (AOCI).  When presented in AOCI, these amounts are net of tax and any required Shadow Adjustments.  To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group segment would result in a premium deficiency if realized, a related increase in Insurance reserves is recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments).  As ofSeptember 30, 2020andDecember 31, 2019, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of$2,559 millionand$2,198 million. 
 
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 The following tables present the estimated fair value and gross unrealized losses of fixed maturity securities in a gross unrealized loss position for which an allowance for credit loss has not been recorded, by the length of time in which the securities have continuously been in that position.Less than 12 Months12 Months or LongerTotalSeptember 30, 2020EstimatedFair ValueGrossUnrealizedLossesEstimatedFair ValueGrossUnrealizedLossesEstimatedFair ValueGrossUnrealizedLosses(In millions)Fixed maturity securities available-for-sale:Corporate and other bonds$1,579$86$56$3$1,635$89States, municipalities and political subdivisions1541——1541Asset-backed:Residential mortgage-backed98113—1111Commercial mortgage-backed6936919171270Other asset-backed4321813144519Total asset-backed1,223884521,26890U.S. Treasury and obligations of government-sponsored enterprises251——251Foreign government20———20—Total$3,001$176$101$5$3,102$181Less than 12 Months12 Months or LongerTotalDecember 31, 2019EstimatedFair ValueGrossUnrealizedLossesEstimatedFair ValueGrossUnrealizedLossesEstimatedFair ValueGrossUnrealizedLosses(In millions)Fixed maturity securities available-for-sale:Corporate and other bonds$914$21$186$11$1,100$32States, municipalities and political subdivisions34———34—Asset-backed:Residential mortgage-backed249130—2791Commercial mortgage-backed38132024015Other asset-backed44933314824Total asset-backed1,07978331,16210U.S. Treasury and obligations of government-sponsored enterprises6222—642Foreign government5911—601Total$2,148$31$272$14$2,420$45Based on current facts and circumstances, the Company believes the unrealized losses presented in theSeptember 30, 2020securities in a gross unrealized loss position table above are not indicative of the ultimate collectibility of the current amortized cost of the securities, but rather are attributable to changes in interest rates, credit spreads and other factors. The Company has no current intent to sell securities with unrealized losses, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost; accordingly, the Company has determined that there are no additional impairment losses to be recorded as ofSeptember 30, 2020. 
 
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 Contractual MaturityThe following table presents available-for-sale fixed maturity securities by contractual maturity.September 30, 2020December 31, 2019(In millions)Cost orAmortizedCostEstimatedFairValueCost orAmortizedCostEstimatedFairValueDue in one year or less$1,372$1,392$1,334$1,356Due after one year through five years11,95512,6259,74610,186Due after five years through ten years13,02614,35914,89215,931Due after ten years12,60915,51812,13414,714Total$38,962$43,894$38,106$42,187Actual maturities may differ from contractual maturities because certain securities may be called or prepaid.  Securities not due at a single date are allocated based on weighted average life.Derivative Financial InstrumentsThe Company holds an embedded derivative on a funds withheld liability with a notional value of$193 millionand$182 millionas ofSeptember 30, 2020andDecember 31, 2019and a fair value of$(16) millionand$(7) millionas ofSeptember 30, 2020andDecember 31, 2019.  The embedded derivative on the funds withheld liability is accounted for separately and reported with the funds withheld liability in Other liabilities on the Condensed Consolidated Balance Sheets.Investment CommitmentsAs part of its overall investment strategy, the Company invests in various assets which require future purchase, sale or funding commitments. These investments are recorded once funded, and the related commitments may include future capital calls from various third-party limited partnerships, signed and accepted mortgage loan applications, and obligations related to private placement securities.  As ofSeptember 30, 2020, the Company had commitments to purchase or fund approximately$1,170 millionand sell approximately$55 millionunder the terms of these investments.Mortgage LoansThe allowance for expected credit losses is developed by assessing the credit quality of pools of mortgage loans in good standing using debt service coverage ratios (DSCR) and loan-to-value ratios (LTV).  The DSCR compares a property’s net operating income to its debt service payments, including principal and interest.  The LTV ratio compares the current unpaid principal balance of the loan to the estimated fair value of the underlying property collateralizing the loan.  The pools developed to measure the credit loss allowance use increments of DSCR and LTV to draw distinctions between risk levels.  Changes in the allowance for mortgage loans are presented as a component of Net investment gains (losses) on the Condensed Consolidated Statements of Operations. 
 
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 The following table presents the amortized cost basis of mortgage loans for each credit quality indicator by year of origination.September 30, 2020Mortgage Loans Amortized Cost Basis by Origination Year(1)(In millions)20202019201820172016PriorTotalDSCR ≥1.6xLTV less than 55%$75$33$19$85$33$161$406LTV 55% to 65%—33295512—129LTV greater than 65%—5———1217DSCR 1.2x - 1.6xLTV less than 55%—3110131679149LTV 55% to 65%20543224——130LTV greater than 65%48103————151DSCR ≤1.2LTV less than 55%———————LTV 55% to 65%—1414———28LTV greater than 65%—23—4524799Total$143$296$104$222$85$259$1,109(1)The values in the table above reflect DSCR on a standardized amortization period and LTV based on the most recent appraised values trended forward using changes in a commercial real estate price index.As ofSeptember 30, 2020, accrued interest receivable on mortgage loans totaled$4 millionand is excluded from the amortized cost basis disclosed in the table above and the estimate of expected credit losses. 
 
 
  
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 Fair Value
 
 Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable.Level 1 - Quoted prices for identical instruments in active markets.Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are not observable.Prices may fall within Level 1, 2 or 3 depending upon the methodology and inputs used to estimate fair value for each specific security.  In general, the Company seeks to price securities using third-party pricing services.  Securities not priced by pricing services are submitted to independent brokers for valuation and, if those are not available, internally developed pricing models are used to value assets using a methodology and inputs the Company believes market participants would use to value the assets.  Prices obtained from third-party pricing services or brokers are not adjusted by the Company.The Company performs control procedures over information obtained from pricing services and brokers to ensure prices received represent a reasonable estimate of fair value and to confirm representations regarding whether inputs are observable or unobservable.  Procedures may include  i) the review of pricing service methodologies or broker pricing qualifications, ii) back-testing, where past fair value estimates are compared to actual transactions executed in the market on similar dates, iii) exception reporting, where period-over-period changes in price are reviewed and challenged with the pricing service or broker based on exception criteria, and iv) deep dives, where the Company performs an independent analysis of the inputs and assumptions used to price individual securities. 
 
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 Assets and Liabilities Measured at Fair ValueAssets and liabilities measured at fair value on a recurring basis are presented in the following tables. Corporate bonds and other includes obligations of the U.S. Treasury, government-sponsored enterprises, foreign governments and redeemable preferred stock.September 30, 2020TotalAssets/Liabilitiesat Fair Value(In millions)Level 1Level 2Level 3AssetsFixed maturity securities:Corporate bonds and other$372$23,459$694$24,525States, municipalities and political subdivisions—11,1794511,224Asset-backed—7,9172358,152Total fixed maturity securities37242,55597443,901Equity securities:Common stock157—16173Non-redeemable preferred stock656747746Total equity securities22267423919Short term and other1,30125—1,326Total assets$1,895$43,254$997$46,146LiabilitiesOther liabilities$—$16$—$16Total liabilities$—$16$—$16December 31, 2019TotalAssets/Liabilitiesat Fair Value(In millions)Level 1Level 2Level 3AssetsFixed maturity securities:Corporate bonds and other$175$22,085$468$22,728States, municipalities and political subdivisions—10,652—10,652Asset-backed—8,6621658,827Total fixed maturity securities17541,39963342,207Equity securities:Common stock135—7142Non-redeemable preferred stock5465811723Total equity securities18965818865Short term and other3971,344—1,741Total assets$761$43,401$651$44,813LiabilitiesOther liabilities$—$7$—$7Total liabilities$—$7$—$7 
 
