Edgar Filing: LOEWS CORP

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 June 30, 2015

[ ]

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

incorporation or organization)

(I.R.S. Employer

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 July 24, 2015
Common stock, $0.01 par value				363,081,509 shares

INDEX


	Page No.

Part I. Financial Information

Item 1. Financial Statements (unaudited)

Consolidated Condensed Balance Sheets		3
June 30, 2015 and December 31, 2014

Consolidated Condensed Statements of Income		4
Three and six months ended June 30, 2015 and 2014

Consolidated Condensed Statements of Comprehensive Income (Loss)		5
Three and six months ended June 30, 2015 and 2014

Consolidated Condensed Statements of Equity		6
Six months ended June 30, 2015 and 2014

Consolidated Condensed Statements of Cash Flows		7
Six months ended June 30, 2015 and 2014

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		71

Item 4. Controls and Procedures		71

Part II. Other Information		72

Item 1. Legal Proceedings		72

Item 1A. Risk Factors		72

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		72

Item 6. Exhibits		73

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)


	June 30, 2015			December 31, 2014

(Dollar amounts in millions, except per share data)

Assets:

Investments:
Fixed maturities, amortized cost of $37,321 and $37,469	$	39,954		$	40,885
Equity securities, cost of $783 and $733		756			728
Limited partnership investments		3,714			3,674
Other invested assets, primarily mortgage loans		768			731
Short term investments		5,856			6,014

Total investments		51,048			52,032
Cash		249			364
Receivables		8,097			7,770
Property, plant and equipment		15,917			15,611
Goodwill		373			374
Other assets		1,710			1,616
Deferred acquisition costs of insurance subsidiaries		621			600

Total assets	$	78,015		$	78,367


Liabilities and Equity:

Insurance reserves:
Claim and claim adjustment expense	$	23,193		$	23,271
Future policy benefits		9,360			9,490
Unearned premiums		3,815			3,592
Policyholders’ funds					27

Total insurance reserves		36,368			36,380
Payable to brokers		741			673
Short term debt		1,061			335
Long term debt		9,791			10,333
Deferred income taxes		773			893
Other liabilities		4,949			5,103

Total liabilities		53,683			53,717


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 – 373,203,709 and 372,934,540 shares		4			4
Additional paid-in capital		3,483			3,481
Retained earnings		15,747			15,515
Accumulated other comprehensive income		53			280

		19,287			19,280
Less treasury stock, at cost (7,572,200 shares)		(305	)

Total shareholders’ equity		18,982			19,280
Noncontrolling interests		5,350			5,370

Total equity		24,332			24,650

Total liabilities and equity	$	78,015		$	78,367

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended						Six Months Ended
	June 30,						June 30,

	2015			2014			2015			2014

(In millions, except per share data)

Revenues:
Insurance premiums	$	1,735		$	1,811		$	3,422		$	3,617
Net investment income		510			597			1,098			1,174
Investment gains (losses):
Other-than-temporary impairment losses		(31	)		(5	)		(43	)		(7)
Portion of other-than-temporary impairment losses recognized in Other comprehensive income (loss)

Net impairment losses recognized in earnings		(31	)		(5	)		(43	)		(7)
Other net investment gains (losses)		29			(9	)		51			35

Total investment gains (losses)		(2	)		(14	)		8			28
Contract drilling revenues		617			650			1,217			1,335
Other revenues		575			549			1,168			1,127

Total		3,435			3,593			6,913			7,281


Expenses:
Insurance claims and policyholders’ benefits		1,469			1,441			2,808			2,887
Amortization of deferred acquisition costs		314			335			617			664
Contract drilling expenses		344			395			695			765
Other operating expenses (Note 4)		879			750			2,128			1,657
Interest		134			126			265			248

Total		3,140			3,047			6,513			6,221

Income before income tax		295			546			400			1,060
Income tax expense		(48	)		(145	)		(104	)		(248)

Income from continuing operations		247			401			296			812
Discontinued operations, net					(186	)					(413)

Net income		247			215			296			399
Amounts attributable to noncontrolling interests		(77	)		(99	)		(17	)		(224)

Net income attributable to Loews Corporation	$	170		$	116		$	279		$	175


Net income attributable to Loews Corporation:
Income from continuing operations	$	170		$	303		$	279		$	568
Discontinued operations, net					(187	)					(393)

Net income	$	170		$	116		$	279		$	175


Basic and diluted net income per share:
Income from continuing operations	$	0.46		$	0.79		$	0.75		$	1.47
Discontinued operations, net					(0.49	)					(1.02)

Net income	$	0.46		$	0.30		$	0.75		$	0.45


Dividends per share	$	0.0625		$	0.0625		$	0.125		$	0.125


Weighted average shares outstanding:
Shares of common stock		369.61			385.72			371.21			386.53
Dilutive potential shares of common stock		0.36			0.65			0.36			0.68

Total weighted average shares outstanding assuming dilution		369.97			386.37			371.57			387.21

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,

	2015		2014		2015			2014

(In millions)

Net income	$	247	$	215	$	296		$	399


Other comprehensive income (loss), after tax
Changes in:
Net unrealized gains (losses) on investments with other-than-temporary impairments		(4)		2		(5	)		14
Net other unrealized gains (losses) on investments		(363)		270		(253	)		507

Total unrealized gains (losses) on available-for-sale investments		(367)		272		(258	)		521
Discontinued operations				10					15
Unrealized gains on cash flow hedges		1				4			3
Pension liability		43		(53)		47			(54)
Foreign currency		49		42		(47	)		36


Other comprehensive income (loss)		(274)		271		(254	)		521


Comprehensive income (loss)		(27)		486		42			920

Amounts attributable to noncontrolling interests		(48)		(126)		9			(277)


Total comprehensive income (loss) attributable to Loews Corporation	$	(75)	$	360	$	51		$	643

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY

(Unaudited)


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

(In millions)

Balance, January 1, 2014	$	24,906		$	4	$	3,607		$	15,508		$	339	$	-	$	5,448
Net income		399								175							224
Other comprehensive income		521											468				53
Dividends paid		(232	)							(48	)						(184)
Purchases of subsidiary stock from noncontrolling interests		(83	)				(8	)									(75)
Purchases of Loews treasury stock		(195	)												(195)
Issuance of Loews common stock		5					5
Stock-based compensation		14					4										10
Other		20								(2	)						22

Balance, June 30, 2014	$	25,355		$	4	$	3,608		$	15,633		$	807	$	(195)	$	5,498


Balance, January 1, 2015	$	24,650		$	4	$	3,481		$	15,515		$	280	$	-	$	5,370
Net income		296								279							17
Other comprehensive income		(254	)										(228)				(26)
Dividends paid		(156	)							(46	)						(110)
Issuance of equity securities by subsidiary		115					(2	)					1				116
Purchases of subsidiary stock from noncontrolling interests		(26	)				3										(29)
Purchases of Loews treasury stock		(305	)												(305)
Issuance of Loews common stock		7					7
Stock-based compensation		12					12
Other		(7	)				(18	)		(1	)						12

Balance, June 30, 2015	$	24,332		$	4	$	3,483		$	15,747		$	53	$	(305)	$	5,350

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)


Six Months Ended June 30	2015			2014

(In millions)

Operating Activities:

Net income	$	296		$	399
Adjustments to reconcile net income to net cash provided (used) by operating activities, net		803			1,112
Changes in operating assets and liabilities, net:
Receivables		(243	)		(142)
Deferred acquisition costs		(8	)		(10)
Insurance reserves		451			234
Other assets		(102	)		(178)
Other liabilities		(120	)		(106)
Trading securities		10			(117)

Net cash flow operating activities		1,087			1,192


Investing Activities:

Purchases of fixed maturities		(5,029	)		(4,921)
Proceeds from sales of fixed maturities		2,859			2,919
Proceeds from maturities of fixed maturities		2,304			1,954
Purchases of equity securities		(30	)		(11)
Proceeds from sales of equity securities		33			14
Purchases of limited partnership investments		(78	)		(109)
Proceeds from sales of limited partnership investments		85			118
Purchases of property, plant and equipment		(1,227	)		(1,152)
Dispositions		20			30
Change in short term investments		119			3
Other, net		(90	)		(4)

Net cash flow investing activities		(1,034	)		(1,159)


Financing Activities:

Dividends paid		(46	)		(48)
Dividends paid to noncontrolling interests		(110	)		(184)
Purchases of subsidiary stock from noncontrolling interests		(24	)		(88)
Purchases of Loews treasury stock		(287	)		(182)
Issuance of Loews common stock		7			5
Proceeds from sale of subsidiary stock		114			4
Principal payments on debt		(1,329	)		(331)
Issuance of debt		1,503			766
Other, net		6			17

Net cash flow financing activities		(166	)		(41)


Effect of foreign exchange rate on cash		(2	)		2


Transfer of cash to assets of discontinued operations					(11)


Net change in cash		(115	)		(17)
Cash, beginning of period		364			294

Cash, end of period	$	249		$	277

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 53% 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 51% 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.

