Edgar Filing: LOEWS CORP

FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X]

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

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to

Commission File Number 1-6541

LOEWS CORPORATION

(Exact name of registrant as specified in its charter)


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

667 Madison Avenue, New York, N.Y. 10065-8087

(Address of principal executive offices) (Zip Code)

(212) 521-2000

(Registrant’s telephone number, including area code)

NOT APPLICABLE

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

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


		Yes X				No

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


		Yes X		No		Not Applicable

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

Large accelerated filer X Accelerated filer Non-accelerated filer Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


		Yes				No X


Class						Outstanding at October 27, 2014
Common stock, $0.01 par value						374,144,134 shares

INDEX


	Page No.

Part I. Financial Information

Item 1. Financial Statements (unaudited)

Consolidated Condensed Balance Sheets September 30, 2014 and December 31, 2013		3

Consolidated Condensed Statements of Income Three and nine months ended September 30, 2014 and 2013		4

Consolidated Condensed Statements of Comprehensive Income Three and nine months ended September 30, 2014 and 2013		5

Consolidated Condensed Statements of Equity Nine months ended September 30, 2014 and 2013		6

Consolidated Condensed Statements of Cash Flows Nine months ended September 30, 2014 and 2013		7

Notes to Consolidated Condensed Financial Statements		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		43

Item 3. Quantitative and Qualitative Disclosures about Market Risk		72

Item 4. Controls and Procedures		72

Part II. Other Information		73

Item 1. Legal Proceedings		73

Item 1A. Risk Factors		73

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		73

Item 6. Exhibits		74

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)


	September 30,			December 31,
	2014			2013
(Dollar amounts in millions, except per share data)

Assets:

Investments:
Fixed maturities, amortized cost of $37,631 and $39,426		$	40,804		$	41,320
Equity securities, cost of $765 and $881			754			871
Limited partnership investments			3,658			3,420
Other invested assets			702			562
Short term investments			6,726			6,772
Total investments			52,644			52,945
Cash			637			294
Receivables			8,185			9,338
Property, plant and equipment			14,411			13,524
Goodwill			353			357
Assets of discontinued operations						1,041
Other assets			1,672			1,635
Deferred acquisition costs of insurance subsidiaries			627			624
Separate account business						181
Total assets		$	78,529		$	79,939


Liabilities and Equity:

Insurance reserves:
Claim and claim adjustment expense		$	23,475		$	24,089
Future policy benefits			8,890			10,471
Unearned premiums			3,703			3,718
Policyholders’ funds			27			116
Total insurance reserves			36,095			38,394
Payable to brokers			663			134
Short term debt			850			819
Long term debt			10,051			9,525
Deferred income taxes			1,030			716
Liabilities of discontinued operations						632
Other liabilities			4,724			4,632
Separate account business						181
Total liabilities			53,413			55,033

Commitments and contingent liabilities

Preferred stock, $0.10 par value:
Authorized – 100,000,000 shares
Common stock, $0.01 par value:
Authorized – 1,800,000,000 shares
Issued – 387,493,404 and 387,210,096 shares			4			4
Additional paid-in capital			3,613			3,607
Retained earnings			15,817			15,508
Accumulated other comprehensive income			638			339
			20,072			19,458
Less treasury stock, at cost (9,571,870 shares)			(415)
Total shareholders’ equity			19,657			19,458
Noncontrolling interests			5,459			5,448
Total equity			25,116			24,906
Total liabilities and equity		$	78,529		$	79,939

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	2014				2013				2014				2013
(In millions, except per share data)

Revenues:
Insurance premiums		$	1,810			$	1,825			$	5,427			$	5,389
Net investment income			451				605				1,625				1,739
Investment gains (losses):
Other-than-temporary impairment losses			(10	)			(15	)			(17	)			(49)
Portion of other-than-temporary impairment losses recognized in Other comprehensive income (loss)							(1	)							(1)
Net impairment losses recognized in earnings			(10	)			(16	)			(17	)			(50)
Other net investment gains			47				18				82				57
Total investment gains			37				2				65				7
Contract drilling revenues			728				691				2,063				2,136
Other revenues			497				474				1,624				1,560
Total			3,523				3,597				10,804				10,831

Expenses:
Insurance claims and policyholders’ benefits			1,354				1,378				4,241				4,259
Amortization of deferred acquisition costs			332				341				996				1,004
Contract drilling expenses			400				420				1,165				1,164
Other operating expenses			977				777				2,634				2,309
Interest			121				105				369				316
Total			3,184				3,021				9,405				9,052
Income before income tax			339				576				1,399				1,779
Income tax expense			(99	)			(155	)			(347	)			(478)
Income from continuing operations			240				421				1,052				1,301
Discontinued operations, net			29				(37	)			(384	)			(107)
Net income			269				384				668				1,194
Amounts attributable to noncontrolling interests			(61	)			(102	)			(285	)			(401)
Net income attributable to Loews Corporation		$	208			$	282			$	383			$	793


Net income attributable to Loews Corporation:
Income from continuing operations		$	179			$	318			$	747			$	901
Discontinued operations, net			29				(36	)			(364	)			(108)
Net income		$	208			$	282			$	383			$	793


Basic net income per share:
Income from continuing operations		$	0.47			$	0.82			$	1.94			$	2.32
Discontinued operations, net			0.08				(0.09	)			(0.94	)			(0.28)
Net income		$	0.55			$	0.73			$	1.00			$	2.04


Diluted net income per share:
Income from continuing operations		$	0.47			$	0.82			$	1.94			$	2.31
Discontinued operations, net			0.08				(0.09	)			(0.94	)			(0.28)
Net income		$	0.55			$	0.73			$	1.00			$	2.03


Dividends per share		$	0.0625			$	0.0625			$	0.1875			$	0.1875


Weighted average shares outstanding:
Shares of common stock			380.59				387.26				384.53				389.13
Dilutive potential shares of common stock			0.60				0.88				0.66				0.83
Total weighted average shares outstanding assuming dilution			381.19				388.14				385.19				389.96

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
(In millions)

Net income	$	269		$	384		$	668		$	1,194

Other comprehensive income (loss), after tax
Changes in:
Net unrealized gains (losses) on investments with other-than-temporary impairments		1			(3	)		15			3
Net other unrealized gains (losses) on investments		(83	)		(70	)		424			(717)
Total unrealized gains (losses) on available-for-sale investments		(82	)		(73	)		439			(714)
Discontinued operations		(34	)		(8	)		(19	)		(13)
Unrealized gains (losses) on cash flow hedges		(4	)		5			(1	)		(1)
Pension liability		2			3			(52	)		12
Foreign currency		(73	)		56			(37	)		(18)

Other comprehensive income (loss)		(191	)		(17	)		330			(734)

Comprehensive income		78			367			998			460

Amounts attributable to noncontrolling interests		(39	)		(102	)		(316	)		(327)

Total comprehensive income attributable to Loews Corporation	$	39		$	265		$	682		$	133

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY

(Unaudited)


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

Balance, January 1, 2013	$	24,676	$	4	$	3,595	$	15,192	$	678	$	(10)	$	5,217
Net income		1,194						793						401
Other comprehensive loss		(734)								(660)				(74)
Dividends paid		(444)						(73)						(371)
Issuance of equity securities by subsidiary		337				51				2				284
Purchase of Loews treasury stock		(218)										(218)
Issuance of Loews common stock		4				4
Stock-based compensation		12				(1)								13
Other		(6)				(1)		(1)						(4)
Balance, September 30, 2013	$	24,821	$	4	$	3,648	$	15,911	$	20	$	(228)	$	5,466


Balance, January 1, 2014	$	24,906	$	4	$	3,607	$	15,508	$	339	$	-	$	5,448
Net income		668						383						285
Other comprehensive income		330								299				31
Dividends paid		(333)						(72)						(261)
Purchases of subsidiary stock from
noncontrolling interests		(83)				(8)								(75)
Purchases of Loews treasury stock		(415)										(415)
Issuance of Loews common stock		5				5
Stock-based compensation		19				9								10
Other		19						(2)						21
Balance, September 30, 2014	$	25,116	$	4	$	3,613	$	15,817	$	638	$	(415)	$	5,459

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)


Nine Months Ended September 30	2014			2013
(In millions)

Operating Activities:

Net income	$	668		$	1,194
Adjustments to reconcile net income to net cash provided by operating activities, net		1,491			925
Changes in operating assets and liabilities, net:
Receivables		571			146
Deferred acquisition costs		14			(23)
Insurance reserves		(222	)		(166)
Other assets		(127	)		(64)
Other liabilities		(152	)		215
Trading securities		(147	)		(898)
Net cash flow operating activities		2,096			1,329

Investing Activities:

Purchases of fixed maturities		(7,457	)		(8,205)
Proceeds from sales of fixed maturities		4,005			4,830
Proceeds from maturities of fixed maturities		2,901			2,496
Purchases of equity securities		(44	)		(61)
Proceeds from sales of equity securities		23			82
Purchases of limited partnership investments		(218	)		(263)
Proceeds from sales of limited partnership investments		133			187
Purchases of property, plant and equipment		(1,595	)		(1,307)
Acquisitions		(180	)		(235)
Dispositions		1,030			135
Change in short term investments		489			611
Other, net		(52	)		(135)
Net cash flow investing activities		(965	)		(1,865)

Financing Activities:

Dividends paid		(72	)		(73)
Dividends paid to noncontrolling interests		(261	)		(371)
Purchases of subsidiary stock from noncontrolling interests		(88	)
Purchases of Loews treasury stock		(396	)		(228)
Issuance of Loews common stock		5			4
Proceeds from sale of subsidiary stock		4			370
Principal payments on debt		(1,250	)		(1,058)
Issuance of debt		1,259			1,953
Other, net		14			(29)
Net cash flow financing activities		(785	)		568

Effect of foreign exchange rate on cash		(3	)		(3)

Net change in cash		343			29
Cash, beginning of period		294			228
Cash, end of period	$	637		$	257

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

Loews Corporation is a holding company. Its subsidiaries are engaged in the following lines of business: commercial property and casualty insurance (CNA Financial Corporation (“CNA”), a 90% owned subsidiary); the operation of offshore oil and gas drilling rigs (Diamond Offshore Drilling, Inc. (“Diamond Offshore”), a 51% owned subsidiary); transportation and storage of natural gas and natural gas liquids and gathering and processing of natural gas (Boardwalk Pipeline Partners, LP (“Boardwalk Pipeline”), a 53% owned subsidiary); and the operation of a chain of hotels (Loews Hotels Holding Corporation (“Loews Hotels”), a wholly owned subsidiary). Unless the context otherwise requires, the terms “Company,” “Loews” and “Registrant” as used herein mean Loews Corporation excluding its subsidiaries and the term “Net income (loss) attributable to Loews Corporation” as used herein means Net income (loss) attributable to Loews Corporation shareholders.

In the opinion of management, the accompanying unaudited Consolidated Condensed Financial Statements reflect all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of September 30, 2014 and December 31, 2013, the results of operations and comprehensive income for the three and nine months ended September 30, 2014 and 2013 and changes in shareholders’ equity and cash flows for the nine months ended September 30, 2014 and 2013.

Net income for the third quarter and first nine months of each of the years is not necessarily indicative of net income for that entire year.

Reference is made to the Notes to Consolidated Financial Statements in the 2013 Annual Report on Form 10-K which should be read in conjunction with these Consolidated Condensed Financial Statements.

The Company presents basic and diluted net income per share on the Consolidated Condensed Statements of Income. Basic net income per share excludes dilution and is computed by dividing net income attributable to common stock by the weighted average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Stock appreciation rights (“SARs”) of 2.6 million, 1.4 million, 2.2 million and 1.4 million shares were not included in the diluted weighted average shares amounts for the three and nine months ended September 30, 2014 and 2013 due to the exercise price being greater than the average stock price.

Updated accounting guidance not yet adopted – In April of 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” Under the new accounting guidance, only disposals representing a strategic shift in operations should be presented as discontinued operations. The update also requires new disclosures for discontinued operations and disposals that do not meet the definition of a discontinued operation. The new accounting guidance is to be applied prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2014, and will not have a material impact on the Company’s consolidated financial statements.

In May of 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The core principle of the new accounting guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new accounting guidance provides a five-step analysis of transactions to determine when and how revenue is recognized and requires enhanced disclosures about revenue. This update is effective for annual reporting periods beginning after December 15, 2016, including interim periods, and can be adopted either retrospectively or as a cumulative effect adjustment at the date of adoption. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its consolidated financial statements.

2. Acquisitions and Divestitures

Continental Assurance Company (“CAC”) – On August 1, 2014, CNA completed the sale of the common stock of CAC. The sale price is subject to a customary post-closing review by the purchaser. The business sold, which was previously reported within the Life & Group Non-Core segment, is reported as discontinued operations in the Consolidated Condensed Statements of Income for the three and nine months ended September 30, 2014 and 2013.

In connection with the sale of CAC, CNA entered into a 100% coinsurance agreement on a separate small block of annuity business outside of CAC. The coinsurance agreement required the transfer of assets with a book value equal to the ceded reserves on the inception date of the contract. Because a substantial portion of the assets supporting these liabilities are held in trust for the benefit of the original cedant, those assets were transferred on a funds withheld basis. Under this approach CNA maintains legal ownership of the assets, but the investment income and realized gains and losses on those assets inure to the reinsurer. As a result, the $31 million (after tax and noncontrolling interests) difference between market value and book value of the funds withheld assets at the coinsurance contract’s inception was recognized in Other operating expenses.

HighMount – In May of 2014, the Company announced that HighMount Exploration & Production LLC (“HighMount”), its natural gas and oil exploration and production subsidiary, was pursuing strategic alternatives, including a potential sale of the business. In the second quarter of 2014, the Company recognized an impairment charge of $259 million ($167 million after tax) related to the excess carrying value of HighMount over the estimated fair value, less costs to sell. The Company measured estimated fair value using an estimated sale price arrived at by assessing market response in the auction process in relation to valuation models provided by HighMount’s financial advisors, which are Level 3 inputs of the fair value hierarchy. On August 7, 2014, the Company entered into an agreement to sell HighMount to privately held affiliates of EnerVest, Ltd. and on September 30, 2014, HighMount was sold for net proceeds of $794 million, subject to customary closing adjustments. HighMount’s bank debt of $480 million was repaid from proceeds of the sale. In the third quarter of 2014, the Company adjusted the previously recognized impairment and reduced the charge by $60 million ($30 million after tax) based on the actual sales price.

See Note 15 for further discussion of discontinued operations.

Evangeline Pipeline System – In October of 2014, Boardwalk Pipeline acquired Chevron Petrochemical Pipeline, LLC, which owns the Evangeline ethylene pipeline system for $295 million in cash, subject to customary adjustments. The purchase price was funded through borrowings under Boardwalk Pipeline’s revolving credit facility. As of September 30, 2014, Boardwalk Pipeline had recorded a $30 million deposit related to this transaction.

Bluegrass Project – As discussed in Note 2 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, Boardwalk Pipeline executed a series of agreements in 2013 with The Williams Companies, Inc. (“Williams”) to develop the Bluegrass Project. In the first quarter of 2014, the Company expensed the previously capitalized project costs related to the development process due to a lack of customer commitments, resulting in a charge of $94 million ($55 million after tax and noncontrolling interests), inclusive of a $10 million charge recorded by Boardwalk Pipeline Partners, LP. This charge was recorded within Other operating expenses on the Consolidated Condensed Statements of Income. In the third quarter of 2014, Boardwalk Pipeline and Williams agreed to dissolve the Bluegrass project entities.

Loews Hotels – In 2014, Loews Hotels has acquired three properties. In July of 2014, Loews Hotels purchased the Loews Chicago O’Hare Hotel, a 556 guestroom hotel, and the Loews Minneapolis Hotel, a 251 guestroom hotel, and in October of 2014, Loews Hotels purchased the Loews Ventana Canyon in Tucson, Arizona, a 398 guestroom hotel, which had been operated by Loews Hotels under a management agreement, for a total cost of approximately $230 million, funded with a combination of cash and property-level debt.

In addition, Loews Hotels has a joint venture interest in the Cabana Bay Beach Resort, an 1,800 guestroom hotel at Universal Orlando, Florida, which opened in March of 2014. Loews Hotels also has commitments of approximately $170 million for the Loews Chicago Hotel, a 400 guestroom hotel being developed and planned to open in early 2015 and approximately $60 million for the development, through a joint venture, of the Loews Sapphire Falls Resort at Universal Orlando, Florida, a 1,000 guestroom hotel, scheduled to open in late 2016.

3. Investments

Net investment income is as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,

	2014			2013			2014			2013

(In millions)

Fixed maturity securities	$	453		$	461		$	1,356		$	1,372
Short term investments		1			2			3			5
Limited partnership investments		26			115			229			345
Equity securities		2			3			7			9
Income (loss) from trading portfolio (a)		(24	)		30			46			28
Other		7			7			25			19

Total investment income		465			618			1,666			1,778
Investment expenses		(14	)		(13	)		(41	)		(39)

Net investment income	$	451		$	605		$	1,625		$	1,739



(a) Includes net unrealized gains (losses) related to changes in fair value on trading securities still held of $(19), $25, $46 and $(22) for the three and nine months ended September 30, 2014 and 2013.