  
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 The tables below present a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).Level 3(In millions)Corporate bonds and otherStates, municipalities and political subdivisionsAsset-backedEquity securitiesTotalBalance as of July 1, 2020$555$—$222$11$788Total realized and unrealized investment gains (losses):Reported in Net investment gains (losses)—————Reported in Net investment income—————Reported in Other comprehensive income (loss)5—9—14Total realized and unrealized investment gains (losses)5—9—14Purchases129452012206Sales—————Settlements(3)—(14)—(17)Transfers into Level 38———8Transfers out of Level 3——(2)—(2)Balance as of September 30, 2020$694$45$235$23$997Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2020 recognized in Net income (loss) in the period$—$—$—$—$—Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2020 recognized in Other comprehensive income (loss) in the period5—8—13Level 3(In millions)Corporate bonds and otherAsset-backedEquity securitiesTotalBalance as of July 1, 2019$338$193$22$553Total realized and unrealized investment gains (losses):Reported in Net investment gains (losses)————Reported in Net investment income————Reported in Other comprehensive income (loss)141—15Total realized and unrealized investment gains (losses)141—15Purchases7922—101Sales————Settlements(3)(4)—(7)Transfers into Level 3————Transfers out of Level 3—(16)—(16)Balance as of September 30, 2019$428$196$22$646Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2019 recognized in Net income (loss) in the period$—$—$—$—Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2019 recognized in Other comprehensive income (loss) in the period142—16 
 
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 Level 3(In millions)Corporate bonds and otherStates, municipalities and political subdivisionsAsset-backedEquity securitiesTotalBalance as of January 1, 2020$468$—$165$18$651Total realized and unrealized investment gains (losses):Reported in Net investment gains (losses)———(4)(4)Reported in Net investment income———(3)(3)Reported in Other comprehensive income (loss)27—18—45Total realized and unrealized investment gains (losses)27—18(7)38Purchases2004510012357Sales——(9)—(9)Settlements(9)—(22)—(31)Transfers into Level 38———8Transfers out of Level 3——(17)—(17)Balance as of September 30, 2020$694$45$235$23$997Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2020 recognized in Net income (loss) in the period$—$—$—$(7)$(7)Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2020 recognized in Other comprehensive income (loss) in the period29—19—48Level 3(In millions)Corporate bonds and otherAsset-backedEquity securitiesTotalBalance as of January 1, 2019$222$197$18$437Total realized and unrealized investment gains (losses):Reported in Net investment gains (losses)——22Reported in Net investment income————Reported in Other comprehensive income (loss)348—42Total realized and unrealized investment gains (losses)348244Purchases211422255Sales————Settlements(7)(12)—(19)Transfers into Level 3—45—45Transfers out of Level 3(32)(84)—(116)Balance as of September 30, 2019$428$196$22$646Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2019 recognized in Net income (loss) in the period$—$—$2$2Unrealized gains (losses) on Level 3 assets and liabilities held as of September 30, 2019 recognized in Other comprehensive income (loss) in the period299—38 Securities may be transferred in or out of levels within the fair value hierarchy based on the availability of observable market information and quoted prices used to determine the fair value of the security.  The availability of observable market information and quoted prices varies based on market conditions and trading volume.
 
 
  
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 Valuation Methodologies and InputsThe following section describes the valuation methodologies and relevant inputs used to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which the instruments are generally classified.Fixed Maturity SecuritiesLevel 1 securities include highly liquid government securities and exchange traded bonds, valued using quoted market prices.  Level 2 securities include most other fixed maturity securities as the significant inputs are observable in the marketplace.  All classes of Level 2 fixed maturity securities are valued using a methodology based on information generated by market transactions involving identical or comparable assets, a discounted cash flow methodology, or a combination of both when necessary.  Common inputs for all classes of fixed maturity securities include prices from recently executed transactions of similar securities, marketplace quotes, benchmark yields, spreads off benchmark yields, interest rates and U.S. Treasury or swap curves.  Specifically for asset-backed securities, key inputs include prepayment and default projections based on past performance of the underlying collateral and current market data.  Fixed maturity securities are primarily assigned to Level 3 in cases where broker/dealer quotes are significant inputs to the valuation and there is a lack of transparency as to whether these quotes are based on information that is observable in the marketplace.  Level 3 securities also include private placement debt securities whose fair value is determined using internal models with some inputs that are not market observable.Equity SecuritiesLevel 1 equity securities include publicly traded securities valued using quoted market prices.  Level 2 securities are primarily valued using pricing for similar securities, recently executed transactions and other pricing models utilizing market observable inputs.  Level 3 securities are primarily priced using broker/dealer quotes and internal models with some inputs that are not market observable.Short Term and Other Invested AssetsSecurities that are actively traded or have quoted prices are classified as Level 1.  These securities include money market funds and treasury bills.  Level 2 primarily includes commercial paper, for which all inputs are market observable.  Fixed maturity securities purchased within one year of maturity are classified consistent with fixed maturity securities discussed above.  Short term investments as presented in the tables above differ from the amounts presented on the Condensed Consolidated Balance Sheets because certain short term investments, such as time deposits, are not measured at fair value.As ofSeptember 30, 2020andDecember 31, 2019, there were$64 millionand$60 millionof overseas deposits within Other invested assets, which can be redeemed at net asset value in 90 days or less.  Overseas deposits are excluded from the fair value hierarchy because their fair value is recorded using the net asset value per share (or equivalent) practical expedient.Derivative Financial InvestmentsThe embedded derivative on funds withheld liability is valued using the change in fair value of the assets supporting the funds withheld liability, which are fixed maturity securities primarily valued with observable inputs. 
 
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 Significant Unobservable InputsThe following tables present quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurements of Level 3 assets.  Valuations for assets and liabilities not presented in the tables below are primarily based on broker/dealer quotes for which there is a lack of transparency as to inputs used to develop the valuations.  The quantitative detail of these unobservable inputs is neither provided nor reasonably available to the Company.  The weighted average rate is calculated based on fair value.September 30, 2020Estimated Fair Value(In millions)Valuation Technique(s)Unobservable Input(s)Range(Weighted Average)Fixed maturity securities$888Discounted cash flowCredit spread1% - 10% (3%)December 31, 2019Estimated Fair Value (In millions)Valuation Technique(s)Unobservable Input(s)Range(Weighted Average)Fixed maturity securities$525Discounted cash flowCredit spread1% - 6% (2%)For fixed maturity securities, an increase to the credit spread assumptions would result in a lower fair value measurement.Financial Assets and Liabilities Not Measured at Fair ValueThe carrying amount and estimated fair value of the Company's financial assets and liabilities which are not measured at fair value on the Condensed Consolidated Balance Sheets are presented in the following tables.September 30, 2020CarryingAmountEstimated Fair Value(In millions)Level 1Level 2Level 3TotalAssetsMortgage loans$1,088$—$—$1,159$1,159LiabilitiesLong term debt$2,776$—$3,118$—$3,118December 31, 2019CarryingAmountEstimated Fair Value(In millions)Level 1Level 2Level 3TotalAssetsMortgage loans$994$—$—$1,025$1,025Note receivable21——2121LiabilitiesLong term debt$2,679$—$2,906$—$2,906In the first quarter of 2020, the note receivable was repaid in full. As of December 31, 2019, the note receivable was included within Other assets on the Condensed Consolidated Balance Sheets.The carrying amounts reported on the Condensed Consolidated Balance Sheets for Cash, Short term investments not carried at fair value, Accrued investment income and certain Other assets and Other liabilities approximate fair value due to the short term nature of these items.  These assets and liabilities are not listed in the tables above. 
 