Loews segments are CNA Financial, including Specialty, Commercial, International and Other Non-Core; Diamond Offshore; Boardwalk Pipeline; Loews Hotels; and Corporate and other. See Note 9 for additional information on segments.

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 June 30, 2015 and December 31, 2014, the results of operations and comprehensive income for the three and six months ended June 30, 2015 and 2014 and changes in shareholders’ equity and cash flows for the six months ended June 30, 2015 and 2014.

Net income for the second quarter and first half of each of the years is not necessarily indicative of net income for that entire year.

Reference is made to the Notes to Consolidated Financial Statements in the 2014 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 3.7 million, 2.2 million, 3.6 million and 2.1 million shares were not included in the diluted weighted average shares amounts for the three and six months ended June 30, 2015 and 2014 due to the exercise price being greater than the average stock price.

As of June 30, 2015, the Company had $20 million of goodwill related to its investment in Diamond Offshore. As a result of the continued deterioration of the market fundamentals in the oil and gas industry, the Company performed the first step of a goodwill impairment test as of June 30, 2015 comparing the fair market value of the Company’s investment in Diamond Offshore to book value. No impairment charge was required based on passing the first step of the impairment test. Due to the continued market decline subsequent to June 30, 2015, the Company may be required to record an impairment charge in the near future.

On August 1, 2014, CNA completed the sale of Continental Assurance Company (“CAC”), its former life insurance subsidiary and on September 30, 2014, the Company sold HighMount Exploration & Production LLC (“HighMount”), its natural gas and oil exploration and production subsidiary. The results of these sold businesses are reflected as discontinued operations in the Consolidated Condensed Statements of Income as further discussed in Note 12.

Updated accounting guidance not yet adopted – In May of 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-09, “Financial Services-Insurance (Topic 944): Disclosures about Short-Duration Contracts.” The updated accounting guidance requires enhanced disclosures to provide additional information about insurance liabilities for short-duration contracts. The updated guidance is effective for annual reporting periods beginning after December 15, 2015 and for interim periods beginning after December 15, 2016. The Company is currently evaluating the effect the updated guidance will have on its financial statement disclosures.

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 was 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. In July of 2015, the FASB voted to approve a one year deferral of the effective date of ASU 2014-09. The FASB expects to issue a final ASU formally amending the effective date by the end of the third quarter of 2015.

2. Investments

Net investment income is as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,

	2015			2014			2015			2014

(In millions)

Fixed maturity securities	$	452		$	451		$	895		$	903
Short term investments					1			3			2
Limited partnership investments		50			116			210			203
Equity securities		3			3			6			5
Income (loss) from trading portfolio (a)		11			30			(4	)		70
Other		9			10			17			18

Total investment income		525			611			1,127			1,201
Investment expenses		(15	)		(14	)		(29	)		(27)

Net investment income	$	510		$	597		$	1,098		$	1,174

(a)	Includes net unrealized gains (losses) related to changes in fair value on trading securities still held of $(10), $40, $(17) and $60 for the three and six months ended June 30, 2015 and 2014.

Investment gains (losses) are as follows:


	Three Months Ended						Six Months Ended
	June 30,						June 30,

	2015			2014			2015			2014

(In millions)

Fixed maturity securities	$	(12	)	$	(19	)				$	19
Equity securities		(1	)				$	(1	)		5
Derivative instruments		11			1			10			1
Short term investments and other					4			(1	)		3

Investment gains (losses) (a)	$	(2	)	$	(14	)	$	8		$	28

(a)	Includes gross realized gains of $36, $20, $70 and $78 and gross realized losses of $49, $39, $71 and $54 on available-for-sale securities for the three and six months ended June 30, 2015 and 2014.

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


	Three Months Ended June 30,				Six Months Ended June 30,

	2015		2014		2015		2014

(In millions)

Fixed maturity securities available-for-sale:
Corporate and other bonds	$	11	$	2	$	16	$	3
States, municipalities and political subdivisions		13				18
Asset-backed:
Residential mortgage-backed		5		1		6		2
Other asset-backed		1		1		1		1

Total asset-backed		6		2		7		3

Total fixed maturities available-for-sale		30		4		41		6

Equity securities available-for-sale:
Common stock				1		1		1
Short term investments		1				1

Net OTTI losses recognized in earnings	$	31	$	5	$	43	$	7

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

June 30, 2015

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

16,879

$1,337

$ 88

18,128

States, municipalities and political subdivisions

11,707

1,186

12,853

Asset-backed:

Residential mortgage-backed

4,940

175

5,100

(46)

Commercial mortgage-backed

2,186

2,251

(2)

Other asset-backed

1,044

1,055

Total asset-backed

8,170

264

8,406

(48)

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

Foreign government

387

399

Redeemable preferred stock

Fixed maturities available-for-sale

37,200

2,807

157

39,850

(48)

Fixed maturities trading

121

104

Total fixed maturities

37,321

2,807

174

39,954

(48)

Equity securities:

Common stock

Preferred stock

154

156

Equity securities available-for-sale

208

216

Equity securities trading

575

109

540

Total equity securities

783

113

756

Total

38,104

$2,893

$ 287

40,710

(48)


December 31, 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	$	17,226		$1,721	$	61	$	18,886
States, municipalities and political subdivisions		11,285		1,463		8		12,740
Asset-backed:
Residential mortgage-backed		5,028		218		13		5,233	$	(53)
Commercial mortgage-backed		2,056		93		5		2,144		(2)
Other asset-backed		1,234		11		10		1,235

Total asset-backed		8,318		322		28		8,612		(55)
U.S. Treasury and obligations of government- sponsored enterprises		26		5				31
Foreign government		438		16				454
Redeemable preferred stock		39		3				42

Fixed maturities available-for-sale		37,332		3,530		97		40,765		(55)
Fixed maturities trading		137				17		120

Total fixed maturities		37,469		3,530		114		40,885		(55)

Equity securities:
Common stock		38		9				47
Preferred stock		172		5		2		175

Equity securities available-for-sale		210		14		2		222		-
Equity securities trading		523		96		113		506

Total equity securities		733		110		115		728		-

Total	$	38,202		$3,640	$	229	$	41,613	$	(55)

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. As of June 30, 2015 and December 31, 2014, the net unrealized gains on investments included in AOCI were net of Shadow Adjustments of $917 million and $1.2 billion. To the extent that unrealized gains on fixed income securities supporting certain products within CNA’s Life & Group Non-Core business 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 (“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

June 30, 2015	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		$ 3,217	$	73		$ 152	$	15		$ 3,369	$	88
States, municipalities and political subdivisions		1,523		34		143		6		1,666		40
Asset-backed:
Residential mortgage-backed		451		6		167		9		618		15
Commercial mortgage-backed		557		9		61		3		618		12
Other asset-backed		135		1		18				153		1

Total asset-backed		1,143		16		246		12		1,389		28
U.S. Treasury and obligations of government-sponsored enterprises		3								3
Foreign government		20		1		1				21		1

Total fixed maturity securities		5,906		124		542		33		6,448		157

Common stock		21		2						21		2
Preferred stock		17		2						17		2

Total		$ 5,944	$	128		$ 542	$	33		$ 6,486	$	161


December 31, 2014

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	1,330	$	46		$ 277	$	15		$ 1,607	$	61
States, municipalities and political subdivisions		335		5		127		3		462		8
Asset-backed:
Residential mortgage-backed		293		5		189		8		482		13
Commercial mortgage-backed		264		2		99		3		363		5
Other asset-backed		607		10		7				614		10

Total asset-backed		1,164		17		295		11		1,459		28
U.S. Treasury and obligations of government-sponsored enterprises		3				4				7
Foreign government		3				3				6
Redeemable preferred stock		3								3

Total fixed maturity securities		2,838		68		706		29		3,544		97
Preferred stock		17		2		1				18		2

Total	$	2,855	$	70		$ 707	$	29		$ 3,562	$	99

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 and other factors. The Company has no current intent to sell securities with unrealized losses, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost; accordingly, the Company has determined that there are no additional OTTI losses to be recorded as of June 30, 2015.

The following table presents the activity related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held as of June 30, 2015 and 2014 for which a portion of an OTTI loss was recognized in Other comprehensive income.


	Three Months Ended				Six Months Ended
	June 30,				June 30,

	2015		2014		2015		2014

(In millions)

Beginning balance of credit losses on fixed maturity securities	$	61	$	69	$	62	$	74
Reductions for securities sold during the period		(2)		(3)		(3)		(5)
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	$	59	$	66	$	59	$	66

Contractual Maturity

The following table presents available-for-sale fixed maturity securities by contractual maturity. 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.


	June 30, 2015				December 31, 2014

	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value

(In millions)

Due in one year or less	$	1,539	$	1,559	$	2,479	$	2,511
Due after one year through five years		7,523		7,972		9,070		9,621
Due after five years through ten years		14,099		14,549		12,055		12,584
Due after ten years		14,039		15,770		13,728		16,049

Total	$	37,200	$	39,850	$	37,332	$	40,765

Derivative Financial Instruments

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

June 30, 2015

December 31, 2014

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

$ 3

$ 70

$ (5)

Without hedge designation:

Equity markets:

Options – purchased

163

544

– written

397

$ (11)

292

(21)

Equity swaps and warrants – long

Futures – long

(1)

Futures – short

208

130

Foreign exchange:

Currency forwards – long

110

(1)

109

(3)

– short

Currency options – long

446

151

– short

279

(2)

Embedded derivative on funds withheld liability

183

184

(3)

Investment Commitments

As of June 30, 2015, the Company had committed approximately $295 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 June 30, 2015, the Company had commitments to purchase or fund additional amounts of $134 million and sell $79 million under the terms of such securities.

