# LOEWS CORP (L) FY 2023 MD&A Verbatim Item 7 Management's Discussion and Analysis from LOEWS CORP's 10-K for fiscal year 2023. SEC filing source: https://www.sec.gov/Archives/edgar/data/60086/000006008624000029/l-20231231.htm Accession: 0000060086-24-000029 Filing date: 2024-02-06 Report date: 2023-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/L/ All MD&A years: /company/L/mda/ Previous year: /company/L/mda/fy2022/ (FY 2022) Next year: /company/L/mda/fy2024/ (FY 2024) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. OVERVIEW Loews Corporation is a holding company and has four reportable segments comprised of three individual consolidated operating subsidiaries, CNA Financial Corporation (“CNA”), Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”) and Loews Hotels Holding Corporation (“Loews Hotels & Co”); and the Corporate segment. The Corporate segment is primarily comprised of Loews Corporation, excluding its operating subsidiaries, and the equity method of accounting for Altium Packaging LLC (“Altium Packaging”). Unless the context otherwise requires, as used herein, the term “Company” means Loews Corporation including its subsidiaries, the terms “Parent Company,” “we,” “our,” “us” or like terms mean Loews Corporation excluding its subsidiaries and the term “Net income (loss) attributable to Loews Corporation” means Net income (loss) attributable to Loews Corporation shareholders. We rely upon our invested cash balances and distributions from our subsidiaries to generate the funds necessary to meet our obligations and to declare and pay any dividends to our shareholders. The ability of our subsidiaries to pay dividends is subject to, among other things, the availability of sufficient earnings and funds in such subsidiaries, applicable state laws, including in the case of the insurance subsidiaries of CNA, laws and rules governing the payment of dividends by regulated insurance companies (see Note 15 of the Notes to Consolidated Financial Statements included under Item 8) and compliance with covenants in their respective loan agreements. Claims of creditors of our subsidiaries will generally have priority as to the assets of such subsidiaries over our claims and those of our creditors and shareholders. We are not responsible for the liabilities and obligations of our subsidiaries and there are no Parent Company guarantees. The following discussion should be read in conjunction with Item 1A, Risk Factors, and Item 8, Financial Statements and Supplementary Data of this Form 10-K. RESULTS OF OPERATIONS This section of this Form 10-K generally discusses 2023 and 2022 results and year-to-year comparisons between 2023 and 2022. With the exception of the discussions of Consolidated Financial Results, CNA Financial and Other Insurance Operations, as a result of the adoption Accounting Standards Update (“ASU”) 2018-12, “Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts,” (“ASU 2018-12”), a discussion of changes in results of operations comparing the years ended December 31, 2022 and 2021 for Loews Corporation and its subsidiaries may be found in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 7, 2023. As of January 1, 2023, ASU 2018-12 was adopted using the modified retrospective method applied as of the transition date of January 1, 2021, which required changes to the measurement and disclosure of long-duration contracts. Prior period amounts presented in the financial statements have been adjusted to reflect application of the new guidance. For additional information see Notes 1 and 9 of the Notes to Consolidated Financial Statements included under Item 8. [[GREPCENT_TABLE]] [["","44"]] [[/GREPCENT_TABLE]] Table of Contents Consolidated Financial Results The following table summarizes net income (loss) attributable to Loews Corporation by segment and the basic and diluted net income per share attributable to Loews Corporation for the years ended December 31, 2023, 2022 and 2021: [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022 (a)","","2021 (a)"],["(In millions, except per share data)"],["CNA Financial","$","1,094","","","$","612","","","$","1,061"],["Boardwalk Pipelines","283","","","247","","","235"],["Loews Hotels & Co","147","","","117","","","(14)"],["Corporate","(90)","","","(154)","","","280"],["Net income attributable to Loews Corporation","$","1,434","","","$","822","","","$","1,562"],["Basic net income per share","$","6.30","","","$","3.39","","","$","6.02"],["Diluted net income per share","$","6.29","","","$","3.38","","","$","6.00"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(a)","As of January 1, 2023, ASU 2018-12 was adopted using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts presented in the financial statements have been adjusted to reflect application of the new guidance. For additional information see Notes 1 and 9 of the Notes to Consolidated Financial Statements included under Item 8."]] [[/GREPCENT_TABLE]] 2023 Compared with 2022 Net income attributable to Loews Corporation for 2023 was $1.4 billion, or $6.29 diluted net income per share, compared to net income attributable to Loews Corporation of $822 million, or $3.38 diluted net income per share, in 2022. Net income attributable to Loews Corporation for 2023 includes a $37 million after-tax charge for Corporate for the termination of a non-contributory defined benefit pension plan and a $36 million after-tax gain for Loews Hotels & Co related to the acquisition of an additional equity interest in, and the consolidation of, a previously unconsolidated joint venture property. The increase in net income attributable to Loews Corporation in 2023 compared to 2022 was driven by improved results at CNA due to higher net investment income, improved underwriting income, lower investment losses, and a significantly lower unfavorable impact in 2023 from long-term care annual reserve reviews performed in the third quarter of each year. Additionally the parent company posted higher investment returns on equity securities and short-term investments. Boardwalk Pipelines also contributed positively to Loews Corporation’s year-over-year results due to higher revenues due to re-contracting at higher rates and recently completed growth projects. 2022 Compared with 2021 Net income attributable to Loews Corporation decreased to $822 million, or $3.38 diluted net income per share, for 2022 as compared to $1.6 billion, or $6.00 diluted net income per share, in 2021. Net income attributable to Loews Corporation for 2021 includes a net investment gain of $555 million ($438 million after tax) related to the sale of approximately 47% of Altium Packaging. Excluding the gain on sale of Altium Packaging, net income decreased $302 million in 2022 compared to 2021, driven by unfavorable limited partnership and common stock results, and net losses from sales of fixed income securities at CNA, partially offset by improved underwriting results and increased net investment income from fixed income securities for CNA and the significant improvement in results for Loews Hotels & Co due to the rebound in leisure travel. Net income for 2022 also included an increase to long term care reserves for CNA, primarily driven by the unfavorable impact of increased cost of care inflation offset by favorable premium rate assumptions. Boardwalk Pipelines also contributed positively to Loews Corporation’s year-over-year results due to higher revenues from recently completed growth projects, re-contracting at higher rates and higher utilization-based revenues. [[GREPCENT_TABLE]] [["","45"]] [[/GREPCENT_TABLE]] Table of Contents CNA Financial The following table summarizes the results of operations for CNA for the years ended December 31, 2023, 2022 and 2021 as presented in Note 21 of the Notes to Consolidated Financial Statements included under Item 8. For further discussion of Net investment income and Investment gains (losses), see the Investments section of this MD&A. [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022 (a)","","2021 (a)"],["(In millions)"],["Revenues:"],["Insurance premiums","$","9,480","","","$","8,667","","","$","8,175"],["Net investment income","2,264","","","1,805","","","2,159"],["Investment gains (losses)","(99)","","","(199)","","","120"],["Non-insurance warranty revenue","1,624","","","1,574","","","1,430"],["Other revenues","30","","","32","","","24"],["Total","13,299","","","11,879","","","11,908"],["Expenses:"],["Insurance claims and policyholders\u2019 benefits","7,068","","","6,653","","","6,371"],["Amortization of deferred acquisition costs","1,644","","","1,490","","","1,443"],["Non-insurance warranty expense","1,544","","","1,471","","","1,328"],["Other operating expenses","1,398","","","1,339","","","1,191"],["Interest","127","","","112","","","113"],["Total","11,781","","","11,065","","","10,446"],["Income before income tax","1,518","","","814","","","1,462"],["Income tax expense","(313)","","","(133)","","","(278)"],["Net income","1,205","","","681","","","1,184"],["Amounts attributable to noncontrolling interests","(111)","","","(69)","","","(123)"],["Net income attributable to Loews Corporation","$","1,094","","","$","612","","","$","1,061"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(a)","As of January 1, 2023, ASU 2018-12 was adopted using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts presented in the financial statements have been adjusted to reflect application of the new guidance. For additional information see Notes 1 and 9 of the Notes to Consolidated Financial Statements included under Item 8."]] [[/GREPCENT_TABLE]] 2023 Compared with 2022 Net income attributable to Loews Corporation increased $482 million for 2023 as compared with 2022. The increase was primarily due to higher net investment income from limited partnership returns and fixed income securities, improved underwriting income and lower investment losses driven by the favorable change in fair value of non-redeemable preferred stock. Net income for 2022 also included a $186 million ($131 million after tax and noncontrolling interests) increase to long term care reserves primarily driven by the unfavorable impact of increased cost of care inflation offset by favorable premium rate assumptions. 2022 Compared with 2021 Net income attributable to Loews Corporation decreased $449 million for 2022 as compared with 2021. The decrease was primarily driven by lower net investment income and investment losses in 2022 as compared with investment gains in 2021. Lower net investment income was driven by unfavorable limited partnership and common stock results and investment losses were driven by net losses on fixed maturity securities and the unfavorable change in fair value of non-redeemable preferred stock. Net income for 2022 also included a $186 million ($131 million after tax and noncontrolling interests) increase to long term care reserves primarily driven by the unfavorable impact of increased cost of care inflation offset by favorable premium rate assumptions. These decreases to net income were partially offset by improved underwriting results and higher net investment income from fixed income securities for 2022 as compared with 2021. Catastrophe losses were $247 million ($174 million after tax and noncontrolling interests) for 2022 as compared with $397 [[GREPCENT_TABLE]] [["","46"]] [[/GREPCENT_TABLE]] Table of Contents million ($280 million after tax and noncontrolling interests) in 2021. Catastrophe losses for 2022 and 2021 were driven by severe weather related events, primarily Winter Storm Elliott and Hurricane Ian for 2022 and Hurricane Ida and Winter Storms Uri and Viola for 2021. CNA’s Property & Casualty and Other Insurance Operations CNA’s commercial property and casualty insurance operations (“Property & Casualty Operations”) include its Specialty, Commercial and International lines of business. CNA’s Other Insurance Operations outside of Property & Casualty Operations include its long-term care business that is in run-off, certain corporate expenses, including interest on CNA’s corporate debt, and the results of certain property and casualty businesses in run-off, including CNA Re, asbestos and environmental pollution (“A&EP”), a legacy portfolio of excess workers’ compensation (“EWC”) policies and certain legacy mass tort reserves. CNA’s products and services are primarily marketed through independent agents, brokers and managing general underwriters to a wide variety of customers, including small, medium and large businesses, insurance companies, associations, professionals and other groups. We believe the presentation of CNA as one reportable segment is appropriate in accordance with applicable accounting standards on segment reporting. However, for purposes of this discussion and analysis of the results of operations, we provide greater detail with respect to CNA’s Property & Casualty Operations and Other Insurance Operations to enhance the reader’s understanding and to provide further transparency into key drivers of CNA’s financial results. In assessing its insurance operations, CNA utilizes the core income (loss) financial measure. Core income (loss) is calculated by excluding investment gains or losses from net income (loss). In addition, core income (loss) excludes the effects of noncontrolling interests. The calculation of core income (loss) excludes investment gains or losses because investment gains or losses are generally driven by economic factors that are not necessarily reflective of CNA’s primary insurance operations. Core income (loss) is deemed to be a non-GAAP financial measure and management believes some investors may find this measure useful to evaluate CNA’s insurance operations. Please see the non-GAAP reconciliation of net income (loss) to core income (loss) that follows in this MD&A. Property & Casualty Operations In evaluating the results of Property & Casualty Operations, CNA utilizes the loss ratio, the underlying loss ratio, the expense ratio, the dividend ratio, the combined ratio and the underlying combined ratio. These ratios are calculated using GAAP financial results. The loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums. The underlying loss ratio excludes the impact of catastrophe losses and development-related items from the loss ratio. Development-related items represent net prior year loss reserve and premium development, and includes the effects of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts. The expense ratio is the percentage of insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of policyholders’ dividends incurred to net earned premiums. The combined ratio is the sum of the loss, expense and dividend ratios. The underlying combined ratio is the sum of the underlying loss ratio, the expense ratio and the dividend ratio. In addition, renewal premium change, rate, retention