  
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 Claim and Claim Adjustment Expense Reserves
 Property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including incurred but not reported (IBNR) claims as of the reporting date.  The Company's reserve projections are based primarily on detailed analysis of the facts in each case, the Company's experience with similar cases and various historical development patterns.  Consideration is given to historical patterns such as claim reserving trends and settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions and economic conditions, including inflation, and public attitudes.  All of these factors can affect the estimation of claim and claim adjustment expense reserves.Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process.  Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve.  Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can affect ultimate claim costs.  In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be.  Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as workers' compensation, general liability and professional liability claims.  Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined.  There can be no assurance that the Company's ultimate cost for insurance losses will not exceed current estimates.Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in our results of operations and/or equity.  The Company reported catastrophe losses, net of reinsurance, of$160 millionand$536 millionfor thethree and nine months ended September 30, 2020.  Net catastrophe losses for thethree months ended September 30, 2020were driven by severe weather related events, primarily Hurricanes Laura, Isaias and Sally, and the Midwest derecho.  Net catastrophe losses for thenine months ended September 30, 2020included$273 millionrelated primarily to severe weather related events,$195 millionrelated to the COVID-19 pandemic and$68 millionrelated to civil unrest.  The Company reported catastrophe losses, net of reinsurance, of$32 millionand$128 millionfor thethree and nine months ended September 30, 2019related primarily to U.S. weather related events. 
 
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 Liability for Unpaid Claim and Claim Adjustment ExpensesThe following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves of the Life & Group segment.For the nine months ended September 30(In millions)20202019Reserves, beginning of year:Gross$21,720$21,984Ceded3,8354,019Net reserves, beginning of year17,88517,965Net incurred claim and claim adjustment expenses:Provision for insured events of current year4,4253,968Increase (decrease) in provision for insured events of prior years(68)(65)Amortization of discount143143Total net incurred(1)4,5004,046Net payments attributable to:Current year events(556)(599)Prior year events(3,285)(3,547)Total net payments(3,841)(4,146)Foreign currency translation adjustment and other3929Net reserves, end of period18,58317,894Ceded reserves, end of period3,9513,702Gross reserves, end of period$22,534$21,596(1)Total net incurred above does not agree to Insurance claims and policyholders' benefits as reflected on the Condensed Consolidated Statements of Operations due to amounts related to retroactive reinsurance deferred gain accounting, uncollectible reinsurance and benefit expenses related to future policy benefits, which are not reflected in the table above.Net Prior Year DevelopmentChanges in estimates of claim and claim adjustment expense reserves, net of reinsurance, for prior years are defined as net prior year loss reserve development (development).  These changes can be favorable or unfavorable.  The following table presents development recorded for the Specialty, Commercial, International and Corporate & Other segments.Periods ended September 30Three MonthsNine Months(In millions)2020201920202019Pretax (favorable) unfavorable development:Specialty$(16)$(20)$(47)$(58)Commercial1354215International—1(3)14Corporate & Other————Total pretax (favorable) unfavorable development$(15)$16$(8)$(29) 
 
  
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 SpecialtyThe following table presents further detail of the development recorded for the Specialty segment.Periods ended September 30Three MonthsNine Months(In millions)2020201920202019Pretax (favorable) unfavorable development:Medical Professional Liability$25$29$35$59Other Professional Liability and Management Liability—(18)(6)(37)Surety(40)(43)(70)(83)Warranty——(3)(7)Other(1)12(3)10Total pretax (favorable) unfavorable development$(16)$(20)$(47)$(58)Three Months2020Unfavorable development in medical professional liability was primarily due to higher than expected frequency of large losses in recent accident years and unfavorable development on a latent claim for an older accident year.Favorable development in surety was due to lower than expected frequency and lack of systemic activity for accident years 2019 and prior.2019Unfavorable development in medical professional liability was primarily due to higher than expected indemnity severity in accident years 2016 through 2018 in the Company's aging services business.Favorable development in other professional liability and management liability was due to lower than expected large claim losses in recent accident years in the Company's public company directors and officers liability (D&O) business.Favorable development in surety was due to lower than expected frequency for accident years 2015 through 2018.Unfavorable development in other was primarily due to higher than expected severity in aging services related to auto liability coverages. 
 
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 Nine Months2020Unfavorable development in medical professional liability was primarily due to higher than expected frequency of large losses in recent accident years, unfavorable development on a latent claim for an older accident year and unfavorable outcomes on specific claims in accident years 2015 and 2016 in the Company's aging services business.Favorable development in surety was due to lower than expected frequency and lack of systemic activity for accident years 2019 and prior.2019Unfavorable development in medical professional liability was primarily due to higher than expected indemnity severity in accident years 2016 through 2018 in the Company's aging services business, higher than expected severity in accident year 2013 in the Company's allied healthcare business, unfavorable outcomes on individual claims and higher than expected severity in accident year 2017 in the Company's dentists business.Favorable development in other professional liability and management liability was primarily due to lower than expected claim frequency and favorable outcomes on individual claims in accident years 2017 and prior related to financial institutions and lower than expected large claim losses in recent accident years in the Company's public company D&O business.Favorable development in surety was due to lower than expected frequency for accident years 2018 and prior.Unfavorable development in other was primarily due to higher than expected severity in aging services related to auto liability coverages. 
 
  
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 CommercialThe following table presents further detail of the development recorded for the Commercial segment.Periods ended September 30Three MonthsNine Months(In millions)2020201920202019Pretax (favorable) unfavorable development:Commercial Auto$9$(16)$33$(24)General Liability15436536Workers' Compensation(23)7(97)2Property and Other—1411Total pretax (favorable) unfavorable development$1$35$42$15Three Months2020Unfavorable development in general liability was primarily due to increased bodily injury severities in accident years 2012 through 2016 and higher than expected frequency and severity in the Company’s umbrella business in accident years 2015 through 2019.Favorable development in workers’ compensation was due to favorable medical trends driving lower than expected severity in multiple accident years.2019Favorable development in commercial auto was primarily due to a decline in bodily injury frequency in accident year 2018 and continued lower than expected severity across accident years 2013 through 2016.Unfavorable development in general liability was primarily due to higher than expected emergence in mass tort exposures related to accident years 2009 and prior, 2015 and 2016.Nine Months2020Unfavorable development in commercial auto was due to unfavorable claim severity in the Company's middle market and construction business in accident years 2017 through 2019.Unfavorable development in general liability was driven by higher than expected emergence in mass tort exposures, primarily due to New York reviver statute-related claims from accident years prior to 2010, increased bodily injury severities in accident years 2012 through 2016 and higher than expected frequency and severity in the Company’s umbrella business in accident years 2015 through 2019.Favorable development in workers’ compensation was due to favorable medical trends driving lower than expected severity in multiple accident years.Unfavorable development in property and other was primarily due to higher than expected large loss activity in accident year 2019 in the Company's middle market, national accounts and marine business units.2019Favorable development in commercial auto was primarily due to a decline in bodily injury frequency in accident year 2018 and continued lower than expected severity across accident years 2016 and prior.Unfavorable development in general liability was primarily due to higher than expected emergence in mass tort exposures as well as higher than expected large loss experience in the Company's excess and umbrella business in accident year 2017. 
 
  
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 InternationalThe following table presents further detail of the development recorded for the International segment.Periods ended September 30Three MonthsNine Months(In millions)2020201920202019Pretax (favorable) unfavorable development:Casualty$(5)$(6)$(11)$(11)Property, Energy and Marine(1)941023Specialty(4)3(2)2Total pretax (favorable) unfavorable development$—$1$(3)$14(1)EffectiveJanuary 1, 2020 the Property and Energy and Marine lines of business have been combined in the International segment. Prior period information has been conformed to the new line of business presentation.Nine Months2020Favorable development in casualty was primarily driven by better than expected loss experience across Europe and Canada in multiple accident years.Unfavorable development in property, energy and marine was driven by adverse attritional and large loss experience on discontinued lines, primarily in the Company’s construction and renewable energy business in recent accident years.2019Favorable development in casualty was driven by lower than expected large losses and claim severity in accident years 2014 and prior in Hardy and Europe.Unfavorable development in property, energy and marine was driven by higher than expected claims in Hardy on 2018 accident year catastrophes. 
 