3. Fair Value

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

●

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

●

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

●

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

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

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

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 presented in the following tables:

June 30, 2015

Level 1

Level 2

Level 3

Total

(In millions)

Fixed maturity securities:

Corporate and other bonds

17,959

141

18,128

States, municipalities and political subdivisions

12,768

12,853

Asset-backed:

Residential mortgage-backed

4,893

207

5,100

Commercial mortgage-backed

2,164

2,251

Other asset-backed

565

490

1,055

Total asset-backed

7,622

784

8,406

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

Foreign government

367

399

Redeemable preferred stock

Fixed maturities available-for-sale

112

38,728

1,010

39,850

Fixed maturities trading

104

Total fixed maturities

112

38,743

1,099

39,954

Equity securities available-for-sale

139

216

Equity securities trading

539

540

Total equity securities

678

756

Short term investments

4,876

900

5,776

Other invested assets

103

146

Receivables

Life settlement contracts

Payable to brokers

(521

)

(526)


December 31, 2014	Level 1			Level 2			Level 3		Total

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	32		$	18,692		$	162	$	18,886
States, municipalities and political subdivisions					12,646			94		12,740
Asset-backed:
Residential mortgage-backed					5,044			189		5,233
Commercial mortgage-backed					2,061			83		2,144
Other asset-backed					580			655		1,235

Total asset-backed					7,685			927		8,612
U.S. Treasury and obligations of government-sponsored enterprises		28			3					31
Foreign government		41			413					454
Redeemable preferred stock		30			12					42

Fixed maturities available-for-sale		131			39,451			1,183		40,765
Fixed maturities trading					30			90		120

Total fixed maturities	$	131		$	39,481		$	1,273	$	40,885


Equity securities available-for-sale	$	145		$	61		$	16	$	222
Equity securities trading		505						1		506

Total equity securities	$	650		$	61		$	17	$	728


Short term investments	$	4,989		$	963				$	5,952
Other invested assets		102			41					143
Receivables		2			7					9
Life settlement contracts							$	82		82
Payable to brokers		(546	)		(6	)				(552)

The following tables present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2015 and 2014:


			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
2015	Balance, April 1		Included in Net Income		Included in OCI		Purchases		Sales		Settlements		into Level 3		out of Level 3		Balance, June 30		Held at June 30

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	186	$	(2)	$	(1)					$	(7)			$	(35)	$	141	$	(3)
States, municipalities and political subdivisions		86										(1)						85
Asset-backed:
Residential mortgage-backed		232		1		(2)						(11)				(13)		207
Commercial mortgage-backed		64		1		(1)	$	9				(1)	$	17		(2)		87
Other asset-backed		553		2		1		47	$	(90)		(17)				(6)		490

Total asset-backed		849		4		(2)		56		(90)		(29)		17		(21)		784		-

Fixed maturities available-for-sale		1,121		2		(3)		56		(90)		(37)		17		(56)		1,010		(3)
Fixed maturities trading		89																89

Total fixed maturities	$	1,210	$	2	$	(3)	$	56	$	(90)	$	(37)	$	17	$	(56)	$	1,099	$	(3)


Equity securities available-for-sale	$	13			$	3											$	16
Equity securities trading		1																1

Total equity securities	$	14	$	-	$	3	$	-	$	-	$	-	$	-	$	-	$	17	$	-


Life settlement contracts	$	79	$	4							$	(8)					$	75	$	(2)


			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
2014	Balance, April 1		Included in Net Income		Included in OCI		Purchases		Sales		Settlements		into Level 3		out of Level 3		Balance, June 30		Held at June 30

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	189	$	1			$	21	$	(6)	$	(5)	$	5	$	(11)	$	194
States, municipalities and political subdivisions		86		1	$	1		1		(10)								79
Asset-backed:
Residential mortgage-backed		359		(24)		47		22		(174)		(19)				(26)		185
Commercial mortgage-backed		126		1		1				(60)		(1)		12		(20)		59
Other asset-backed		439				4		229		(28)		(18)						626	$	(1)

Total asset-backed		924		(23)		52		251		(262)		(38)		12		(46)		870		(1)

Fixed maturities available-for-sale		1,199		(21)		53		273		(278)		(43)		17		(57)		1,143		(1)
Fixed maturities trading		85		6														91		6

Total fixed maturities	$	1,284	$	(15)	$	53	$	273	$	(278)	$	(43)	$	17	$	(57)	$	1,234	$	5


Equity securities available-for-sale	$	2															$	2
Equity securities trading		2	$	1			$	1										4	$	1

Total equity securities	$	4	$	1	$	-	$	1	$	-	$	-	$	-	$	-	$	6	$	1


Life settlement contracts	$	87	$	12							$	(13)					$	86	$	1
Derivative financial instruments, net		(4)		1					$	1					$	2		-


			Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)										Transfers into Level 3		Transfers out of Level 3				Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities
2015	Balance, January 1		Included in Net Income		Included in OCI		Purchases		Sales		Settlements		Transfers into Level 3		Transfers out of Level 3		Balance, June 30		Held at June 30

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	162	$	(1)	$	(1)	$	12	$	(12)	$	(21)	$	37	$	(35)	$	141	$	(3)
States, municipalities and political subdivisions		94		1								(10)						85
Asset-backed:
Residential mortgage-backed		189		2		(2)		72				(21)				(33)		207
Commercial mortgage-backed		83		2				15				(2)		17		(28)		87
Other asset-backed		655		3		10		82		(234)		(20)				(6)		490

Total asset-backed		927		7		8		169		(234)		(43)		17		(67)		784		-

Fixed maturities available-for-sale		1,183		7		7		181		(246)		(74)		54		(102)		1,010		(3)
Fixed maturities trading		90								(1)								89

Total fixed maturities	$	1,273	$	7	$	7	$	181	$	(247)	$	(74)	$	54	$	(102)	$	1,099	$	(3)


Equity securities available-for-sale	$	16															$	16
Equity securities trading		1																1

Total equity securities	$	17	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	17	$	-


Life settlement contracts	$	82	$	17							$	(24)					$	75	$	(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
2014	Balance, January 1		Included in Net Income		Included in OCI		Purchases		Sales		Settlements		into Level 3		out of Level 3		Balance, June 30		Held at June 30

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	204	$	2	$	1	$	26	$	(10)	$	(10)	$	8	$	(27)	$	194
States, municipalities and political subdivisions		71		1		2		1		(10)				14				79
Asset-backed:
Residential mortgage-backed		331		(23)		62		47		(174)		(40)		21		(39)		185
Commercial mortgage-backed		151		2						(60)		(2)		12		(44)		59
Other asset-backed		446		1		4		377		(111)		(90)				(1)		626	$	(1)

Total asset-backed		928		(20)		66		424		(345)		(132)		33		(84)		870		(1)

Fixed maturities available-for-sale		1,203		(17)		69		451		(365)		(142)		55		(111)		1,143		(1)
Fixed maturities trading		80		11														91		11

Total fixed maturities	$	1,283	$	(6)	$	69	$	451	$	(365)	$	(142)	$	55	$	(111)	$	1,234	$	10


Equity securities available-for-sale	$	11	$	3	$	(4)			$	(8)							$	2
Equity securities trading		8					$	2		(6)								4

Total equity securities	$	19	$	3	$	(4)	$	2	$	(14)	$	-	$	-	$	-	$	6	$	-


Life settlement contracts	$	88	$	22							$	(24)					$	86	$	2
Separate account business		1													$	(1)		-
Derivative financial instruments, net		(3)		1			$	(2)	$	2						2		-		2

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
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 and six months ended June 30, 2015 there were no transfers between Level 1 and Level 2. During the three months ended June 30, 2014 there were $1 million of transfers from Level 2 to Level 1 and no transfers from Level 1 to Level 2. During the six months ended June 30, 2014 there were $24 million of transfers from Level 2 to Level 1 and $1 million of transfers from Level 1 to Level 2. 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

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. All classes of Level 2 fixed maturity securities are valued using a methodology based on information generated by market transactions involving identical or comparable assets, a discounted cash flow methodology or a combination of both when necessary. Common inputs for all classes of fixed maturity securities include prices from recently executed transactions of similar securities, marketplace quotes, benchmark yields, spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. Specifically for asset-backed securities, key inputs include prepayment and default projections based on past performance of the underlying collateral and current market data. Fixed maturity securities are 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, 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 or have quoted prices are classified as Level 1. These securities include money market funds and treasury bills. Level 2 primarily includes commercial paper, for which all inputs are market observable. Fixed maturity securities purchased within one year of maturity are classified consistent with fixed maturity securities discussed above. Short term investments as presented in the tables above differ from the amounts presented 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.