Investment gains (losses) are as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,

	2014			2013			2014			2013

(In millions)

Fixed maturity securities	$	39		$	2		$	58		$	22
Equity securities		(3	)		(2	)		2			(17)
Derivative instruments					(1	)		1			(4)
Short term investments and other		1			3			4			6

Investment gains (a)	$	37		$	2		$	65		$	7

(a)	Includes gross realized gains of $52, $50, $130 and $129 and gross realized losses of $16, $50, $70 and $124 on available-for-sale securities for the three and nine months ended September 30, 2014 and 2013.

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,

	2014		2013		2014		2013

(In millions)

Fixed maturity securities available-for-sale:
Corporate and other bonds	$	6	$	8	$	9	$	16
Asset-backed:
Residential mortgage-backed		2		2		4		5
Other asset-backed				1		1		2

Total asset-backed		2		3		5		7

Total fixed maturities available-for-sale		8		11		14		23

Equity securities available-for-sale:
Common stock		2		3		3		5
Preferred stock				2				22

Total equity securities available-for-sale		2		5		3		27

Net OTTI losses recognized in earnings	$	10	$	16	$	17	$	50

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

September 30, 2014

Cost or
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair Value

Unrealized
OTTI Losses
(Gains)

(In millions)

Fixed maturity securities:

Corporate and other bonds

17,480

$ 1,704

$19,144

States, municipalities and political subdivisions

11,217

1,295

12,459

Asset-backed:

Residential mortgage-backed

4,972

187

5,146

(54)

Commercial mortgage-backed

2,079

2,158

(2)

Other asset-backed

1,222

1,230

Total asset-backed

8,273

287

8,534

(56)

U.S. Treasury and obligations of government-sponsored enterprises

Foreign government

456

471

Redeemable preferred stock

Fixed maturities available- for-sale

37,490

3,310

120

40,680

(56)

Fixed maturities, trading

141

124

Total fixed maturities

37,631

3,310

137

40,804

(56)

Equity securities:

Common stock

Preferred stock

162

165

Equity securities available-for-sale

197

211

Equity securities, trading

568

112

543

Total equity securities

765

102

113

754

Total

38,396

$ 3,412

250

$41,558

(56)


December 31, 2013	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	19,352	$	1,645	$	135	$	20,862
States, municipalities and political subdivisions		11,281		548		272		11,557
Asset-backed:
Residential mortgage-backed		4,940		123		92		4,971	$	(37)
Commercial mortgage-backed		1,995		90		22		2,063		(3)
Other asset-backed		945		13		3		955

Total asset-backed		7,880		226		117		7,989		(40)
U.S. Treasury and obligations of government-sponsored enterprises		139		6		1		144
Foreign government		531		15		3		543
Redeemable preferred stock		92		10				102

Fixed maturities available-for-sale		39,275		2,450		528		41,197		(40)
Fixed maturities, trading		151				28		123

Total fixed maturities		39,426		2,450		556		41,320		(40)

Equity securities:
Common stock		36		9				45
Preferred stock		143		1		4		140

Equity securities available-for-sale		179		10		4		185		-
Equity securities, trading		702		119		135		686

Total equity securities		881		129		139		871		-

Total	$	40,307	$	2,579	$	695	$	42,191	$	(40)

The net unrealized gains on investments included in the tables above are recorded as a component of Accumulated other comprehensive income (“AOCI”). When presented in AOCI, these amounts are net of tax and noncontrolling interests and any required Shadow Adjustments. At September 30, 2014 and December 31, 2013, the net unrealized gains on investments included in AOCI were net of Shadow Adjustments of $873 million and $478 million. To the extent that unrealized gains on fixed income securities supporting certain products within CNA’s Life & Group Non-Core segment would result in a premium deficiency if realized, a related decrease in Deferred acquisition costs, and/or increase in Insurance reserves are recorded, net of tax and noncontrolling interests, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments).

The available-for-sale securities in a gross unrealized loss position are as follows:


	Less than 12 Months				12 Months or Longer				Total

September 30, 2014	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	1,726	$	23	$	402	$	17	$	2,128	$	40
States, municipalities and political subdivisions		176		2		435		51		611		53
Asset-backed:
Residential mortgage-backed		208		3		254		10		462		13
Commercial mortgage-backed		506		4		112		4		618		8
Other asset-backed		507		4		13		1		520		5

Total asset-backed		1,221		11		379		15		1,600		26
U.S. Treasury and obligations of government-sponsored enterprises						5				5
Foreign government		35				8		1		43		1

Total fixed maturity securities		3,158		36		1,229		84		4,387		120
Preferred stock		32		1		1				33		1

Total	$	3,190	$	37	$	1,230	$	84	$	4,420	$	121


	Less than 12 Months						12 Months or Longer						Total
December 31, 2013	Estimated Fair Value			Gross Unrealized Losses			Estimated Fair Value			Gross Unrealized Losses			Estimated Fair Value			Gross Unrealized Losses

(In millions)

Fixed maturity securities:
Corporate and other bonds		$	3,592		$	129		$	72		$	6		$	3,664		$	135
States, municipalities and political subdivisions			3,251			197			129			75			3,380			272
Asset-backed:
Residential mortgage-backed			1,293			29			343			63			1,636			92
Commercial mortgage-backed			640			22									640			22
Other asset-backed			269			3									269			3

Total asset-backed			2,202			54			343			63			2,545			117
U.S. Treasury and obligations of government-sponsored enterprises			13			1									13			1
Foreign government			111			3									111			3

Total fixed maturity securities			9,169			384			544			144			9,713			528
Preferred stock			87			4									87			4

Total		$	9,256		$	388		$	544		$	144		$	9,800		$	532

Based on current facts and circumstances, the Company believes the unrealized losses presented in the table above are not indicative of the ultimate collectibility of the current amortized cost of the securities, but rather are primarily attributable to changes in interest rates and credit spreads, market illiquidity and other factors. The Company has no current intent to sell securities with unrealized losses, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost; accordingly, the Company has determined that there are no additional OTTI losses to be recorded at September 30, 2014.

The following table summarizes the activity for the three and nine months ended September 30, 2014 and 2013 related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held at September 30, 2014 and 2013 for which a portion of an OTTI loss was recognized in Other comprehensive income (loss).


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2014			2013			2014			2013
(In millions)

Beginning balance of credit losses on fixed maturity securities		$	66		$	89		$	74		$	95
Additional credit losses for securities for which an OTTI loss was previously recognized						1						2
Reductions for securities sold during the period			(2)			(7)			(7)			(14)
Reductions for securities the Company intends to sell or more likely than not will be required to sell									(3)
Ending balance of credit losses on fixed maturity securities		$	64		$	83		$	64		$	83

Contractual Maturity

The following table summarizes available-for-sale fixed maturity securities by contractual maturity at September 30, 2014 and December 31, 2013. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid with or without call or prepayment penalties. Securities not due at a single date are allocated based on weighted average life.


	September 30, 2014				December 31, 2013
	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value
(In millions)

Due in one year or less	$	2,329	$	2,368	$	2,420	$	2,455
Due after one year through five years		8,888		9,455		9,496		10,068
Due after five years through ten years		12,446		12,951		11,667		11,954
Due after ten years		13,827		15,906		15,692		16,720
Total	$	37,490	$	40,680	$	39,275	$	41,197

Investment Commitments

As of September 30, 2014, the Company had committed approximately $365 million to future capital calls from various third-party limited partnership investments in exchange for an ownership interest in the related partnerships.

The Company invests in various privately placed debt securities, including bank loans, as part of its overall investment strategy and has committed to additional future purchases, sales and funding. As of September 30, 2014, the Company had commitments to purchase or fund additional amounts of $140 million and sell $103 million under the terms of such securities.