 
  
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 Asbestos and Environmental Pollution (A&EP) ReservesIn 2010, Continental Casualty Company (CCC) together with several of the Company’s insurance subsidiaries completed a transaction with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc., under which substantially all of the Company’s legacy A&EP liabilities were ceded to NICO through a Loss Portfolio Transfer (LPT).  At the effective date of the transaction, the Company ceded approximately$1.6 billionof net A&EP claim and allocated claim adjustment expense reserves to NICO under a retroactive reinsurance agreement with an aggregate limit of$4 billion.  The $1.6 billionof claim and allocated claim adjustment expense reserves ceded to NICO was net of$1.2 billionof ceded claim and allocated claim adjustment expense reserves under existing third-party reinsurance contracts.  The NICO LPT aggregate reinsurance limit also covers credit risk on the existing third-party reinsurance related to these liabilities.  The Company paid NICO a reinsurance premium of$2 billionand transferred to NICO billed third-party reinsurance receivables related to A&EP claims with a net book value of$215 million, resulting in total consideration of$2.2 billion.In years subsequent to the effective date of the LPT, the Company recognized adverse prior year development on its A&EP reserves resulting in additional amounts ceded under the LPT.  As a result, the cumulative amounts ceded under the LPT have exceeded the$2.2 billionconsideration paid, resulting in the NICO LPT moving into a gain position, requiring retroactive reinsurance accounting.  Under retroactive reinsurance accounting, this gain is deferred and only recognized in earnings in proportion to actual paid recoveries under the LPT.  Over the life of the contract, there is no economic impact as long as any additional losses incurred are within the limit of the LPT.  In a period in which the Company recognizes a change in the estimate of A&EP reserves that increases or decreases the amounts ceded under the LPT, the proportion of actual paid recoveries to total ceded losses is affected and the change in the deferred gain is recognized in earnings as if the revised estimate of ceded losses was available at the effective date of the LPT.  The effect of the deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders' benefits in the Condensed Consolidated Statements of Operations.The impact of the LPT on the Condensed Consolidated Statements of Operations was the recognition of a retroactive reinsurance benefit of$9 millionand$7 millionfor the three months endedSeptember 30, 2020and2019and$43 millionfor the nine months endedSeptember 30, 2020and2019.  As ofSeptember 30, 2020andDecember 31, 2019, the cumulative amounts ceded under the LPT were$3.2 billion.  The unrecognized deferred retroactive reinsurance benefit was$349 millionand$392 millionas ofSeptember 30, 2020andDecember 31, 2019and is included within Other liabilities on the Condensed Consolidated Balance Sheets.NICO established a collateral trust account as security for its obligations to the Company.  The fair value of the collateral trust account was$3.5 billionand$3.7 billionas ofSeptember 30, 2020andDecember 31, 2019.  In addition, Berkshire Hathaway Inc. guaranteed the payment obligations of NICO up to the aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement.  NICO is responsible for claims handling and billing and collection from third-party reinsurers related to the majority of the Company’s A&EP claims. 
 
  
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 Life & Group Policyholder ReservesThe Company’s Life & Group segment includes its run-off long term care business as well as structured settlement obligations not funded by annuities related to certain property and casualty claimants.  Long term care policies provide benefits for nursing homes, assisted living facilities and home health care subject to various daily and lifetime caps.  Generally, policyholders must continue to make periodic premium payments to keep the policy in force and the Company has the ability to increase policy premiums, subject to state regulatory approval.The Company maintains both claim and claim adjustment expense reserves as well as future policy benefit reserves for policyholder benefits for the Life & Group segment.  Claim and claim adjustment expense reserves consist of estimated reserves for long term care policyholders that are currently receiving benefits, including claims that have been incurred but are not yet reported.  In developing the claim and claim adjustment expense reserve estimates for long term care policies, the Company’s actuaries perform a detailed claim experience study on an annual basis.  The study reviews the sufficiency of existing reserves for policyholders currently on claim and includes an evaluation of expected benefit utilization and claim duration.  In addition, claim and claim adjustment expense reserves are also maintained for the structured settlement obligations.  In developing the claim and claim adjustment expense reserve estimates for structured settlement obligations, the Company's actuaries monitor mortality experience on an annual basis.  The Company’s recorded claim and claim adjustment expense reserves reflect management's best estimate after incorporating the results of the most recent studies.The Company's most recent annual claim experience studies were completed in the third quarter of 2020 and resulted in a$46 millionpretax increase in claim and claim adjustment expense reserve estimates for structured settlement obligations primarily due to lower discount rate assumptions and mortality assumption changes and a$37 millionpretax reduction in claim and claim adjustment expense reserves for long term care policies primarily due to lower claim severity than anticipated in the reserve estimates.  The Company's 2019 annual claim experience studies were completed in the third quarter of 2019 and resulted in a$56 millionpretax reduction in claim and claim adjustment expense reserves for long term care policies primarily due to lower claim severity than anticipated in the reserve estimates.Future policy benefit reserves represent the active life reserves related to the Company’s long term care policies for policyholders that are not currently receiving benefits, which represent the present value of expected future benefit payments and expenses less expected future premium.  The determination of these reserves requires management to make estimates and assumptions about expected investment and policyholder experience over the life of the contract.  Since many of these contracts may be in force for several decades, these assumptions are subject to significant estimation risk.The actuarial assumptions that management believes are subject to the most variability are morbidity, persistency, discount rates and anticipated future premium rate increases.  Morbidity is the frequency and severity of injury, illness, sickness and diseases contracted.  Persistency is the percentage of policies remaining in force and can be affected by policy lapses, benefit reductions and death.  Discount rates are influenced by the investment yield on assets supporting long term care reserves which is subject to interest rate and market volatility and may also be affected by changes to the Internal Revenue Code.  Future premium rate increases are generally subject to regulatory approval, and therefore the exact timing and size of the approved rate increases are unknown.  As a result of this variability, the Company’s long term care future policy benefit reserves may be subject to material increases if actual experience develops adversely to the Company’s expectations.Annually, in the third quarter, management assesses the adequacy of its long term care future policy benefit reserves by performing a gross premium valuation (GPV) to determine if there is a premium deficiency.  Under the GPV, management estimates required reserves using best estimate assumptions as of the date of the assessment without provisions for adverse deviation.  The GPV required reserves are then compared to the existing recorded reserves.  If the GPV required reserves are greater than the existing recorded reserves, the existing assumptions are unlocked and future policy benefit reserves are increased to the greater amount.  Any such increase is reflected in the Company’s results of operations in the period in which the need for such adjustment is determined.  If the GPV required reserves are less than the existing recorded reserves, assumptions remain locked in and no adjustment is required.  Periodically, management engages independent third parties to assess the appropriateness of its best estimate assumptions.  The most recent third party assessment, performed in 2019, validated the assumption setting process and confirmed the best estimate assumptions appropriately reflected the experience data at that time. 
 
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 The GPV for the long term care future policy benefit reserves, performed in the third quarter of 2020 and 2019, indicated a premium deficiency primarily driven by lower discount rate assumptions.  Recognition of the premium deficiency resulted in a$74 millionand a$216 millionpretax increase in policyholders' benefits reflected in the Company's results of operations for the three and nine months ended September 30, 2020 and 2019. 
 
  
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 Legal Proceedings, Contingencies and Guarantees
 The Company is a party to various claims and litigation incidental to its business, which, based on the facts and circumstances currently known, are not material to the Company's results of operations or financial position.GuaranteesAs ofSeptember 30, 2020andDecember 31, 2019, the Company had recorded liabilities of approximately$5 millionrelated to guarantee and indemnification agreements.  Management does not believe that any future indemnity claims will be significantly greater than the amounts recorded.The Company has provided guarantees, if the primary obligor fails to perform, to holders of structured settlement annuities issued by a previously owned subsidiary.  As ofSeptember 30, 2020, the potential amount of future payments the Company could be required to pay under these guarantees was approximately$1.7 billion, which will be paid over the lifetime of the annuitants.  The Company does not believe any payment is likely under these guarantees, as the Company is the beneficiary of a trust that must be maintained at a level that approximates the discounted reserves for these annuities. 
 