Significant Unobservable Inputs

The following tables present quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurements of Level 3 assets. Valuations for assets and liabilities not presented in the 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.


June 30, 2015	Estimated Fair Value		Valuation Techniques	Unobservable Inputs	Range (Weighted Average)

	(In millions)

Fixed maturity securities	$	97	Discounted cash flow	Credit spread	2% – 13% (3%)

Life settlement contracts		75	Discounted cash flow	Discount rate risk premium Mortality assumption	9% 55% – 1,676% (165%)
December 31, 2014


Fixed maturity securities	$	101	Discounted cash flow	Credit spread	2% – 13% (3%)
Equity securities		16	Market approach	Private offering price	$12 – $4,391 per share ($600 per share)
Life settlement contracts		82	Discounted cash flow	Discount rate risk premium Mortality assumption	9% 55% – 1,676% (163%)

For fixed maturity securities, an increase to the credit spread assumptions would result in a lower fair value measurement. For equity securities, an increase in the private offering price 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 assets and liabilities which are not measured at fair value on the Consolidated Condensed Balance Sheets are presented in the following tables. The carrying amounts and estimated fair values of short term debt and long term debt exclude capital lease obligations. The carrying amounts reported on the Consolidated Condensed Balance Sheets for cash and short term investments not carried at fair value and certain other assets and liabilities approximate fair value due to the short term nature of these items.


	Carrying Amount		Estimated Fair Value
June 30, 2015	Carrying Amount		Level 1	Level 2		Level 3		Total

(In millions)

Assets:
Other invested assets, primarily mortgage loans	$	622				$	640	$	640

Liabilities:
Short term debt		1,060		$	1,037		36		1,073
Long term debt		9,776			9,492		470		9,962

December 31, 2014


Assets:
Other invested assets, primarily mortgage loans	$	588				$	608	$	608

Liabilities:
Short term debt		334		$	255		84		339
Long term debt		10,320			10,299		420		10,719

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.

Fair value of debt was based on observable market prices when available. When observable market prices were not available, the fair value of 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.

4. Property, Plant and Equipment

Diamond Offshore

Asset Impairment

In response to recently announced regulatory requirements in the U.S. Gulf of Mexico, as well as the continued deterioration of the market fundamentals in the oil and gas industry, including the dramatic decline in oil prices, significant cutbacks in customer capital spending plans and contract cancellations by customers, Diamond Offshore evaluated most of its mid-water semisubmersible rigs, one drillship and five jack-up rigs for impairment during the first quarter of 2015.

Diamond Offshore utilizes an undiscounted probability-weighted cash flow analysis in testing an asset for potential impairment. A matrix of assumptions is developed for each rig under evaluation using multiple utilization/dayrate scenarios, to each of which Diamond Offshore assigns a probability of occurrence. Diamond Offshore arrives at a projected probability weighted cash flow for each rig based on the respective matrix and compares such amount to the carrying value of the asset to assess recoverability.

The underlying assumptions and assigned probabilities of occurrence for utilization and dayrate scenarios are developed using a methodology that examines historical data for each rig, which considers the rig’s age, rated water depth and other attributes and then assesses its future marketability in light of the current and projected market environment at the time of assessment. Other assumptions, such as operating, maintenance and inspection costs, are estimated using historical data adjusted for known developments and future events that are anticipated by management at the time of the assessment.

Based on this evaluation, Diamond Offshore determined that seven mid-water semisubmersibles and one drillship were impaired and an impairment loss was recognized aggregating $359 million ($158 million after tax and noncontrolling interests) for the six months ended June 30, 2015. The fair value of five of the impaired rigs was determined utilizing a market approach, which utilized the most recent contracted sales price for another of Diamond Offshore’s previously impaired mid-water semisubmersible rigs. The fair value of Diamond Offshore’s three remaining rigs (which were under contract with a customer at that time) was determined using an income approach, which utilized significant unobservable inputs, including assumptions related to estimated dayrate revenue, rig utilization and anticipated costs for the remainder of the current contract, as well as estimated proceeds that may be received on disposition of each rig, representative of a Level 3 fair value measurement.

Of the impaired rigs, three semisubmersible rigs were sold for scrap in the second quarter of 2015 and another three rigs are currently cold stacked or are expected to be cold stacked in the near term. Two of the remaining impaired rigs are currently under contract and are expected to be cold stacked or sold for scrap at the end of their respective contracts. During the second quarter of 2015, Diamond Offshore reviewed most of their mid-water semisubmersibles, which were not previously impaired, two ultra-deepwater semisubmersibles, one deepwater semisubmersible and five jack-up rigs for impairment. As of June 30, 2015, Diamond Offshore determined that further impairment had not occurred. The aggregate fair value of the impaired rigs was $4 million as of June 30, 2015 and is included in Property, plant and equipment on the Consolidated Condensed Balance Sheets.

Loews Hotels

In 2015, Loews Hotels has paid a total of approximately $330 million to acquire two hotels, funded with capital contributions from the Company.

5. Claim and Claim Adjustment Expense Reserves

CNA’s property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including 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 can contribute to material period-to-period fluctuations in CNA’s results of operations and/or equity. CNA reported catastrophe losses, net of reinsurance, of $60 million and $56 million for the three months ended June 30, 2015 and 2014 and $89 million and $130 million for the six months ended June 30, 2015 and 2014. Catastrophe losses in 2015 related primarily to U.S. weather-related events.

Net Prior Year Development

The following tables and discussion present net prior year development recorded for Specialty, Commercial and International segments.


Three Months Ended June 30, 2015	Specialty		Commercial		International		Total

(In millions)

Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(13)	$	16	$	(8)	$	(5)
Pretax (favorable) unfavorable premium development		(2)		(11)		(2)		(15)

Total pretax (favorable) unfavorable net prior year development	$	(15)	$	5	$	(10)	$	(20)


Three Months Ended June 30, 2014


Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(41)	$	90	$	(25)	$	24
Pretax (favorable) unfavorable premium development		(2)		(6)		6		(2)

Total pretax (favorable) unfavorable net prior year development	$	(43)	$	84	$	(19)	$	22


Six Months Ended June 30, 2015


Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(11)	$	11	$	(12)	$	(12)
Pretax (favorable) unfavorable premium development		(8)		(12)		14		(6)

Total pretax (favorable) unfavorable net prior year development	$	(19)	$	(1)	$	2	$	(18)


Six Months Ended June 30, 2014


Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(44)	$	108	$	(15)	$	49
Pretax (favorable) unfavorable premium development		(8)		(24)		(1)		(33)

Total pretax (favorable) unfavorable net prior year development	$	(52)	$	84	$	(16)	$	16

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 Specialty segment:


	Three Months Ended June 30,				Six Months Ended June 30,

	2015		2014		2015		2014

(In millions)

Medical professional liability	$	(6)	$	1	$	8	$	1
Other professional liability and management liability		(1)		(44)		(4)		(50)
Surety						1		1
Warranty		1				1
Other		(7)		2		(17)		4

Total pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(13)	$	(41)	$	(11)	$	(44)

Three Months

2015

Overall, favorable development in medical professional liability was primarily due to lower than expected severity for individual healthcare professionals and allied facilities in accident years 2009 through 2012. Unfavorable development was recorded related to increased claim frequency in the aging services business in accident years 2009 and 2010.

Favorable development of $38 million was recorded in other professional liability and management liability related to lower than expected severity for professional services primarily in accident years 2010 and prior. Unfavorable development of $37 million was recorded primarily related to increased claim frequency on public company management liability in accident years 2012 through 2014.

Favorable development for other coverages was primarily due to better than expected claim frequency in property coverages provided to Specialty customers in accident year 2014.

2014

Favorable development for other professional liability and management liability was primarily related to favorable outcomes on individual large claims in accident years 2009 and prior, which contributed to a lower estimate of ultimate severity. Additionally, there was lower than expected severity in accident years 2008 through 2011.

Six Months

2015

Overall, unfavorable development for medical professional liability was primarily related to increased claim frequency in the aging services business for accident years 2009 through 2014, partially offset by lower than expected severity in accident years 2010 and prior. Additional favorable development was due to lower than expected severity for individual healthcare professionals and allied facilities in accident years 2009 through 2012.

Favorable development of $41 million was recorded in other professional liability and management liability primarily related to lower than expected severity in accident years 2010 and prior for professional services. Unfavorable development of $37 million was recorded primarily related to increased claim frequency on public company management liability in accident years 2012 through 2014.

Favorable development for other coverages was primarily due to better than expected claim frequency in property coverages provided to Specialty customers in accident year 2014.

2014

Commercial

The following table and discussion provide further detail of the development recorded for the Commercial segment. The majority of the 2014 unfavorable development relates to business classes which CNA has exited, but also includes Small Business where CNA has taken underwriting actions in an effort to improve profitability.


	Three Months Ended June 30,				Six Months Ended June 30,

	2015		2014		2015		2014

(In millions)

Commercial auto	$	7	$	19	$	7	$	39
General liability		1		32		5		32
Workers’ compensation		24		39		23		50
Property and other		(16)				(24)		(13)

Total pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	16	$	90	$	11	$	108

Three Months

2015

In the aggregate, the unfavorable loss development of $16 million was driven by an extra contractual obligation loss and losses associated with premium development. The reserve development discussed below was largely offsetting.