4. Fair Value

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

—

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

—

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

—

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

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

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

The fair values of CNA’s life settlement contracts are included in Other assets on the Consolidated Condensed Balance Sheets. Equity options purchased are included in Equity securities, and all other derivative assets are included in Receivables. Derivative liabilities are included in Payable to brokers. Assets and liabilities measured at fair value on a recurring basis are summarized in the tables below:

September 30, 2014

Level 1

Level 2

Level 3

Total

(In millions)

Fixed maturity securities:

Corporate and other bonds

18,938

173

19,144

States, municipalities and political subdivisions

12,379

12,459

Asset-backed:

Residential mortgage-backed

4,986

160

5,146

Commercial mortgage-backed

2,061

2,158

Other asset-backed

588

642

1,230

Total asset-backed

7,635

899

8,534

U.S. Treasury and obligations of government-sponsored enterprises

Foreign government

424

471

Redeemable preferred stock

Fixed maturities available-for-sale

137

39,391

1,152

40,680

Fixed maturities, trading

124

Total fixed maturities

137

39,424

1,243

40,804

Equity securities available-for-sale

141

211

Equity securities, trading

540

543

Total equity securities

681

754

Short term investments

6,047

612

6,659

Other invested assets

102

146

Receivables

Life settlement contracts

Payable to brokers

(409)

(5)

(414)


December 31, 2013	Level 1			Level 2			Level 3			Total

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	33		$	20,625		$	204		$	20,862
States, municipalities and political subdivisions					11,486			71			11,557
Asset-backed:
Residential mortgage-backed					4,640			331			4,971
Commercial mortgage-backed					1,912			151			2,063
Other asset-backed					509			446			955

Total asset-backed					7,061			928			7,989
U.S. Treasury and obligations of government-sponsored enterprises		116			28						144
Foreign government		81			462						543
Redeemable preferred stock		45			57						102

Fixed maturities available-for-sale		275			39,719			1,203			41,197
Fixed maturities, trading					43			80			123

Total fixed maturities	$	275		$	39,762		$	1,283		$	41,320


Equity securities available-for-sale	$	126		$	48		$	11		$	185
Equity securities, trading		678						8			686

Total equity securities	$	804		$	48		$	19		$	871


Short term investments	$	6,134		$	563					$	6,697
Other invested assets					54						54
Receivables					3						3
Life settlement contracts							$	88			88
Separate account business		9			171			1			181
Payable to brokers		(40	)		(1	)		(3	)		(44)
Assets of discontinued operations		28			2			2			32
Liabilities of discontinued operations					(6	)		(2	)		(8)

The tables below present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and nine months ended September 30, 2014 and 2013:


			Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)										Transfers		Transfers				Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities
	Balance,		Included in		Included in								into		out of		Balance,		Held at
2014	July 1		Net Income		OCI		Purchases		Sales		Settlements		Level 3		Level 3		September 30		September 30
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	194			$	(1)	$	4			$	(3)			$	(21)	$	173
States, municipalities and political subdivisions		79				1												80
Asset-backed:
Residential mortgage-backed		185	$	1								(17)	$	11		(20)		160
Commercial mortgage-backed		59		2		(2)		28				(21)		31				97
Other asset-backed		626		1		(4)		80				(25)				(36)		642

Total asset-backed		870		4		(6)		108	$	-		(63)		42		(56)		899	$	-

Fixed maturities available-for-sale		1,143		4		(6)		112				(66)		42		(77)		1,152
Fixed maturities, trading		91																91

Total fixed maturities	$	1,234	$	4	$	(6)	$	112	$	-	$	(66)	$	42	$	(77)	$	1,243	$	-


Equity securities available-for-sale	$	2			$	(1)	$	16									$	17
Equity securities trading		4						(1)										3

Total equity securities	$	6	$	-	$	(1)	$	15	$	-	$	-	$	-	$	-	$	20	$	-


Life settlement contracts	$	86	$	1							$	(1)					$	86	$	1
Derivative financial instruments, net		-																-		(1)


			Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)										Transfers		Transfers				Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities
	Balance,		Included in		Included in								into		out of		Balance,		Held at
2013	July 1		Net Income		OCI		Purchases		Sales		Settlements		Level 3		Level 3		September 30		September 30
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	202	$	1			$	6	$	(6)	$	(8)	$	17	$	(1)	$	211
States, municipalities and political subdivisions		140			$	(3)						(15)				(27)		95
Asset-backed:
Residential mortgage-backed		428				(20)		5				(21)				(22)		370	$	(1)
Commercial mortgage-backed		165		(1)		(2)		10				(1)				(14)		157
Other asset-backed		387				1		56				(6)				(5)		433		(1)

Total asset-backed		980		(1)		(21)		71		-		(28)		-		(41)		960		(2)
Redeemable preferred stock		25		(1)		1						(25)						-

Fixed maturities available-for-sale		1,347		(1)		(23)		77		(6)		(76)		17		(69)		1,266		(2)
Fixed maturities, trading		87		(8)						(1)								78		(8)

Total fixed maturities	$	1,434	$	(9)	$	(23)	$	77	$	(7)	$	(76)	$	17	$	(69)	$	1,344	$	(10)


Equity securities available-for-sale	$	13	$	(2)	$	2											$	13	$	(2)
Equity securities trading		2																2

Total equity securities	$	15	$	(2)	$	2	$	-	$	-	$	-	$	-	$	-	$	15	$	(2)


Life settlement contracts	$	91	$	3							$	(4)					$	90
Separate account business		2																2
Derivative financial instruments, net		5		2	$	(4)			$	(2)		(1)						-


			Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)										Transfers		Transfers				Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities
	Balance,		Included in		Included in								into		out of		Balance,		Held at
2014	January 1		Net Income		OCI		Purchases		Sales		Settlements		Level 3		Level 3		September 30		September 30
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	204	$	2			$	30	$	(10)	$	(13)	$	8	$	(48)	$	173
States, municipalities and political subdivisions		71		1	$	3		1		(10)				14				80
Asset-backed:
Residential mortgage-backed		331		(22)		62		47		(174)		(57)		32		(59)		160
Commercial mortgage-backed		151		4		(2)		28		(60)		(23)		43		(44)		97
Other asset-backed		446		2				457		(111)		(115)				(37)		642	$	(1)

Total asset-backed		928		(16)		60		532		(345)		(195)		75		(140)		899		(1)

Fixed maturities available-for-sale		1,203		(13)		63		563		(365)		(208)		97		(188)		1,152		(1)
Fixed maturities, trading		80		11														91		11

Total fixed maturities	$	1,283	$	(2)	$	63	$	563	$	(365)	$	(208)	$	97	$	(188)	$	1,243	$	10


Equity securities available-for-sale	$	11	$	3	$	(5)	$	16	$	(8)							$	17
Equity securities trading		8						1		(6)								3

Total equity securities	$	19	$	3	$	(5)	$	17	$	(14)	$	-	$	-	$	-	$	20	$	-


Life settlement contracts	$	88	$	23							$	(25)					$	86	$	3
Separate account business		1													$	(1)		-
Derivative financial instruments, net		(3)		1			$	(2)	$	2						2		-		1


			Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)										Transfers		Transfers				Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities
	Balance,		Included in		Included in								into		out of		Balance,		Held at
2013	January 1		Net Income		OCI		Purchases		Sales		Settlements		Level 3		Level 3		September 30		September 30
(In millions)

Fixed maturity securities:
Corporate and other bonds	$	219	$	2	$	(1)	$	129	$	(96)	$	(34)	$	43	$	(51)	$	211	$	(2)
States, municipalities and political subdivisions		96		(3)		1		122		(79)		(20)		5		(27)		95
Asset-backed:
Residential mortgage-backed		413		2		(21)		116		(10)		(53)		4		(81)		370		(3)
Commercial mortgage-backed		129				7		88				(10)		21		(78)		157
Other asset-backed		368		3		(1)		230		(132)		(30)				(5)		433		(2)

Total asset-backed		910		5		(15)		434		(142)		(93)		25		(164)		960		(5)
Redeemable preferred stock		26		(1)								(25)						-

Fixed maturities available-for-sale		1,251		3		(15)		685		(317)		(172)		73		(242)		1,266		(7)
Fixed maturities, trading		89		(7)						(4)								78		(7)

Total fixed maturities	$	1,340	$	(4)	$	(15)	$	685	$	(321)	$	(172)	$	73	$	(242)	$	1,344	$	(14)


Equity securities available-for-sale	$	34	$	(22)	$	2									$	(1)	$	13	$	(22)
Equity securities trading		7		(5)														2		(5)

Total equity securities	$	41	$	(27)	$	2	$	-	$	-	$	-	$	-	$	(1)	$	15	$	(27)


Short term investments	$	6							$	(6)							$	-
Other invested assets		1								(1)								-
Life settlement contracts		100	$	14							$	(24)						90	$	(1)
Separate account business		2																2
Derivative financial instruments, net		5		7	$	(6)	$	1		(2)		(5)						-		1

Net realized and unrealized gains and losses are reported in Net income as follows:


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

Fixed maturity securities available-for-sale		Investment gains (losses)
Fixed maturity securities, trading		Net investment income
Equity securities available-for-sale		Investment gains (losses)
Equity securities, trading		Net investment income
Other invested assets		Investment gains (losses) and Net investment income
Derivative financial instruments held in a trading portfolio		Net investment income
Derivative financial instruments, other		Investment gains (losses) and Other revenues
Derivative financial instruments included in Assets and Liabilities of discontinued operations		Discontinued operations, net
Life settlement contracts		Other revenues

Securities may be transferred in or out of levels within the fair value hierarchy based on the availability of observable market information and quoted prices used to determine the fair value of the security. The availability of observable market information and quoted prices varies based on market conditions and trading volume. During the three months ended September 30, 2014 there were no transfers between Level 1 and Level 2. During the nine months ended September 30, 2014 there were $24 million of transfers from Level 2 to Level 1 and $1 million from Level 1 to Level 2. There were no transfers between Level 1 and Level 2 during the three or nine months ended September 30, 2013. The Company’s policy is to recognize transfers between levels at the beginning of quarterly reporting periods.

