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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
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 1-5823
CNA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware36-6169860
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
151 N. Franklin 60606
Chicago,Illinois(Zip Code)
(Address of principal executive offices)
(312) 822-5000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, Par value $2.50"CNA"New York Stock Exchange
Chicago Stock Exchange
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 No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
As of April 27, 2023, 270,854,297 shares of common stock were outstanding.



Item NumberPage
Number
1.
2.
3.
4.
PART II
1
2
6
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PART I
Item 1. Condensed Consolidated Financial Statements
CNA Financial Corporation
Condensed Consolidated Statements of Operations (Unaudited)
Three months ended March 31
(In millions, except per share data)2023
2022 (1)
Revenues
Net earned premiums$2,248 $2,059 
Net investment income525 448 
Net investment losses(35)(11)
Non-insurance warranty revenue407 382 
Other revenues7 7 
Total revenues3,152 2,885 
Claims, Benefits and Expenses
Insurance claims and policyholders’ benefits (re-measurement gain (loss) of $1 and $5)
1,653 1,478 
Amortization of deferred acquisition costs379 344 
Non-insurance warranty expense384 354 
Other operating expenses 337 326 
Interest28 28 
Total claims, benefits and expenses2,781 2,530 
Income before income tax371 355 
Income tax expense(74)(60)
Net income$297 $295 
Basic earnings per share$1.10 $1.08 
Diluted earnings per share$1.09 $1.08 
Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic271.3271.8
Diluted272.3272.9
(1) As of January 1, 2023, the Company adopted ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (ASU 2018-12) using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts in the financial statements have been adjusted to reflect application of the new guidance. See Note A to the Condensed Consolidated Financial Statements for additional information.
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

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CNA Financial Corporation
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
Three months ended March 31
(In millions)2023
2022 (1)
Comprehensive Income (Loss)
Net income$297 $295 
Other Comprehensive Income (Loss), net of tax
Changes in:
Net unrealized gains and losses on investments with an allowance for credit losses(8)(4)
Net unrealized gains and losses on other investments670 (2,643)
Net unrealized gains and losses on investments662 (2,647)
Impact of changes in discount rates used to measure long-duration contract liabilities(396)1,635 
Foreign currency translation adjustment17 (14)
Pension and postretirement benefits7 6 
Other comprehensive income (loss), net of tax290 (1,020)
Total comprehensive income (loss)$587 $(725)
(1) As of January 1, 2023, the Company adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts in the financial statements have been adjusted to reflect application of the new guidance. See Note A to the Condensed Consolidated Financial Statements for additional information.
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).
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CNA Financial Corporation
Condensed Consolidated Balance Sheets (Unaudited)
(In millions, except share data)March 31, 2023
December 31, 2022 (1)
Assets  
Investments:  
Fixed maturity securities at fair value (amortized cost of $41,660 and $41,032, less allowance for credit loss of $2 and $1)
$39,107 $37,627 
Equity securities at fair value (cost of $708 and $703)
682 674 
Limited partnership investments1,982 1,926 
Other invested assets79 78 
Mortgage loans (less allowance for uncollectible receivables of $24 and $24)
1,006 1,040 
Short term investments1,167 1,832 
Total investments44,023 43,177 
Cash483 475 
Reinsurance receivables (less allowance for uncollectible receivables of $22 and $22)
5,484 5,416 
Insurance receivables (less allowance for uncollectible receivables of $29 and $29)
3,126 3,158 
Accrued investment income415 402 
Deferred acquisition costs852 806 
Deferred income taxes1,157 1,251 
Property and equipment at cost (less accumulated depreciation of $289 and $280)
232 226 
Goodwill145 144 
Deferred non-insurance warranty acquisition expense3,671 3,671 
Other assets (includes $ and $18 due from Loews Corporation)
2,467 2,274 
Total assets$62,055 $61,000 
Liabilities  
Insurance reserves: 
Claim and claim adjustment expenses$22,409 $22,120 
Unearned premiums6,581 6,374 
Future policy benefits13,976 13,480 
Short term debt243 243 
Long term debt2,539 2,538 
Deferred non-insurance warranty revenue4,710 4,714 
Other liabilities (includes $32 and $26 due to Loews Corporation)
2,930 2,983 
Total liabilities53,388 52,452 
Commitments and contingencies (Notes B and F)
Stockholders' Equity  
Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 270,852,335 and 270,895,902 shares outstanding)
683 683 
Additional paid-in capital2,196 2,220 
Retained earnings9,191 9,336 
Accumulated other comprehensive loss(3,308)(3,598)
Treasury stock (2,187,908 and 2,144,341 shares), at cost
(95)(93)
Total stockholders’ equity8,667 8,548 
Total liabilities and stockholders' equity$62,055 $61,000 
(1) As of January 1, 2023, the Company adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts in the financial statements have been adjusted to reflect application of the new guidance. See Note A to the Condensed Consolidated Financial Statements for additional information.
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).
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CNA Financial Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31
(In millions)2023
2022 (1)
Cash Flows from Operating Activities  
Net income$297 $295 
Adjustments to reconcile net income to net cash flows provided by operating activities:
Deferred income tax expense21 12 
Trading portfolio activity(13) 
Net investment losses35 11 
Equity method investees6 152 
Net amortization of investments(46)(26)
Depreciation and amortization12 13 
Changes in:
Receivables, net(24)(5)
Accrued investment income(13)(22)
Deferred acquisition costs(45)(31)
Insurance reserves432 512 
Other, net(226)(266)
Net cash flows provided by operating activities436 645 
Cash Flows from Investing Activities  
Dispositions:
Fixed maturity securities - sales1,414 803 
Fixed maturity securities - maturities, calls and redemptions317 916 
Equity securities62 77 
Limited partnerships28 80 
Mortgage loans39 55 
Purchases:
Fixed maturity securities(2,258)(2,547)
Equity securities(82)(75)
Limited partnerships(116)(85)
Mortgage loans(12)(25)
Change in other investments(2)(3)
Change in short term investments681 687 
Purchases of property and equipment(20)(12)
Net cash flows provided (used) by investing activities51 (129)
Cash Flows from Financing Activities
Dividends paid to common stockholders(445)(657)
Purchase of treasury stock(24)(21)
Other, net(11)(10)
Net cash flows used by financing activities(480)(688)
Effect of foreign exchange rate changes on cash1 (3)
Net change in cash8 (175)
Cash, beginning of year475 536 
Cash, end of period$483 $361 
(1) As of January 1, 2023, the Company adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts in the financial statements have been adjusted to reflect application of the new guidance. See Note A to the Condensed Consolidated Financial Statements for additional information.
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).
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CNA Financial Corporation
Condensed Consolidated Statements of Stockholders' Equity (Unaudited)
Three months ended March 31
(In millions)2023
2022 (1)
Common Stock
Balance, beginning of period$683 $683 
Balance, end of period683 683 
Additional Paid-in Capital
Balance, beginning of period2,220 2,215 
Stock-based compensation(24)(20)
Balance, end of period2,196 2,195 
Retained Earnings
Balance, beginning of period, as previously reported9,572 9,663 
Cumulative effect adjustments from changes in accounting guidance, net of tax(236)(24)
Balance, beginning of period, as adjusted9,336 9,639 
Dividends to common stockholders ($1.62 and $2.40 per share)
(442)(657)
Net income297 295 
Balance, end of period9,191 9,277 
Accumulated Other Comprehensive (Loss) Income
Balance, beginning of period, as previously reported(3,557)320 
Cumulative effect adjustments from changes in accounting guidance, net of tax(41)(1,680)
Balance, beginning of period, as adjusted(3,598)(1,360)
Other comprehensive income (loss)290 (1,020)
Balance, end of period(3,308)(2,380)
Treasury Stock
Balance, beginning of period(93)(72)
Stock-based compensation22 16 
Purchase of treasury stock (24)(21)
Balance, end of period(95)(77)
Total stockholders' equity$8,667 $9,698 
(1) As of January 1, 2023, the Company adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts in the financial statements have been adjusted to reflect application of the new guidance. See Note A to the Condensed Consolidated Financial Statements for additional information.
The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).