Unfavorable development for workers’ compensation was primarily due to higher than expected severity related to Defense Base Act contractors in accident years 2008 through 2013.

Favorable development for property and other was primarily due to better than expected loss emergence from 2012 catastrophe events and better than expected claim frequency of large claims in accident year 2014.

2014

Unfavorable development for commercial auto was primarily related to increased claim frequency of large losses in accident years 2010 through 2013.

Unfavorable development for general liability was primarily related to higher than expected severity in accident years 2009 through 2011. In addition, there was higher than expected severity in accident year 2013 related to Small Business.

Unfavorable development for workers’ compensation was primarily due to higher than expected severity related to Defense Base Act contractors in accident years 2012 and 2013.

Six Months

2015

In addition to the favorable property development noted in the three month discussion, there was additional favorable development for property related to better than expected loss emergence from 2014 catastrophe events.

2014

Unfavorable development for commercial auto was primarily related to increased claim frequency of large losses in accident years 2010 through 2013. Additionally, unfavorable development was recorded for increased claim frequency in accident years 2012 and 2013 and higher than expected severity in accident years 2010 and 2011.

Unfavorable development for workers’ compensation was primarily due to higher than expected severity related to Defense Base Act contractors in accident years 2012 and 2013 and the recognition of losses related to favorable premium development in accident year 2013.

Overall, favorable development for property and other coverages in accident years 2011 and prior primarily related to fewer claims than expected and favorable individual claim settlements. Additionally, there was favorable development due to better than expected loss emergence in catastrophe losses in accident year 2013. Unfavorable development was recorded in accident year 2012 primarily related to higher than expected loss emergence in catastrophe losses.

International

The following table and discussion provide further detail of the development recorded for the International segment:


	Three Months Ended June 30,				Six Months Ended June 30,

	2015		2014		2015		2014

(In millions)

Medical professional liability							$	1
Other professional liability	$	(5)	$	(14)	$	(5)		(15)
Liability		(2)		(4)		(7)		(6)
Property & marine		(8)		(7)		(14)		1
Other		7				14		(6)
Commutations								10

Total pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(8)	$	(25)	$	(12)	$	(15)

Three Months

2015

Favorable development in property and marine was due to better than expected emergence in accident years 2012 through 2014.

Unfavorable development in other is due to large losses in financial institutions and political risk primarily in accident year 2014.

2014

Favorable development for other professional liability was primarily related to lower than expected severity in accident years 2011 and prior.

Six Months

2015

Favorable development in property and marine was due to better than expected emergence in accident years 2012 through 2014.

Unfavorable development in other is due to large losses in financial institutions and political risk primarily in accident year 2014.

2014

Favorable development for other professional liability was primarily related to lower than expected severity in accident years 2011 and prior.

Reinsurance commutations in the first quarter of 2014 reduced ceded losses from prior years. Overall the commutations increased net operating income because of the release of the related allowance for doubtful accounts on reinsurance receivables.

Asbestos and Environmental Pollution Reserves

In 2010, Continental Casualty Company (“CCC”) together with several of CNA’s insurance subsidiaries completed a transaction with National Indemnity Company (“NICO”), a subsidiary of Berkshire Hathaway Inc., under which substantially all of CNA’s legacy asbestos and environmental pollution (“A&EP”) liabilities were ceded to NICO (loss portfolio transfer or “LPT”). At the transaction effective date, CNA ceded approximately $1.6 billion of net A&EP claim and allocated claim adjustment expense reserves to NICO under a retroactive reinsurance agreement with an aggregate limit of $4.0 billion. The $1.6 billion of claim and allocated claim adjustment expense reserves ceded to NICO was net of $1.2 billion of ceded claim and allocated claim adjustment expense reserves under existing third party reinsurance contracts. The NICO aggregate reinsurance limit also covers credit risk on the existing third party reinsurance related to these liabilities. CNA paid NICO a reinsurance premium of $2.0 billion and transferred to NICO billed third party reinsurance receivables related to A&EP claims with a net book value of $215 million, resulting in total consideration of $2.2 billion.

Through December 31, 2013, CNA recorded $0.9 billion of additional amounts ceded under the LPT. As a result, the cumulative amounts ceded under the loss portfolio transfer exceeded the $2.2 billion consideration paid, resulting in a deferred retroactive reinsurance gain. This deferred gain is recognized in earnings in proportion to actual recoveries under the loss portfolio transfer. Over the life of the contract, there is no economic impact as long as any additional losses are within the limit under the contract. In a period in which the estimate of ceded losses is changed, the required change to the deferred gain is cumulatively recognized in earnings as if the revised estimate was available at the inception of the LPT.

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


	Three Months Ended June 30				Six Months Ended June 30

	2015		2014		2015		2014

(In millions)

Net A&EP adverse development before consideration of LPT	$	150			$	150
Provision for uncollectible third party reinsurance on A&EP

Additional amounts ceded under LPT		150				150
Retroactive reinsurance benefit recognized		(66)	$	(1)		(71)	$	(5)

Pretax impact of unrecognized deferred retroactive reinsurance benefit	$	84	$	(1)	$	79	$	(5)

The fourth quarter of 2014 A&EP reserve review was not completed in 2014 because additional information and analysis on inuring third party reinsurance recoveries were needed to finalize the review. The review was finalized in the second quarter of 2015. Unfavorable development was due to a decrease in anticipated future reinsurance recoveries related to asbestos claims and higher than expected severity on pollution claims. The effect of the unrecognized deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders’ benefits in the Consolidated Condensed Statements of Income.

As of June 30, 2015 and December 31, 2014, the cumulative amounts ceded under the LPT were $2.6 billion and $2.5 billion. The unrecognized deferred retroactive reinsurance benefit was $255 million and $176 million as of June 30, 2015 and December 31, 2014.

NICO established a collateral trust account as security for its obligations to CNA. The fair value of the collateral trust account was $3.1 billion and $3.4 billion at June 30, 2015 and December 31, 2014. In addition, Berkshire Hathaway Inc. guaranteed the payment obligations of NICO up to the full aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement. NICO is responsible for claims handling and billing and collection from third party reinsurers related to CNA’s A&EP claims.

6. Debt

Diamond Offshore

In the second quarter of 2015, Diamond Offshore issued $375 million in commercial paper supported by its existing $1.5 billion revolving credit facility. As of June 30, 2015, the commercial paper notes had a weighted average interest rate of 0.5% and a weighted average remaining term of eight days.

Diamond Offshore repaid $250 million aggregate principal amount of its 4.9% senior notes due July 1, 2015, primarily with funds obtained through the issuance of additional commercial paper.

Boardwalk Pipeline

In the first quarter of 2015, Boardwalk Pipeline completed a public offering of an additional $250 million aggregate principal amount of its 5.0% senior notes due December 15, 2024. Boardwalk Pipeline originally issued $350 million aggregate principal amount of its 5.0% senior notes due December 15, 2024 in November of 2014. During 2015, Boardwalk Pipeline used the net proceeds from this offering to retire all of the outstanding $250 million aggregate principal amount of 4.6% notes that matured on June 1, 2015 and repaid at maturity the entire $275 million aggregate principal amount of its 5.1% senior notes.

During 2015, Boardwalk Pipeline repaid the $200 million of outstanding borrowings and terminated all related commitments of their variable-rate term loan.

In May of 2015, Boardwalk Pipeline entered into an amended revolving credit agreement having aggregate lending commitments of $1.5 billion and a maturity date of May 2020. As of June 30, 2015, Boardwalk Pipeline had $400 million of loans outstanding under its revolving credit facility with a weighted-average interest rate on the borrowings of 1.4%.