and new business are also utilized in evaluating operating trends. Renewal premium change represents the estimated change in average premium on policies that renew, including rate and exposure changes. Rate represents the average change in price on policies that renew excluding exposure change. Exposure represents the measure of risk used in the pricing of the insurance product. The change in exposure represents the change in premium dollars on policies that renew as a result of the change in risk of the policy. Retention represents the percentage of premium dollars renewed, excluding rate and exposure changes, in comparison to the expiring premium dollars from policies available to renew. New business represents premiums from policies written with new customers and additional policies written with existing customers. Gross written premiums, excluding third-party captives, excludes business which is ceded to third-party captives, including business related to large warranty programs. CNA uses underwriting gain (loss), calculated using GAAP financial results, to monitor insurance operations. Underwriting gain (loss) is pretax and is calculated as net earned premiums less total insurance expenses, which includes insurance claims and policyholders’ benefits, amortization of deferred acquisition costs and other insurance related expenses. Underlying underwriting gain (loss) represents underwriting results excluding catastrophe losses and development-related items. [[GREPCENT_TABLE]] [["","47"]] [[/GREPCENT_TABLE]] Table of Contents The following tables summarize the results of CNA’s Property & Casualty Operations for the years ended December 31, 2023 and 2022. [[GREPCENT_TABLE]] [["Year Ended December 31, 2023","Specialty","","Commercial","","International","","Total"],["(In millions, except %)"],["Gross written premiums","$","7,113","","","$","6,120","","","$","1,485","","","$","14,718"],["Gross written premiums excluding third-party captives","3,800","","","5,994","","","1,485","","","11,279"],["Net written premiums","3,329","","","4,880","","","1,237","","","9,446"],["Net earned premiums","3,307","","","4,547","","","1,176","","","9,030"],["Underwriting gain","317","","","182","","","86","","","585"],["Net investment income","558","","","645","","","103","","","1,306"],["Core income","708","","","652","","","145","","","1,505"],["Other performance metrics:"],["Loss ratio excluding catastrophes and development","58.5","%","","61.5","%","","57.8","%","","59.9","%"],["Effect of catastrophe impacts","","","4.5","","","2.5","","","2.6"],["Effect of development-related items","(0.3)","","","(0.1)","","","1.1"],["Loss ratio","58.2","%","","65.9","%","","61.4","%","","62.5","%"],["Expense ratio","32.0","","","29.6","","","31.2","","","30.7"],["Dividend ratio","0.2","","","0.5","","","","","0.3"],["Combined ratio","90.4","%","","96.0","%","","92.6","%","","93.5","%"],["Combined ratio excluding catastrophes and development","90.7","%","","91.6","%","","89.0","%","","90.9","%"],["Rate","","","","7","%","","3","%","","5","%"],["Renewal premium change","1","%","","10","","","6","","","7"],["Retention","88","","","84","","","83","","","85"],["New business","$","481","","","$","1,297","","","$","302","","","$","2,080"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["Year Ended December 31, 2022"],["Gross written premiums","$","7,514","","","$","5,170","","","$","1,394","","","$","14,078"],["Gross written premiums excluding third-party captives","3,814","","","5,056","","","1,394","","","10,264"],["Net written premiums","3,306","","","4,193","","","1,164","","","8,663"],["Net earned premiums","3,203","","","3,923","","","1,070","","","8,196"],["Underwriting gain","366","","","106","","","87","","","559"],["Net investment income","431","","","488","","","63","","","982"],["Core income","668","","","466","","","106","","","1,240"],["Other performance metrics:"],["Loss ratio excluding catastrophes and development","58.6","%","","61.5","%","","58.5","%","","60.0","%"],["Effect of catastrophe impacts","0.1","","","5.6","","","2.2","","","3.0"],["Effect of development-related items","(1.3)","","","(0.7)","","","(1.2)","","","(1.0)"],["Loss ratio","57.4","%","","66.4","%","","59.5","%","","62.0","%"],["Expense ratio","31.0","","","30.4","","","32.3","","","30.9"],["Dividend ratio","0.2","","","0.5","","","","","0.3"],["Combined ratio","88.6","%","","97.3","%","","91.8","%","","93.2","%"],["Combined ratio excluding catastrophes and development","89.8","%","","92.4","%","","90.8","%","","91.2","%"],["Rate","6","%","","5","%","","6","%","","5","%"],["Renewal premium change","7","","","8","","","11","","","8"],["Retention","86","","","86","","","81","","","86"],["New business","$","548","","","$","1,009","","","$","319","","","$","1,876"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","48"]] [[/GREPCENT_TABLE]] Table of Contents 2023 Compared with 2022 Gross written premiums, excluding third-party captives, for Specialty decreased $14 million in 2023 as compared with 2022 driven by lower new business partially offset by strong retention. Net written premiums for Specialty increased $23 million in 2023 as compared with 2022. The increase in net earned premiums was consistent with the trend in net written premiums for Specialty. Gross written premiums for Commercial increased $950 million in 2023 as compared with 2022 driven by higher new business and rate. Net written premiums for Commercial increased $687 million in 2023 as compared with 2022. The increase in net earned premiums was consistent with the trend in net written premiums for Commercial. Gross written premiums for International increased $91 million in 2023 as compared with 2022. Excluding the effect of foreign currency exchange rates, gross written premiums increased $102 million driven by favorable renewal premium change. Net written premiums for International increased $73 million in 2023 as compared with 2022. Excluding the effect of foreign currency exchange rates, net written premiums increased $74 million in 2023 as compared with 2022. The increase in net earned premiums was consistent with the trend in net written premiums for International. Core income increased $265 million in 2023 as compared with 2022 driven by higher net investment income and improved underwriting results. Catastrophe losses were $236 million in 2023 as compared with $247 million in 2022. For 2023 and 2022 Specialty had no catastrophe losses and $2 million of catastrophe losses, Commercial had catastrophe losses of $207 million and $222 million and International had catastrophe losses of $29 million and $23 million. Favorable net prior year loss reserve development of $23 million and $96 million was recorded in 2023 and 2022. In 2023 and 2022, Specialty recorded favorable net prior year loss reserve development of $14 million and $40 million, Commercial recorded favorable net prior year loss reserve development of $22 million and $43 million and International recorded unfavorable net prior year loss reserve development of $13 million and favorable net prior year loss reserve development of $13 million. Further information on net prior year loss reserve development is included in Note 8 of the Notes to Consolidated Financial Statements included under Item 8. Specialty’s combined ratio increased 1.8 points in 2023 as compared with 2022 primarily due to a 1.0 point increase in the expense ratio and a 0.8 point increase in the loss ratio. The increase in the expense ratio was driven by higher employee related and acquisition costs. The increase in the loss ratio was largely due to lower favorable net prior year loss reserve development. Commercial’s combined ratio improved 1.3 points in 2023 as compared with 2022 due to a 0.8 point improvement in the expense ratio and a 0.5 point improvement in the loss ratio. The improvement in the expense ratio was driven by higher net earned premiums partially offset by higher employee related costs. The improvement in the loss ratio was driven by lower catastrophe losses, which were 4.5 points of the loss ratio in 2023, as compared with 5.6 points of the loss ratio in 2022, partially offset by lower favorable net prior year loss reserve development. International’s combined ratio increased 0.8 points in 2023 as compared with 2022 due to a 1.9 point increase in the loss ratio partially offset by a 1.1 point improvement in the expense ratio. The increase in the loss ratio was driven by unfavorable net prior year loss reserve development of $13 million recorded for 2023 compared to favorable net prior year loss reserve development of $13 million recorded for 2022. Catastrophe losses were 2.5 points of the loss ratio for 2023, as compared with 2.2 points of the loss ratio for 2022. The improvement in the expense ratio was driven by higher net earned premiums and a favorable reinsurance acquisition related catch-up adjustment in the third quarter of 2023, partially offset by higher employee related costs. [[GREPCENT_TABLE]] [["","49"]] [[/GREPCENT_TABLE]] Table of Contents Other Insurance Operations The following table summarizes the results of CNA’s Other Insurance Operations for the years ended December 31, 2023, 2022 and 2021. [[GREPCENT_TABLE]] [["Years Ended December 31","2023","","2022 (a)","","2021 (a)"],["(In millions)"],["Net earned premiums","$","451","","","$","473","","","$","491"],["Net investment income","958","","","823","","","981"],["Core loss","(221)","","","(404)","","","(96)"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(a)","As of January 1, 2023, ASU 2018-12 was adopted using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts presented in the financial statements have been adjusted to reflect application of the new guidance. Core loss for Other Insurance Operations for the years ended December 31, 2022 and 2021 were adjusted by $(212) and $(18) as a result of adopting the standard. For additional information see Notes 1 and 9 of the Notes to Consolidated Financial Statements included under Item 8."]] [[/GREPCENT_TABLE]] 2023 Compared with 2022 Core results improved $183 million in 2023 as compared with 2022 primarily due to the unfavorable pretax impact of $181 million in 2022 as a result of the annual reserve reviews and higher net investment income, partially offset by long-term care policy buyouts in 2023. Policy buyouts generally result in an unfavorable impact on core results, as the cash payments are linked to higher statutory reserve levels. Excluding the impacts of long-term care policy buyouts, 2023 underwriting results are generally in line with reserving expectations. Both years are inclusive of cash flow assumption updates as a result of the annual reserve review completed in the third quarter of each year. Cash flow assumption updates for 2023 resulted in an $8 million pretax increase in long-term care reserves. Adjusted to reflect the application of ASU 2018-12, the cash flow assumption updates for 2022 resulted in a $186 million pretax increase in long-term care reserves, primarily driven by the unfavorable impact of increased cost of care inflation, partially offset by favorable premium rate assumptions. Core results for 2023 also include a $19 million charge related to office consolidation, and a $56 million charge related to unfavorable net prior year loss reserve development for legacy mass tort claims compared with a $51 million charge for legacy mass tort claims in 2022. Further information on net prior year loss reserve development is included in Note 8 of the Notes to Consolidated Financial Statements included under Item 8. 2022 Compared with 2021 Core results decreased $308 million in 2022 as compared with 2021 primarily due to the unfavorable impact of the 2022 annual reserve reviews and lower net investment income. Cash flow assumption updates, as a result of the annual reserve reviews, for 2022 resulted in an $186 million pretax increase in long-term care reserves compared to a $3 million pretax increase in 2021. The decreases to core results for 2022 were partially offset by favorability related to the A&EP Loss Portfolio Transfer (“LPT”) and the prior period recognition of a $12 million loss resulting from the legacy excess workers’ compensation loss portfolio transfer (“EWC LPT”). The application of retroactive reinsurance accounting to additional cessions to the A&EP LPT resulted in a benefit of $3 million in 2022 as compared to a charge of $25 million in 2021, both of which have no economic impact. For further information on the A&EP LPT and EWC LPT see Note 8 of the Notes to Consolidated Financial Statements included under Item 8. Impact of CNA Office Consolidation on 2024 Results In the first quarter of 2024, CNA committed to consolidate some of its offices. As a result, CNA anticipates a charge of approximately $16 million pretax in 2024 in Other Insurance Operations. [[GREPCENT_TABLE]] [["","50"]] [[/GREPCENT_TABLE]] Non-GAAP Reconciliation of Net Income Attributable to Loews Corporation to Core Income The following table reconciles net income attributable to Loews Corporation to core income for the years ended December 31, 2023, 2022 and 2021: [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022 (a)","","2021 (a)"],["(In millions)"],["Net income attributable to Loews Corporation","$","1,094","","","$","612","","","$","1,061"],["Investment (gains) losses","79","","","154","","","(96)"],["Consolidating adjustments including noncontrolling interests","111","","","70","","","123"],["Total core income","$","1,284","","","$","836","","","$","1,088"],["Core income (loss):"],["Property & Casualty Operations","$","1,505","","","$","1,240","","","$","1,184"],["Other Insurance Operations","(221)","","","(404)","","","(96)"],["Total core income","$","1,284","","","$","836","","","$","1,088"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(a)","As of January 1, 2023, ASU 2018-12 was adopted using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts presented in the financial statements have been adjusted to reflect application of the new guidance. Core loss for Other Insurance Operations for the years ended December 31, 2022 and 2021 were adjusted by $(212) and $(18) as a result of adopting the standard. For additional information see Notes 1 and 9 of the Notes to Consolidated Financial Statements included under Item 8."]] [[/GREPCENT_TABLE]] Boardwalk Pipelines Overview Boardwalk Pipelines operates in the midstream portion of the natural gas and natural gas liquids (“NGLs”) industry, providing transportation and storage for those commodities. It also provides ethane supply and transportation services for industrial customers in Louisiana and Texas. Boardwalk Pipelines is not in the business of buying and selling natural gas and NGLs other than for system management purposes and to facilitate its ethane supply operations, but changes