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CNA Financial Corporation
Notes to Condensed Consolidated Financial Statements
Note A. General
Basis of Presentation
The Condensed Consolidated Financial Statements include the accounts of CNA Financial Corporation (CNAF) and its subsidiaries. Collectively, CNAF and its subsidiaries are referred to as CNA or the Company. Loews Corporation (Loews) owned 90% of the outstanding common stock of CNAF as of March 31, 2023.
The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Intercompany amounts have been eliminated. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, including certain financial statement notes, is not required for interim reporting purposes and has been condensed or omitted. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in CNAF's Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) for the year ended December 31, 2022, including the summary of significant accounting policies in Note A. The preparation of Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
The interim financial data as of March 31, 2023 and for the three months ended March 31, 2023 and 2022 is unaudited. However, in the opinion of management, the interim data includes all adjustments, including normal recurring adjustments, necessary for a fair statement of the Company's results for the interim periods. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The December 31, 2022 Consolidated Balance Sheet included in this Quarterly Report on Form 10-Q was derived from audited financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC, adjusted for the application of ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (ASU 2018-12).
Recently Adopted Accounting Standards Updates (ASU)
ASU 2018-12: In August 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-12, which requires changes to the measurement and disclosure of long-duration contracts. Entities are required to review, and update if there is a change, cash flow assumptions (including morbidity and persistency) used to measure the liability for future policyholder benefits (LFPB) at least annually. The LFPB must also be updated for actual experience at least annually. The LFPB is reflected as Future policyholder benefits reserves on the Condensed Consolidated Balance Sheet. The discount rate assumption used to measure the LFPB must be updated quarterly using an upper-medium grade (low credit risk) fixed-income instrument yield, commonly interpreted as a single-A rate. The effect of changes in cash flow assumptions and actual variances from expected experience are recorded in the Company's results of operations within Insurance claims and policyholders’ benefits. The effect of changes in discount rate assumptions are recorded in Other comprehensive income (loss). In contrast, under legacy accounting guidance, cash flow and discount rate assumptions were locked-in unless a premium deficiency emerged. The discount rate assumption under legacy accounting guidance was determined using the Company’s internal investment portfolio yield, which was generally higher than a single-A yield.
The new guidance eliminates the need to hold shadow reserves associated with the Company’s long term care reserves. Under legacy accounting guidance, to the extent that unrealized gains on fixed maturity securities supporting long term care reserves would have resulted in a premium deficiency if realized, a related increase to Insurance reserves was recorded, net of tax, as a reduction of net unrealized gains (losses), through Other comprehensive income (loss) (shadow reserves).
The unit of account is the level at which reserves are measured. Under the new guidance, the unit of account used to measure the LFPB is the cohort. Cohorts are comprised of insurance contracts issued no more than one
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year apart, and must be further disaggregated according to policy benefit and insurance risk characteristics. Under legacy accounting guidance, the LFPB was generally measured at the individual policy level.
Under the new guidance, the Net Premium Ratio (NPR) is capped at 100%. To the extent that NPR would otherwise exceed 100%, the LFPB is increased and a loss is recognized immediately in the Company’s results of operations. The NPR cap is applied at the cohort level each quarter when NPR is updated. In contrast, under legacy accounting guidance, premium deficiency testing was performed annually at the product level. See Note F to the Condensed Consolidated Financial Statements for further explanation of the NPR and LFPB calculations.
The Company adopted the new guidance effective January 1, 2023, using the modified retrospective method applied as of the transition date of January 1, 2021. The Company's run-off long term care business is in scope of the new guidance. All prior periods presented in the financial statements have been adjusted to reflect application of the new guidance. The Company’s original locked in discount rate, utilized for purposes of calculating the NPR under the new guidance, was based on the discount rate assumption used to calculate the LFPB immediately prior to the transition date. While the requirements of the new guidance represent a material change from legacy accounting, the new guidance does not impact capital and surplus under statutory accounting practices, cash flows or the underlying economics of the business.
In December 2022, the FASB issued ASU 2022-05, Financial Services-Insurance (Topic 944): Transition for Sold Contracts (ASU 2022-05). This guidance permits companies to make an election to exclude from the scope of ASU 2018-12 any insurance contracts that have been de-recognized prior to the effective date of ASU 2018-12, assuming that the company has no significant continuing involvement with the de-recognized contracts. In the fourth quarter of 2022, the Company novated its block of legacy annuity business, which was fully-ceded prior to novation. The Company has elected the ASU 2022-05 transition relief, and has excluded the novated legacy annuity business from the scope of ASU 2018-12.
Explanation of ASU 2018-12 Transition Impacts:
The following table presents a roll-forward of the pre-transition LFPB balance as of January 1, 2021:

(In millions)
Balance as of December 31, 2020, as previously reported$13,318 
Reclassification of reserves for policyholders currently receiving benefits to Future policy benefits (1)
2,844 
De-recognition of shadow reserves(3,293)
Re-measurement using an upper-medium grade fixed income instrument yield discount rate6,255 
Other adjustments8 
Balance as of January 1, 2021, as adjusted$19,132 
(1) In conjunction with the adoption of ASU 2018-12, at January 1, 2023, the Company reclassified the long term care reserves for policyholders currently receiving benefits from Claim and claim adjustment expenses to Future policy benefits. This change was applied retrospectively as of January 1, 2021.
Shadow reserves associated with the Company’s long term care business were de-recognized as of the transition date in Accumulated other comprehensive income (AOCI). The effect of re-measuring the LFPB at the single-A discount rate as of the transition date was similarly recorded in AOCI. The Company did not have any cohorts for which the NPR exceeded 100% at the transition date.
The Company’s practice under legacy accounting guidance was to calculate and record premium deficiency reserves at the policy level. Accordingly, an allocation methodology was not required to assign historical premium deficiency reserves to cohorts upon transition to ASU 2018-12.
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The following table presents after tax adjustments to the opening balance of Stockholders’ equity resulting from adoption of ASU 2018-12:

(In millions)
Accumulated other comprehensive income (loss)Retained earnings
Balance as of December 31, 2020, as previously reported$803 $9,081 
De-recognition of shadow reserves2,601  
Re-measurement of LFPB using an upper-medium grade fixed income instrument yield discount rate(4,941) 
     Other adjustments (6)
Balance as of January 1, 2021, as adjusted$(1,537)$9,075 
The effects of adoption of ASU 2018-12 on the Condensed Consolidated Statement of Operations for the three months ended March 31, 2022 were as follows:

(In millions)
Prior to AdoptionEffect of Adoption As reported
Insurance claims and policyholders’ benefits (1)
$1,455 $23 $1,478 
Income (loss) before income tax378 (23)355 
Income tax (expense) benefit(65)5 (60)
Net income313 (18)295 
Basic earnings (loss) per share1.15 (0.07)1.08 
Diluted earnings (loss) per share1.15 (0.07)1.08 
(1) The effect of adopting ASU 2018-12 on Insurance claims and policyholders’ benefits is inclusive of the re-measurement gain (loss) of $5 million, which is presented parenthetically on the Condensed Consolidated Statement of Operations.
The effects of adoption of ASU 2018-12 on the Condensed Consolidated Balance Sheet as of December 31, 2022 were as follows:

(In millions)
Prior to AdoptionEffect of AdoptionAs reported
Deferred income taxes$1,178 $73 $1,251 
Total assets60,927 73 61,000 
Claim and claim adjustment expenses (1)
25,099 (2,979)22,120 
Future policy benefits (1)
10,151 3,329 13,480 
Total liabilities52,102 350 52,452 
Retained earnings9,572 (236)9,336 
Accumulated other comprehensive income (loss)(3,557)(41)(3,598)
Total stockholders' equity8,825 (277)8,548 
(1) In conjunction with the adoption of ASU 2018-12, at January 1, 2023, the Company reclassified the long term care reserves for policyholders currently receiving benefits from Claim and claim adjustment expenses to Future policy benefits. This change was applied retrospectively as of January 1, 2021.
The effects of adoption of ASU 2018-12 on the Condensed Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, 2022 were as follows:

(In millions)
Prior to AdoptionEffect of AdoptionAs reported
Impact of changes in discount rates used to measure long-duration contract liabilities$ $1,635 $1,635 
Changes in: Net unrealized gains and losses on other investments(1,611)(1,032)(2,643)
Net unrealized gains and losses on investments(1,615)(1,032)(2,647)
Other comprehensive income (loss), net of tax(1,623)603 (1,020)
Total comprehensive income (loss)(1,310)585 (725)

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The effects of adoption of ASU 2018-12 on the Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2022 were as follows:

(In millions)
Prior to AdoptionEffect of AdoptionAs reported
Net income$313 $(18)$295 
Deferred income tax expense (benefit)17 (5)12 
Changes in: Insurance reserves489 23 512 
The effects of adoption of ASU 2018-12 on segment results of operations of the Life & Group segment for the three months ended March 31, 2022 were as follows:

(In millions)
Prior to AdoptionEffect of AdoptionAs reported
Net incurred claims and benefits (1)
$281 $23 $304 
Core income (loss) before income tax16 (23)(7)
Income tax (expense) benefit on core income (loss)7 5 12 
Core income (loss)23 (18)5 
(1) The effect of adopting ASU 2018-12 on Net incurred claims and benefits is inclusive of the re-measurement gain (loss) of $5 million, which is presented parenthetically on the Condensed Consolidated Statement of Operations.
The effects of adoption of ASU 2018-12 on segment results for selected balance sheet lines of the Life & Group segment as of December 31, 2022 were as follows:

(In millions)
Prior to AdoptionEffect of AdoptionAs reported
Claim and claim adjustment expenses (1)
$3,674 $(2,979)$695 
Future policy benefits (1)
10,151 3,329 13,480 
(1) In conjunction with the adoption of ASU 2018-12, at January 1, 2023, the Company reclassified the long term care reserves for policyholders currently receiving benefits from Claim and claim adjustment expenses to Future policy benefits. This change was applied retrospectively as of January 1, 2021.
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Note B. Earnings (Loss) Per Share Data
Earnings (loss) per share is based on weighted average number of outstanding common shares. Basic earnings (loss) per share excludes the impact of dilutive securities and is computed by dividing Net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.
The following table presents the income and share data used in the basic and diluted earnings per share computations.
Three months ended March 31
(In millions, except per share data)20232022
Net income (loss) (1)
$297 $295 
Common Stock and Common Stock Equivalents
Basic
      Weighted average shares outstanding271.3 271.8 
Diluted
Weighted average shares outstanding271.3 271.8 
Dilutive effect of stock-based awards under compensation plans1.0 1.1 
Total272.3 272.9 
Earnings (loss) per share (1)
      Basic $1.10 $1.08 
Diluted$1.09 $1.08 
(1) As of January 1, 2023, the Company adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts have been adjusted to reflect application of the new guidance.
Excluded from the calculation of diluted earnings (loss) per share is the impact of potential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans that would have been antidilutive during the respective periods.
The Company repurchased 550,000 and 445,000 shares of CNAF common stock at an aggregate cost of $24 million and $21 million during the three months ended March 31, 2023 and 2022.
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Note C. Investments
The significant components of Net investment income are presented in the following table.
Three months ended March 31
(In millions)20232022
Fixed maturity securities$470 $429 
Equity securities12 2 
Limited partnership investments25 18 
Mortgage loans14 15 
Short term investments15  
Trading portfolio3 1 
Other5  
Gross investment income544 465 
Investment expense(19)(17)
Net investment income$525 $448 
Net investment income (loss) recognized due to the change in fair value of common stock held as of March 31, 2023 and 2022$(1)$(5)
Net investment gains (losses) are presented in the following table.
Three months ended March 31
(In millions)20232022
Net investment gains (losses):
Fixed maturity securities:
Gross gains$35 $26 
Gross losses(57)(28)
Net investment gains (losses) on fixed maturity securities(22)(2)
Equity securities(14)(38)
Derivatives 29 
Short term investments and other1  
Net investment gains (losses)$(35)$(11)
Net investment gains (losses) recognized due to the change in fair value of non-redeemable preferred stock held as of March 31, 2023 and 2022$(2)$(38)
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The components of available-for-sale impairment losses (gains) recognized in earnings by asset type are presented in the following table. The table includes losses (gains) on securities with an intention to sell and changes in the allowance for credit losses on securities since acquisition date.
Three months ended March 31
(In millions)20232022
Fixed maturity securities available-for-sale:
Corporate and other bonds$8 $8 
Asset-backed 2 
Impairment losses (gains) recognized in earnings$8 $10 
There were no losses recognized on mortgage loans during the three months ended March 31, 2023 or 2022.
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The following tables present a summary of fixed maturity securities.
March 31, 2023Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance for Credit LossesEstimated
Fair
Value
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds$24,140 $437 $1,675 $1 $22,901 
States, municipalities and political subdivisions8,332 410 741  8,001 
Asset-backed:
Residential mortgage-backed3,066 6 413  2,659 
Commercial mortgage-backed1,868 5 242  1,631 
Other asset-backed3,464 8 306 1 3,165 
Total asset-backed8,398 19 961 1 7,455 
U.S. Treasury and obligations of government-sponsored enterprises126  2  124 
Foreign government647 1 39  609 
   Redeemable preferred stock3    3 
Total fixed maturity securities available-for-sale41,646 867 3,418 2 39,093 
Total fixed maturity securities trading14 — — — 14 
Total fixed maturity securities$41,660 $867 $3,418 $2 $39,107 
December 31, 2022Cost or
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Allowance for Credit LossesEstimated
Fair
Value
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds$23,137 $301 $2,009 $ $21,429 
States, municipalities and political subdivisions8,918 338 939  8,317 
Asset-backed:
Residential mortgage-backed3,073 5 447  2,631 
Commercial mortgage-backed1,886 4 255  1,635 
Other asset-backed3,287 2 361 1 2,927 
Total asset-backed8,246 11 1,063 1 7,193 
U.S. Treasury and obligations of government-sponsored enterprises111 1 2  110 
Foreign government617 1 43  575 
Redeemable preferred stock3    3 
Total fixed maturity securities available-for-sale41,032 652 4,056 1 37,627 
Total fixed maturity securities trading — — —  
Total fixed maturity securities$41,032 $652 $4,056 $1 $37,627 

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The following tables present the estimated fair value and gross unrealized losses of available-for-sale fixed maturity securities in a gross unrealized loss position for which an allowance for credit loss has not been recorded, by the length of time in which the securities have continuously been in that position.
Less than 12 Months12 Months or LongerTotal
March 31, 2023Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds$10,753 $545 $6,184 $1,130 $16,937 $1,675 
States, municipalities and political subdivisions1,708 87 2,347 654 4,055 741 
Asset-backed:
Residential mortgage-backed741 28 1,784 385 2,525 413 
Commercial mortgage-backed474 36 1,072 206 1,546 242 
Other asset-backed1,073 86 1,474 220 2,547 306 
Total asset-backed2,288 150 4,330 811 6,618 961 
U.S. Treasury and obligations of government-sponsored enterprises57 1 41 1 98 2 
Foreign government231 7 327 32 558 39 
Total$15,037 $790 $13,229 $2,628 $28,266 $3,418 
Less than 12 Months12 Months or LongerTotal
December 31, 2022Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
Estimated
Fair Value
Gross
Unrealized
Losses
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds$15,946 $1,585 $1,634 $424 $17,580 $2,009 
States, municipalities and political subdivisions4,079 769 456 170 4,535 939 
Asset-backed:
Residential mortgage-backed1,406 144 1,143 303 2,549 447 
Commercial mortgage-backed1,167 159 408 96 1,575 255 
Other asset-backed2,087 262 542 99 2,629 361 
Total asset-backed4,660 565 2,093 498 6,753 1,063 
U.S. Treasury and obligations of government-sponsored enterprises76 1 16 1 92 2 
   Foreign government473 26 78 17 551 43 
Total$25,234 $2,946 $4,277 $1,110 $29,511 $4,056 
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The following table presents the estimated fair value and gross unrealized losses of available-for-sale fixed maturity securities in a gross unrealized loss position for which an allowance for credit loss has not been recorded, by ratings distribution.
March 31, 2023December 31, 2022

(In millions)
Estimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized Losses
U.S. Government, Government agencies and Government-sponsored enterprises$2,357 $302 $2,355 $337 
AAA1,424 260 1,559 298 
AA 4,053 670 4,327 817 
A6,440 619 6,615 749 
BBB12,651 1,360 13,226 1,621 
Non-investment grade1,341 207 1,429 234 
Total$28,266 $3,418 $29,511 $4,056 
Based on current facts and circumstances, the Company believes the unrealized losses presented in the March 31, 2023 securities in a gross unrealized loss position tables above are not indicative of the ultimate collectability of the current amortized cost of the securities, but rather are primarily attributable to changes in risk-free interest rates and a general market widening of credit spreads. In reaching this determination, the Company considered the continued volatility in risk-free rates and credit spreads as well as the fact that its unrealized losses are concentrated in investment grade issuers. Additionally, the Company has no current intent to sell securities with unrealized losses, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost; accordingly, the Company has determined that there are no additional impairment losses to be recorded as of March 31, 2023.
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The following tables present the activity related to the allowance on available-for-sale securities with credit impairments and purchased credit-deteriorated (PCD) assets. Accrued interest receivable on available-for-sale fixed maturity securities totaled $407 million, $394 million, and $389 million as of March 31, 2023, December 31, 2022, and March 31, 2022 and is excluded from the estimate of expected credit losses and the amortized cost basis in the table included within this Note.
(In millions)Corporate and other bondsAsset-backedTotal
Allowance for credit losses:
Balance as of January 1, 2023$ $1 $1 
Additions to the allowance for credit losses:
Available-for-sale securities accounted for as PCD assets9  9 
Reductions to the allowance for credit losses:
Securities sold during the period (realized)6  6 
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis3  3 
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period1  1 
Balance as of March 31, 2023
$1 $1 $2 
(In millions)Corporate and other bondsAsset-backedTotal
Allowance for credit losses:
Balance as of January 1, 2022$11 $7 $18 
Additions to the allowance for credit losses:
Available-for-sale securities accounted for as PCD assets   
Reductions to the allowance for credit losses:
Securities sold during the period (realized)   
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis   
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period1 (2)(1)
Balance as of March 31, 2022
$12 $5 $17 