  
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 Benefit Plans
 The components of net periodic pension cost (benefit) are presented in the following table.Periods ended September 30Three MonthsNine Months(In millions)2020201920202019Net periodic pension cost (benefit)Interest cost on projected benefit obligation$20$25$60$75Expected return on plan assets(38)(36)(116)(107)Amortization of net actuarial (gain) loss11103330Settlement loss——2—Total net periodic pension cost (benefit)$(7)$(1)$(21)$(2)For thethree and nine months ended September 30, 2020, the Company recognized$2 millionand$6 millionof non-service benefit in Insurance claims and policyholders' benefits and$5 millionand$15 millionof non-service benefit in Other operating expenses.  For thethree and nine months ended September 30, 2019, the Company recognized less than$1 millionand$1 millionof non-service benefit in Insurance claims and policyholders' benefits and less than$1 millionand$1 millionof non-service benefit in Other operating expenses. 
 
 
  
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 Accumulated Other Comprehensive Income (Loss) by Component
 The tables below display the changes in Accumulated other comprehensive income (loss) by component.(In millions)Net unrealized gains (losses) on investments with an allowance for credit losses(1)Net unrealized gains (losses) on other investments(1)Pension and postretirement benefitsCumulative foreign currency translation adjustmentTotalBalance as of July 1, 2020$(9)$1,172$(815)$(194)$154Other comprehensive income (loss) before reclassifications2231(2)37268Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $1, $(7), $2, $- and $(4)(4)24(9)—11Other comprehensive income (loss) net of tax (expense) benefit of $(1), $(56), $(3), $- and $(60)6207737257Balance as of September 30, 2020$(3)$1,379$(808)$(157)$411(In millions)Net unrealized gains (losses) on investments with OTTI losses(1)Net unrealized gains (losses) on other investments(1)Pension and postretirement benefitsCumulative foreign currency translation adjustmentTotalBalance as of July 1, 2019$20$1,023$(760)$(163)$120Other comprehensive income (loss) before reclassifications—44—(29)15Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $-, $2, $- and $2—3(7)—(4)Other comprehensive income (loss) net of tax (expense) benefit of $-, $(11), $(2), $- and $(13)—417(29)19Balance as of September 30, 2019$20$1,064$(753)$(192)$139(1)As of January 1, 2020, the Company adopted ASU 2016-13,Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The Net unrealized gains (losses) on investments with OTTI losses column that tracked the change in unrealized gains (losses) on investments with OTTI losses has been replaced with the Net unrealized gains (losses) on investments with an allowance for credit losses column. The balances previously reported in the Net unrealized gains (losses) on investments with OTTI losses column are now reported in the Net unrealized gains (losses) on other investments column. 
 
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 (In millions)Net unrealized gains (losses) on investments with an allowance for credit losses(1)Net unrealized gains (losses) on other investments(1)Pension and postretirement benefitsCumulative foreign currency translation adjustmentTotalBalance as of January 1, 2020$—$1,025$(833)$(141)$51Other comprehensive income (loss) before reclassifications(48)374(3)(16)307Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $12, $(5), $7, $- and $14(45)20(28)—(53)Other comprehensive income (loss) net of tax (expense) benefit of $1, $(92), $(7), $- and $(98)(3)35425(16)360Balance as of September 30, 2020$(3)$1,379$(808)$(157)$411(In millions)Net unrealized gains (losses) on investments with OTTI losses(1)Net unrealized gains (losses) on other investments(1)Pension and postretirement benefitsCumulative foreign currency translation adjustmentTotalBalance as of January 1, 2019$16$61$(775)$(180)$(878)Other comprehensive income (loss) before reclassifications3999(1)(12)989Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $-, $1, $6, $- and $7(1)(4)(23)—(28)Other comprehensive income (loss) net of tax (expense) benefit of $(2), $(266), $(6), $- and $(274)41,00322(12)1,017Balance as of September 30, 2019$20$1,064$(753)$(192)$139(1)As of January 1, 2020, the Company adopted ASU 2016-13,Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The Net unrealized gains (losses) on investments with OTTI losses column that tracked the change in unrealized gains (losses) on investments with OTTI losses has been replaced with the Net unrealized gains (losses) on investments with an allowance for credit losses column. The balances previously reported in the Net unrealized gains (losses) on investments with OTTI losses column are now reported in the Net unrealized gains (losses) on other investments column.Amounts reclassified from Accumulated other comprehensive income (loss) shown above are reported in Net income (loss) as follows:Component of AOCICondensed Consolidated Statements of Operations Line Item Affected by ReclassificationsNet unrealized gains (losses) on investments with an allowance for credit losses, Net unrealized gains (losses) on investments with OTTI losses and Net unrealized gains (losses) on other investmentsNet investment gains (losses)Pension and postretirement benefitsOther operating expenses and Insurance claims and policyholders' benefits 
 
  
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 Business Segments
 
 The Company's property and casualty commercial insurance operations are managed and reported inthreebusiness segments: Specialty, Commercial and International.  Thesethreesegments are collectively referred to as Property & Casualty Operations.  The Company's operations outside of Property & Casualty Operations are managed and reported intwosegments: Life & Group and Corporate & Other.The accounting policies of the segments are the same as those described in NoteAto the Consolidated Financial Statements within CNAF's Annual Report on Form 10-K for the year endedDecember 31, 2019.  The Company manages most of its assets on a legal entity basis, while segment operations are generally conducted across legal entities.  As such, only Insurance and Reinsurance receivables, Insurance reserves, Deferred acquisition costs, Goodwill and Deferred non-insurance warranty acquisition expense and revenue are readily identifiable for individual segments.  Distinct investment portfolios are not maintained for every individual segment; accordingly, allocation of assets to each segment is not performed.  Therefore, a significant portion of Net investment income and Net investment gains or losses are allocated primarily based on each segment's net carried insurance reserves, as adjusted.  All significant intersegment income and expense have been eliminated.  Income taxes have been allocated on the basis of the taxable income of the segments.In the following tables, certain financial measures are presented to provide information used by management to monitor the Company's operating performance.  Management utilizes these financial measures to monitor the Company's insurance operations and investment portfolio.The performance of the Company's insurance operations is monitored by management through core income (loss), which is derived from certain income statement amounts.  The Company's investment portfolio is monitored by management through analysis of various factors including unrealized gains and losses on securities, portfolio duration and exposure to market and credit risk.Core income (loss) is calculated by excluding from net income (loss) the after-tax effects of net investment gains or losses and any cumulative effects of changes in accounting guidance.  The calculation of core income (loss) excludes net investment gains or losses because net investment gains or losses are generally driven by economic factors that are not necessarily reflective of our primary operations. 
 
 
  
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 The Company's results of operations and selected balance sheet items by segment are presented in the following tables.Three months ended September 30, 2020SpecialtyCommercialInternationalLife &GroupCorporate& Other(In millions)EliminationsTotalOperating revenuesNet earned premiums$734$857$236$127$—$(1)$1,953Net investment income126165152083—517Non-insurance warranty revenue317—————317Other revenues—6————6Total operating revenues1,1771,0282513353(1)2,793Claims, benefits and expensesNet incurred claims and benefits433673150363(8)—1,611Policyholders’ dividends—5————5Amortization of deferred acquisition costs15815052———360Non-insurance warranty expense293—————293Other insurance related expenses661273128—(1)251Other expenses147(8)334—50Total claims, benefits and expenses96496222539426(1)2,570Core income (loss) before income tax2136626(59)(23)—223Income tax (expense) benefit on core income (loss)(45)(14)1244—(30)Core income (loss)$168$52$27$(35)$(19)$—193Net investment gains (losses)27Income tax (expense) benefit on net investment gains (losses)(7)Net investment gains (losses), after tax20Net income (loss)$213 
 