in natural gas and NGL prices may impact the volumes of natural gas or NGLs transported and stored by customers or the ethane supply requirements on its systems. The pricing contained in the purchase and sales agreements associated with the supply services is generally based on the same ethane commodity index, plus a fixed delivery fee. Except for possible timing differences that may occur when volumes are purchased in one month and sold in another month, Boardwalk Pipelines’ ethane supply services, like its other businesses, result in it having little to no direct commodity price exposure. Due to the capital-intensive nature of its business, Boardwalk Pipelines’ operating costs and expenses do not vary significantly based upon the amount of products transported, with the exception of costs recorded in fuel and transportation expense, which are netted with fuel retained on our Consolidated Statements of Operations. For further information on Boardwalk Pipelines’ revenue recognition policies see Note 1 of the Notes to Consolidated Financial Statements included under Item 8. Boardwalk Pipelines’ operations and maintenance expenses are impacted by its compliance with the requirements of, among other regulations, the Pipeline and Hazardous Materials Safety Administration Mega Rule (“Mega Rule”) and Boardwalk Pipelines’ efforts to monitor, control and reduce emissions, as further discussed below. On September 29, 2023, Boardwalk Pipelines acquired 100% of the equity interests of Bayou Ethane from Williams Field Services Group, LLC for $355 million in cash. Bayou Ethane provides ethane supply and transportation services for industrial customers in Louisiana and Texas. For further information see Note 2 of the Notes to Consolidated Financial Statements included under Item 8. Firm Agreements A substantial portion of Boardwalk Pipelines’ transportation and storage capacity is contracted for under firm agreements. For the year ended December 31, 2023, approximately 89% of Boardwalk Pipelines’ revenues were derived from capacity reservation fees under firm contracts or from contracts with minimum volume commitments. The table below shows a rollforward of projected operating revenues under committed firm agreements in place as of December 31, [[GREPCENT_TABLE]] [["","51"]] [[/GREPCENT_TABLE]] Table of Contents 2022 to December 31, 2023, including agreements for transportation, storage, ethane supply and other services, over the remaining term of those agreements: [[GREPCENT_TABLE]] [["As of December 31, 2023"],["(In millions)"],["Total projected operating revenues under committed firm agreements as of December 31, 2022","$","9,125"],["Adjustments for:"],["Actual revenues recognized from firm agreements in 2023 (a)","(1,356)"],["Firm agreements entered into or acquired in 2023","1,903"],["Total projected operating revenues under committed firm agreements as of December 31, 2023","$","9,672"]] [[/GREPCENT_TABLE]] (a)Reflects an increase of $76 million in Boardwalk Pipelines’ actual 2023 revenues recognized from fixed fees under firm agreements as compared with its expected 2023 revenues from fixed fees under firm agreements, including agreements for transportation, storage and other services as of December 31, 2022, primarily due to an increase from contract renewals at higher rates that occurred in 2023. The Bayou Ethane acquisition also contributed $14.3 million to the increase. During 2023, Boardwalk Pipelines entered into $1.9 billion of new firm agreements, of which approximately 16% were from new growth projects executed in 2023 and 9%, or $178 million, were from the agreements assumed as part of the Bayou Ethane acquisition. For firm agreements associated with new growth projects, the associated assets may not be placed into commercial service until sometime in the future. Each year a portion of Boardwalk Pipelines’ firm transportation and storage agreements expire. The rates Boardwalk Pipelines is able to charge customers are heavily influenced by market trends (both short and longer term), including the available supply, geographical location of natural gas production, the competition between producing basins, competition with other pipelines for supply and markets, the demand for gas by end-users such as power plants, petrochemical facilities and LNG export facilities and the price differentials between the gas supplies and the market demand for the gas (basis differentials). As of December 31, 2023, Boardwalk Pipelines’ top ten customers under committed firm agreements comprised approximately 53% of its total projected operating revenues and the credit profile associated with Boardwalk Pipelines’ customers comprising the total projected operating revenues under committed firm agreements was 77% rated as investment grade, 7% rated as non-investment grade and 16% not rated. Pipeline System Maintenance and Greenhouse Gases (“GHGs”) Emission Reduction Initiatives Boardwalk Pipelines incurs substantial costs for ongoing maintenance of its pipeline systems and related facilities, including those incurred for pipeline integrity management activities, equipment overhauls, general upkeep and repairs. These costs are not dependent on the amount of revenues earned from its transportation services. PHMSA has developed regulations that require transportation pipeline operators to implement integrity management programs to comprehensively evaluate certain high risk areas, known as HCAs, and MCAs, along pipelines and take additional safety measures to protect people and property in these areas. The HCAs for natural gas pipelines are predicated on high-population density areas (which, for natural gas transmission lines, include Class 3 and 4 areas and, depending on the potential impacts of a risk event, may include Class 1 and 2 areas) whereas HCAs along Boardwalk Pipelines’ NGL pipelines are based on high-population density areas, areas near certain drinking water sources and unusually sensitive ecological areas. These regulations have resulted in an overall increase in Boardwalk Pipelines’ ongoing maintenance costs, including maintenance capital and maintenance expense. In 2019, PHMSA issued the first part of its gas Mega Rule, which became effective on July 1, 2020. This regulation imposed numerous requirements, including MAOP reconfirmation through re-verification of all historical records for pipelines in service, which re-certification process may require natural gas pipelines installed before 1970 (previously excluded from certain pressure testing obligations) to be pressure tested, the periodic assessment of additional pipeline mileage outside of HCAs (in MCAs as well as Class 3 and Class 4 areas), the reporting of exceedances of MAOP and the consideration of seismicity as a risk factor in integrity management. In 2021, PHMSA issued a final rule that will impose safety regulations related to onshore gas gathering lines and in June 2021, PHMSA issued an Advisory Bulletin advising pipeline and pipeline facility operators of applicable requirements to update their inspection and maintenance plans for the elimination of hazardous leaks and minimization of natural gas released from pipeline facilities. PHMSA and state regulators reportedly began their review of these plans in 2022, and in May 2023, PHMSA published a proposed rule that would enhance requirements for detecting and repairing leaks on new and existing natural gas distribution, gas transmission and gas gathering pipelines. In August 2022, PHMSA published another final rule expanding the Management of Change process, extending corrosion control requirements for gas transmission pipelines, adding requirements that operators ensure no conditions exist following an extreme weather event that could adversely [[GREPCENT_TABLE]] [["","52"]] [[/GREPCENT_TABLE]] Table of Contents affect the safe operation of the pipeline, and adopting repair criteria for non-HCAs similar to those applicable to HCAs. In September 2023, PHMSA published a proposed rule that would enhance the safety requirements for gas distribution pipelines and would require updates to distribution integrity management programs, emergency response plans, operations and maintenance manuals, and other safety practices. Due to the nature of Boardwalk Pipelines’ business, its operations emit various types of GHGs. Boardwalk Pipelines seeks to carefully monitor its emissions and expects to incur additional costs to mitigate emissions. New legislation or regulations could increase the costs related to operating and maintaining Boardwalk Pipelines’ facilities. Depending on the particular law, regulation or program, Boardwalk Pipelines could be required to incur capital expenditures for installing new monitoring equipment or emission controls on its facilities, acquire and surrender allowances for GHG emissions, pay taxes or fees related to GHG emissions and/or administer and manage a more comprehensive GHG emissions program. Boardwalk Pipelines has been focused on seeking to meet and, in certain instances, pursuing projects aimed at exceeding regulatory obligations (such as those found in the Clean Air Act (“CAA”)) by working to reduce emissions of regulated air pollutants, including methane, associated with its pipeline transportation and storage assets. For example, in selecting new compression equipment for growth or asset reliability projects, Boardwalk Pipelines considers air emissions as a component in the decision-making process and, when appropriate, places increased emphasis in the selection process on equipment with emissions performance that exceeds applicable federal standards. Several of Boardwalk Pipelines’ reliability projects over the last few years have resulted in replacement of older, higher-emitting compressor drivers with units equipped with advanced emission control systems. As a result, these projects have resulted in decreases in emissions of nitrogen oxides and other air pollutants. Boardwalk Pipelines has identified the reduction of GHG emissions as an area of focus and looks for opportunities to reduce emissions using a variety of strategies, including the following: •evaluating replacing older compression equipment with electric drive compression or new low emission, fuel efficient units when practical; •modifying fuel systems on certain reciprocating compression equipment to lower fuel consumption and emissions; •conducting emissions surveys and performing maintenance and repairs on identified component leaks; •performing annual leak surveys along Boardwalk Pipelines’ pipelines with the aid of helicopters and fixed-wing planes, and analytical field surveys when appropriate; •performing measurement surveys on all of Boardwalk Pipelines’ compressor stations at least twice a year, exceeding Environmental Protection Agency (“EPA”) requirements; •using optical gas imaging cameras to scan natural gas piping and components at Boardwalk Pipelines’ compressor stations to visualize any leaks in real time; •installing continuous monitoring emission detection equipment at three compression stations; •employing experts in air emissions to develop and monitor efforts in reducing emissions; •reducing methane emissions vented to the atmosphere from transmission pipeline blowdowns by using existing and portable compression and flaring when feasible; •installing repair sleeves and composite wraps where appropriate to avoid pipeline blowdowns; •exploring options to replace high-bleed natural gas pneumatic devices with low or zero flow bleed devices; and •reducing methane emissions from rod packing seals on reciprocating compressors, where appropriate. However, Boardwalk Pipelines cannot guarantee that it will be able to implement any of the opportunities it may review or explore, or, for any opportunities it chooses to implement, to implement them in their intended manner or within a specific timeframe or across all operational assets. These new and any future regulations adopted by PHMSA and efforts to reduce GHG emissions are expected to cause Boardwalk Pipelines to incur increased capital and operating costs, may cause Boardwalk Pipelines to experience operational delays and may result in potential adverse impacts to its ability to reliably serve its customers. For more information, see Item 1. Business and Item 1A. Risk Factors of this Report. Maintenance costs may be capitalized or expensed, depending on the nature of the activities. For any given reporting period, the mix of projects that Boardwalk Pipelines undertakes will affect the amounts it records as property, plant and equipment on the Consolidated Balance Sheets or recognizes as expenses, which impacts earnings. In 2024, Boardwalk [[GREPCENT_TABLE]] [["","53"]] [[/GREPCENT_TABLE]] Table of Contents Pipelines expects to spend approximately $505 million to maintain its pipeline systems, comply with regulations and monitor, control and reduce its GHG emissions, of which approximately $215 million is expected to be maintenance capital. In 2023, Boardwalk Pipelines spent $446 million on these matters, of which $165 million was recorded as maintenance capital. Results of Operations The following table summarizes the results of operations for Boardwalk Pipelines for the years ended December 31, 2023 and 2022 as presented in Note 21 of the Notes to Consolidated Financial Statements included under Item 8. Boardwalk Pipelines also utilizes a non-GAAP measure, earnings before interest, income tax expense, depreciation and amortization (“EBITDA”) as a financial measure to assess its operating and financial performance and return on invested capital. Management believes some investors may find this measure useful in evaluating Boardwalk Pipelines’ performance. [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022"],["(In millions)"],["Revenues:"],["Operating revenues and other","$","1,625","","","$","1,446"],["Interest income","11"],["Total","1,636","","","1,446"],["Expenses:"],["Operating and other:"],["Operating costs and expenses","696","","","554"],["Depreciation and amortization","412","","","396"],["Interest","155","","","166"],["Total","1,263","","","1,116"],["Income before income tax","373","","","330"],["Income tax expense","(90)","","","(83)"],["Net income attributable to Loews Corporation","$","283","","","$","247"],["EBITDA","$","929","","","$","892"]] [[/GREPCENT_TABLE]] 2023 Compared with 2022 Net income attributable to Loews Corporation and EBITDA increased $36 million and $37 million in 2023 as compared with 2022, primarily due to the reasons discussed below. Total revenues increased $190 million in 2023 as compared with 2022. Including fuel and transportation expenses and product costs, operating revenues increased $88 million. Boardwalk Pipelines’ transportation revenues increased $71 million, primarily due to re-contracting at higher rates and recently completed growth