7. Shareholders’ Equity

Accumulated other comprehensive income

The tables below display the changes in Accumulated other comprehensive income (“AOCI”) by component for the three and six months ended June 30, 2014 and 2015:


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

(In millions)

Balance, April 1, 2014	$	29	$	820	$	21	$	(2)	$	(432)	$	127	$	563
Other comprehensive income before reclassifications, after tax of $(1), $(140), $(4), $(2), $0 and $0		2		257		3		3				42		307
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $0, $(6), $(2), $1, $27 and $0				13		7		(3)		(53)				(36)

Other comprehensive income (loss)		2		270		10		-		(53)		42		271
Amounts attributable to noncontrolling interests		(1)		(28)		(1)		(1)		7		(3)		(27)

Balance, June 30, 2014	$	30	$	1,062	$	30	$	(3)	$	(478)	$	166	$	807


Balance, April 1, 2015	$	31	$	944	$	-	$	(3)	$	(636)	$	(38)	$	298
Other comprehensive income (loss) before reclassifications, after tax of $2, $186, $0, $0, $(18) and $0		(4)		(370)						37		49		(288)
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $0, $(5), $0, $0, $(4) and $0				7				1		6				14

Other comprehensive income (loss)		(4)		(363)		-		1		43		49		(274)
Amounts attributable to noncontrolling interests		1		38				(1)		(5)		(4)		29

Balance, June 30, 2015	$	28	$	619	$	-	$	(3)	$	(598)	$	7	$	53


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

(In millions)

Balance, January 1, 2014	$	23	$	622	$	(3)	$	(4)	$	(432)	$	133	$	339
Transfer to net assets of discontinued operations		(5)		(15)		20								-
Other comprehensive income before reclassifications, after tax of $(7), $(281), $(5), $(3), $0 and $0		14		521		5		5				36		581
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $0, $8, $(5), $1, $26 and $0				(14)		10		(2)		(54)				(60)

Other comprehensive income (loss)		14		507		15		3		(54)		36		521
Amounts attributable to noncontrolling interests		(2)		(52)		(2)		(2)		8		(3)		(53)

Balance, June 30, 2014	$	30	$	1,062	$	30	$	(3)	$	(478)	$	166	$	807


Balance, January 1, 2015	$	32	$	846	$	-	$	(6)	$	(641)	$	49	$	280
Other comprehensive income (loss) before reclassifications, after tax of $2, $124, $0, $1, $(18) and $0		(5)		(251)				(2)		37		(47)		(268)
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $0, $(5), $0, $(2), $(7) and $0				(2)				6		10				14

Other comprehensive income (loss)		(5)		(253)		-		4		47		(47)		(254)
Issuance of equity securities by subsidiary										1				1
Amounts attributable to noncontrolling interests		1		26				(1)		(5)		5		26

Balance, June 30, 2015	$	28	$	619	$	-	$	(3)	$	(598)	$	7	$	53

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

Loews purchased 0.9 million shares of Diamond Offshore common stock at an aggregate cost of $24 million during the six months ended June 30, 2015. The Company’s percentage ownership interest in Diamond Offshore increased as a result of these transactions, from 52% to 53%. The Company’s carrying value exceeded the purchase price of the shares, resulting in an increase to Additional paid-in capital (“APIC”) of $3 million.

During the six months ended June 30, 2015, Boardwalk Pipeline sold 7.1 million common units under an equity distribution agreement with certain broker-dealers and received net proceeds of $115 million, including a $2 million contribution from the Company to maintain its 2% general partner interest. The Company’s percentage ownership interest in Boardwalk Pipeline declined as a result of this transaction, from 53% to 51%. The Company’s carrying value exceeded the issuance price of the common units, resulting in a decrease to APIC of $2 million and an increase to AOCI of $1 million.

Treasury Stock

The Company repurchased 7.6 million and 4.5 million shares of Loews common stock at aggregate costs of $305 million and $195 million during the six months ended June 30, 2015 and 2014.

8. Benefit Plans

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

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

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

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

The components of net periodic benefit cost are as follows:


	Pension Benefits

	Three Months Ended June 30,				Six Months Ended June 30,

	2015		2014		2015		2014

(In millions)

Service cost	$	4	$	3	$	8	$	8
Interest cost		32		37		64		74
Expected return on plan assets		(49)		(52)		(97)		(105)
Amortization of unrecognized net loss		12		8		23		15
Regulatory asset decrease				1				1

Net periodic benefit cost	$	(1)	$	(3)	$	(2)	$	(7)


	Other Postretirement Benefits

	Three Months Ended June 30,				Six Months Ended June 30,

	2015		2014		2015		2014

(In millions)

Interest cost			$	1	$	1	$	2
Expected return on plan assets	$	(1)		(1)		(2)		(2)
Amortization of unrecognized prior service benefit		(3)		(7)		(5)		(13)
Amortization of unrecognized net loss		1				1
Curtailment gain				(86)				(86)

Net periodic benefit cost	$	(3)	$	(93)	$	(5)	$	(99)

In the second quarter of 2015, CNA eliminated future benefit accruals associated with the CNA Retirement Plan effective June 30, 2015. This amendment resulted in a $55 million curtailment which is a decrease in the plan benefit obligation liability and a reduction of the unrecognized actuarial losses included in AOCI. In connection with the curtailment, CNA remeasured the plan benefit obligation which resulted in an increase in the discount rate used to determine the benefit obligation from 3.9% to 4.0%.

In the second quarter of 2014, CNA eliminated certain postretirement medical benefits associated with the CNA Health and Group Benefits Program. This change is a negative plan amendment that 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%.

9. Business Segments

The Company’s reportable segments are primarily based on its individual operating subsidiaries. Each of the principal operating subsidiaries is headed by a chief executive officer who is responsible for the operation of its business and has the duties and authority commensurate with that position. 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: Specialty, Commercial, International and Other Non-Core. Specialty provides a broad array of professional, financial and specialty property and casualty products and services, through a network of independent agents, brokers and managing general underwriters. Commercial includes property and casualty coverages sold to small businesses and middle market entities and organizations primarily through an independent agency distribution system. Commercial also includes commercial insurance and risk management products sold to large corporations primarily through insurance brokers. International provides management and professional liability coverages as well as a broad range of other property and casualty insurance products and services abroad through a network of brokers, independent agencies and managing general underwriters, as well as the Lloyd’s marketplace. Other Non-Core primarily includes the results of CNA’s individual and group long term care businesses that are in run-off and also includes corporate expenses, including interest on corporate debt, and the results of certain property and casualty business in run-off, including CNA Re and A&EP.

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 35 drilling rigs, including one newbuild rig which is under construction. On June 30, 2015, Diamond Offshore’s drilling rigs were located offshore seven 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 23 hotels, 22 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, 2014. 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 following tables set forth the Company’s consolidated revenues and income (loss) by business segment:


	Three Months Ended June 30,						Six Months Ended June 30,

	2015			2014			2015			2014

(In millions)

Revenues (a):

CNA Financial:
Property and Casualty:
Specialty	$	904		$	931		$	1,821		$	1,846
Commercial		883			936			1,778			1,882
International		220			244			426			503
Other Non-Core		320			329			654			672

Total CNA Financial		2,327			2,440			4,679			4,903
Diamond Offshore		632			701			1,259			1,411
Boardwalk Pipeline		299			295			629			652
Loews Hotels		167			112			306			217
Corporate and other		10			45			40			98

Total	$	3,435		$	3,593		$	6,913		$	7,281


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

CNA Financial:
Property and Casualty:
Specialty	$	206		$	246		$	413		$	449
Commercial		122			65			308			184
International		35			31			48			58
Other Non-Core		(198	)		23			(290	)		(25)

Total CNA Financial		165			365			479			666
Diamond Offshore		106			112			(181	)		280
Boardwalk Pipeline (b)		38			54			115			77
Loews Hotels		14			9			24			14
Corporate and other		(28	)		6			(37	)		23

Total	$	295		$	546		$	400		$	1,060


Net income (loss) (a):

CNA Financial:
Property and Casualty:
Specialty	$	124		$	146		$	247		$	269
Commercial		72			39			182			112
International		19			18			28			33
Other Non-Core		(91	)		32			(123	)		21

Total CNA Financial		124			235			334			435
Diamond Offshore		45			42			(81	)		111
Boardwalk Pipeline (b)		12			17			37			(1)
Loews Hotels		8			5			13			8
Corporate and other		(19	)		4			(24	)		15

Income from continuing operations		170			303			279			568
Discontinued operations, net					(187	)					(393)

Total	$	170		$	116		$	279		$	175

(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 June 30,				Six Months Ended June 30,

	2015		2014		2015		2014


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

CNA Financial:
Property and Casualty:
Specialty			$	(5)	$	4	$	6
Commercial	$	2		(5)		6		5
International		1		(3)		2
Other Non-Core		(5)		(1)		(4)		17

Total	$	(2)	$	(14)	$	8	$	28


Net income (loss):

CNA Financial:
Property and Casualty:
Specialty	$	1	$	(4)	$	3	$	3
Commercial				(6)		3		1
International				1		1		1
Other Non-Core		2				4		10

Total	$	3	$	(9)	$	11	$	15

(b)

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, 2014, a charge of $94 million ($55 million after tax and noncontrolling interests) was recorded in the first quarter of 2014 related to the Bluegrass Project.

10. 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.

11. Commitments and Contingencies

CNA Financial

In the course of selling business entities and assets to third parties, CNA 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 in effect for sales of business entities, assets and third party loans may include provisions that survive indefinitely. As of June 30, 2015, the aggregate amount related to quantifiable guarantees was $375 million and the aggregate amount related to indemnification agreements was $260 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 June 30, 2015, 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 guarantees, 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 $2.0 billion as of June 30, 2015. 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

Diamond Offshore is financially obligated under a contract with Hyundai Heavy Industries, Co. Ltd. for the construction of a dynamically positioned, harsh environment semisubmersible drilling rig, with expected delivery in the second quarter of 2016. The total cost of the rig including shipyard costs, capital spares, commissioning, project management and shipyard supervision is estimated to be $764 million. The remaining contractual payment of $440 million is due upon delivery of the rig.

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. Diamond Offshore is currently unable to estimate the range of loss, if any, that it would incur if Petrobras is ultimately assessed such taxes and if it is determined that Petrobras is entitled to obtain reimbursement from Diamond Offshore. However, if Diamond Offshore’s position is not sustained, the amount of such reimbursement could have a material adverse effect on its financial condition and the Company’s results of operations and cash flows.