Valuation Methodologies and Inputs

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

Fixed Maturity Securities

Fixed maturity securities are valued using methodologies that model information generated by market transactions involving identical or comparable assets, as well as discounted cash flow methodologies. Common inputs include: prices from recently executed transactions of similar securities, broker/dealer quotes, benchmark yields, spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. Specifically for asset-backed securities, key inputs include prepayment and default projections based on past performance of the underlying collateral and current market data.

Level 1 securities include exchange traded bonds, highly liquid U.S. and foreign government bonds, and redeemable preferred stock, valued using quoted market prices. Level 2 securities include most other fixed maturity securities as the significant inputs are observable in the marketplace. Securities are generally assigned to Level 3 in cases where broker/dealer quotes are significant inputs to the valuation and there is a lack of transparency as to whether these quotes are based on information that is observable in the marketplace. Level 3 securities also include private placement debt securities whose fair value is determined using internal models with inputs that are not market observable.

Equity Securities

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

Derivative Financial Instruments

Exchange traded derivatives are valued using quoted market prices and are classified within Level 1 of the fair value hierarchy. Level 2 derivatives primarily include currency forwards valued using observable market forward rates. Over-the-counter derivatives, principally interest rate swaps, total return swaps, commodity swaps, credit default swaps, equity warrants and options, are valued using inputs including broker/dealer quotes and are classified within Level 2 or Level 3 of the valuation hierarchy, depending on the amount of transparency as to whether these quotes are based on information that is observable in the marketplace.

Short Term Investments

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

Other Invested Assets

Level 1 securities include exchange traded open-end funds valued using quoted market prices. Level 2 securities include overseas deposits which can be redeemed at net asset value in 90 days or less.

Life Settlement Contracts

The fair values of life settlement contracts are determined as the present value of the anticipated death benefits less anticipated premium payments based on contract terms that are distinct for each insured, as well as CNA’s own assumptions for mortality, premium expense, and the rate of return that a buyer would require on the contracts, as no comparable market pricing data is available.

Separate Account Business

Separate account business includes fixed maturity securities, equities and short term investments. The valuation methodologies and inputs for these asset types have been described above.

Assets and Liabilities of Discontinued Operations

Assets and liabilities of discontinued operations relate to HighMount, as discussed in Notes 2 and 15. These balances represent short term investments and derivative assets and liabilities, which are valued using the methodologies and inputs for these asset and liability types described above.

Significant Unobservable Inputs

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

September 30, 2014

Fair Value

Valuation
Techniques

Unobservable

Inputs

Range

(Weighted

Average)

(In millions)

Assets

Fixed maturity securities

Discounted cash flow

Credit spread

2% – 12% (3%)

Equity securities

Market approach

Private offering price

$13 – $4,388 per share

($554 per share)

Life settlement contracts

Discounted cash flow

Discount rate risk premium

Mortality assumption

70% – 743% (193%)

December 31, 2013

Assets

Fixed maturity securities

142

Discounted cash flow

Credit spread

2% – 20% (4%)

Equity securities

Market approach

Private offering price

$360 – $4,268 per share

($1,148 per share)

Life settlement contracts

Discounted cash flow

Discount rate risk premium

Mortality assumption

70% – 743% (192%)

For fixed maturity securities, an increase in the credit spread assumptions would result in a lower fair value measurement. For equity securities, an increase in the private offering price, earnings projections and earnings multiple would result in a higher fair value measurement. For life settlement contracts, an increase in the discount rate risk premium or decrease in the mortality assumption would result in a lower fair value measurement.

Financial Assets and Liabilities Not Measured at Fair Value

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


	Carrying		Estimated Fair Value
September 30, 2014	Amount		Level 1	Level 2		Level 3		Total
(In millions)

Financial Assets:
Other invested assets	$	556				$	576	$	576

Financial Liabilities:
Short term debt		850		$	813		51		864
Long term debt		10,040			10,191		420		10,611

December 31, 2013

Financial Assets:
Other invested assets	$	508				$	515	$	515

Financial Liabilities:
Premium deposits and annuity contracts		57					58		58
Short term debt		818		$	832		20		852
Long term debt		9,515			9,907		182		10,089
Long term debt included in discontinued operations		500			500				500

The following methods and assumptions were used in estimating the fair value of these financial assets and liabilities.

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

Premium deposits and annuity contracts were valued based on cash surrender values or estimated fair values of policyholder liabilities, net of amounts ceded related to sold business.

Fair value of debt was based on observable market prices when available. When observable market prices were not available, the fair value for debt was based on observable market prices of comparable instruments adjusted for differences between the observed instruments and the instruments being valued or is estimated using discounted cash flow analyses, based on current incremental borrowing rates for similar types of borrowing arrangements.

5. Derivative Financial Instruments

A summary of the aggregate contractual or notional amounts and gross estimated fair values related to derivative financial instruments follows. The contractual or notional amounts for derivatives are used to calculate the exchange of contractual payments under the agreements and may not be representative of the potential for gain or loss on these instruments.


	September 30, 2014							December 31, 2013

	Contractual/							Contractual/
	Notional		Estimated Fair Value					Notional		Estimated Fair Value
	Amount		Asset		(Liability)			Amount		Asset		(Liability)

(In millions)

With hedge designation:

Foreign exchange:
Currency forwards – short	$	133			$	(4	)	$	114	$	2	$	(1	)

Without hedge designation:

Equity markets:
Options – purchased		569	$	18					1,561		41
– written		218				(18	)		729				(23	)
Equity swaps and warrants
– long		12		4					17		9

Interest rate risk:
Credit default swaps
– purchased protection									50				(3	)
– sold protection									25
Foreign exchange:
Currency forwards – long									55
– short		181		7					113
Currency options – long		625		13
– short		50
Embedded derivative on funds withheld liability		185				(1	)

Discontinued operations:

Interest rate risk:
Interest rate swaps									300				(4	)
Commodities:
Forwards – short									180		4		(4	)

Gross estimated fair values of derivative positions are currently presented in Equity securities, Receivables, Payable to brokers and Assets and Liabilities of discontinued operations on the Consolidated Condensed Balance Sheets. There would be no significant difference in the balance included in such accounts if the estimated fair values were presented net for the periods ended September 30, 2014 and December 31, 2013.

In connection with the sale of HighMount, as discussed in Note 2, cash flow hedge accounting treatment was discontinued for all of HighMount’s commodity and interest rate swaps in 2014 and a loss of $4 million after tax was reclassified from AOCI into Discontinued operations, net for those hedges where the original forecasted transactions are no longer probable of occurring. In addition, mark-to-market losses of $2 million after tax were recognized on these derivatives in 2014.

For derivative financial instruments without hedge designation, changes in the fair value of derivatives not held in a trading portfolio are reported in Investment gains (losses) and changes in the fair value of derivatives held for trading purposes are reported in Net investment income on the Consolidated Condensed Statements of Income. Losses of $1 million for the three months ended September 30, 2013 and gains of $1 million and losses of $4 million for the nine months ended September 30, 2014 and 2013 were included in Investment gains (losses). Losses of $7 million and $17 million for the three months ended September 30, 2014 and 2013 and losses of $2 million and $33 million for the nine months ended September 30, 2014 and 2013 were included in Net investment income.

The Company’s derivative financial instruments with cash flow hedge designation hedge variable price risk associated with the purchase and sale of natural gas and exposure to foreign currency losses on future foreign currency expenditures. Losses of $6 million and gains of $1 million were recognized in OCI related to these cash flow hedges for the three months ended September 30, 2014 and 2013. Gains of $2 million and losses of $6 million were recognized in OCI related to these cash flow hedges for the nine months ended September 30, 2014 and 2013. For the three months ended September 30, 2013, losses of $5 million were reclassified from AOCI into income. For the nine months ended September 30, 2014 and 2013, gains of $3 million and losses of $3 million were reclassified from AOCI into income. As of September 30, 2014, the estimated amount of net unrealized losses associated with these cash flow hedges that will be reclassified from AOCI into earnings during the next twelve months was $6 million. The net amounts recognized due to ineffectiveness were less than $1 million for the three and nine months ended September 30, 2014 and 2013.

6. Claim and Claim Adjustment Expense Reserves

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

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

Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in CNA’s results of operations and/or equity. CNA reported catastrophe losses, net of reinsurance, of $17 million and $42 million for the three months ended September 30, 2014 and 2013 and $147 million and $146 million for the nine months ended September 30, 2014 and 2013. Catastrophe losses in 2014 related primarily to U.S. weather-related events.

Net Prior Year Development

The following tables and discussion include the net prior year development recorded for CNA Specialty, CNA Commercial and Other.