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Contractual Maturity
The following table presents available-for-sale fixed maturity securities by contractual maturity.
March 31, 2023December 31, 2022
(In millions)Cost or
Amortized
Cost
Estimated
Fair
Value
Cost or
Amortized
Cost
Estimated
Fair
Value
Due in one year or less$1,009 $989 $1,012 $1,001 
Due after one year through five years10,486 10,035 9,880 9,399 
Due after five years through ten years13,763 12,702 13,788 12,453 
Due after ten years16,388 15,367 16,352 14,774 
Total$41,646 $39,093 $41,032 $37,627 
Actual maturities may differ from contractual maturities because certain securities may be called or prepaid. Securities not due at a single date are allocated based on weighted average life.
Investment Commitments
As part of its overall investment strategy, the Company invests in various assets which require future purchase, sale or funding commitments. These investments are recorded once funded, and the related commitments may include future capital calls from various third-party limited partnerships, signed and accepted mortgage loan applications, and obligations related to private placement securities. As of March 31, 2023, the Company had commitments to purchase or fund approximately $1,665 million and sell approximately $125 million under the terms of these investments.
Mortgage Loans
The following table presents the amortized cost basis of mortgage loans for each credit quality indicator by year of origination. The primary credit quality indicators utilized are debt service coverage ratios (DSCR) and loan-to-value ratios (LTV).
March 31, 2023
Mortgage Loans Amortized Cost Basis by Origination Year (1)
(In millions)20232022202120202019PriorTotal
DSCR ≥1.6x
LTV less than 55%$ $9 $13 $112 $41 $280 $455 
LTV 55% to 65%       
LTV greater than 65% 31 11    42
DSCR 1.2x - 1.6x
LTV less than 55% 5 49 13 43 47 157
LTV 55% to 65%12 44  24  8 88
LTV greater than 65% 58     58
DSCR ≤1.2
LTV less than 55% 34   35  69
LTV 55% to 65% 41   43  84
LTV greater than 65% 27 21  22 7 77
Total$12 $249 $94 $149 $184 $342 $1,030 
(1) The values in the table above reflect DSCR on a standardized amortization period and LTV based on the most recent appraised values trended forward using changes in a commercial real estate price index.

As of March 31, 2023, accrued interest receivable on mortgage loans totaled $4 million and is excluded from the amortized cost basis disclosed in the table above and the estimate of expected credit losses.

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Note D. Fair Value
Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable.
Level 1 - Quoted prices for identical instruments in active markets.
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are not observable.
Prices may fall within Level 1, 2 or 3 depending upon the methodology and inputs used to estimate fair value for each specific security. In general, the Company seeks to price securities using third-party pricing services. Securities not priced by pricing services are submitted to independent brokers for valuation and, if those are not available, internally developed pricing models are used to value assets using a methodology and inputs the Company believes market participants would use to value the assets. Prices obtained from third-party pricing services or brokers are not adjusted by the Company.
The Company performs control procedures over information obtained from pricing services and brokers to ensure prices received represent a reasonable estimate of fair value and to confirm representations regarding whether inputs are observable or unobservable. Procedures may include i) the review of pricing service methodologies or broker pricing qualifications, ii) back-testing, where past fair value estimates are compared to actual transactions executed in the market on similar dates, iii) exception reporting, where period-over-period changes in price are reviewed and challenged with the pricing service or broker based on exception criteria, and iv) deep dives, where the Company performs an independent analysis of the inputs and assumptions used to price individual securities.
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Assets and Liabilities Measured at Fair Value
Assets and liabilities measured at fair value on a recurring basis are presented in the following tables. Corporate bonds and other includes obligations of the United States of America (U.S.) Treasury, government-sponsored enterprises, foreign governments and redeemable preferred stock.
March 31, 2023   Total
Assets/Liabilities
at Fair Value
(In millions)Level 1Level 2Level 3
Assets    
Fixed maturity securities:    
Corporate bonds and other$135 $22,604 $912 $23,651 
States, municipalities and political subdivisions 7,957 44 8,001 
Asset-backed 6,596 859 7,455 
Total fixed maturity securities 135 37,157 1,815 39,107 
Equity securities:
Common stock177  29 206 
Non-redeemable preferred stock55 421  476 
Total equity securities232 421 29 682 
Short term and other975 27  1,002 
Total assets$1,342 $37,605 $1,844 $40,791 
Liabilities
Other liabilities$ $1 $ $1 
Total liabilities$ $1 $ $1 

December 31, 2022   Total
Assets/Liabilities
at Fair Value
(In millions)Level 1Level 2Level 3
Assets    
Fixed maturity securities:    
Corporate bonds and other$120 $21,187 $810 $22,117 
States, municipalities and political subdivisions 8,274 43 8,317 
Asset-backed 6,405 788 7,193 
Total fixed maturity securities 120 35,866 1,641 37,627 
Equity securities:
Common stock150  35 185 
Non-redeemable preferred stock54 435  489 
Total equity securities204 435 35 674 
Short term and other1,608 71  1,679 
Total assets$1,932 $36,372 $1,676 $39,980 
Liabilities  
Other liabilities$ $1 $ $1 
Total liabilities$ $1 $ $1 
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The tables below present a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).
Level 3
(In millions)
Corporate bonds and otherStates, municipalities and political subdivisionsAsset-backedEquity securitiesTotal
Balance as of January 1, 2023$810 $43 $788 $35 $1,676 
Total realized and unrealized investment gains (losses):
Reported in Net investment gains (losses)     
Reported in Net investment income  5 (6)(1)
Reported in Other comprehensive income (loss)24 1 7  32 
Total realized and unrealized investment gains (losses)24 1 12 (6)31 
Purchases81  55  136 
Sales     
Settlements(3) (9) (12)
Transfers into Level 3  23  23 
Transfers out of Level 3  (10) (10)
Balance as of March 31, 2023$912 $44 $859 $29 $1,844 
Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2023 recognized in Net income (loss) in the period$ $ $ $(6)$(6)
Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2023 recognized in Other comprehensive income (loss) in the period24 1 7  32 