projects, storage and parking and lending revenues increased $23 million due to favorable market conditions and the Bayou Ethane acquisition contributed $11 million, resulting from product sales of $99 million and product costs of $88 million. These increases were partially offset by $9 million from lower sales of other NGL products. Operating costs and expenses increased $142 million in 2023 as compared with 2022. Excluding expenses and product costs offset with operating revenues, operating costs and expenses increased $51 million primarily due to increased costs from maintenance projects associated with the requirements of the Mega Rule, higher materials and supplies, outside services and employee-related costs and expenses from the Bayou Ethane acquisition. Depreciation and amortization expense increased $16 million in 2023 as compared with 2022 primarily due to an increased asset base from recently completed growth projects, the Bayou Ethane acquisition and a change in the estimated life of certain assets. Interest expense decreased $11 million in 2023 as compared with 2022, primarily due to lower average outstanding long-term debt. [[GREPCENT_TABLE]] [["","54"]] [[/GREPCENT_TABLE]] Table of Contents Non-GAAP Reconciliation of Net Income Attributable to Loews Corporation to EBITDA The following table reconciles net income attributable to Loews Corporation to EBITDA for the years ended December 31, 2023 and 2022: [[GREPCENT_TABLE]] [["Year Ended December 31","","","","2023","","2022"],["(In millions)"],["Net income attributable to Loews Corporation","","","","$","283","","","$","247"],["Interest, net","","","","144","","","166"],["Income tax expense","","","","90","","","83"],["Depreciation and amortization","","","","412","","","396"],["EBITDA","","","","$","929","","","$","892"]] [[/GREPCENT_TABLE]] Loews Hotels & Co The following table summarizes the results of operations for Loews Hotels & Co for the years ended December 31, 2023 and 2022 as presented in Note 21 of the Notes to Consolidated Financial Statements included under Item 8: [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022"],["(In millions)"],["Revenues:"],["Operating revenue","$","678","","","$","596"],["Gain on acquisition of a joint venture","46"],["Revenues related to reimbursable expenses","128","","","125"],["Total","852","","","721"],["Expenses:"],["Operating and other:"],["Operating","558","","","483"],["Asset impairments","12","","","25"],["Reimbursable expenses","128","","","125"],["Depreciation and amortization expense","69","","","64"],["Equity income from joint ventures","(129)","","","(148)"],["Interest","14","","","11"],["Total","652","","","560"],["Income before income tax","200","","","161"],["Income tax expense","(53)","","","(44)"],["Net income attributable to Loews Corporation","$","147","","","$","117"]] [[/GREPCENT_TABLE]] 2023 Compared with 2022 Net income attributable to Loews Corporation improved by $30 million in 2023 as compared with 2022. Results for 2023 include a gain of $46 million ($36 million after tax) related to the acquisition of an additional equity interest in, and the consolidation of, a previously unconsolidated joint venture property. [[GREPCENT_TABLE]] [["","55"]] [[/GREPCENT_TABLE]] Table of Contents Operating revenues improved by $82 million and operating expenses increased by $75 million in 2023 as compared with 2022. The increase in operating revenues was driven by consolidating the results of a property previously accounted for under the equity method and a higher overall occupancy level at owned hotels. The increase in operating expenses was largely due to consolidating the results of a property previously accounted for under the equity method in addition to increased staffing costs and higher property taxes. Equity income from joint ventures decreased $19 million in 2023 as compared to 2022. The overall occupancy level at joint venture properties was lower in 2023 as compared to 2022, while average daily rates increased nominally for 2023 compared to 2022. Expenses at joint venture properties increased in 2023 compared to 2022, largely due to increased staffing costs, as well as higher insurance, property taxes and interest costs. In 2023 and 2022, Loews Hotels & Co recorded impairment charges of $12 million and $25 million to reduce the carrying value of certain assets to their estimated fair value. Interest expense for 2023 increased $3 million as compared with 2022 due primarily to consolidating the results of a property previously accounted for under the equity method, and a lower favorable impact from interest rate caps, offset by the increase in capitalized interest on projects under development. Corporate Corporate operations consist primarily of investment income, interest expense and administrative costs at the Parent Company. Investment income includes earnings on cash and short-term investments held at the Parent Company to meet current and future liquidity needs, as well as results of the trading portfolio held at the Parent Company. Corporate also includes the equity method of accounting for Altium Packaging. The following table summarizes the results of operations for Corporate for the years ended December 31, 2023 and 2022 as presented in Note 21 of the Notes to Consolidated Financial Statements included under Item 8: [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022"],["(In millions)"],["Revenues:"],["Net investment income (loss)","$","114","","","$","(7)"],["Operating revenues and other","","","","5"],["Total","114","","","(2)"],["Expenses:"],["Operating and other","120","","","91"],["Equity method loss","9","","","9"],["Interest","80","","","89"],["Total","209","","","189"],["Loss before income tax","(95)","","","(191)"],["Income tax benefit","5","","","37"],["Net loss attributable to Loews Corporation","$","(90)","","","$","(154)"]] [[/GREPCENT_TABLE]] 2023 Compared with 2022 Net investment income for the Parent Company was $114 million in 2023 as compared with net investment loss of $7 million in 2022, primarily due to higher income from short-term investments and fixed maturity securities and the favorable change in the fair value of equity based investments in the trading portfolio. Operating and other expenses increased $29 million in 2023 as compared with 2022. These increases were primarily due to a settlement expense of $47 million in 2023 to recognize previously unrealized losses, which were included in AOCI, due to the termination of a non-contributory defined benefit plan. This increase is partially offset by higher legal fees and corporate overhead expenses in 2022. For additional information on the settlement expense see Note 16 of the Notes to Consolidated Financial Statements included under Item 8. [[GREPCENT_TABLE]] [["","56"]] [[/GREPCENT_TABLE]] Table of Contents Interest expenses decreased $9 million in 2023 as compared with 2022, due to the retirement of the Parent Company’s $500 million aggregate principal amount of its 2.6% senior notes in May of 2023. The lower income tax benefit in 2023, as compared to 2022, included an adjustment to deferred state income taxes. LIQUIDITY AND CAPITAL RESOURCES Parent Company Parent Company cash and investments, net of receivables and payables, totaled $2.6 billion at December 31, 2023 as compared to $3.2 billion at December 31, 2022. In 2023, we received $1.0 billion in cash dividends from our subsidiaries, including a special cash dividend of $293 million from CNA. Cash outflows in 2023 included the payment of $849 million to fund treasury stock purchases, $500 million to retire at maturity the outstanding aggregate principal amount of our 2.6% senior notes, $57 million of cash dividends to our shareholders, $178 million to purchase common shares of CNA and equity contributions of $38 million to Loews Hotels & Co. In March of 2024, we will receive cash dividends of $606 million from CNA. As a holding company we depend on dividends from our subsidiaries and returns on our investment portfolio to fund our obligations. We also have an effective shelf registration statement on file with the Securities and Exchange Commission (“SEC”) under which we may publicly issue an unspecified amount of our debt, equity or hybrid securities from time to time. We are not responsible for the liabilities and obligations of our subsidiaries and there are no Parent Company guarantees. Depending on market and other conditions, we may purchase shares of our and our subsidiaries outstanding common stock in the open market, in privately negotiated transactions or otherwise. In 2023, we purchased 14.0 million shares of Loews Corporation common stock and 4.5 million shares of CNA’s common stock. As of February 2, 2024, there were 222,201,139 shares of Loews Corporation common stock outstanding. Loews Corporation has a corporate credit and senior debt rating of A with a stable outlook from S&P Global Ratings (“S&P”), a senior debt rating of A3 with a stable outlook from Moody’s Investors Service (“Moody’s”) and a senior debt rating of A- with a stable outlook from Fitch Ratings Inc. (“Fitch”). Future uses of our cash may include investing in our subsidiaries, new acquisitions, dividends and/or purchases of our and our subsidiaries’ outstanding common stock. The declaration and payment of future dividends to holders of our common stock will be at the discretion of our Board of Directors and will depend on many factors, including our earnings, financial condition and business needs. Subsidiaries CNA’s cash provided by operating activities was $2.3 billion in 2023 and $2.5 billion in 2022. The decrease in cash provided by operating activities was driven by higher net claim payments, which includes long-term care policy buyouts of $193 million and higher operating expenses, partially offset by an increase in premiums collected. CNA paid cash dividends of $2.88 per share on its common stock, including a special cash dividend of $1.20 per share, in 2023. On February 2, 2024, CNA’s Board of Directors declared a quarterly cash dividend of $0.44 per share and a special cash dividend of $2.00 per share payable March 7, 2024 to shareholders of record on February 20, 2024. CNA’s declaration and payment of future dividends is at the discretion of its Board of Directors and will depend on many factors, including CNA’s earnings, financial condition, business needs and regulatory constraints. CNA believes that its present cash flows from operating, investing and financing activities are sufficient to fund its current and expected working capital and debt obligation needs and does not expect this to change in the near term. Dividends to CNA from Continental Casualty Company (“CCC”), a subsidiary of CNA, are subject to the insurance holding company laws of the State of Illinois, the domiciliary state of CCC. Under these laws, ordinary dividends, or dividends that do not require prior approval by the Illinois Department of Insurance (the “Department”), are determined based on the greater of the prior year’s statutory net income or 10% of statutory surplus as of the end of the prior year, as well as the timing and amount of dividends paid in the preceding 12 months. Additionally, ordinary dividends may only be paid from earned surplus, which is calculated by removing unrealized gains from unassigned surplus. As of December 31, 2023, CCC was in a positive earned surplus position. The maximum allowable dividend CCC could pay during 2024 that would not be subject to the Department’s prior approval is $1.1 billion, less dividends paid during the preceding twelve months measured at that point in time. CCC paid dividends of $1.1 billion in 2023. The actual level of dividends paid in any year is determined after an assessment of available dividend capacity, holding company liquidity and cash needs as well as the impact the dividends will have on the statutory surplus of the applicable insurance company. [[GREPCENT_TABLE]] [["","57"]] [[/GREPCENT_TABLE]] Table of Contents In 2023, CNA completed a public offering of $500 million aggregate principal amount of its 5.5% senior notes due June 15, 2033 and repaid at maturity the $243 million outstanding aggregate principal balance of its 7.3% debenture. CNA has a financial strength rating of A and senior debt rating of bbb+ from A.M. Best Company (“A.M. Best”), a financial strength rating of A2 and senior debt rating of Baa2 from Moody’s, a financial strength rating of A+ and senior debt rating of A- from S&P and financial strength rating of A+ and senior debt rating of BBB+ from Fitch. A.M. Best, Moody’s, S&P and Fitch maintain stable outlooks across CNA’s financial strength and senior debt credit ratings. CNA has an effective shelf registration statement on file with the SEC under which it may publicly issue an unspecified amount of debt, equity or hybrid securities from time to time. Boardwalk Pipelines’ cash provided by operating activities increased $91 million in 2023 compared to 2022, primarily due to changes in net income adjusted for depreciation and amortization. For 2023 and 2022, Boardwalk Pipelines’ capital expenditures were $382 million and $344 million, consisting of growth capital expenditures of $218 million and $180 million and maintenance capital expenditures of $164 million and $157 million. During 2022, Boardwalk Pipelines also spent $7 million on natural gas to be used in its integrated natural gas pipeline system. Boardwalk Pipelines expects total capital expenditures to be approximately $420 million in 2024, including approximately $215 million for maintenance capital and $205 million related to growth projects. During 2023, Boardwalk Pipelines acquired Bayou Ethane for $355 million. Boardwalk Pipelines anticipates that its existing capital resources, including its cash on hand, revolving credit facility and cash flows from operating activities, will be adequate to fund its operations and capital expenditures for 2024. Boardwalk Pipelines may seek to access the debt markets to fund some or all capital expenditures for growth projects or acquisitions, to refinance maturing debt or for general partnership purposes. Boardwalk Pipelines has an effective shelf registration statement on file with the SEC under which it may publicly issue $1.5 billion of debt securities, warrants or rights from time to time. Boardwalk Pipelines has $600 million outstanding aggregate principal amount of its 5.0% notes maturing in December of 2024, which it expects to retire near or at maturity through available capital resources, including borrowing under its revolving credit facility or publicly issuing debt securities. In June of 2023, Boardwalk Pipelines’ amended its revolving credit facility to extend the maturity date by one year to May 26, 2028. As of December 31, 2023, Boardwalk Pipelines had $25 million of outstanding borrowings and $975 million of