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 Three months ended September 30, 2019SpecialtyCommercialInternationalLife &GroupCorporate& Other(In millions)EliminationsTotalOperating revenuesNet earned premiums$712$813$236$130$—$(1)$1,890Net investment income121136172076—487Non-insurance warranty revenue292—————292Other revenues110(1)(1)1(1)9Total operating revenues1,1269592523367(2)2,678Claims, benefits and expensesNet incurred claims and benefits411564163476(7)—1,607Policyholders’ dividends25————7Amortization of deferred acquisition costs15513456———345Non-insurance warranty expense278—————278Other insurance related expenses711233529—(1)257Other expenses1397135(1)64Total claims, benefits and expenses93083526150628(2)2,558Core income (loss) before income tax196124(9)(170)(21)—120Income tax (expense) benefit on core income (loss)(43)(27)—484—(18)Core income (loss)$153$97$(9)$(122)$(17)$—102Net investment gains (losses)7Income tax (expense) benefit on net investment gains (losses)(2)Net investment gains (losses), after tax5Net income (loss)$107 
 
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 Nine months ended September 30, 2020SpecialtyCommercialInternationalLife &GroupCorporate& Other(In millions)EliminationsTotalOperating revenuesNet earned premiums$2,124$2,470$699$380$—$(1)$5,672Net investment income3153894462210—1,380Non-insurance warranty revenue926—————926Other revenues118——3(3)19Total operating revenues3,3662,8777431,00213(4)7,997Claims, benefits and expensesNet incurred claims and benefits1,3461,897480983(40)—4,666Policyholders’ dividends215————17Amortization of deferred acquisition costs462441143———1,046Non-insurance warranty expense859—————859Other insurance related expenses20837810679(1)(1)769Other expenses372636108(3)177Total claims, benefits and expenses2,9142,7577321,06867(4)7,534Core income (loss) before income tax45212011(66)(54)—463Income tax (expense) benefit on core income (loss)(98)(24)4496—(63)Core income (loss)$354$96$15$(17)$(48)$—400Net investment gains (losses)(120)Income tax (expense) benefit on net investment gains (losses)23Net investment gains (losses), after tax(97)Net income (loss)$303September 30, 2020(In millions)Reinsurance receivables$855$948$253$401$1,937$—$4,394Insurance receivables1,0151,26726971—2,559Deferred acquisition costs32428588———697Goodwill117—29———146Deferred non-insurance warranty acquisition expense2,998—————2,998Insurance reservesClaim and claim adjustment expenses5,6989,0541,9753,7662,041—22,534Unearned premiums2,5501,847502121——5,020Future policy benefits———12,978——12,978Deferred non-insurance warranty revenue3,951—————3,951 
 
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 Nine months ended September 30, 2019SpecialtyCommercialInternationalLife &GroupCorporate& Other(In millions)EliminationsTotalOperating revenuesNet earned premiums$2,061$2,339$729$390$—$(2)$5,517Net investment income4104804761620—1,573Non-insurance warranty revenue858—————858Other revenues120——5(4)22Total operating revenues3,3302,8397761,00625(6)7,970Claims, benefits and expensesNet incurred claims and benefits1,1981,5814721,093(40)—4,304Policyholders’ dividends415————19Amortization of deferred acquisition costs454391180———1,025Non-insurance warranty expense801—————801Other insurance related expenses2173729487(2)(2)766Other expenses3727145108(4)187Total claims, benefits and expenses2,7112,3867601,18566(6)7,102Core income (loss) before income tax61945316(179)(41)—868Income tax (expense) benefit on core income (loss)(136)(97)(2)747—(154)Core income (loss)$483$356$14$(105)$(34)$—714Net investment gains (losses)20Income tax (expense) benefit on net investment gains (losses)(7)Net investment gains (losses), after tax13Net income (loss)$727December 31, 2019(In millions)Reinsurance receivables$575$855$247$385$2,142$—$4,204Insurance receivables9711,21028416——2,481Deferred acquisition costs31125794———662Goodwill117—30———147Deferred non-insurance warranty acquisition expense2,840—————2,840Insurance reservesClaim and claim adjustment expenses5,2388,6561,8763,7162,234—21,720Unearned premiums2,3371,626495125——4,583Future policy benefits———12,311——12,311Deferred non-insurance warranty revenue3,779—————3,779 
 
 
  
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 The following table presents operating revenue by line of business for each reportable segment.Periods ended September 30Three MonthsNine Months(In millions)2020201920202019SpecialtyManagement & Professional Liability$668$638$1,881$1,903Surety153156444446Warranty & Alternative Risks3563321,041981Specialty revenues1,1771,1263,3663,330CommercialMiddle Market3813571,0711,065Construction(1)298265823754Small Business126124352377Other Commercial223213631643Commercial revenues1,0289592,8772,839InternationalCanada7370214204Europe9691282270Hardy8291247302International revenues251252743776Life & Group revenues3353361,0021,006Corporate & Other revenues371325Eliminations(1)(2)(4)(6)Total operating revenues2,7932,6787,9977,970Net investment gains (losses)277(120)20Total revenues$2,820$2,685$7,877$7,990 (1)EffectiveJanuary 1, 2020, the Construction line of business is presented separately in the Commercial segment to better align with the Company's underwriting expertise and the manner in which the products are sold. Prior period information has been conformed to the new line of business presentation. 
 
  
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 Non-Insurance Revenues from Contracts with Customers
 The Company reported$4.0 billionof Deferred non-insurance warranty revenue as ofSeptember 30, 2020and$3.8 billionas ofDecember 31, 2019.  For thethree and nine months ended September 30, 2020, the Company recognized$262 millionand$826 millionof revenues that were included in the deferred revenue balance as ofJanuary 1, 2020.  For thethree and nine months ended September 30, 2019, the Company recognized$236 millionand$747 millionof revenues that were included in the deferred revenue balance as ofJanuary 1, 2019.  For thethree and nine months ended September 30, 2020and2019, Non-insurance warranty revenue recognized from performance obligations related to prior periods due to a change in estimate was not material.  The Company expects to recognize approximately$0.3 billionof the deferred revenue in the remainder of 2020,$1.1 billionin 2021,$0.9 billionin 2022 and$1.7 billionthereafter. 
 
  
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 Expected Credit Losses - Uncollectible Reinsurance and Insurance Receivables
 The Company has established an allowance for uncollectible reinsurance receivables which relates to both amounts already billed on ceded paid losses as well as ceded reserves that will be billed when losses are paid in the future.  For assessing expected credit losses, the Company separates reinsurance receivables into two pools: voluntary reinsurance receivables and involuntary reinsurance exposures to mandatory pools.  The Company has not recorded an allowance for involuntary pools as there is no perceived credit risk.  The principal credit quality indicator used in the valuation of the allowance on voluntary reinsurance receivables is the financial strength rating of the reinsurer sourced from major rating agencies.  If the reinsurer is unrated, an internal financial strength rating is assigned based on the Company’s historical loss experience and the Company’s assessment of reinsurance counterparty risk profile, which generally corresponds with a B rating.  Changes in the allowance are presented as a component of Insurance claims and policyholders' benefits on the Condensed Consolidated Statements of Operations.The following table summarizes the outstanding amount of voluntary reinsurance receivables, gross of any collateral arrangements, by financial strength rating.(In millions)September 30, 2020A- to A++$2,729B- to B++874Insolvent4Totalvoluntary reinsurance outstanding balance(1)$3,607(1)Expected credit losses for legacy A&EP receivables are ceded to NICO and the reinsurance limit on the LPT has not been exhausted, therefore no allowance is recorded for these receivables and they are excluded from the table above.  Refer to Note E for information regarding the LPT.  The Company has also excluded receivables from involuntary pools.Voluntary reinsurance receivables within the B- to B++ rating distribution are primarily due from captive reinsurers and backed by collateral arrangements. The Company has established an allowance for uncollectible insurance receivables. A loss rate methodology is used to determine expected credit losses for premium receivables.  This methodology uses the Company’s historical annual credit losses relative to gross premium written to develop a range of credit loss rates for each dollar of gross written premium underwritten.  The expected credit loss for loss sensitive business in good standing is calculated on a pool basis, using historical default rate data obtained from major rating agencies.  Changes in the allowance are presented as a component of Other operating expenses on the Condensed Consolidated Statements of Operations.
 