Level 3
(In millions)
Corporate bonds and otherStates, municipalities and political subdivisionsAsset-backedEquity securitiesTotal
Balance as of January 1, 2022$937 $56 $556 $29 $1,578 
Total realized and unrealized investment gains (losses):
Reported in Net investment gains (losses)(1) 2 (1) 
Reported in Net investment income  1 4 5 
Reported in Other comprehensive income (loss)(71)(5)(32) (108)
Total realized and unrealized investment gains (losses)(72)(5)(29)3 (103)
Purchases67  140 12 219 
Sales(5)   (5)
Settlements(22) (17) (39)
Transfers into Level 310  5  15 
Transfers out of Level 3  (51) (51)
Balance as of March 31, 2022$915 $51 $604 $44 $1,614 
Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2022 recognized in Net income (loss) in the period$ $ $ $3 $3 
Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2022 recognized in Other comprehensive income (loss) in the period(72)(5)(31) (108)
Securities may be transferred in or out of levels within the fair value hierarchy based on the availability of observable market information and quoted prices used to determine the fair value of the security. The availability of observable market information and quoted prices varies based on market conditions and trading volume.
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Valuation Methodologies and 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 highly liquid government securities and exchange traded bonds, valued using quoted market prices. Level 2 securities include most other fixed maturity securities as the significant inputs are observable in the marketplace. All classes of Level 2 fixed maturity securities are valued using a methodology based on information generated by market transactions involving identical or comparable assets, a discounted cash flow methodology, or a combination of both when necessary. Common inputs for all classes of fixed maturity securities include prices from recently executed transactions of similar securities, marketplace quotes, benchmark yields, spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. Specifically for asset-backed securities, key inputs include prepayment and default projections based on past performance of the underlying collateral and current market data. Fixed maturity securities are primarily assigned to Level 3 in cases where broker/dealer quotes are significant inputs to the valuation and there is a lack of transparency as to whether these quotes are based on information that is observable in the marketplace. Level 3 securities also include private placement debt securities whose fair value is determined using internal models with some inputs that are not market observable.
Equity Securities
Level 1 equity securities include publicly traded securities valued using quoted market prices. Level 2 securities are primarily valued using pricing for similar securities, recently executed transactions and other pricing models utilizing market observable inputs. Level 3 securities are primarily priced using broker/dealer quotes and internal models with some inputs that are not market observable.
Short Term and Other Invested Assets
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 non-U.S. government securities for which all inputs are market observable. Fixed maturity securities purchased within one year of maturity are classified consistent with fixed maturity securities discussed above. Short term investments as presented in the tables above differ from the amounts presented on the Condensed Consolidated Balance Sheets because certain short term investments, such as time deposits, are not measured at fair value.
As of March 31, 2023 and December 31, 2022, there were $73 million and $72 million of overseas deposits within Other invested assets, which can be redeemed at net asset value in 90 days or less. Overseas deposits are excluded from the fair value hierarchy because their fair value is recorded using the net asset value per share (or equivalent) practical expedient.
Other Liabilities
Level 2 securities include currency forward contracts valued using observable market forward rates.
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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 tables below are primarily based on broker/dealer quotes for which there is a lack of transparency as to inputs used to develop the valuations. The quantitative detail of these unobservable inputs is neither provided nor reasonably available to the Company. The weighted average rate is calculated based on fair value.
March 31, 2023Estimated Fair Value
(In millions)
Valuation Technique(s)Unobservable Input(s)Range
 (Weighted Average)
Fixed maturity securities$1,340 Discounted cash flowCredit spread
1% - 8% (3%)
December 31, 2022Estimated Fair Value
(In millions)
Valuation Technique(s)Unobservable Input(s)Range
 (Weighted Average)
Fixed maturity securities$1,177 Discounted cash flowCredit spread
1% - 8% (2%)
For fixed maturity securities, an increase to the credit spread assumptions would result in a lower fair value measurement.
Financial Assets and Liabilities Not Measured at Fair Value
The carrying amount and estimated fair value of the Company's financial assets and liabilities which are not measured at fair value on the Condensed Consolidated Balance Sheets are presented in the following tables.
March 31, 2023Carrying
Amount
Estimated Fair Value
(In millions)Level 1Level 2Level 3Total
Assets
Mortgage loans$1,006 $ $ $958 $958 
Liabilities
Short term debt$243 $ $245 $ $245 
Long term debt2,539  2,387  2,387 
December 31, 2022Carrying
Amount
Estimated Fair Value
(In millions)Level 1Level 2Level 3Total
Assets
Mortgage loans$1,040 $ $ $973 $973 
Liabilities
Short term debt$243 $ $248 $ $248 
Long term debt2,538  2,349  2,349 
The carrying amounts reported on the Condensed Consolidated Balance Sheets for Cash, Short term investments not carried at fair value, Accrued investment income and certain Other assets and Other liabilities approximate fair value due to the short term nature of these items. These assets and liabilities are not listed in the tables above.
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Note E. Claim and Claim Adjustment Expense Reserves
Claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including incurred but not reported (IBNR) claims as of the reporting date. The Company's reserve projections are based primarily on detailed analysis of the facts in each case, the Company's experience with similar cases and various historical development patterns. Consideration is given to historical patterns such as claim reserving trends and settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions and economic conditions, economic, medical and social inflation, and public attitudes. All of these factors can affect the estimation of claim and claim adjustment expense reserves.
Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process. Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve. Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can affect ultimate claim costs. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as workers' compensation, general liability and professional liability claims. Claim and claim adjustment expense reserves are also maintained for the Company's structured settlement obligations. In developing the claim and claim adjustment expense reserve estimates for structured settlement obligations, the Company's actuaries review mortality experience on an annual basis. Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined. There can be no assurance that the Company's ultimate cost for insurance losses will not exceed current estimates.
Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in our results of operations and/or equity. The Company reported catastrophe losses, net of reinsurance, of $52 million and $19 million for the three months ended March 31, 2023 and 2022 primarily related to severe weather related events.
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Liability for Unpaid Claim and Claim Adjustment Expenses
The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves.
Three months ended March 31
(In millions)2023
2022 (1)
Reserves, beginning of year:
Gross$22,120 $21,269 
Ceded5,191 4,969 
Net reserves, beginning of year16,929 16,300 
Net incurred claim and claim adjustment expenses:
Provision for insured events of current year1,326 1,188 
Increase (decrease) in provision for insured events of prior years13 (7)
Amortization of discount11 12 
Total net incurred (2)
1,350 1,193 
Net payments attributable to:
Current year events(72)(68)
Prior year events(1,042)(920)
Total net payments(1,114)(988)
Foreign currency translation adjustment and other35 (92)
Net reserves, end of period17,200 16,413 
Ceded reserves, end of period5,209 5,002 
Gross reserves, end of period$22,409 $21,415 
(1) In conjunction with the Company's adoption of ASU 2018-12, at January 1, 2023, long term care reserves for policyholders currently receiving benefits were reclassified from Claim and claim adjustment expenses into Future policy benefits and this change was applied retrospectively as of January 1, 2021. See Note A to the Condensed Consolidated Financial Statements for additional information.
(2) Total net incurred above does not agree to Insurance claims and policyholders' benefits as reflected on the Condensed Consolidated Statements of Operations due to amounts related to retroactive reinsurance deferred gain accounting and uncollectible reinsurance, which are not reflected in the table above.
Net Prior Year Development
Changes in estimates of claim and claim adjustment expense reserves, net of reinsurance, for prior years are defined as net prior year loss reserve development (development). These changes can be favorable or unfavorable. The following table presents development recorded for the Specialty, Commercial, International and Corporate & Other segments.
Three months ended March 31
(In millions)20232022
Pretax (favorable) unfavorable development:
Specialty$ $(10)
Commercial(2)(2)
International15  
Corporate & Other 
Total pretax (favorable) unfavorable development$13 $(12)
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Specialty
The following table presents further detail of the development recorded for the Specialty segment.
Three months ended March 31
(In millions)20232022
Pretax (favorable) unfavorable development:
Medical Professional Liability$9 $8 
Other Professional Liability and Management Liability  
Surety (9)
Warranty(9)(9)
Other  
Total pretax (favorable) unfavorable development$ $(10)
Commercial
The following table presents further detail of the development recorded for the Commercial segment.
Three months ended March 31
(In millions)20232022
Pretax (favorable) unfavorable development:
Commercial Auto$ $ 
General Liability  
Workers' Compensation(2)(2)
Property and Other  
Total pretax (favorable) unfavorable development$(2)$(2)
International
The following table presents further detail of the development recorded for the International segment.
Three months ended March 31
(In millions)20232022
Pretax (favorable) unfavorable development:
Commercial$(2)$ 
Specialty19  
Other(2) 
Total pretax (favorable) unfavorable development $15 $ 
2023
Unfavorable development in specialty was due to higher than expected large loss emergence in the Company's professional liability business in accident year 2017.
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Asbestos & Environmental Pollution (A&EP) Reserves
In 2010, Continental Casualty Company (CCC) together with several of the Company’s insurance subsidiaries completed a transaction with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc., under which substantially all of the Company’s legacy A&EP liabilities were ceded to NICO through a Loss Portfolio Transfer (LPT). At the effective date of the transaction, the Company ceded approximately $1.6 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 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 LPT aggregate reinsurance limit also covers credit risk on the existing third-party reinsurance related to these liabilities. The Company paid NICO a reinsurance premium of $2 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.
In years subsequent to the effective date of the LPT, the Company recognized adverse prior year development on its A&EP reserves resulting in additional amounts ceded under the LPT. As a result, the cumulative amounts ceded under the LPT have exceeded the $2.2 billion consideration paid, resulting in the NICO LPT moving into a gain position, requiring retroactive reinsurance accounting. Under retroactive reinsurance accounting, this gain is deferred and only recognized in earnings in proportion to actual paid recoveries under the LPT. Over the life of the contract, there is no economic impact as long as any additional losses incurred are within the limit of the LPT. In a period in which the Company recognizes a change in the estimate of A&EP reserves that increases or decreases the amounts ceded under the LPT, the proportion of actual paid recoveries to total ceded losses is affected and the change in the deferred gain is recognized in earnings as if the revised estimate of ceded losses was available at the effective date of the LPT. The effect of the deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders' benefits on the Condensed Consolidated Statements of Operations.
The impact of the LPT on the Condensed Consolidated Statements of Operations was the recognition of a retroactive reinsurance benefit of $8 million and $12 million for the three months ended March 31, 2023 and 2022. As of March 31, 2023 and December 31, 2022, the cumulative amounts ceded under the LPT were $3.5 billion. The unrecognized deferred retroactive reinsurance benefit was $417 million and $425 million as of March 31, 2023 and December 31, 2022 and is included within Other liabilities on the Condensed Consolidated Balance Sheets.
NICO established a collateral trust account as security for its obligations to the Company. The fair value of the collateral trust account was $2.5 billion as of March 31, 2023. In addition, Berkshire Hathaway Inc. guaranteed the payment obligations of NICO up to the aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement. NICO is responsible for claims handling and billing and collection from third-party reinsurers related to the majority of the Company’s A&EP claims.
Credit Risk for Ceded Reserves
The majority of the Company’s outstanding voluntary reinsurance receivables are due from reinsurers with financial strength ratings of A or higher. Receivables due from reinsurers with lower financial strength ratings are primarily due from captive reinsurers and are backed by collateral arrangements.
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Note F. Future Policy Benefits Reserves
Future policy benefits reserves are related to the Company's run-off long term care business, which is included in the Life & Group segment.
The determination of Future policy benefits reserves requires management to make estimates and assumptions about expected policyholder experience over the remaining life of the policy. Since policies may be in force for several decades, these assumptions are subject to significant estimation risk. As a result of this variability, the Company’s future policy benefits reserves may be subject to material increases if actual experience develops adversely to the Company’s expectations.
The LFPB is computed using the net level premium method, which incorporates cash flow assumptions and discount rate assumptions. Under the net level premium method, the LFPB is equal to the present value of future benefits and claim settlement expenses less the present value of future net premiums. Net premiums are equal to gross premiums multiplied by the NPR. The NPR is generally the ratio of the present value of benefits and expense payments to the present value of gross premiums, expected over the lifetime of the policy. As a result of the modified retrospective adoption of ASU 2018-12, the Company’s NPR calculation incorporates the original locked in discount rate and the reserve balance as of the transition date of January 1, 2021.
The key cash flow assumptions used to estimate the LFPB are morbidity, persistency (inclusive of mortality), anticipated future premium rate increases and expenses. Morbidity is the frequency and severity of injury, illness, sickness and diseases contracted. Persistency is the percentage of policies remaining in force and can be affected by policy lapses, benefit reductions and death. Future premium rate increases are generally subject to regulatory approval, and therefore the exact timing and size of the approved rate increases are unknown. Expense assumptions relate to claim adjudication. The Company has not elected the practical expedient that allows locking in the expense assumption. The discount rate is determined using the upper-medium grade fixed income instrument yield curve.
The Company has elected to update the NPR and the LFPB for actual experience on a quarterly basis. A quarterly assessment is also made as to whether evidence suggests that cash flow assumptions should be updated. Annually in the third quarter, actuarial analysis is performed on policyholder morbidity, persistency, premium rate increases and expense experience. This analysis, combined with judgment, informs the setting of updated cash flow assumptions used to estimate the LFPB. Actuarial analysis includes predictive modeling, actual to expected experience comparisons and trend analysis. Applicable industry research is also considered.
Quarterly, to derive the upper-medium grade fixed income instrument yield discount rate assumption, the Company uses a published spot rate curve constructed from single-A rated U.S. dollar denominated corporate bonds. The Company uses linear interpolation to determine yield assumptions for tenors that fall between points for which observable rates are available. For cash flows that are projected to occur beyond the tenor for which market-observable rates are available, the Company applies judgment to estimate a normative rate which the Company grades to over 10 years.
Quarterly, the updated NPR is used to derive an updated LFPB as of the beginning of the current quarter measured at the original locked in discount rate. The updated LFPB is then compared to the existing carrying amount of the liability as of the same date (measured at the original locked in discount rate) to determine the re-measurement gain (loss), which is presented parenthetically within the Insurance claims and policyholders’ benefits line on the Condensed Consolidated Statements of Operations.
Insurance contracts are grouped into cohorts according to issue year. Contracts assumed through reinsurance are generally included within the same cohorts as contracts issued directly by the Company, according to issue year. The issue year for assumed contracts is defined according to the date that the Company’s assumption of insurance risk incepted. For assumed contracts that were reinsured concurrently with the issuance of the underlying direct contract, issue year is defined as the year that the underlying policy was issued. For contracts that were already in-force when assumed by the Company, issue year is defined as the year in which the reinsurance agreement incepted. For group long term care business, issue year is defined as the year the individual insurance certificate was issued. Long term care is the Company's only long-duration product line, therefore, cohorts are not further disaggregated by product.