available borrowing capacity under its revolving credit facility. In December of 2023, Boardwalk Pipelines paid a distribution of $300 million to the Company. Boardwalk Pipelines has a senior debt rating of BBB- with a stable outlook from S&P, a senior debt rating of Baa2 with a stable outlook from Moody’s and a senior debt rating of BBB with a stable outlook from Fitch. As of December 31, 2023, Loews Hotels & Co, through its subsidiaries, had $532 million in mortgage loans that mature within twelve months. Loews Hotels & Co currently intends to refinance or exercise options to extend these loans prior to maturity. Refinancing or extending any indebtedness, including loans of unconsolidated joint venture partnerships, may require Loews Hotels & Co to make principal pay downs, establish restricted cash reserves or provide guaranties of the subsidiary’s debt. Through the date of this Report, all Loews Hotels & Co’s subsidiaries are in compliance with their debt covenants. In 2023, Loews Hotels & Co received capital contributions of $38 million from Loews Corporation to fund development projects. [[GREPCENT_TABLE]] [["","58"]] [[/GREPCENT_TABLE]] Table of Contents Contractual Obligations We and our subsidiaries have contractual obligations which arise in the ordinary course of business. For a discussion regarding the obligations related to our and our subsidiaries long-term debt see Note 12 of the Notes to Consolidated Financial Statements included under Item 8. For contractual payment obligations related to the claim and claim adjustment expense reserves and future policy benefit reserves see the table below: [[GREPCENT_TABLE]] [["","Payments Due by Period"],["December 31, 2023","Total","","Less than 1 year","","1-3 years","","3-5 years","","More than 5 years"],["(In millions)"],["Claim and claim adjustment expense"],["reserves (a)","$","23,864","","","$","5,417","","","$","6,441","","","$","3,448","","","$","8,558"],["Future policy benefit reserves (b)","27,964","","","733","","","1,435","","","1,629","","","24,167"]] [[/GREPCENT_TABLE]] (a)The claim and claim adjustment expense reserves reflected above are not discounted and represent CNA’s estimate of the amount and timing of the ultimate settlement and administration of gross claims based on its assessment of facts and circumstances known as of December 31, 2023. See the Insurance Reserves section of this MD&A for further information. (b)The future policy benefit reserves reflected above are not discounted, include maintenance costs, represent CNA’s estimate of the ultimate amount and timing of the settlement of benefits net of expected premiums and are based on its assessment of facts and circumstances known as of December 31, 2023. Additional information on future policy benefit reserves is included in Note 1 of the Notes to Consolidated Financial Statements included under Item 8. Further information on our commitments, contingencies and guarantees is provided in the Notes to Consolidated Financial Statements included under Item 8. INVESTMENTS Investment activities of our non-insurance subsidiaries primarily consist of investments in fixed income securities, including short-term investments. The Parent Company portfolio also includes equity securities, including short sales and derivative instruments. Certain of these types of Parent Company investments generally have greater volatility, less liquidity and greater risk than fixed income investments and are included within Results of Operations – Corporate. The Parent Company enters into short sales and invests in certain derivative instruments that are used for asset and liability management activities, income enhancements to its portfolio management strategy and to benefit from anticipated future movements in the underlying markets. If such movements do not occur as anticipated, significant losses may occur. Monitoring procedures include senior management review of daily reports of existing positions and valuation fluctuations to seek to ensure that open positions are consistent with the portfolio strategy. Credit exposure associated with non-performance by counterparties to derivative instruments is generally limited to the uncollateralized change in fair value of the derivative instruments recognized in the Consolidated Balance Sheets. The risk of non-performance is mitigated by monitoring the creditworthiness of counterparties and diversifying derivatives by using multiple counterparties. Collateral is occasionally required from derivative investment counterparties depending on the amount of the exposure and the credit rating of the counterparty. Insurance CNA maintains a large portfolio of fixed maturity and equity securities, including large amounts of corporate and government issued debt securities, residential and commercial mortgage-backed securities, other asset-backed securities and investments in limited partnerships which pursue a variety of long and short investment strategies across a broad array of asset classes. CNA’s investment portfolio supports its obligation to pay future insurance claims and provides investment returns which are an important part of CNA’s overall profitability. [[GREPCENT_TABLE]] [["","59"]] [[/GREPCENT_TABLE]] Table of Contents Net Investment Income The significant components of CNA’s net investment income are presented in the following table. Fixed income securities, as presented, include both fixed maturity securities and non-redeemable preferred stock. [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022"],["(In millions)"],["Fixed income securities:"],["Taxable fixed income securities","$","1,798","","","$","1,585"],["Tax-exempt fixed income securities","178","","","244"],["Total fixed income securities","1,976","","","1,829"],["Limited partnership and common stock investments","202","","","(31)"],["Other, net of investment expense","86","","","7"],["Net investment income","$","2,264","","","$","1,805"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["Effective income yield for the fixed income securities"],["portfolio","4.7","%","","4.4","%"],["Limited partnership and common stock return","9.4","%","","(1.4)","%"]] [[/GREPCENT_TABLE]] CNA’s net investment income increased $459 million in 2023 as compared with 2022, driven by favorable limited partnership returns and higher income from fixed income securities as a result of the rising interest rate environment. Investment Gains (Losses) The components of CNA’s investment gains (losses) are presented in the following table: [[GREPCENT_TABLE]] [["Year Ended December 31","2023","","2022"],["(In millions)"],["Investment gains (losses):"],["Fixed maturity securities:"],["Corporate and other bonds","$","(57)","","","$","(89)"],["States, municipalities and political subdivisions","10","","","26"],["Asset-backed","(44)","","","(34)"],["Total fixed maturity securities","(91)","","","(97)"],["Non-redeemable preferred stock","4","","","(116)"],["Derivatives, short-term and other","(12)","","","14"],["Total investment losses","(99)","","","(199)"],["Income tax benefit","20","","","45"],["Amounts attributable to noncontrolling interests","8","","","16"],["Investment losses attributable to Loews Corporation","$","(71)","","","$","(138)"]] [[/GREPCENT_TABLE]] CNA’s investment losses decreased $100 million in 2023 as compared with 2022, driven by the favorable change in fair value of non-redeemable preferred stock. Additionally, Derivatives, short-term and other for 2022 included an $18 million non-economic net gain related to the novation of a coinsurance agreement on CNA’s legacy annuity business in its Other Insurance Operations and the associated funds withheld embedded derivative. The coinsurance agreement was novated in the fourth quarter of 2022. [[GREPCENT_TABLE]] [["","60"]] [[/GREPCENT_TABLE]] Table of Contents Further information on CNA’s investment gains and losses is set forth in Note 3 of the Notes to Consolidated Financial Statements included under Item 8. Portfolio Quality The following table presents the estimated fair value and net unrealized gains (losses) of CNA’s fixed maturity securities by rating distribution: [[GREPCENT_TABLE]] [["","December 31, 2023","","December 31, 2022"],["","Estimated Fair Value","","Net Unrealized Gains (Losses)","","Estimated Fair Value","","Net Unrealized Gains(Losses)"],["(In millions)"],["U.S. Government, Government agencies and Government-sponsored enterprises","$","2,795","","","$","(298)","","","$","2,419","","","$","(336)"],["AAA","2,727","","","(169)","","","2,398","","","(208)"],["AA","6,444","","","(420)","","","6,342","","","(663)"],["A","9,910","","","(223)","","","9,043","","","(531)"],["BBB","16,670","","","(744)","","","15,651","","","(1,447)"],["Non-investment grade","1,879","","","(119)","","","1,774","","","(219)"],["Total","$","40,425","","","$","(1,973)","","","$","37,627","","","$","(3,404)"]] [[/GREPCENT_TABLE]] As of December 31, 2023 and 2022, 1% of CNA’s fixed maturity portfolio was rated internally. AAA rated securities included $0.2 billion and $0.3 billion of pre-funded municipal bonds as of December 31, 2023 and 2022. The following table presents CNA’s available-for-sale fixed maturity securities in a gross unrealized loss position by ratings distribution: [[GREPCENT_TABLE]] [["December 31, 2023","Estimated Fair Value","","Gross Unrealized Losses"],["(In millions)"],["U.S. Government, Government agencies and Government-sponsored enterprises","$","2,273","","","$","309"],["AAA","1,524","","","261"],["AA","3,817","","","658"],["A","5,652","","","517"],["BBB","11,523","","","1,095"],["Non-investment grade","942","","","155"],["Total","$","25,731","","","$","2,995"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","61"]] [[/GREPCENT_TABLE]] Table of Contents The following table presents the maturity profile for these available-for-sale fixed maturity securities. Securities not due to mature on a single date are allocated based on weighted average life: [[GREPCENT_TABLE]] [["December 31, 2023","Estimated Fair Value","","Gross Unrealized Losses"],["(In millions)"],["Due in one year or less","$","974","","","$","33"],["Due after one year through five years","8,197","","","468"],["Due after five years through ten years","8,058","","","1,058"],["Due after ten years","8,502","","","1,436"],["Total","$","25,731","","","$","2,995"]] [[/GREPCENT_TABLE]] Commercial Real Estate CNA’s investment portfolio has exposure to the commercial real estate sector primarily through its fixed maturity securities and mortgage loan portfolios. The performance of these assets is dependent on a number of factors, including the performance of the underlying collateral (which is influenced by cash flows from underlying property leases), changes in the fair value of collateral, refinancing risk, and the creditworthiness of tenants of credit tenant loan properties (where lease payments directly service the loan). Within CNA’s fixed maturity securities portfolio, its exposure is primarily through the commercial mortgage-backed securities portfolio and the corporate and other bonds portfolio, which contains obligations of real estate investment trust (“REIT”) issuers. Commercial mortgage-backed securities include both single asset, single borrower collateral that is securitized independently and conduit collateral that is securitized in diversified pools. The following tables present the estimated fair value and net unrealized gains (losses) of CNA’s commercial mortgage-backed securities by property type and by ratings distribution: [[GREPCENT_TABLE]] [["December 31, 2023","Estimated Fair Value","","Net Unrealized Gains (Losses)"],["(In millions)"],["Commercial mortgage-backed:"],["Single asset, single borrower:"],["Office","$","306","","","$","(70)"],["Retail","283","","","(28)"],["Lodging","227","","","(23)"],["Industrial","93","","","(4)"],["Multifamily","59","","","(3)"],["Total single asset, single borrower","968","","","(128)"],["Conduits (multi property, multi borrower pools)","663","","","(95)"],["Total commercial mortgage-backed","$","1,631","","","$","(223)"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","62"]] [[/GREPCENT_TABLE]] Table of Contents [[GREPCENT_TABLE]] [["December 31, 2023","Estimated Fair Value","","Net Unrealized Gains (Losses)"],["(In millions)"],["Commercial mortgage backed:"],["AAA","$","570","","","$","(27)"],["AA","594","","","(95)"],["A","202","","","(30)"],["BBB","216","","","(45)"],["Non-investment grade","49","","","(26)"],["Total commercial mortgage-backed","$","1,631","","","$","(223)"]] [[/GREPCENT_TABLE]] The following tables present the estimated fair value and net unrealized gains (losses) of the REIT issuer exposure within CNA’s corporate and other bonds portfolio by property type and by ratings distribution: [[GREPCENT_TABLE]] [["December 31, 2023","Estimated Fair Value","","Net Unrealized Gains (Losses)"],["(In millions)"],["Corporate and other bonds - REITs:"],["Retail","$","515","","","$","(25)"],["Office","250","","","(20)"],["Industrial","99","","","(1)"],["Other (a)","452","","","(22)"],["Total corporate and other bonds - REITs","$","1,316","","","$","(68)"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(a)","Other includes a diversified mix of property type strategies including self-storage, healthcare and apartments."