Three Months Ended September 30, 2014	CNA Specialty		CNA Commercial		Other		Total

(In millions)

Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(82)	$	57	$	(1)	$	(26)
Pretax (favorable) unfavorable premium development		(2)		(1)		6		3

Total pretax (favorable) unfavorable net prior year development	$	(84)	$	56	$	5	$	(23)


Three Months Ended September 30, 2013


Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(74)	$	(3)	$	(4)	$	(81)
Pretax (favorable) unfavorable premium development		(3)		7		1		5

Total pretax (favorable) unfavorable net prior year development	$	(77)	$	4	$	(3)	$	(76)


Nine Months Ended September 30, 2014


Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(139)	$	153	$	9	$	23
Pretax (favorable) unfavorable premium development		(11)		(25)		6		(30)

Total pretax (favorable) unfavorable net prior year development	$	(150)	$	128	$	15	$	(7)


Nine Months Ended September 30, 2013


Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(130)	$	13	$	5	$	(112)
Pretax (favorable) unfavorable premium development		(16)		(8)		8		(16)

Total pretax (favorable) unfavorable net prior year development	$	(146)	$	5	$	13	$	(128)

CNA Specialty

The following table and discussion provide further detail of the net prior year claim and allocated claim adjustment expense reserve development (“development”) recorded for the CNA Specialty segment:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013

(In millions)

Medical professional liability	$	13	$	9	$	15	$	(11)
Other professional liability and management liability		(9)		(4)		(73)		(28)
Surety		(79)		(76)		(78)		(74)
Other		(7)		(3)		(3)		(17)

Total pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(82)	$	(74)	$	(139)	$	(130)

Three Months

2014

Unfavorable development for medical professional liability was primarily related to increased frequency of large medical products liability class action lawsuits in accident years 2012 and prior.

Favorable development for surety coverages was primarily due to lower than expected frequency of large losses in accident years 2012 and prior.

2013

Favorable development for surety coverages was primarily due to better than expected large loss emergence in accident years 2011 and prior.

Nine Months

2014

Unfavorable development for medical professional liability was primarily related to increased frequency of large medical products liability class action lawsuits in accident years 2012 and prior.

Favorable development for other professional liability and management liability was related to better than expected severity in accident years 2008 through 2011, including favorable outcomes on individual large claims.

Favorable development for surety coverages was primarily due to lower than expected frequency of large losses in accident years 2012 and prior.

2013

Overall, favorable development for medical professional liability reflects favorable experience in accident years 2009 and prior. Unfavorable development was recorded for accident years 2010 and 2011 due to higher than expected large loss activity.

Overall, favorable development for other professional liability and management liability was related to better than expected loss emergence in accident years 2007 through 2009. Unfavorable development was recorded in accident years 2010 through 2012 related to an increase in severity.

Favorable development for surety coverages was primarily due to better than expected large loss emergence in accident years 2011 and prior.

Favorable development for other coverages was primarily due to better than expected loss emergence in property coverages in accident years 2010 and subsequent.

CNA Commercial

The following table and discussion provide further detail of the development recorded for the CNA Commercial segment. A significant amount of the unfavorable development for the nine months ended September 30, 2014 relates to business classes which CNA has exited, but also includes Small Business where CNA is taking underwriting actions in an effort to improve profitability.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
(In millions)

Commercial auto	$	12	$	4	$	52	$	1
General liability		39		(18)		64		(24)
Workers’ compensation		24		26		74		96
Property and other		(18)		(15)		(37)		(60)

Total pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	57	$	(3)	$	153	$	13

Three Months

2014

Overall, unfavorable development for general liability coverages was primarily related to higher than expected severity in accident years 2010, 2011 and 2013. Favorable development was recorded primarily related to lower than expected frequency of large losses in accident years 2005 through 2008.

Overall, unfavorable development for workers’ compensation was primarily related to increased medical severity in accident years 2010 and prior and higher than expected severity related to Defense Base Act (“DBA”) contractors in accident years 2010 through 2013. Favorable development of $26 million was recorded in accident years 1996 and prior related to the commutation of a workers’ compensation reinsurance pool.

Favorable development for property and other first-party coverages was recorded in accident years 2013 and prior, primarily related to fewer claims than expected and favorable individual claim settlements.

2013

Favorable development for general liability coverages was primarily related to better than expected loss emergence in accident years 2005 through 2007 and 2012.

Unfavorable development for workers’ compensation was primarily due to increased frequency and severity on claims related to DBA contractors in accident year 2012.

Favorable development for property and other coverages was primarily related to favorable loss emergence in non-catastrophe losses in accident years 2010 through 2012.

Nine Months

2014

Unfavorable development for commercial auto was primarily related to higher than expected frequency in accident years 2012 and 2013 and higher than expected severity for liability coverages in accident years 2009 through 2013.

Overall, unfavorable development for general liability was primarily related to higher than expected severity in accident years 2010, 2011 and 2013, including unfavorable development in accident year 2013 related to Small Business. Favorable development was recorded primarily related to lower than expected frequency of large losses in accident years 2005 through 2008.

Overall, unfavorable development for workers’ compensation was primarily due to increased medical severity in accident years 2010 and prior, higher than expected severity related to DBA contractors in accident years 2010 through 2013 and the recognition of losses related to favorable premium development in accident year 2013. Favorable development of $26 million was recorded in accident years 1996 and prior related to the commutation of a workers’ compensation reinsurance pool.

2013

Favorable development for general liability coverages was primarily related to better than expected loss emergence in accident years 2009 and prior and 2012.

Unfavorable development for workers’ compensation includes CNA’s response to legislation enacted during 2013 related to the New York Fund for Reopened Cases. The law change necessitated an increase in reserves as re-opened workers’ compensation claims can no longer be turned over to the state for handling and payment after December 31, 2013. Additional unfavorable development was recorded in accident year 2012 related to increased frequency and severity on claims related to DBA contractors and in accident year 2010 due to higher than expected large losses and increased severity in the state of California.

Favorable development for property and other coverages was primarily related to favorable outcomes on litigated catastrophe claims in accident years 2005 and 2010 and favorable loss emergence in non-catastrophe losses in accident years 2010 through 2012.

7. Impairment of Long-Lived Assets

In the third quarter of 2014, Diamond Offshore cold stacked a semisubmersible rig and expects to cold stack two additional rigs in the near term. Demand for offshore drilling rigs continues to decline and is exacerbated by an oversupply of rigs including newbuilds scheduled for delivery in 2014 and 2015. Due to these factors, among other things, Diamond Offshore plans to retire and scrap a number of rigs that are currently idle, as well as an additional rig upon completion of its contract term in March of 2015. As a result, Diamond Offshore performed an impairment analysis to determine whether the carrying amount of these assets was recoverable. Based on this analysis, an impairment loss, related to Diamond Offshore’s semisubmersible rigs, was recognized aggregating $109 million ($55 million after tax and noncontrolling interests) for the three and nine months ended September 30, 2014. This impairment loss was recorded within Other operating expenses on the Consolidated Condensed Statements of Income. At September 30, 2014, the fair value of these rigs amounted to $17 million. The fair value was determined through discussions and a nonbinding quote from a rig broker, and for the rig currently under contract using an internally developed income approach, which are Level 3 inputs of the fair value hierarchy.

8. Income Taxes

During 2013, Diamond Offshore received notification from the Egyptian tax authorities proposing a $1.2 billion increase in taxable income for the years 2006 to 2008. In December of 2013, Diamond Offshore accrued an additional $57 million of expense for uncertain tax positions in Egypt for all open years. During the first quarter of 2014, Diamond Offshore settled certain disputes for the years 2006 through 2008 with the Egyptian tax authorities, resulting in a net reduction to income tax expense of $17 million.

During the second quarter of 2014, the Appeals Committee in Egypt issued a decision regarding one remaining open item for the years 2006 to 2008. Diamond Offshore has filed an objection with the Egyptian courts and continues to dispute the matter, believing that its position will, more likely than not, be sustained. However, if Diamond Offshore’s position is not sustained, tax expense and related penalties would increase by approximately $50 million related to this issue for the 2006 through 2008 tax years as of September 30, 2014.

In July of 2014, the United Kingdom Finance Act (“Finance Act”) was enacted, with an effective date retroactive to April 1, 2014. Certain provisions of the Finance Act will limit the amount of tax deductions available with respect to rigs operating in the United Kingdom (“U.K.”) under bareboat charter arrangements, which has caused Diamond Offshore’s expected tax expense for the full year of 2014 to increase by approximately $26 million.

During the third quarter of 2014, Diamond Offshore reversed $36 million of reserves for uncertain tax positions, including $6 million for interest and $11 million for penalties, related to a favorable court decision in Brazil resulting in the closure of the 2004 and 2005 tax years, approval from Malaysian tax authorities for the settlement of tax liabilities and penalties for the years 2003 through 2008 and the expiration of the statute of limitations in Mexico for the 2008 tax year.