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The following table summarizes balances and changes in the LFPB.

(In millions)
20232022
Present value of future net premiums
Balance, January 1$3,993 $4,735 
     Effect of changes in discount rate(74)(880)
Balance, January 1, at original locked in discount rate3,919 3,855 
     Effect of changes in cash flow assumptions (1)
  
     Effect of actual variances from expected experience (1)
(49)(18)
Adjusted balance, January 13,870 3,837 
Interest accrual52 53 
     Net premiums: earned during period(111)(112)
Balance, end of period at original locked in discount rate3,811 3,778 
     Effect of changes in discount rate154 525 
Balance, March 31$3,965 $4,303 
Present value of future benefits & expenses
Balance, January 1$17,472 $22,745 
     Effect of changes in discount rate(125)(5,942)
Balance, January 1, at original locked in discount rate17,347 16,803 
     Effect of changes in cash flow assumptions (1)
  
     Effect of actual variances from expected experience (1)
(50)(23)
Adjusted balance, January 117,297 16,780 
Interest accrual242 241 
     Benefit & expense payments(302)(233)
Balance, end of period at original locked in discount rate17,237 16,788 
     Effect of changes in discount rate704 3,517 
Balance, March 31$17,941 $20,305 
Net LFPB$13,976 $16,002 
(1) As of March 31, 2023 and 2022, the re-measurement gain (loss) of $1 million and $5 million presented parenthetically on the Condensed Consolidated Statement of Operations is comprised of the effect of changes in cash flow assumptions and the effect of actual variances from expected experience.
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Earned premiums associated with the Company's long term care business were $115 million and $120 million for the three months ended March 31, 2023 and 2022.
The following table presents undiscounted expected future benefit and expense payments, and undiscounted expected future gross premiums.
As of March 31

(In millions)
20232022
  Expected future benefit and expense payments$33,759 $33,674 
  Expected future gross premiums5,729 5,969 
Discounted expected future gross premiums at the upper-medium grade fixed income instrument yield discount rate were $4,046 million and $4,567 million as of March 31, 2023 and 2022.
The weighted average effective duration of the LFPB calculated using the original locked in discount rate was 12 years as of March 31, 2023 and 2022.
The weighted average interest rates in the table below are calculated based on the rate used to discount all future cash flows.
As of March 31As of December 31
202320222022
   Original locked in discount rate5.26 %5.31 %5.27 %
Upper-medium grade fixed income instrument discount rate4.92 3.67 5.23 
For the three months ended March 31, 2023, immediate charges to net income resulting from adverse development that caused NPR to exceed 100% were $13 million. There were no such charges for the three months ended March 31, 2022. The portion of losses recognized in a prior period due to NPR exceeding 100% which, due to favorable development, was reversed through net income for the three months ended March 31, 2023 and 2022 was $11 million and $1 million.
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Note G. Legal Proceedings, Contingencies and Guarantees
The Company is a party to various claims and litigation incidental to its business, which, based on the facts and circumstances currently known, are not material to the Company's results of operations or financial position.
Guarantees
The Company has provided guarantees, if the primary obligor fails to perform, to holders of structured settlement annuities issued by a previously owned subsidiary. As of March 31, 2023, the potential amount of future payments the Company could be required to pay under these guarantees was approximately $1.5 billion, which will be paid over the lifetime of the annuitants. The Company does not believe any payment is likely under these guarantees, as the Company is the beneficiary of a trust that must be maintained at a level that approximates the discounted reserves for these annuities.
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Note H. Benefit Plans
The components of net periodic pension cost (benefit) are presented in the following table.
Three months ended March 31
(In millions)20232022
Net periodic pension cost (benefit)
Interest cost on projected benefit obligation$25 $17 
Expected return on plan assets(30)(38)
Amortization of net actuarial loss 8 7 
Total net periodic pension cost (benefit)$3 $(14)
The following table indicates the line items in which the non-service cost (benefit) is presented on the Condensed Consolidated Statements of Operations.
Three months ended March 31
(In millions)20232022
Non-Service Cost (Benefit):
Insurance claims and policyholder's benefits$1 $(4)
Other operating expenses2 (10)
Total net periodic pension cost (benefit)$3 $(14)
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Note I. Accumulated Other Comprehensive Income (Loss) by Component
The tables below display the changes in Accumulated other comprehensive income (loss) by component.
(In millions)Net unrealized gains (losses) on investments with an allowance for credit losses
Net unrealized gains (losses) on other investments(1)
Pension and postretirement benefits
Cumulative impact of changes in discount rates used to measure long duration contracts (1)
Cumulative foreign currency translation adjustmentTotal
Balance as of January 1, 2023, as previously reported$(7)$(2,738)$(591)$ $(221)$(3,557)
Cumulative effect adjustment from accounting change for adoption of ASU 2018-12(1) net of tax (expense) benefit of $, $, $, $11, $ and $11
   (41) (41)
Balance as of January 1, 2023$(7)$(2,738)$(591)$(41)$(221)$(3,598)
Other comprehensive income (loss) before reclassifications(8)652  (396)17 265 
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $, $4, $2, $, $ and $6
 (18)(7)  (25)
Other comprehensive income (loss) net of tax (expense) benefit of $2, $(180), $(2), $105, $ and $(75)
(8)670 7 (396)17 290 
Balance as of March 31, 2023$(15)$(2,068)$(584)$(437)$(204)$(3,308)
(In millions)Net unrealized gains (losses) on investments with an allowance for credit losses
Net unrealized gains (losses) on other investments(1)
Pension and postretirement benefits
Cumulative impact of changes in discount rates used to measure long duration contracts(1)
Cumulative foreign currency translation adjustmentTotal
Balance as of January 1, 2022, as previously reported$(2)$1,039 $(604)$ $(113)$320 
Cumulative effect adjustment from accounting change for adoption of ASU 2018-12(1) net of tax (expense) benefit of $, $617, $, $(1,063), $ and $(446)
 2,320  (4,000) (1,680)
Balance as of January 1, 2022, as adjusted(2)3,359 (604)(4,000)(113)(1,360)
Other comprehensive income (loss) before reclassifications(4)(2,644) 1,635 (14)(1,027)
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $, $1, $2, $, $ and $3
 (1)(6)  (7)
Other comprehensive income (loss) net of tax (expense) benefit of $1, $698, $(2), $(435), $ and $262
(4)(2,643)6 1,635 (14)(1,020)
Balance as of March 31, 2022$(6)$716 $(598)$(2,365)$(127)$(2,380)
(1) See Note A to the Condensed Consolidated Financial Statements for additional information.