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["December 31, 2023","Estimated Fair Value","","Net Unrealized Gains (Losses)"],["(In millions)"],["Corporate and other bonds - REITs:"],["AA","$","10"],["A","285","","","$","(3)"],["BBB","994","","","(64)"],["Non-investment grade","27","","","(1)"],["Total corporate and other bonds - REITs","$","1,316","","","$","(68)"]] [[/GREPCENT_TABLE]] Mortgage loans are commercial in nature and are carried at unpaid principal balance, net of unamortized fees and an allowance for expected credit losses. The 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”). This assessment utilizes historical credit loss experience adjusted to reflect current conditions and reasonable and supportable forecasts. As of December 31, 2023 the allowance for expected credit losses on CNA’s mortgage portfolio was $35 million, or 3.3% of its amortized cost basis. [[GREPCENT_TABLE]] [["","63"]] [[/GREPCENT_TABLE]] Table of Contents The following table presents the amortized cost basis of mortgage loans by property type: [[GREPCENT_TABLE]] [["December 31, 2023","Amortized Cost","","Percentage of Total"],["(In millions, except %)"],["Mortgage loans:"],["Retail","$","520","","","48","%"],["Office","245","","","23"],["Industrial","124","","","12"],["Other","181","","","17"],["Total mortgage loans","1,070","","","100","%"],["Less: Allowance for expected credit losses","(35)"],["Total mortgage loans - net of allowance","$","1,035"]] [[/GREPCENT_TABLE]] In addition to the mortgage loan portfolio, CNA invests in securitized credit tenant loans and ground lease financings that are classified as fixed maturity securities and are largely investment grade quality. As of December 31, 2023, these holdings had an estimated fair value of $479 million and net unrealized losses of $87 million. CNA owns other fixed maturity securities which have exposure to cell towers, data centers and other collateral types that could be viewed as having real estate characteristics. CNA views these securities to have risks more similar to operating enterprises that do not share the same risks as the broader commercial real estate market. CNA does not hold any direct investments in commercial real estate. Additionally, CNA does not have significant exposure through its limited partnership portfolio to funds whose primary strategy is real estate focused. Duration A primary objective in the management of CNA’s investment portfolio is to optimize return relative to the corresponding liabilities and respective liquidity needs. CNA’s views on the current interest rate environment, tax regulations, asset class valuations, specific security issuer and broader industry segment conditions as well as domestic and global economic conditions, are some of the factors that enter into an investment decision. CNA also continually monitors exposure to issuers of securities held and broader industry sector exposures and may from time to time adjust such exposures based on its views of a specific issuer or industry sector. A further consideration in the management of CNA’s investment portfolio is the characteristics of the corresponding liabilities and the ability to align the duration of the portfolio to those liabilities and to meet future liquidity needs, minimize interest rate risk and maintain a level of income sufficient to support the underlying insurance liabilities. For portfolios where future liability cash flows are determinable and typically long-term in nature, CNA segregates investments for asset/liability management purposes. The segregated investments support the long-term care and structured settlement liabilities in Other Insurance Operations. The effective durations of CNA’s fixed income securities and short-term investments are presented in the following table. Amounts presented are net of payable and receivable amounts for securities purchased and sold, but not yet settled. [[GREPCENT_TABLE]] [["","64"]] [[/GREPCENT_TABLE]] Table of Contents [[GREPCENT_TABLE]] [["","December 31, 2023","","December 31, 2022"],["","Estimated Fair Value","","Effective Duration (Years)","","Estimated Fair Value","","Effective Duration (Years)"],["(In millions of dollars)"],["Investments supporting Other Insurance Operations","$","15,137","","","10.2","","$","14,511","","","9.9"],["Other investments","27,981","","","4.5","","25,445","","","4.7"],["Total","$","43,118","","","6.5","","$","39,956","","","6.6"]] [[/GREPCENT_TABLE]] CNA’s investment portfolio is periodically analyzed for changes in duration and related price risk. Certain securities have duration characteristics that are variable based on market interest rates, credit spreads and other factors that may drive variability in the amount and timing of cash flows. Additionally, CNA periodically reviews the sensitivity of the portfolio to the level of foreign exchange rates and other factors that contribute to market price changes. A summary of these risks and specific analysis on changes is included in the Quantitative and Qualitative Disclosures about Market Risk included under Item 7A. INSURANCE RESERVES The level of reserves CNA maintains represents its best estimate, as of a particular point in time, of what the ultimate settlement and administration of claims will cost based on CNA’s assessment of facts and circumstances known at that time. Reserves are not an exact calculation of liability but instead are complex estimates that CNA derives, generally utilizing a variety of actuarial reserve estimation techniques, from numerous assumptions and expectations about future events, both internal and external, many of which are highly uncertain. As noted below, CNA reviews its reserves for each segment of its business periodically, and any such review could result in the need to increase reserves in amounts which could be material and could adversely affect our results of operations and equity and CNA’s equity, business and insurer financial strength and corporate debt ratings. Further information on reserves is provided in Notes 8 and 9 of the Notes to Consolidated Financial Statements included under Item 8. Property and Casualty Claim and Claim Adjustment Expense Reserves CNA maintains loss reserves to cover its estimated ultimate unpaid liability for claim and claim adjustment expenses, including the estimated cost of the claims adjudication process, for claims that have been reported but not yet settled (case reserves) and claims that have been incurred but not reported (“IBNR”). IBNR includes a provision for development on known cases as well as a provision for late reported incurred claims. Claim and claim adjustment expense reserves are reflected as liabilities and are included on the Consolidated Balance Sheets under the heading “Insurance Reserves.” Adjustments to prior year reserve estimates, if necessary, are reflected in results of operations in the period that the need for such adjustments is determined. The carried case and IBNR reserves as of each balance sheet date are provided in the discussion that follows and in Note 8 of the Notes to Consolidated Financial Statements included under Item 8. There is a risk that CNA’s recorded reserves are insufficient to cover its estimated ultimate unpaid liability for claims and claim adjustment expenses. Unforeseen emerging or potential claims and coverage issues are also difficult to predict and could materially adversely affect the adequacy of CNA’s claim and claim adjustment expense reserves and could lead to future reserve increases. In addition, CNA’s property and casualty insurance subsidiaries also have actual and potential exposures related to A&EP claims, which could result in material losses. To mitigate the risks posed by CNA’s exposure to A&EP claims and claim adjustment expenses, CNA completed a transaction with National Indemnity Company (“NICO”), under which substantially all of CNA’s legacy A&EP liabilities were ceded to NICO effective January 1, 2010. See Note 8 of the Notes to the Consolidated Financial Statements included under Item 8 for further discussion about the transaction with NICO, its impact on CNA’s results of operations and the deferred retroactive reinsurance gains and the amount of remaining reinsurance limit. Establishing Property & Casualty Reserve Estimates In developing claim and claim adjustment expense reserve estimates, CNA’s actuaries perform detailed reserve analyses that are staggered throughout the year. The data is organized at a reserve group level. A reserve group typically can be a [[GREPCENT_TABLE]] [["","65"]] [[/GREPCENT_TABLE]] Table of Contents line of business covering a subset of insureds such as commercial automobile liability for small or middle market customers, or it can be a particular type of claim such as construction defect. Every reserve group is reviewed at least once during the year, but most are reviewed more frequently. The analyses generally review losses gross of ceded reinsurance and apply the ceded reinsurance terms to the gross estimates to establish estimates net of reinsurance. In addition to the detailed analyses, CNA reviews actual loss emergence for all products each quarter. Most of CNA’s business can be characterized as long-tail. For long-tail business, it will generally be several years between the time the business is written and the time when all claims are settled. CNA’s long-tail exposures include commercial automobile liability, workers’ compensation, general liability, medical professional liability, other professional liability and management liability coverages, assumed reinsurance run-off and products liability. Short-tail exposures include property, commercial automobile physical damage, marine, surety and warranty. Property & Casualty Operations contain both long-tail and short-tail exposures. Other Insurance Operations contain long-tail exposures. Various methods are used to project ultimate losses for both long-tail and short-tail exposures. The paid development method estimates ultimate losses by reviewing paid loss patterns and applying them to accident or policy years with further expected changes in paid losses. Selection of the paid loss pattern may require consideration of several factors including the impact of economic, social and medical inflation on claim costs, the rate at which claims professionals make claim payments and close claims, the impact of judicial decisions, the impact of underwriting changes, the impact of large claim payments and other factors. Claim cost inflation itself may require evaluation of changes in the cost of repairing or replacing property, changes in the cost of medical care, changes in the cost of wage replacement, judicial decisions, legislative changes and other factors. Because this method assumes that losses are paid at a consistent rate, changes in any of these factors can affect the results. Since the method does not rely on case reserves, it is not directly influenced by changes in their adequacy. For many reserve groups, paid loss data for recent periods may be too immature or erratic for accurate predictions. This situation often exists for long-tail exposures. In addition, changes in the factors described above may result in inconsistent payment patterns. Finally, estimating the paid loss pattern subsequent to the most mature point available in the data analyzed often involves considerable uncertainty for long-tail products such as workers’ compensation. The incurred development method is similar to the paid development method, but it uses case incurred losses instead of paid losses. Since the method uses more data (case reserves in addition to paid losses) than the paid development method, the incurred development patterns may be less variable than paid patterns. However, selection of the incurred loss pattern typically requires analysis of all of the same factors described above. In addition, the inclusion of case reserves can lead to distortions if changes in case reserving practices have taken place, and the use of case incurred losses may not eliminate the issues associated with estimating the incurred loss pattern subsequent to the most mature point available. The loss ratio method multiplies earned premiums by an expected loss ratio to produce ultimate loss estimates for each accident or policy year. This method may be useful for immature accident or policy periods or if loss development patterns are inconsistent, losses emerge very slowly or there is relatively little loss history from which to estimate future losses. The selection of the expected loss ratio typically requires analysis of loss ratios from earlier accident or policy years or pricing studies and analysis of inflationary trends, frequency trends, rate changes, underwriting changes and other applicable factors. The Bornhuetter-Ferguson method using paid loss is a combination of the paid development method and the loss ratio method. This method normally determines expected loss ratios similar to the approach used to estimate the expected loss ratio for the loss ratio method and typically requires analysis of the same factors described above. This method assumes that future losses will develop at the expected loss ratio level. The percent of paid loss to ultimate loss implied from the paid development method is used to determine what percentage of ultimate loss is yet to be paid. The use of the pattern from the paid development method typically requires consideration of the same factors listed in the description of the paid development method. The estimate of losses yet to be paid is added to current paid losses to estimate the ultimate loss for each year. For long-tail lines, this method will react very slowly if actual ultimate loss ratios are different from expectations due to changes not accounted for by the expected loss ratio calculation. The Bornhuetter-Ferguson method using incurred loss is similar to the Bornhuetter-Ferguson method using paid loss except that it uses case incurred losses. The use of case incurred losses instead of paid losses can result in development patterns that are less variable than paid patterns. However, the inclusion of case reserves can lead to distortions if changes in case reserving have taken place, and the method typically requires analysis of the same factors that need to be reviewed for the loss ratio and incurred development methods. [[GREPCENT_TABLE]] [["","66"]] [[/GREPCENT_TABLE]] Table of Contents The frequency times severity method multiplies a projected number of ultimate claims by an estimated ultimate average loss for each accident or policy year to produce ultimate loss estimates. Since projections of the ultimate number of claims are often less variable than projections of ultimate loss, this method can provide more reliable results for reserve groups where loss development patterns are inconsistent or too variable to be relied on exclusively. In addition, this method can more directly account for changes in coverage that affect the number and size of claims. However, this method can be difficult to apply to situations where very large claims or a substantial number of unusual claims result in volatile average claim sizes. Projecting the ultimate number of claims may require analysis of several factors, including the rate at which policyholders report claims to CNA, the impact of judicial decisions, the impact of underwriting changes and other factors. Estimating the ultimate average loss may require analysis of the impact of large losses and claim cost trends based on changes in the cost of repairing or replacing property, changes in the cost of medical care, changes in the cost of wage replacement, judicial decisions, legislative changes and other factors. Stochastic modeling produces a range of possible outcomes based on varying assumptions related to the particular reserve group being modeled. For some reserve groups, CNA uses models which rely on historical development patterns at an aggregate level, while other reserve groups are modeled using individual claim variability assumptions supplied by the claims department. In either case, multiple simulations using varying assumptions are run and the results are analyzed to produce a range of potential outcomes. The results will typically include a mean and percentiles of the possible reserve distribution which aid in the selection of a point estimate. For many exposures, especially those that can