12. Discontinued Operations

The Consolidated Condensed Statements of Income include discontinued operations of HighMount as follows:


	Three Months Ended		Six Months Ended
	June 30, 2014		June 30, 2014

(In millions)

Revenues:
Other revenue, primarily operating		$ 46		$ 101

Total		46		101

Expenses:
Other operating expenses
Impairment of natural gas and oil properties				29
Operating		56		111
Interest		3		5

Total		59		145

Loss before income tax		(13)		(44)
Income tax expense		(12)		(1)

Results of discontinued operations, net of income tax		(25)		(45)
Impairment loss, net of tax benefit of $92		(167)		(167)

Loss from discontinued operations		$ (192)		$ (212)

The Consolidated Condensed Statements of Income include discontinued operations of the CAC business as follows:


	Three Months Ended		Six Months Ended
	June 30, 2014		June 30, 2014

(In millions)

Revenues:
Net investment income		$ 39		$ 80
Investment gains		1		2

Total		40		82

Expenses:
Insurance claims and policyholders’ benefits		32		63
Other operating expenses		1		2

Total		33		65

Income before income tax		7		17
Income tax expense		(1)		(4)

Results of discontinued operations, net of income tax		6		13
Impairment loss, net of tax benefit of $41				(214)
Amounts attributable to noncontrolling interests		(1)		20

Income (loss) from discontinued operations		$ 5		$ (181)

13. Consolidating Financial Information

The following schedules present the Company’s consolidating balance sheet information at June 30, 2015 and December 31, 2014, and consolidating statements of income information for the six months ended June 30, 2015 and 2014. These schedules present the individual subsidiaries of the Company and their contribution to the Consolidated Condensed Financial Statements. Amounts presented will not necessarily be the same as those in the individual financial statements of the Company’s subsidiaries due to adjustments for purchase accounting, income taxes and noncontrolling interests. In addition, many of the Company’s subsidiaries use a classified balance sheet which also leads to differences in amounts reported for certain line items.

The Corporate and other column primarily reflects the parent company’s investment in its subsidiaries, invested cash portfolio and corporate long term debt. The elimination adjustments are for intercompany assets and liabilities, interest and dividends, the parent company’s investment in capital stocks of subsidiaries, and various reclasses of debit or credit balances to the amounts in consolidation. Purchase accounting adjustments have been pushed down to the appropriate subsidiary.

Loews Corporation

Consolidating Balance Sheet Information

June 30, 2015

CNA
Financial

Diamond
Offshore

Boardwalk
Pipeline

Loews
Hotels

Corporate
and Other

Eliminations

Total

(In millions)

Assets:

Investments

45,332

102

100

5,514

51,048

Cash

145

249

Receivables

7,365

537

123

121

(94)

8,097

Property, plant and equipment

304

6,934

7,633

997

15,917

Deferred income taxes

283

146

(431)

Goodwill

116

237

373

Investments in capital stocks of subsidiaries

15,756

(15,756)

Other assets

835

268

324

261

1,710

Deferred acquisition costs of insurance subsidiaries

621

Total assets

55,001

7,871

8,337

1,416

21,659

(16,269)

78,015

Liabilities and Equity:

Insurance reserves

36,368

Payable to brokers

196

545

741

Short term debt

625

400

1,061

Long term debt

2,564

1,982

3,493

471

1,281

9,791

Deferred income taxes

393

755

(419)

773

Other liabilities

3,660

591

425

301

(94)

4,949

Total liabilities

42,797

3,591

4,673

608

2,527

(513)

53,683

Total shareholders’ equity

10,944

2,285

1,571

806

19,132

(15,756)

18,982

Noncontrolling interests

1,260

1,995

2,093

5,350

Total equity

12,204

4,280

3,664

808

19,132

(15,756)

24,332

Total liabilities and equity

55,001

7,871

8,337

1,416

21,659

(16,269)

78,015

Loews Corporation

Consolidating Balance Sheet Information


December 31, 2014	CNA Financial		Diamond Offshore		Boardwalk Pipeline		Loews Hotels		Corporate and Other		Eliminations		Total

(In millions)

Assets:

Investments	$	46,262	$	234			$	75	$	5,461			$	52,032
Cash		190		16	$	8		9		141				364
Receivables		7,097		490		128		29		82	$	(56)		7,770
Property, plant and equipment		280		6,949		7,649		671		62				15,611
Deferred income taxes		222						2		374		(598)		-
Goodwill		117		20		237								374
Investments in capital stocks of subsidiaries										15,974		(15,974)		-
Other assets		778		307		304		206		7		14		1,616
Deferred acquisition costs of insurance subsidiaries		600												600

Total assets	$	55,546	$	8,016	$	8,326	$	992	$	22,101	$	(16,614)	$	78,367


Liabilities and Equity:

Insurance reserves	$	36,380											$	36,380
Payable to brokers		117	$	5					$	551				673
Short term debt				250			$	85						335
Long term debt		2,561		1,981	$	3,690		421		1,680				10,333
Deferred income taxes		11		514		732		36			$	(400)		893
Other liabilities		3,713		792		400		17		421		(240)		5,103

Total liabilities		42,782		3,542		4,822		559		2,652		(640)		53,717

Total shareholders’ equity		11,457		2,359		1,558		431		19,449		(15,974)		19,280
Noncontrolling interests		1,307		2,115		1,946		2						5,370

Total equity		12,764		4,474		3,504		433		19,449		(15,974)		24,650

Total liabilities and equity	$	55,546	$	8,016	$	8,326	$	992	$	22,101	$	(16,614)	$	78,367

Loews Corporation

Consolidating Statement of Income Information

Six Months Ended June 30, 2015

CNA
Financial

Diamond
Offshore

Boardwalk
Pipeline

Loews
Hotels

Corporate
and Other

Eliminations

Total

(In millions)

Revenues:

Insurance premiums

3,422

Net investment income

1,058

1,098

Intercompany interest and dividends

650

(650)

Investment gains

Contract drilling revenues

1,217

Other revenues

191

629

306

1,168

Total

4,679

1,259

629

306

690

(650)

6,913

Expenses:

Insurance claims and policyholders’ benefits

2,808

Amortization of deferred acquisition costs

617

Contract drilling expenses

695

Other operating expenses

697

696

423

272

2,128

Interest

265

Total

4,200

1,440

514

282

6,513

Income (loss) before income tax

479

(181)

115

613

(650)

400

Income tax (expense) benefit

(107)

(21)

(11)

(104)

Net income (loss)

372

(159)

626

(650)

296

Amounts attributable to noncontrolling interests

(38)

(57)

(17)

Net income (loss) attributable to Loews Corporation

334

(81)

626

(650)

279

Loews Corporation

Consolidating Statement of Income Information


Six Months Ended June 30, 2014	CNA Financial		Diamond Offshore		Boardwalk Pipeline		Loews Hotels		Corporate and Other		Eliminations		Total

(In millions)

Revenues:

Insurance premiums	$	3,617											$	3,617
Net investment income		1,076	$	1					$	97				1,174
Intercompany interest and dividends										512	$	(512)		-
Investment gains		28												28
Contract drilling revenues				1,335										1,335
Other revenues		182		75	$	652	$	217		1				1,127

Total		4,903		1,411		652		217		610		(512)		7,281


Expenses:

Insurance claims and policyholders’ benefits		2,887												2,887
Amortization of deferred acquisition costs		664												664
Contract drilling expenses				765										765
Other operating expenses		596		329		494		200		38				1,657
Interest		90		37		81		3		37				248

Total		4,237		1,131		575		203		75		-		6,221

Income before income tax		666		280		77		14		535		(512)		1,060
Income tax (expense) benefit		(182)		(53)		1		(6)		(8)				(248)

Income from continuing operations		484		227		78		8		527		(512)		812
Discontinued operations, net		(201)								(212)				(413)

Net income		283		227		78		8		315		(512)		399
Amounts attributable to noncontrolling interests		(29)		(116)		(79)								(224)

Net income (loss) attributable to Loews Corporation	$	254	$	111	$	(1)	$	8	$	315	$	(512)	$	175

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

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with our Consolidated Condensed Financial Statements included in Item 1 of this Report, Risk Factors included in Part II, Item 1A of this Report, and the Consolidated Financial Statements, Risk Factors, and MD&A included in our Annual Report on Form 10-K for the year ended December 31, 2014. This MD&A is comprised of the following sections:


		Page No.

Overview		43
Consolidated Financial Results		43
Discontinued Operations		44
Parent Company Structure		45
Critical Accounting Estimates		45
Results of Operations by Business Segment		45
CNA Financial		46
Diamond Offshore		51
Boardwalk Pipeline		57
Loews Hotels		60
Corporate and Other		60
Discontinued Operations		61
Liquidity and Capital Resources		61
CNA Financial		61
Diamond Offshore		62
Boardwalk Pipeline		63
Loews Hotels		63
Corporate and Other		64
Investments		64
Accounting Standards Update		68
Forward-Looking Statements		68

OVERVIEW

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

●

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

●

operation of offshore oil and gas drilling rigs (Diamond Offshore Drilling, Inc. (“Diamond Offshore”), a 53% 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 51% owned subsidiary); and

●

operation of a chain of hotels (Loews Hotels Holding Corporation (“Loews Hotels”), a wholly owned subsidiary).