Amounts reclassified from Accumulated other comprehensive income (loss) shown above are reported in Net income (loss) as follows:
Component of AOCICondensed Consolidated Statements of Operations Line Item Affected by Reclassifications
Net unrealized gains (losses) on investments with an allowance for credit losses and Net unrealized gains (losses) on other investmentsNet investment gains (losses)
Pension and postretirement benefitsOther operating expenses and Insurance claims and policyholders' benefits
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Note J. Business Segments
The Company's property and casualty commercial insurance operations are managed and reported in three business segments: Specialty, Commercial and International. These three segments are collectively referred to as Property & Casualty Operations. The Company's operations outside of Property & Casualty Operations are managed and reported in two segments: Life & Group and Corporate & Other.
The accounting policies of the segments are the same as those described in Note A to the Consolidated Financial Statements within CNAF's Annual Report on Form 10-K for the year ended December 31, 2022. The Company manages most of its assets on a legal entity basis, while segment operations are generally conducted across legal entities. As such, only Insurance and Reinsurance receivables, Insurance reserves, Deferred acquisition costs, Goodwill and Deferred non-insurance warranty acquisition expense and revenue are readily identifiable for individual segments. Distinct investment portfolios are not maintained for every individual segment; accordingly, allocation of assets to each segment is not performed. Therefore, a significant portion of Net investment income and Net investment gains or losses are allocated primarily based on each segment's net carried insurance reserves, as adjusted. All significant intersegment income and expense have been eliminated. Income taxes have been allocated on the basis of the taxable income of the segments.
In the following tables, certain financial measures are presented to provide information used by management to monitor the Company's operating performance. Management utilizes these financial measures to monitor the Company's insurance operations and investment portfolio.
The performance of the Company's insurance operations is monitored by management through core income (loss), which is derived from certain income statement amounts. The Company's investment portfolio is monitored by management through analysis of various factors including unrealized gains and losses on securities, portfolio duration and exposure to market and credit risk.
Core income (loss) is calculated by excluding from net income (loss) the after-tax effects of net investment gains or losses. The calculation of core income (loss) excludes net investment gains or losses because net investment gains or losses are generally driven by economic factors that are not necessarily reflective of our primary operations.
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The Company's results of operations and selected balance sheet items by segment are presented in the following tables.
Three months ended March 31, 2023
Specialty

Commercial
InternationalLife &
Group
Corporate
& Other
  
(In millions)EliminationsTotal
Operating revenues 
Net earned premiums$797 $1,046 $290 $115 $ $ $2,248 
Net investment income129 149 23 214 10  525 
Non-insurance warranty revenue407      407 
Other revenues 7   3 (3)7 
Total operating revenues1,333 1,202 313 329 13 (3)3,187 
Claims, benefits and expenses      
Net incurred claims and benefits465 688 189 311 (7) 1,646 
Policyholders’ dividends1 6     7 
Amortization of deferred acquisition costs165 169 45    379 
Non-insurance warranty expense384      384 
Other insurance related expenses86 142 47 29 1  305 
Other expenses14 6 1 1 41 (3)60 
Total claims, benefits and expenses1,115 1,011 282 341 35 (3)2,781 
Core income (loss) before income tax218 191 31 (12)(22) 406 
Income tax (expense) benefit on core income (loss)(47)(40)(7)9 4  (81)
Core income (loss) $171 $151 $24 $(3)$(18)$ 325 
Net investment gains (losses)(35)
Income tax (expense) benefit on net investment gains (losses)7 
Net investment gains (losses), after tax(28)
Net income (loss)$297 
March 31, 2023
(In millions)      
Reinsurance receivables$1,419 $1,118 $442 $102 $2,425 $ $5,506 
Insurance receivables1,008 1,754 388 5   3,155 
Deferred acquisition costs394 338 120    852 
Goodwill117  28    145 
Deferred non-insurance warranty acquisition expense3,671      3,671 
Insurance reserves 
Claim and claim adjustment expenses6,976 9,528 2,502 704 2,699  22,409 
Unearned premiums3,188 2,558 713 123  (1)6,581 
Future policy benefits   13,976   13,976 
Deferred non-insurance warranty revenue4,710      4,710 

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Three months ended March 31, 2022
Specialty

Commercial
International
Life &
Group (1)
Corporate
& Other
  
(In millions)Eliminations
Total (1)
Operating revenues 
Net earned premiums$772 $904 $264 $120 $(1)$ $2,059 
Net investment income103 118 14 212 1  448 
Non-insurance warranty revenue382      382 
Other revenues1 8 (1)(1)2 (2)7 
Total operating revenues1,258 1,030 277 331 2 (2)2,896 
Claims, benefits and expenses    
Net incurred claims and benefits 445 573 158 304 (8) 1,472 
Policyholders’ dividends1 5     6 
Amortization of deferred acquisition costs157 148 39    344 
Non-insurance warranty expense354      354 
Other insurance related expenses81 130 47 31 2  291 
Other expenses13 7 1 3 41 (2)63 
Total claims, benefits and expenses1,051 863 245 338 35 (2)2,530 
Core income (loss) before income tax207 167 32 (7)(33) 366 
Income tax (expense) benefit on core income (loss)(44)(35)(6)12 5  (68)
Core income (loss)$163 $132 $26 $5 $(28)$ 298 
Net investment gains (losses)(11)
Income tax (expense) benefit on net investment gains (losses)8 
Net investment gains (losses), after tax(3)
Net income (loss)$295 
December 31, 2022
(In millions)
Reinsurance receivables$1,384 $1,062 $414 $101 $2,477 $ $5,438 
Insurance receivables1,082 1,728 369 8   3,187 
Deferred acquisition costs381 321 104    806 
Goodwill117  27    144 
Deferred non-insurance warranty acquisition expense3,671      3,671 
Insurance reserves 
Claim and claim adjustment expenses6,878 9,395 2,403 695 2,749  22,120 
Unearned premiums3,193 2,425 653 103   6,374 
Future policy benefits   13,480   13,480 
Deferred non-insurance warranty revenue4,714      4,714 
(1) As of January 1, 2023, the Company adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts in the financial statements have been adjusted to reflect application of the new guidance. See Note A to the Condensed Consolidated Financial Statements for additional information.
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The following table presents operating revenues by line of business for each reportable segment.
Three months ended March 31
(In millions)20232022
Specialty
Management & Professional Liability$705 $673 
Surety168 148 
Warranty & Alternative Risks460 437 
Specialty revenues1,333 1,258 
Commercial
Middle Market398 362 
Construction385 324 
Small Business150 138 
Other Commercial269 206 
Commercial revenues1,202 1,030 
International
Canada93 88 
Europe127 120 
Hardy93 69 
International revenues313 277 
Life & Group revenues329 331 
Corporate & Other revenues 13 2 
Eliminations(3)(2)
Total operating revenues3,187 2,896 
Net investment gains (losses)(35)(11)
Total revenues$3,152 $2,885 
