9. Debt

CNA Financial

In February of 2014, CNA completed a public offering of $550 million aggregate principal amount of 4.0% senior notes due May 15, 2024. CNA intends to use the net proceeds from this offering to repurchase, redeem, repay or otherwise retire the $549 million outstanding aggregate principal balance of its 5.9% senior notes due December 15, 2014.

Diamond Offshore

In September of 2014, Diamond Offshore repaid at maturity the entire $250 million principal amount of its 5.2% senior notes.

In October of 2014, Diamond Offshore entered into an agreement to increase its revolving credit facility by $500 million. The credit agreement provides for a $1.5 billion revolving credit facility for general corporate purposes, maturing in 2019. As of September 30, 2014, there were no borrowings under the revolving credit facility.

Loews Hotels

In August of 2014, Loews Hotels refinanced the indebtedness on the Miami Beach Hotel by extinguishing the existing $125 million 4.8% mortgage loan and entering into a new $300 million 4.1% mortgage loan due in September of 2024.

10. Shareholders’ Equity

Accumulated Other Comprehensive Income

The tables below display the changes in Accumulated other comprehensive income (“AOCI”) by component for the three and nine months ended September 30, 2013 and 2014:


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

(In millions)

Balance, July 1, 2013	$	23	$	650	$	15	$	(7)	$	(721)	$	77	$	37
Other comprehensive income (loss) before reclassifications, after tax of $1, $36, $(3), $0, $0 and $0		(4)		(68)		8		1				56		(7)
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $0, $2, $8, $(1), $(5) and $0		1		(2)		(16)		4		3				(10)

Other comprehensive income (loss)		(3)		(70)		(8)		5		3		56		(17)
Amounts attributable to noncontrolling interests		1		7				(2)				(6)		-

Balance, September 30, 2013	$	21	$	587	$	7	$	(4)	$	(718)	$	127	$	20


Balance, July 1, 2014	$	30	$	1,062	$	30	$	(3)	$	(478)	$	166	$	807
Other comprehensive income (loss) before reclassifications, after tax of $(1), $52, $2, $2, $1 and $0		1		(59)		(3)		(4)		(2)		(73)		(140)
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $0, $12, $21, $0, $(2) and $0				(24)		(31)				4				(51)

Other comprehensive income (loss)		1		(83)		(34)		(4)		2		(73)		(191)
Amounts attributable to noncontrolling interests		1		8		4		2				7		22

Balance, September 30, 2014	$	32	$	987	$	-	$	(5)	$	(476)	$	100	$	638


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

(In millions)

Balance, January 1, 2013	$	18	$	1,233	$	20	$	(4)	$	(732)	$	143	$	678
Other comprehensive income (loss) before reclassifications, after tax of $(2), $382, $(5), $3, $0 and $0		2		(706)		14		(3)				(18)		(711)
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $0, $5, $14, $(1), $(10) and $0		1		(11)		(27)		2		12				(23)

Other comprehensive income (loss)		3		(717)		(13)		(1)		12		(18)		(734)
Issuance of equity securities by subsidiary										2				2
Amounts attributable to noncontrolling interests				71				1				2		74

Balance, September 30, 2013	$	21	$	587	$	7	$	(4)	$	(718)	$	127	$	20


Balance, January 1, 2014	$	23	$	622	$	(3)	$	(4)	$	(432)	$	133	$	339
Transfer to net assets of discontinued operations		(5)		(15)		20								-
Other comprehensive income (loss) before reclassifications, after tax $(8), $(229), $(3), $(1), $1 and $0		15		462		2		1		(2)		(37)		441
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $0, $20, $16, $1, $24 and $0				(38)		(21)		(2)		(50)				(111)

Other comprehensive income (loss)		15		424		(19)		(1)		(52)		(37)		330
Amounts attributable to noncontrolling interests		(1)		(44)		2				8		4		(31)

Balance, September 30, 2014	$	32	$	987	$	-	$	(5)	$	(476)	$	100	$	638

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


Major Category of AOCI		Affected Line Item


OTTI gains (losses)		Investment gains (losses)
Unrealized gains (losses) on investments		Investment gains (losses)
Unrealized gains (losses) and cash flow hedges related to discontinued operations		Discontinued operations, net
Cash flow hedges		Other revenues and Contract drilling expenses
Pension liability		Other operating expenses

Subsidiary Equity Transactions

Diamond Offshore repurchased 1.9 million shares of its common stock at an aggregate cost of $88 million during the nine months ended September 30, 2014. The Company’s percentage ownership interest in Diamond Offshore increased as a result of these repurchases, from 50.4% to 51.1%. The repurchase price of the shares exceeded the Company’s carrying value, resulting in a decrease to Additional paid-in capital of $8 million.

Treasury Stock

The Company repurchased 9.6 million and 4.9 million shares of Loews common stock at aggregate costs of $415 million and $218 million during the nine months ended September 30, 2014 and 2013.

11. Benefit Plans

Pension Plans - The Company has several non-contributory defined benefit plans for eligible employees. Benefits for certain plans are determined annually based on a specified percentage of annual earnings (based on the participant’s age or years of service) and a specified interest rate (which is established annually for all participants) applied to accrued balances. The benefits for another plan which cover salaried employees are based on formulas which include, among others, years of service and average pay. The Company’s funding policy is to make contributions in accordance with applicable governmental regulatory requirements.

Other Postretirement Benefit Plans - The Company has several postretirement benefit plans covering eligible employees and retirees. Participants generally become eligible after reaching age 55 with required years of service. Actual requirements for coverage vary by plan. Benefits for retirees who were covered by bargaining units vary by each unit and contract. Benefits for certain retirees are in the form of a Company health care account.

Benefits for retirees reaching age 65 are generally integrated with Medicare. Other retirees, based on plan provisions, must use Medicare as their primary coverage, with the Company reimbursing a portion of the unpaid amount; or are reimbursed for the Medicare Part B premium or have no Company coverage. The benefits provided by the Company are basically health and, for certain retirees, life insurance type benefits.

The Company funds certain of these benefit plans and accrues postretirement benefits during the active service of those employees who would become eligible for such benefits when they retire.

The components of net periodic benefit cost are as follows:


	Pension Benefits

	Three Months Ended				Nine Months Ended
	September 30,				September 30,

	2014		2013		2014		2013

(In millions)

Service cost	$	5	$	6	$	13	$	18
Interest cost		37		34		111		101
Expected return on plan assets		(52)		(49)		(157)		(148)
Amortization of unrecognized net loss		7		12		22		40
Regulatory asset decrease				4		1		4

Net periodic benefit cost	$	(3)	$	7	$	(10)	$	15


	Other Postretirement Benefits

	Three Months Ended				Nine months ended
	September 30,				September 30,

	2014		2013		2014		2013

(In millions)

Service cost			$	1			$	1
Interest cost	$	1		1	$	3		3
Expected return on plan assets		(1)		(1)		(3)		(3)
Amortization of unrecognized net loss				1				1
Amortization of unrecognized prior service benefit		(2)		(6)		(15)		(19)
Curtailment gain						(86)

Net periodic benefit cost	$	(2)	$	(4)	$	(101)	$	(17)

In the second quarter of 2014, CNA eliminated certain postretirement medical benefits associated with the CNA Health and Group Benefits Program. This change was a negative plan amendment and also resulted in an $86 million curtailment gain which is included in Other operating expenses in the Consolidated Condensed Statements of Income. In connection with the plan amendment, CNA remeasured the plan benefit obligation which resulted in a decrease to the discount rate used to determine the benefit obligation from 3.6% to 3.1%.

12. Business Segments

The Company’s reportable segments are primarily based on its individual operating subsidiaries. Each of the principal operating subsidiaries are headed by a chief executive officer who is responsible for the operation of its business and has the duties and authority commensurate with that position. Investment gains (losses) and the related income taxes, excluding those of CNA, are included in the Corporate and other segment.

CNA’s results are reported in four business segments: CNA Specialty, CNA Commercial, Life & Group Non-Core and Other. CNA Specialty provides a broad array of professional, financial and specialty property and casualty products and services, primarily through insurance brokers and managing general underwriters. CNA Commercial includes property and casualty coverages sold to small businesses and middle market entities and organizations primarily through an independent agency distribution system. CNA Commercial also includes commercial insurance and risk management products sold to large corporations primarily through insurance brokers. Life & Group Non-Core primarily includes the results of the life and group lines of business that are in run-off. Other includes the operations of Hardy Underwriting Bermuda Limited (“Hardy”), corporate expenses, including interest on corporate debt, and the results of certain property and casualty business primarily in run-off, including CNA Re and asbestos and environmental pollution. Hardy is a specialized Lloyd’s of London underwriter primarily of short-tail exposures in marine and aviation, non-marine property, specialty lines and property treaty reinsurance.