 
  
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 •Insurance Reserves •Long Term Care Reserves •Reinsurance and Insurance Receivables •Valuation of Investments and Impairment of Securities •Income Taxes 
 
 
  
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 Periods ended September 30Three MonthsNine Months(In millions)2020201920202019Operating RevenuesNet earned premiums$1,953$1,890$5,672$5,517Net investment income5174871,3801,573Non-insurance warranty revenue317292926858Other revenues691922Total operating revenues2,7932,6787,9977,970Claims, Benefits and ExpensesNet incurred claims and benefits1,6111,6074,6664,304Policyholders' dividends571719Amortization of deferred acquisition costs3603451,0461,025Non-insurance warranty expense293278859801Other insurance related expenses251257769766Other expenses5064177187Total claims, benefits and expenses2,5702,5587,5347,102Core income before income tax223120463868Income tax expense on core income(30)(18)(63)(154)Core income193102400714Net investment gains (losses)277(120)20Income tax (expense) benefit on net investment gains (losses)(7)(2)23(7)Net investment gains (losses), after tax205(97)13Net income$213$107$303$727
 
 
 
 
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 Periods ended September 30Three MonthsNine Months(In millions, except ratios, rate, renewal premium change and retention)2020201920202019Gross written premiums$1,855$1,766$5,331$5,191Gross written premiums excluding third party captives8617782,4132,263Net written premiums7957322,2312,143Net earned premiums7347122,1242,061Net investment income126121315410Core income168153354483Other performance metrics:Loss ratio excluding catastrophes and development60.0%60.1%59.8%60.2%Effect of catastrophe impacts1.00.55.70.8Effect of development-related items(2.0)(2.8)(2.1)(2.9)Loss ratio59.0%57.8%63.4%58.1%Expense ratio30.531.831.532.6Dividend ratio—0.20.10.2Combined ratio89.5%89.8%95.0%90.9%Combined ratio excluding catastrophes and development90.5%92.1%91.4%93.0%Rate13%6%11%4%Renewal premium change129117Retention86878588New business$104$91$275$274
 
 
 
 
 
 
 
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 (In millions)September 30, 2020December 31, 2019Gross case reserves$1,580$1,481Gross IBNR reserves4,1183,757Total gross carried claim and claim adjustment expense reserves$5,698$5,238Net case reserves$1,412$1,343Net IBNR reserves3,4643,333Total net carried claim and claim adjustment expense reserves$4,876$4,676
 
 
  
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 Periods ended September 30Three MonthsNine Months(In millions, except ratios, rate, renewal premium change and retention)2020201920202019Gross written premiums$915$860$3,103$2,825Gross written premiums excluding third party captives9158523,0182,742Net written premiums8047752,7032,536Net earned premiums8578132,4702,339Net investment income165136389480Core income529796356Other performance metrics:Loss ratio excluding catastrophes and development61.0%61.5%60.4%61.8%Effect of catastrophe impacts17.03.014.34.3Effect of development-related items0.64.82.11.5Loss ratio78.6%69.3%76.8%67.6%Expense ratio32.331.733.232.7Dividend ratio0.60.60.60.6Combined ratio111.5%101.6%110.6%100.9%Combined ratio excluding catastrophes and development93.9%93.8%94.2%95.1%Rate11%4%9%3%Renewal premium change8585Retention81868486New business$168$173$564$522
 
 
 
 
 
 
 
 
 
 
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 (In millions)September 30, 2020December 31, 2019Gross case reserves$3,776$3,937Gross IBNR reserves5,2784,719Total gross carried claim and claim adjustment expense reserves$9,054$8,656Net case reserves$3,378$3,543Net IBNR reserves4,8194,306Total net carried claim and claim adjustment expense reserves$8,197$7,849
 
 
  
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 Periods ended September 30Three MonthsNine Months(In millions, except ratios, rate, renewal premium change and retention)2020201920202019Gross written premiums$238$226$822$837Net written premiums222201680709Net earned premiums236236699729Net investment income15174447Core income (loss)27(9)1514Other performance metrics:Loss ratio excluding catastrophes and development60.1%67.3%60.1%61.4%Effect of catastrophe impacts3.01.78.91.4Effect of development-related items0.10.4(0.4)1.9Loss ratio63.2%69.4%68.6%64.7%Expense ratio34.938.035.637.5Combined ratio98.1%107.4%104.2%102.2%Combined ratio excluding catastrophes and development95.0%105.3%95.7%98.9%Rate16%10%12%7%Renewal premium change146115Retention70747170New business$58$52$187$207
 
 
 
 
 
 
 
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 (In millions)September 30, 2020December 31, 2019Gross case reserves$821$858Gross IBNR reserves1,1541,018Total gross carried claim and claim adjustment expense reserves$1,975$1,876Net case reserves$718$759Net IBNR reserves997869Total net carried claim and claim adjustment expense reserves$1,715$1,628
 
 
  
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 Periods ended September 30Three MonthsNine Months(In millions)2020201920202019Net earned premiums$127$130$380$390Net investment income208207622616Core loss before income tax(59)(170)(66)(179)Income tax benefit on core loss24484974Core loss(35)(122)(17)(105)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 Long Term Care Active Life Reserve - Change in estimated reserve margin (In millions)September 30, 2019 Estimated Margin$—Changes in underlying discount rate assumptions(609)Changes in underlying morbidity assumptions51Changes in underlying persistency assumptions152Changes in underlying premium rate action assumptions318Changes in underlying expense and other assumptions14September 30, 2020 Premium Deficiency$(74)
 
 
 
 September 30, 2020Estimated reduction to pretax incomeHypothetical revisions (In millions)Morbidity:2.5% increase in morbidity$3395% increase in morbidity677Persistency:5% decrease in active life mortality and lapse$25410% decrease in active life mortality and lapse469Discount Rates:25 basis point decline in new money interest rates$17550 basis point decline in new money interest rates356Premium Rate Actions:25% decrease in anticipated future premium rate increases$6650% decrease in anticipated future premium rate increases132
 
 
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 September 30, 2020(In millions)Claim and claim adjustment expensesFuture policy benefitsTotalLong term care$2,866$9,678$12,544Structured settlement annuities547—547Other12—12Total3,4259,67813,103Shadow adjustments(1)2043,0353,239Ceded reserves(2)137265402Total gross reserves$3,766$12,978$16,744
 December 31, 2019(In millions)Claim and claim adjustment expensesFuture policy benefitsTotalLong term care$2,863$9,470$12,333Structured settlement annuities515—515Other12—12Total3,3909,47012,860Shadow adjustments(1)1672,6152,782Ceded reserves(2)159226385Total gross reserves$3,716$12,311$16,027
 (1)To the extent that unrealized gains on fixed income securities supporting long term care products and annuity contracts would result in a premium deficiency if those gains were realized, an increase in Insurance reserves is recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments). (2)Ceded reserves relate to claim or policy reserves fully reinsured in connection with a sale or exit from the underlying business. 
 
 
  
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 Periods ended September 30Three MonthsNine Months(In millions)2020201920202019Net investment income$3$6$10$20Interest expense32319499Core loss(19)(17)(48)(34)
 
 
 
 
 
 (In millions)September 30, 2020December 31, 2019Gross case reserves$1,147$1,137Gross IBNR reserves8941,097Total gross carried claim and claim adjustment expense reserves$2,041$2,234Net case reserves$90$92Net IBNR reserves7683Total net carried claim and claim adjustment expense reserves$166$175
 
 
 
  
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 Periods ended September 30Three MonthsNine Months(In millions)2020201920202019Fixed income securities:Taxable fixed income securities$363$383$1,094$1,151Tax-exempt fixed income securities8079238241Total fixed income securities4434621,3321,392Limited partnership investments641238125Common stock76(8)32Other, net of investment expense371824Pretax net investment income$517$487$1,380$1,573Fixed income securities, after tax$364$378$1,092$1,140Net investment income, after tax4213991,1301,284Effective income yield for the fixed income securities portfolio, pretax4.5%4.8%4.6%4.8%Effective income yield for the fixed income securities portfolio, after tax3.7%3.9%3.7%3.9%Limited partnership and common stock return4.1%0.9%1.7%7.7%
 
 
 
 
  