be considered long-tail, a particular accident or policy year may not have a sufficient volume of paid losses to produce a statistically reliable estimate of ultimate losses. In such a case, CNA’s actuaries typically assign more weight to the incurred development method than to the paid development method. As claims continue to settle and the volume of paid loss increases, the actuaries may assign additional weight to the paid development method. For most of CNA’s products, even the incurred losses for accident or policy years that are early in the claim settlement process will not be of sufficient volume to produce a reliable estimate of ultimate losses. In these cases, CNA may not assign much, if any, weight to the paid and incurred development methods. CNA may use the loss ratio, Bornhuetter-Ferguson and/or frequency times severity methods. For short-tail exposures, the paid and incurred development methods can often be relied on sooner primarily because CNA’s history includes a sufficient number of years to cover the entire period over which paid and incurred losses are expected to change. However, CNA may also use the loss ratio, Bornhuetter-Ferguson and/or frequency times severity methods for short-tail exposures. For other more complex reserve groups where the above methods may not produce reliable indications, CNA uses additional methods tailored to the characteristics of the specific situation. Periodic Reserve Reviews The reserve analyses performed by CNA’s actuaries result in point estimates. Each quarter, the results of the detailed reserve reviews are summarized and discussed with CNA’s senior management to determine the best estimate of reserves. CNA’s senior management considers many factors in making this decision. CNA’s recorded reserves reflect its best estimate as of a particular point in time based upon known facts and circumstances, consideration of the factors cited above and its judgment. The carried reserve differs from the actuarial point estimate as discussed further below. Currently, CNA’s recorded reserves are modestly higher than the actuarial point estimate. For Property & Casualty Operations, the difference between CNA’s reserves and the actuarial point estimate is primarily driven by uncertainty with respect to immature accident years, claim cost inflation, changes in claims handling, changes to the tort environment which may adversely affect claim costs and the effects from the economy. For CNA’s legacy A&EP liabilities, the difference between CNA’s reserves and the actuarial point estimate is primarily driven by the potential tail volatility of run-off exposures. The key assumptions fundamental to the reserving process are often different for various reserve groups and accident or policy years. Some of these assumptions are explicit assumptions that are required of a particular method, but most of the assumptions are implicit and cannot be precisely quantified. An example of an explicit assumption is the pattern employed in the paid development method. However, the assumed pattern is itself based on several implicit assumptions such as the impact of inflation on medical costs and the rate at which claim professionals close claims. As a result, the effect on reserve estimates of a particular change in assumptions typically cannot be specifically quantified, and changes in these assumptions cannot be tracked over time. CNA’s recorded reserves are management’s best estimate. In order to provide an indication of the variability associated with CNA’s net reserves, the following discussion provides a sensitivity analysis that shows the approximate estimated impact of variations in significant factors affecting CNA’s reserve estimates for particular types of business. These significant factors are the ones that CNA believes could most likely materially affect the reserves. This discussion covers [[GREPCENT_TABLE]] [["","67"]] [[/GREPCENT_TABLE]] Table of Contents the major types of business for which CNA believes a material deviation to its reserves is reasonably possible. There can be no assurance that actual experience will be consistent with the current assumptions or with the variation indicated by the discussion. In addition, there can be no assurance that other factors and assumptions will not have a material impact on CNA’s reserves. The three areas for which CNA believes a significant deviation to its net reserves is reasonably possible are (i) professional liability, management liability and surety products (ii) workers’ compensation and (iii) general liability. Professional liability, management liability and surety products include U.S. professional liability coverages provided to various professional firms, including architects, real estate agents, small and mid-sized accounting firms, law firms and other professional firms. They also include D&O, E&O, employment practices, fiduciary, fidelity, cyber and surety coverages and medical liability. The most significant factor affecting reserve estimates for these liability coverages is claim severity. Claim severity is driven by the cost of medical care, the cost of wage replacement, legal fees, judicial decisions, legislative changes and other factors. Underwriting and claim handling decisions such as the classes of business written and individual claim settlement decisions can also affect claim severity. If the estimated claim severity increases by 9%, CNA estimates that net reserves would increase by approximately $500 million. If the estimated claim severity decreases by 3%, CNA estimates that net reserves would decrease by approximately $150 million. CNA’s net reserves for these products were approximately $5.7 billion as of December 31, 2023. For workers’ compensation, since many years will pass from the time the business is written until all claim payments have been made, the most significant factor affecting workers’ compensation reserve estimates is claim cost inflation on claim payments. Workers’ compensation claim cost inflation is driven by the cost of medical care, the cost of wage replacement, expected claimant lifetimes, judicial decisions, legislative changes and other factors. If estimated workers’ compensation claim cost inflation increases by 100 basis points for the entire period over which claim payments will be made, CNA estimates that its net reserves would increase by approximately $250 million. If estimated workers’ compensation claim cost inflation decreases by 100 basis points for the entire period over which claim payments will be made, CNA estimates that its net reserves would decrease by approximately $250 million. Net reserves for workers’ compensation were approximately $3.6 billion as of December 31, 2023. For general liability, the most significant factor affecting reserve estimates is claim severity. Claim severity is driven by changes in the cost of repairing or replacing property, the cost of medical care, the cost of wage replacement, judicial decisions, legislation and other factors. If the estimated claim severity for general liability increases by 6%, CNA estimates that its net reserves would increase by approximately $250 million. If the estimated claim severity for general liability decreases by 3%, CNA estimates that its net reserves would decrease by approximately $150 million. Net reserves for general liability were approximately $4.2 billion as of December 31, 2023. Given the factors described above, it is not possible to quantify precisely the ultimate exposure represented by claims and related litigation. As a result, CNA regularly reviews the adequacy of its reserves and reassesses its reserve estimates as historical loss experience develops, additional claims are reported and settled and additional information becomes available in subsequent periods. In reviewing CNA’s reserve estimates, CNA makes adjustments in the period that the need for such adjustments is determined. These reviews have resulted in CNA’s identification of information and trends that have caused CNA to change its reserves in prior periods and could lead to CNA’s identification of a need for additional material increases or decreases in claim and claim adjustment expense reserves, which could materially affect our results of operations and equity and CNA’s business and insurer financial strength and corporate debt ratings positively or negatively. See Note 8 of the Notes to the Consolidated Financial Statements included under Item 8 for additional information about reserve development. [[GREPCENT_TABLE]] [["","68"]] [[/GREPCENT_TABLE]] Table of Contents The following table summarizes gross and net carried reserves for CNA’s Property & Casualty Operations: [[GREPCENT_TABLE]] [["December 31","2023","","2022"],["(In millions)"],["Gross Case Reserves","$","5,759","","","$","5,502"],["Gross IBNR Reserves","14,184","","","13,174"],["Total Gross Carried Claim and Claim Adjustment Expense Reserves","$","19,943","","","$","18,676"],["Net Case Reserves","$","4,978","","","$","4,805"],["Net IBNR Reserves","12,235","","","11,191"],["Total Net Carried Claim and Claim Adjustment Expense Reserves","$","17,213","","","$","15,996"]] [[/GREPCENT_TABLE]] The following table summarizes the gross and net carried reserves for other insurance businesses in run-off, including CNA Re and A&EP: [[GREPCENT_TABLE]] [["December 31","2023","","2022"],["(In millions)"],["Gross Case Reserves","$","1,353","","","$","1,428"],["Gross IBNR Reserves","1,333","","","1,321"],["Total Gross Carried Claim and Claim Adjustment Expense Reserves","$","2,686","","","$","2,749"],["Net Case Reserves","$","129","","","$","137"],["Net IBNR Reserves","239","","","202"],["Total Net Carried Claim and Claim Adjustment Expense Reserves","$","368","","","$","339"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","69"]] [[/GREPCENT_TABLE]] Table of Contents Life & Group Policyholder Reserves CNA’s Life & Group business 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 may 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 CNA has the ability to increase policy premiums, subject to state regulatory approval. CNA maintains future policy benefit reserves for its long-term care policies. Future policy benefit reserves for long-term care policies relate to policyholders that are currently receiving benefits, including claims that have been incurred but are not yet reported, as well as policyholders that are not yet receiving benefits. In developing the future policy benefit reserves, CNA’s actuaries perform a reserve review on an annual basis. During the annual review, historical policyholder morbidity, persistency (inclusive of mortality), anticipated future premium rate increases and expense experience is reviewed and compared to the current best estimate actuarial assumption set for potential revision. On a quarterly basis, actuaries perform experience studies that monitor the appropriateness of best estimate actuarial assumptions against emerging experience to assess whether any updates to those assumptions are warranted. The determination of these reserves requires management to make estimates and assumptions about expected policyholder experience over the remaining life of the policies. Since policies may be in force for several decades, these assumptions are subject to significant estimation risk. In addition, claim and claim adjustment expense reserves are maintained for CNA’s structured settlement obligations. In developing the claim and claim adjustment expense reserve estimates for CNA’s structured settlement obligations, CNA’s actuaries monitor mortality and expense experience on an annual basis. CNA’s recorded claim and claim adjustment expense reserves reflect CNA’s best estimate after incorporating the results of the most recent reviews. Claim and claim adjustment expense reserves for structured settlement obligations are discounted as discussed in Note 1 to the Consolidated Financial Statements included under Item 8. The actuarial assumptions related to future policy benefit reserves for long-term care policies that management believes are subject to the most variability are morbidity, persistency 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. 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, CNA’s long-term care reserves may be subject to material increases if actual experience develops adversely to its expectations. The table below summarizes the estimated pretax impact on CNA’s results of operations from various hypothetical revisions to its liability for future policyholder benefits reserve assumptions. CNA has assumed that revisions to such assumptions would occur in each policy type, age and duration within each policy group. The impact of each sensitivity is discrete and does not reflect the impact one factor may have on another or the mitigating impact from management actions, which may include additional future premium rate increases. Although such hypothetical revisions are not currently required or anticipated, CNA believes they could occur based on past variances in experience and its expectations of the ranges of future experience that could reasonably occur. Any actual adjustment would be dependent on the specific policies affected and, therefore, may differ from the estimates summarized below. The estimated impacts to results of operations in the table below are after consideration of any net premium ratio impacts. [[GREPCENT_TABLE]] [["For the year ended December 31, 2023","Estimated Reduction to Pretax Income"],["(In millions)"],["Hypothetical revisions"],["Morbidity:"],["2.5% increase in morbidity","$","275"],["5% increase in morbidity","600"],["Persistency:"],["5% decrease in active life mortality and lapse","$","150"],["10% decrease in active life mortality and lapse","300"],["Premium rate actions:"],["25% decrease in anticipated future premium rate increases","$","25"],["50% decrease in anticipated future premium rate increases","50"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","70"]] [[/GREPCENT_TABLE]] Table of Contents As part of the annual reserve review, statutory long-term care reserve adequacy is evaluated by premium deficiency testing, by comparing carried statutory reserves with best estimate reserves, which incorporates best estimate discount rate and liability assumptions in its determination. Statutory margin is the excess of carried reserves over best estimate reserves. As of September 30, 2023, statutory long-term care margin increased $1.3 billion, primarily driven by a more favorable interest rate environment resulting in a higher yielding investment portfolio. The following tables summarize policyholder reserves for CNA’s long-term care operations: [[GREPCENT_TABLE]] [["December 31, 2023","Claim and claim adjustment expenses","","Future policy benefits","","Total"],["(In millions)"],["Long-term care","","","$","13,959","","","$","13,959"],["Structured settlement annuities and other","$","582","","","","","582"],["Total","582","","","13,959","","","14,541"],["Ceded reserves","93","","","","","93"],["Total gross reserves","$","675","","","$","13,959","","","$","14,634"],["December 31, 2022"],["Long-term care (a)(b)","","","$","13,480","","","$","13,480"],["Structured settlement annuities and other","$","594","","","","","594"],["Total","594","","","13,480","","","14,074"],["Ceded reserves","101","","","","","101"],["Total gross reserves","$","695","","","$","13,480","","","$","14,175"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["(a)","As of January 1, 2023, ASU 2018-12 was adopted using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts presented in the financial statements have been adjusted to reflect application of the new guidance. For additional information see Notes 1 and 9 of the Notes to Consolidated Financial Statements included under Item 8."],["(b)","In conjunction with the adoption of ASU 2018-12, at January 1, 2023 the long-term care reserves for policyholders currently receiving benefits were reclassified from Claim and claim adjustment expenses to Future policy benefits. This change was applied retrospectively as of January 1, 2021."]] [[/GREPCENT_TABLE]] CATASTROPHES AND RELATED REINSURANCE Various events can cause catastrophe losses. These events can be natural or man-made, including hurricanes, tornadoes, windstorms, earthquakes, hail, severe winter weather, fires, floods, riots, strikes, civil unrest, cyber attacks, pandemics and acts of terrorism that produce unusually large aggregate losses. In most, but not all cases, CNA’s catastrophe losses from these events in the U.S. are defined consistent with the definition of the Property Claims Service (“PCS”). PCS defines a catastrophe as an event that causes damage of $25 million or more in direct insured losses to property and affects a significant number of policyholders and insurers. For events outside of the U.S., CNA defines a catastrophe as an industry recognized event that generates an accumulation of claims amounting to more than $1 million for the International line of business. Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in CNA’s results of operations and/or equity. Catastrophe losses, net of reinsurance, of $236 million and $247 million were recorded for the years ended December 31, 2023 and 2022. Catastrophe losses for the years ended December 31, 2023 and 2022 were driven by severe weather related events, primarily Winter Storm Elliott and Hurricane Ian for 2022. CNA uses various analyses and methods, including using one of the industry standard natural catastrophe models, to estimate hurricane and earthquake losses at various return periods and to inform underwriting and reinsurance decisions designed to manage its exposure to catastrophic events. CNA generally seeks to manage its exposure through the purchase [[GREPCENT_TABLE]] [["","71"]] [[/GREPCENT_TABLE]] Table of Contents of catastrophe reinsurance and utilize various reinsurance programs to mitigate catastrophe losses, including excess-of-loss occurrence and aggregate treaties covering property and workers’ compensation, a property quota share treaty and the Terrorism Risk Insurance Program Reauthorization Act of 2019 (“TRIPRA”), as well as individual risk agreements that reinsure from losses from specific classes or lines of business. CNA conducts an ongoing review of its risk and catastrophe reinsurance coverages and from time to time makes changes as it deems appropriate. The following discussion summarizes CNA’s most significant catastrophe reinsurance coverage at January 1, 2024. Group North American Property Treaty CNA purchased corporate catastrophe excess-of-loss treaty reinsurance covering its U.S. states and territories and Canadian property exposures underwritten in its North American and European companies. Exposures underwritten through Hardy are excluded and covered under a separate treaty. The treaty has a term of June 1, 2023 to June 1, 2024 and provides coverage for the accumulation of covered losses from catastrophe occurrences above CNA’s per occurrence retention of $235 million up to $1.1 billion for all losses other than earthquakes. Earthquakes are covered up to $1.2 billion. Losses stemming from terrorism events are covered unless they are due to a nuclear, biological or chemical attack. All layers of the treaty provide for one full reinstatement. Group Workers’ Compensation Treaty CNA also purchased corporate Workers’ Compensation catastrophe excess-of-loss treaty reinsurance for the period January 1, 2024 to January 1, 2025 providing $275 million of coverage for the accumulation of covered losses related to natural catastrophes above CNA’s per occurrence retention of $25 million. The treaty provides $775 million of coverage for the accumulation of covered losses related to terrorism events above CNA’s per occurrence retention of $25 million. Of the $775 million in terrorism coverage, $200 million is provided for nuclear, biological, chemical and radiation events. One full reinstatement is available for the first $275 million above the retention, regardless of the covered peril. Terrorism Risk Insurance Program Reauthorization Act of 2019 CNA’s principal reinsurance protection against large-scale terrorist attacks, including nuclear, biological, chemical or radiological attacks, is the coverage currently provided through TRIPRA which runs through the end of 2027. TRIPRA provides a U.S. government backstop for insurance-related losses resulting from any “act of terrorism,” which is certified by the Secretary of Treasury in consultation with the Secretary of Homeland Security for losses that exceed a threshold of $200 million industry-wide for the calendar year 2024. Under the current provisions of the program, in 2024 the federal government will reimburse 80% of CNA’s covered losses in excess of its applicable deductible up to a total industry program cap of $100 billion. CNA’s deductible is based on eligible commercial property and casualty earned premiums for the preceding calendar year. Based on 2023 earned premiums, CNA’s estimated deductible under the program is $1.1 billion for 2024. If an act of terrorism or acts of terrorism result in covered losses exceeding the $100 billion annual industry aggregate limit, Congress would be responsible for determining how additional losses in excess of $100 billion will be paid. CRITICAL ACCOUNTING ESTIMATES The preparation of the Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported on the Consolidated Financial Statements and the related notes. Actual results could differ from those estimates. The Consolidated Financial Statements and accompanying notes have been prepared in accordance with GAAP, applied on a consistent basis. We continually evaluate the accounting policies and estimates used to prepare the Consolidated Financial Statements. In general, our estimates are based on historical experience, evaluation of current trends, information from third party professionals and various other assumptions that we believe are reasonable under the known facts and circumstances. We consider the accounting policies discussed below to be critical to an understanding of our Consolidated Financial Statements as their application places the most significant demands on our judgment. Due to the inherent uncertainties involved with these types of judgments, actual results could differ significantly from estimates and may have a material adverse impact on our results of operations, financial condition, equity, business and CNA’s insurer financial strength and corporate debt ratings. [[GREPCENT_TABLE]] [["","72"]] [[/GREPCENT_TABLE]] Table of Contents Insurance Reserves Insurance reserves are established for both short and long-duration insurance contracts. Short-duration contracts are primarily related to property and casualty insurance policies where the reserving process is based on actuarial estimates of the amount of loss, including amounts for known and unknown claims. Long-duration contracts are primarily related to long-term care policies and the reserves are recorded as Future policy benefits reserves as discussed below. The reserve for unearned premiums represents the portion of premiums written related to the unexpired terms of coverage. The reserving process is discussed in further detail in the Insurance Reserves section of this MD&A. Long Term Care Reserves Future policy benefits reserves for long-term care policies are based on certain actuarial assumptions, including morbidity, persistency (inclusive of mortality), anticipated future premium rate increases and expenses. The adequacy of the reserves is contingent upon actual experience and future expectations related to these key assumptions. If actual or expected future experience differs from these assumptions, the reserves may not be adequate, requiring an increase to reserves. The reserves are discounted using upper-medium grade fixed income instrument yields as of each reporting date. In addition, regulatory approval may not be received for the level of premium rate increases requested. The reserving process is discussed in further detail in the Insurance Reserve section of this MD&A. Reinsurance and Other Receivables Exposure exists with respect to the collectibility of ceded property and casualty and life reinsurance to the extent that any reinsurer is unable to meet its obligations or disputes the liabilities CNA has ceded under reinsurance agreements. An allowance for doubtful accounts on reinsurance receivables is recorded on the basis of periodic evaluations of balances due from reinsurers, reinsurer financial strength rating and solvency, industry experience and current and forecast economic conditions. Further information on CNA’s reinsurance receivables is included in Note 17 of the Notes to Consolidated Financial Statements included under Item 8. Additionally, exposure exists with respect to the collectibility of amounts due from customers on other receivables. An allowance for doubtful accounts is recorded on the basis of periodic evaluations of balances due, currently as well as in the future, historical business default data, management’s experience and current and forecast economic conditions. If actual experience differs from the estimates made by management in determining the allowances for doubtful accounts on reinsurance and other receivables, net receivables as reflected on our Consolidated Balance Sheets may not be collected. Further information on CNA’s process for determining the allowance for doubtful accounts on reinsurance and insurance receivables is in Note 1 to the Consolidated Financial Statements included under Item 8. Valuation of Investments and Impairment of Securities Fixed maturity and equity securities are carried at fair value on the balance sheet. Fair value represents the price that would be received in a sale of an asset in an orderly transaction between market participants on the measurement date, the determination of which may require us to make a significant number of assumptions and judgments. Securities with the greatest level of subjectivity around valuation are those that rely on inputs that are significant to the estimated fair value and that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs are based on assumptions consistent with what we believe other market participants would use to price such securities. Further information on fair value measurements is included in Note 4 of the Notes to Consolidated Financial Statements included under Item 8. CNA’s fixed maturity securities are subject to market declines below amortized cost that may result in the recognition of impairment losses in earnings. Factors considered in the determination of whether or not an impairment loss is recognized in earnings include a current intention or need to sell the security or an indication that a credit loss exists. Significant judgment is required in the determination of whether a credit loss has occurred for a security. CNA considers all available evidence when determining whether a security requires a credit allowance to be recorded, including the financial condition and expected near-term and long-term prospects of the issuer, whether the issuer is current with interest and principal payments, credit ratings on the security or changes in ratings over time, general market conditions, industry, sector or other specific factors and whether CNA expects to receive cash flows sufficient to recover the entire amortized cost basis of the security. CNA’s mortgage loan portfolio is subject to the expected credit loss model, which requires immediate recognition of estimated credit losses over the life of the asset and the presentation of the asset at the net amount expected to be collected. [[GREPCENT_TABLE]] [["","73"]] [[/GREPCENT_TABLE]] Table of Contents Significant judgment is required in the determination of estimated credit losses and any changes in CNA’s expectation of the net amount to be collected are recognized in earnings. Further information on CNA’s process for evaluating impairments and expected credit losses is included in Note 1 of the Notes to Consolidated Financial Statements included under Item 8. ACCOUNTING STANDARDS UPDATE For a discussion of accounting standards updates that have been adopted, please read Note 1 of the Notes to Consolidated Financial Statements included under Item 8. RECENT TAX LEGISLATION Corporate Alternative Minimum Tax The Inflation Reduction Act was enacted on August 16, 2022, and includes, among other provisions, a new 15% corporate alternative minimum tax (“CAMT”), effective January 1, 2023, imposed on the adjusted financial statement income (“AFSI”) of an applicable corporation whose average annual AFSI over three prior years exceeds $1 billion. Based on interpretations of the CAMT and current guidance, the Company believes that the CAMT has no impact on its consolidated financial results for the year ended December 31, 2023. The Company will continue to monitor as additional technical guidance from the U.S. Department of Treasury, including forthcoming proposed regulations, becomes available. Pillar Two The Organization for Economic Co-operation and Development/G20 Inclusive Framework on Base Erosion and Profit Shifting has introduced rules to establish a global minimum corporate tax rate of 15%, commonly referred to as the Pillar Two rules. Numerous foreign countries have enacted legislation to implement the Pillar Two rules, effective beginning in 2024, or are expected to enact similar legislation. The Company is currently evaluating the potential impacts that Pillar Two may have on future periods and will continue to monitor the implementation of the Pillar Two rules in the jurisdictions in which it operates.