See below for a discussion of discontinued operations.

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

Consolidated Financial Results

Net income for the three months ended June 30, 2015 was $170 million, or $0.46 per share, compared to $116 million, or $0.30 per share, in the prior year period. Net income for the six months ended June 30, 2015 was $279 million, or $0.75 per share, compared to $175 million, or $0.45 per share, in the prior year period. Net income for the three and six month periods in 2014 included losses from discontinued operations of $187 million and $393 million reflecting the disposition by Loews of HighMount Exploration & Production, LLC (“HighMount”) and by CNA of its annuity and pension deposit business.

Income from continuing operations for the three months ended June 30, 2015 was $170 million, or $0.46 per share, compared to $303 million, or $0.79 per share, in the 2014 second quarter. Income from continuing operations decreased primarily due to lower earnings at CNA and less favorable performance of the parent company trading portfolio as a result of lower returns on equities and limited partnership investments.

CNA’s earnings decreased primarily due to an $84 million ($49 million after tax and noncontrolling interests) charge related to a retroactive reinsurance agreement to cede its legacy asbestos and environmental pollution liabilities (“LPT”). Under retroactive reinsurance accounting, amounts ceded through the LPT in excess of the consideration paid result in a deferred benefit that is recognized in income in proportion to paid recoveries over future periods. The year-over-year earnings comparison was also impacted by a gain of $86 million ($50 million after tax and noncontrolling interests) in 2014 from a postretirement plan curtailment. The decline in the second quarter of 2015 as compared to the prior year was partially offset by an improvement in net prior year development in CNA’s commercial business segment.

Diamond Offshore’s earnings were relatively flat as lower rig utilization and increased depreciation and interest expense were offset by significantly reduced contract drilling expenses.

Boardwalk Pipeline’s earnings decreased primarily as a result of lower parking and lending revenue and increased depreciation and interest costs. Boardwalk Pipeline recorded $12 million of higher transportation revenue due to business interruption insurance proceeds received and new rates taking effect as a result of the Gulf South rate case.

Loews Hotels’ earnings increased primarily due to higher income from joint venture properties.

Discontinued operations in 2014 included an impairment charge related to the divested HighMount business.

Income from continuing operations for the six months ended June 30, 2015 was $279 million, or $0.75 per share, compared to $568 million, or $1.47 per share, in the prior year period. Income from continuing operations decreased primarily due to lower earnings at CNA and Diamond Offshore.

CNA’s earnings decreased primarily due to the reasons discussed above.

Diamond Offshore’s earnings decreased primarily due to a $158 million (after tax and noncontrolling interests) asset impairment charge taken in the first quarter of 2015 related to the carrying value of eight drilling rigs as well as lower rig utilization and increased depreciation and interest expense.

Boardwalk Pipeline’s earnings increase stemmed from the impact in 2014 of a $55 million charge (after tax and noncontrolling interests) related to the write off of all capitalized costs associated with the terminated Bluegrass project. Absent this charge, earnings decreased primarily due to the unusually cold and sustained winter of 2014 as compared to the relatively normal 2015 winter season and lower natural gas storage revenues.

Loews Hotels’ earnings increased primarily due to higher income from joint venture properties partially offset by higher interest expense.

Discontinued operations in 2014 included impairment charges related to the sale of both CNA’s annuity and pension deposit business and HighMount.

Book value per share increased to $51.91 at June 30, 2015 from $51.70 at December 31, 2014 and $51.85 at June 30, 2014. Book value per share excluding accumulated other comprehensive income (“AOCI”) increased to $51.77 at June 30, 2015 from $50.95 at December 31, 2014 and $49.74 at June 30, 2014.

Discontinued Operations

On August 1, 2014, CNA completed the sale of Continental Assurance Company (“CAC”), its former life insurance subsidiary and on September 30, 2014, the Company sold HighMount, its natural gas and oil exploration and production subsidiary. The results of these sold businesses are reported as discontinued operations in the Consolidated Condensed Statements of Income.

Parent Company Structure

We are a holding company and derive substantially all of our cash flow from our subsidiaries. We rely upon our invested cash balances and distributions from our subsidiaries to generate the funds necessary to meet our obligations and to declare and pay any dividends to our shareholders. The ability of our subsidiaries to pay dividends is subject to, among other things, the availability of sufficient earnings and funds in such subsidiaries, applicable state laws, including in the case of the insurance subsidiaries of CNA, laws and rules governing the payment of dividends by regulated insurance companies and compliance with covenants in their respective loan agreements. Claims of creditors of our subsidiaries will generally have priority as to the assets of such subsidiaries over our claims and those of our creditors and shareholders.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the consolidated condensed financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the related notes. Actual results could differ from those estimates.

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

We consider the accounting policies discussed below to be critical to an understanding of our consolidated condensed financial statements as their application places the most significant demands on our judgment. Due to the inherent uncertainties involved with these types of judgments, actual results could differ significantly from estimates, which may have a material adverse impact on our results of operations or equity.

●

Insurance Reserves

●

Reinsurance and Other Receivables

●

Valuation of Investments and Impairment of Securities

●

Long Term Care Policies

●

Pension and Postretirement Benefit Obligations

●

Impairment of Long-Lived Assets

●

Goodwill

●

Income Taxes

Due to the inherent uncertainties involved with these types of judgments, actual results could differ significantly from estimates, which may have a material adverse impact on our results of operations or equity. See the Critical Accounting Estimates section and the Results of Operations by Business Segment – CNA Financial – Reserves – Estimates and Uncertainties section of our MD&A included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2014 for further information.

RESULTS OF OPERATIONS BY BUSINESS SEGMENT

Unless the context otherwise requires, references to net operating income (loss), net realized investment results and net income (loss) reflect amounts attributable to Loews Corporation shareholders.

CNA Financial

The following table summarizes the results of operations for CNA for the three and six months ended June 30, 2015 and 2014 as presented in Note 13 of the Notes to Consolidated Condensed Financial Statements included in Item 1 of this Report:


	Three Months Ended June 30,				Six Months Ended June 30,

	2015		2014		2015			2014

(In millions)

Revenues:
Insurance premiums	$	1,735	$	1,811	$	3,422		$	3,617
Net investment income		500		550		1,058			1,076
Investment gains (losses)		(2)		(14)		8			28
Other revenues		94		93		191			182

Total		2,327		2,440		4,679			4,903

Expenses:
Insurance claims and policyholders’ benefits		1,469		1,441		2,808			2,887
Amortization of deferred acquisition costs		314		335		617			664
Other operating expenses		340		253		697			596
Interest		39		46		78			90

Total		2,162		2,075		4,200			4,237

Income before income tax		165		365		479			666
Income tax expense		(27)		(103)		(107	)		(182)

Income from continuing operations		138		262		372			484
Discontinued operations, net				6					(201)

Net income		138		268		372			283
Amounts attributable to noncontrolling interests		(14)		(28)		(38)			(29)

Net income attributable to Loews Corporation	$	124	$	240	$	334		$	254

Three Months Ended June 30, 2015 Compared to 2014

Income from continuing operations decreased $124 million for the three months ended June 30, 2015 as compared with the same period in 2014. Results in 2015 were negatively impacted by a $49 million (after tax and noncontrolling interests) charge related to the application of retroactive reinsurance accounting to adverse reserve development ceded under the 2010 asbestos and environmental pollution (“A&EP”) loss portfolio transfer, as further discussed in Note 5 of the Notes to Consolidated Condensed Financial Statements included under Item 1. Results in 2014 benefited from a $50 million (after tax and noncontrolling interests) curtailment gain related to a change in postretirement benefits, as further discussed in Note 8 of the Notes to Consolidated Condensed Financial Statements included under Item 1. In addition, results in 2015 included lower net investment income and decreased results in the long term care business, partially offset by improved underwriting results. See the Investments section of this MD&A for further discussion of net realized investment results and net investment income. Further information on net prior year development is included in Note 5 of the Notes to Consolidated Condensed Financial Statements included under Item 1.

Six Months Ended June 30, 2015 Compared to 2014

Income from continuing operations decreased $112 million for the six months ended June 30, 2015 as compared with the same period in 2014, primarily due to the same reasons as discussed above in the three month comparison.

CNA Property and Casualty Insurance Operations

CNA’s property and casualty insurance operations consist of professional, financial, specialty property and casualty products and services and commercial insurance and risk management products.

In the evaluation of the results of the property and casualty businesses, CNA utilizes the loss ratio, the expense ratio, the dividend ratio and the combined ratio. These ratios are calculated using GAAP financial results. The loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums. The expense ratio is the percentage of insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of policyholders’ dividends incurred to net earned premiums. The combined ratio is the sum of the loss, expense and dividend ratios.

The following tables summarize the results of CNA’s property and casualty operations for the three and six months ended June 30, 2015 and 2014:

Three Months Ended June 30, 2015

Specialty

Commercial

International