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 Periods ended September 30Three MonthsNine Months(In millions)2020201920202019Fixed maturity securities:Corporate and other bonds$14$7$(105)$—States, municipalities and political subdivisions613913Asset-backed6(5)34(19)Total fixed maturity securities263(32)(6)Non-redeemable preferred stock257(45)60Short term and other(21)(3)(27)(34)Mortgage loans(3)—(16)—Net investment gains (losses)277(120)20Income tax (expense) benefit on net investment gains (losses)(7)(2)23(7)Net investment gains (losses), after tax$20$5$(97)$13
 
 
 
 
 
  
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 September 30, 2020December 31, 2019(In millions)Estimated Fair ValueNet Unrealized Gains (Losses)Estimated Fair ValueNet Unrealized Gains (Losses)U.S. Government, Government agencies and Government-sponsored enterprises$4,026$127$4,136$95AAA3,6234523,254349AA6,7739616,663801A9,4701,2969,0621,051BBB17,4882,10516,8391,684Non-investment grade2,521382,253101Total$43,901$4,979$42,207$4,081
 
 
 September 30, 2020(In millions)Estimated Fair ValueGross Unrealized LossesU.S. Government, Government agencies and Government-sponsored enterprises$99$1AAA371AA2449A64221BBB1,26471Non-investment grade81678Total$3,102$181
 September 30, 2020(In millions)Estimated Fair ValueGross Unrealized LossesDue in one year or less$142$8Due after one year through five years81954Due after five years through ten years1,47983Due after ten years66236Total$3,102$181
 
 
 
 
 
 
  
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 September 30, 2020December 31, 2019(In millions)Estimated Fair ValueEffectiveDuration(In years)Estimated Fair ValueEffectiveDuration(In years)Investments supporting Life & Group$18,7009.0$18,0158.9Other investments27,4084.526,8134.1Total$46,1086.3$44,8286.0
 
 
 
 
 (In millions)September 30, 2020December 31, 2019Short term investments:Commercial paper$—$1,181U.S. Treasury securities1,247364Other215316Total short term investments$1,462$1,861
 
 
 
 
  
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 •During thenine months ended September 30, 2020, we paid dividends of$850 millionand repurchased435,376shares of our common stock at an aggregate cost of$18 million. •In the third quarter of2020, we issued $500 million of 2.05% senior notes due August 15, 2030 and redeemed the $400 million outstanding aggregate principal balances of our 5.750% senior notes due August 15, 2021. •During thenine months ended September 30, 2019, we paid dividends of$834 millionand repurchased415,695shares of our common stock at an aggregate cost of$18 million. •In the second quarter of2019, we issued $500 million of 3.90% senior notes due May 1, 2029 and redeemed the $500 million outstanding aggregate principal balances of our 5.875% senior notes due August 15, 2020. 
 
 
 
 
  
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 •the risks and uncertainties associated with our insurance reserves, as outlined in the Critical Accounting Estimates and the Reserves - Estimates and Uncertainties sections of our 2019 Annual Report on Form 10-K and this report, including the sufficiency of the reserves and the possibility for future increases, which would be reflected in the results of operations in the period that the need for such adjustment is determined; •the risk that the other parties to the transaction in which, subject to certain limitations, we ceded our legacy A&EP liabilities will not fully perform their obligations to CNA, the uncertainty in estimating loss reserves for A&EP liabilities and the possible continued exposure of CNA to liabilities for A&EP claims that are not covered under the terms of the transaction; •the performance of reinsurance companies under reinsurance contracts with us; and •the risks and uncertainties associated with potential acquisitions and divestitures, including the consummation of such transactions, the successful integration of acquired operations and the potential for subsequent impairment of goodwill or intangible assets. 
 •the COVID-19 pandemic, and actions seeking to mitigate the spread of the virus, have resulted in significant risk across our enterprise, as economic uncertainty and depressed business conditions brought on by the crisis may materially and adversely impact our business, drive significant decreases in our premium volume and result in significant losses in our investment portfolio, increased claim and litigation activity and unfavorable regulatory outcomes. •the impact of competitive products, policies and pricing and the competitive environment in which we operate, including changes in our book of business; •product and policy availability and demand and market responses, including the level of ability to obtain rate increases and decline or non-renew underpriced accounts, to achieve premium targets and profitability and to realize growth and retention estimates; •general economic and business conditions, including recessionary conditions that may decrease the size and number of our insurance customers and create additional losses to our 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; •conditions in the capital and credit markets, including uncertainty and instability in these markets, as well as the overall economy, and their impact on the returns, types, liquidity and valuation of our investments; •conditions in the capital and credit markets that may limit our ability to raise significant amounts of capital on favorable terms; and 
 
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 •the possibility of changes in our ratings by ratings agencies, including the inability to access certain markets or distribution channels and the required collateralization of future payment obligations as a result of such changes, and changes in rating agency policies and practices. 
 •regulatory and legal initiatives and compliance with governmental regulations and other legal requirements, including with respect to cyber security protocols, legal inquiries by state authorities, judicial interpretations within the regulatory framework, including interpretation of policy provisions, decisions regarding coverage and theories of liability, legislative actions that increase claimant activity, including those revising applicability of statutes of limitations, trends in litigation and the outcome of any litigation involving us and rulings and changes in tax laws and regulations; •regulatory limitations, impositions and restrictions upon us, including with respect to our ability to increase premium rates, and the effects of assessments and other surcharges for guaranty funds and second-injury funds, other mandatory pooling arrangements and future assessments levied on insurance companies; and •regulatory limitations and restrictions, including limitations upon our ability to receive dividends from our insurance subsidiaries, imposed by regulatory authorities, including regulatory capital adequacy standards. 
 •weather and other natural physical events, including the severity and frequency of storms, hail, snowfall and other winter conditions, natural disasters such as hurricanes and earthquakes, as well as climate change, including effects on global weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, wildfires, rain, hail and snow; •regulatory requirements imposed by coastal state regulators in the wake of hurricanes or other natural disasters, including limitations on the ability to exit markets or to non-renew, cancel or change terms and conditions in policies, as well as mandatory assessments to fund any shortfalls arising from the inability of quasi-governmental insurers to pay claims; •man-made disasters, including the possible occurrence of terrorist attacks, the unpredictability of the nature, targets, severity or frequency of such events, and the effect of the absence or insufficiency of applicable terrorism legislation on coverages; •the occurrence of epidemics and pandemics; and •mass tort claims, including those related to exposure to potentially harmful products or substances such as glyphosate, lead paint and opioids; and claims arising from changes that repeal or weaken tort reforms, such as those related to abuse reviver statutes. 
 •in 2016, the U.K. approved an exit from the E.U., commonly referred to as "Brexit.”  While the withdrawal of the U.K. from the E.U. was official as of January 31, 2020, until the transition period ends, there remains a lack of specificity and detail regarding the long term relationship between the two sides and how businesses operating in both jurisdictions may be affected.  In any event, effective January 1, 2019, our E.U. business is no longer handled out of our U.K.-domiciled subsidiary, but through our European subsidiary in Luxembourg, which was established specifically to address the departure of the U.K. from the E.U. and to seek to ensure the Company’s ability to operate effectively throughout the E.U.  As a result, the complexity and cost of regulatory compliance of our European business has increased and will likely continue to result in elevated expenses. 
 
 
  
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 CNA Financial CorporationDated:  November 2, 2020By/s/ Albert J. MirallesAlbert J. MirallesExecutive Vice President andChief Financial Officer(Duly authorized officer and principal financial and accounting officer)
 
 
  
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 Description of ExhibitExhibit NumberCertification of Chief Executive Officer31.1Certification of Chief Financial Officer31.2Written Statement of the Chief Executive Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)32.1Written Statement of the Chief Financial Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)32.2XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document101.INSInline XBRL Taxonomy Extension Schema101.SCHInline XBRL Taxonomy Extension Calculation Linkbase101.CALInline XBRL Taxonomy Extension Definition Linkbase101.DEFInline XBRL Taxonomy Label Linkbase101.LABInline XBRL Taxonomy Extension Presentation Linkbase101.PRECover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)104.1