Diamond Offshore owns and operates offshore drilling rigs that are chartered on a contract basis for fixed terms by companies engaged in exploration and production of hydrocarbons. Offshore rigs are mobile units that can be relocated based on market demand. Diamond Offshore’s fleet consists of 38 drilling rigs, excluding six mid-water rigs that Diamond Offshore plans to retire and scrap, and including four newbuild rigs, which are under construction and one rig being constructed utilizing the hull of one of Diamond Offshore’s existing mid-water floaters. On September 30, 2014, Diamond Offshore’s drilling rigs were located offshore nine countries in addition to the United States.

Boardwalk Pipeline is engaged in the interstate transportation and storage of natural gas and NGLs and gathering and processing of natural gas. This segment consists of interstate natural gas pipeline systems originating in the Gulf Coast region, Oklahoma and Arkansas, and extending north and east through the midwestern states of Tennessee, Kentucky, Illinois, Indiana and Ohio, natural gas storage facilities in four states and NGL pipelines and storage facilities in Louisiana, with approximately 14,625 miles of pipeline.

Loews Hotels operates a chain of 21 hotels, 20 of which are in the United States and one of which is in Canada.

The Corporate and other segment consists primarily of corporate investment income, corporate interest expense and other unallocated expenses.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. In addition, CNA does not maintain a distinct investment portfolio for every insurance segment, and accordingly, allocation of assets to each segment is not performed. Therefore, a

significant portion of net investment income and investment gains (losses) are allocated based on each segment’s carried insurance reserves, as adjusted.

The HighMount and CAC businesses are reported as discontinued operations in the Consolidated Condensed Statements of Income for the three and nine months ended September 30, 2014 and 2013. See Notes 2 and 15 for further discussion of discontinued operations.

The following tables set forth the Company’s consolidated revenues and income (loss) by business segment:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013

(In millions)

Revenues (a):

CNA Financial:
CNA Specialty	$	987	$	996	$	2,959	$	2,906
CNA Commercial		985		1,062		3,053		3,267
Life & Group Non-Core		343		300		990		918
Other		96		100		312		272

Total CNA Financial		2,411		2,458		7,314		7,363
Diamond Offshore		737		706		2,148		2,198
Boardwalk Pipeline		279		288		931		921
Loews Hotels		126		95		343		290
Corporate and other		(30)		50		68		59

Total	$	3,523	$	3,597	$	10,804	$	10,831


Income (loss) before income tax and noncontrolling interests (a):

CNA Financial:
CNA Specialty	$	290	$	283	$	771	$	718
CNA Commercial		99		200		306		559
Life & Group Non-Core		(52)		(83)		(91)		(190)
Other		(42)		(26)		(25)		(91)

Total CNA Financial		295		374		961		996
Diamond Offshore		82		131		362		593
Boardwalk Pipeline		28		60		105		226
Loews Hotels				(2)		14
Corporate and other		(66)		13		(43)		(36)

Total	$	339	$	576	$	1,399	$	1,779


Net income (loss) (a):

CNA Financial:
CNA Specialty	$	174	$	170	$	462	$	427
CNA Commercial		61		119		186		328
Life & Group Non-Core		(19)		(33)		(6)		(69)
Other		(28)		(11)		(19)		(51)

Total CNA Financial		188		245		623		635
Diamond Offshore		25		44		136		213
Boardwalk Pipeline		8		19		7		74
Loews Hotels				1		8		2
Corporate and other		(42)		9		(27)		(23)

Income from continuing operations		179		318		747		901
Discontinued operations, net		29		(36)		(364)		(108)

Total	$	208	$	282	$	383	$	793

(a)	Investment gains (losses) included in Revenues, Income (loss) before income tax and noncontrolling interests and Net income (loss) are as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,

	2014		2013		2014		2013


Revenues and Income (loss) before income tax and noncontrolling interests:

CNA Financial:
CNA Specialty	$	3	$	2	$	10		$ (1)
CNA Commercial		3		3		8		(5)
Life & Group Non-Core		30		(3)		42		6
Other		1				5		7

Total	$	37	$	2	$	65	$	7


Net income (loss):

CNA Financial:
CNA Specialty	$	2			$	6	$	(1)
CNA Commercial		3	$	1		5		(3)
Life & Group Non-Core		20		(2)		26		4
Other		(1)		2		2		5

Total	$	24	$	1	$	39	$	5

13. Legal Proceedings

The Company and its subsidiaries are parties to litigation arising in the ordinary course of business. The outcome of this litigation will not, in the opinion of management, materially affect the Company’s results of operations or equity.

14. Commitments and Contingencies

CNA Financial

In the course of selling business entities and assets to third parties, CNA has agreed to guarantee the performance of certain obligations of a previously owned subsidiary and to indemnify purchasers for losses arising out of breaches of representation and warranties with respect to the business entities or assets being sold, including, in certain cases, losses arising from undisclosed liabilities or certain named litigation. Such guarantee and indemnification agreements may include provisions that survive indefinitely. As of September 30, 2014, the aggregate amount of quantifiable guarantee and indemnification agreements in effect for sales of business entities, assets and third party loans was $375 million and $324 million. Should CNA be required to make payments under the guarantee, it would have the right to seek reimbursement in certain cases from an affiliate of a previously owned subsidiary.

In addition, CNA has agreed to provide indemnification to third party purchasers for certain losses associated with sold business entities or assets that are not limited by a contractual monetary amount. As of September 30, 2014, CNA had outstanding unlimited indemnifications in connection with the sales of certain of its business entities or assets that included tax liabilities arising prior to a purchaser’s ownership of an entity or asset, defects in title at the time of sale, employee claims arising prior to closing and in some cases losses arising from certain litigation and undisclosed liabilities. Certain provisions of the indemnification agreements survive indefinitely while others survive until the applicable statutes of limitation expire, or until the agreed upon contract terms expire.

In the normal course of business, CNA also provided indemnifications, if the primary obligor fails to perform, to holders of structured settlement annuities provided by a previously owned subsidiary, which are estimated to mature through 2120. The potential amount of future payments CNA could be required to pay under these guarantees was approximately $1.9 billion at September 30, 2014. CNA does not believe a payable is likely under these guarantees, as CNA is the beneficiary of a trust that must be maintained at a level that approximates the discounted reserves for these annuities.

Diamond Offshore

In July of 2014, Diamond Offshore was notified by Petróleo Brasileiro S.A., (“Petrobras”) that it is challenging assessments by Brazilian tax authorities of withholding taxes associated with the provision of drilling rigs for its operations in Brazil during the years 2008 and 2009. If Petrobras is ultimately assessed such withholding taxes, it will seek reimbursement from Diamond Offshore for the portion allocable to its drilling rigs. Diamond Offshore disputes any basis for Petrobras to obtain such reimbursement and has notified Petrobras of its position and intends to pursue all legal remedies available to defend any reimbursement claims against it vigorously. However, if Diamond Offshore’s position is not sustained, the amount of such reimbursement could be material.

15. Discontinued Operations

As discussed in Note 2, HighMount and the CAC business are classified and presented as discontinued operations.

The Consolidated Condensed Statements of Income include discontinued operations of HighMount for the three and nine months ended September 30, 2014 and 2013, as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,

	2014		2013		2014		2013

(In millions)

Revenues:
Other revenue, primarily operating	$	49	$	61	$	150	$	195

Total		49		61		150		195

Expenses:
Other operating expenses
Impairment of natural gas and oil properties				65		29		210
Operating		54		52		165		162
Interest		3		4		8		13

Total		57		121		202		385

Loss before income tax		(8)		(60)		(52)		(190)
Income tax benefit		3		22		2		69

Results of discontinued operations, net of income tax		(5)		(38)		(50)		(121)
Impairment loss, net of tax (expense) benefit of $(30) and $62		30				(137)

Income (loss) from discontinued operations	$	25	$	(38)	$	(187)	$	(121)

The Consolidated Condensed Statements of Income include discontinued operations of the CAC business for the three and nine months ended September 30, 2014 and 2013, as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,

	2014		2013		2014		2013

(In millions)

Revenues:
Net investment income	$	14	$	42	$	94	$	128
Investment gains		1		3		3		8
Other				1				1

Total revenues	$	15	$	46	$	97	$	137


Expenses:
Insurance claims and policyholders’ benefits		12		36		75		105
Other operating expenses				6		2		8

Total		12		42		77		113

Income before income tax		3		4		20		24
Income tax expense		(2)		(3)		(6)		(10)

Results of discontinued operations, net of income tax		1		1		14		14
Loss on sale, net of tax (expense) benefit of $(1) and $40		3				(211)
Amounts attributable to noncontrolling interests				1		20		(1)

Income (loss) from discontinued operations	$	4	$	2	$	(177)	$	13

The following table presents the assets and liabilities of HighMount reported as discontinued operations as of December 31, 2013:

HighMount

Eliminations

Total

(In millions)

Assets:

Investments, including cash

Receivables<

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