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Note K. Non-Insurance Revenues from Contracts with Customers
The Company had deferred non-insurance warranty revenue balances of $4.7 billion reported in Deferred non-insurance warranty revenue as of March 31, 2023 and December 31, 2022. For the three months ended March 31, 2023 and 2022, the Company recognized $0.4 billion of revenues that were included in the deferred revenue balance as of January 1, 2023 and 2022. For the three months ended March 31, 2023 and 2022, Non-insurance warranty revenue recognized from performance obligations related to prior periods due to a change in estimate was not material. The Company expects to recognize approximately $1.2 billion of the deferred revenue in the remainder of 2023, $1.1 billion in 2024, $0.9 billion in 2025 and $1.5 billion thereafter.
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Item 2. Management's Discussion and Analysis (MD&A) of Financial Conditions and Results of Operations
OVERVIEW
The following discussion highlights significant factors affecting the Company. References to “we,” “our,” “us” or like terms refer to the business of CNA.
The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements included under Part I, Item 1 of this Form 10-Q and Item 1A Risk Factors and Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2022.
We utilize the core income (loss) financial measure to monitor our operations. Core income (loss) is calculated by excluding from net income (loss) the after-tax effects of net investment gains or losses. The calculation of core income (loss) excludes net investment gains or losses because net investment gains or losses are generally driven by economic factors that are not necessarily reflective of our primary operations. Management monitors core income (loss) for each business segment to assess segment performance. Presentation of consolidated core income (loss) is deemed to be a non-GAAP financial measure and management believes some investors may find this measure useful to evaluate our primary operations. See further discussion regarding how we manage our business in Note J to the Condensed Consolidated Financial Statements included under Part I, Item 1. For reconciliations of non-GAAP measures to the most comparable GAAP measures and other information, please refer herein and/or to CNA's most recent Annual Report on Form 10-K on file with the Securities and Exchange Commission.
In evaluating the results of our Specialty, Commercial and International segments, we utilize the loss ratio, the underlying loss ratio, the expense ratio, the dividend ratio, the combined ratio and the underlying combined ratio. These ratios are calculated using GAAP financial results. The loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums. The underlying loss ratio excludes the impact of catastrophe losses and development-related items from the loss ratio. Development-related items represents net prior year loss reserve and premium development, and includes the effects of interest accretion and change in allowance for uncollectible reinsurance and deductible amounts. The expense ratio is the percentage of insurance underwriting and acquisition expenses, including the amortization of deferred acquisition costs, to net earned premiums. The dividend ratio is the ratio of policyholders' dividends incurred to net earned premiums. The combined ratio is the sum of the loss, expense and dividend ratios. The underlying combined ratio is the sum of the underlying loss ratio, the expense ratio and the dividend ratio. In addition, we also utilize renewal premium change, rate, retention and new business in evaluating operating trends. Renewal premium change represents the estimated change in average premium on policies that renew, including rate and exposure changes. Rate represents the average change in price on policies that renew excluding exposure change. For certain products within Small Business, where quantifiable, rate includes the influence of new business as well. Exposure represents the measure of risk used in the pricing of the insurance product. The change in exposure represents the change in premium dollars on policies that renew as a result of the change in risk of the policy. Retention represents the percentage of premium dollars renewed, excluding rate and exposure changes, in comparison to the expiring premium dollars from policies available to renew. New business represents premiums from policies written with new customers and additional policies written with existing customers. Gross written premiums, excluding third-party captives, excludes business which is ceded to third-party captives, including business related to large warranty programs. We use underwriting gain (loss), calculated using GAAP financial results, to monitor our insurance operations. Underwriting gain (loss) is pretax and is calculated as net earned premiums less total insurance expenses, which includes insurance claims and policyholders' benefits, amortization of deferred acquisition costs and other insurance related expenses.
Changes in estimates of claim and claim adjustment expense reserves, net of reinsurance, for prior years are defined as net prior year loss reserve development within this MD&A. These changes can be favorable or unfavorable. Net prior year loss reserve development does not include the effect of any related acquisition expenses. Further information on our reserves is provided in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

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CRITICAL ACCOUNTING ESTIMATES
The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the amount of revenues and expenses reported during the period. Actual results may differ from those estimates.
Our Condensed Consolidated Financial Statements and accompanying notes have been prepared in accordance with GAAP applied on a consistent basis. We continually evaluate the accounting policies and estimates used to prepare the Condensed Consolidated Financial Statements. In general, our estimates are based on historical experience, evaluation of current trends, information from third-party professionals and various other assumptions that are believed to be reasonable under the known facts and circumstances.
The accounting estimates discussed below are considered by us to be critical to an understanding of our Condensed Consolidated Financial Statements as their application places the most significant demands on our judgment:
Insurance Reserves
Long Term Care Reserves
Reinsurance and Insurance Receivables
Valuation of Investments and Impairment of Securities
Income Taxes
Due to the inherent uncertainties involved with these types of judgments, actual results could differ significantly from our estimates and may have a material adverse impact on our results of operations, financial condition, equity, business, and insurer financial strength and corporate debt ratings.
See the Critical Accounting Estimates section of our Management's Discussion and Analysis of Financial Condition and Results of Operations included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022 for further information on the accounting estimates related to Reinsurance and Insurance Receivables, Valuation of Investments and Impairment of Securities and Income Taxes.
The information presented below restates in their entirety, as a result of the adoption of ASU 2018-12 and its impact on long term care reserves, the accounting estimates related to Insurance Reserves and Long Term Care Reserves included under the Critical Accounting Estimates section of our Management's Discussion and Analysis of Financial Condition and Results of Operations included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022. Further information on the long term care reserving process under the new guidance is included in Note A and Note F to the Condensed Consolidated Financial Statements included under Part I, Item I.
Insurance Reserves
Insurance reserves are established for both short and long-duration insurance contracts. Short-duration contracts are primarily related to property and casualty insurance policies where the reserving process is based on actuarial estimates of the amount of loss, including amounts for known and unknown claims. Long-duration contracts are primarily related to long term care policies and the reserves are recorded as Future policy benefits reserves as discussed below. The reserve for unearned premiums represents the portion of premiums written related to the unexpired terms of coverage. The reserving process is discussed in further detail in the Reserves - Estimates and Uncertainties section of our Annual Report on Form 10-K for the year ended December 31, 2022.
Long Term Care Reserves
Future policy benefits reserves for our long term care policies are based on certain assumptions, including morbidity, persistency (inclusive of mortality), future premium rate increases, and expenses. The adequacy of the reserves is contingent upon actual experience and our future expectations related to these key assumptions. If actual or expected future experience differs from these assumptions, the reserves may not be adequate, requiring us to increase reserves. The reserves are discounted using upper-medium grade fixed income instrument yields as of each reporting date. In addition, we may not receive regulatory approval for the level of premium rate increases we request.
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These changes to our reserves could materially adversely impact our results of operations, financial condition and equity.
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CONSOLIDATED OPERATIONS
Results of Operations
The following table includes the consolidated results of our operations including our financial measure, core income (loss). For more detailed components of our business operations and a discussion of the core income (loss) financial measure, see the Segment Results section within this MD&A. For further discussion of Net investment income and Net investment gains or losses, see the Investments section of this MD&A.
Three months ended March 31
(In millions)2023
2022 (1)
Operating Revenues
Net earned premiums$2,248 $2,059 
Net investment income525 448 
Non-insurance warranty revenue407 382 
Other revenues
Total operating revenues3,187 2,896 
Claims, Benefits and Expenses
Net incurred claims and benefits (re-measurement gain (loss) of $1 and $5)
1,646 1,472 
Policyholders' dividends
Amortization of deferred acquisition costs379 344 
Non-insurance warranty expense384 354 
Other insurance related expenses305 291 
Other expenses60 63 
Total claims, benefits and expenses2,781 2,530 
Core income before income tax406 366 
Income tax expense on core income(81)(68)
Core income325 298 
Net investment losses(35)(11)
Income tax benefit on net investment losses
Net investment losses, after tax(28)(3)
Net income$297 $295 
(1) As of January 1, 2023, we adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts presented in the financial statements have been adjusted to reflect application of the new guidance. See Note A to the Condensed Consolidated Financial Statements for additional information.
Core income increased $27 million for the three months ended March 31, 2023 as compared with the same period in 2022. Core income for our Property & Casualty Operations increased $25 million primarily due to higher net investment income and improved non-catastrophe current accident year underwriting results partially offset by higher catastrophe losses and unfavorable net prior year loss reserve development. Core results for our Life & Group segment decreased $8 million, while core loss for our Corporate & Other segment improved $10 million.
Catastrophe losses were $52 million and $19 million for the three months ended March 31, 2023 and 2022. Unfavorable net prior year loss reserve development of $13 million was recorded for the three months ended March 31, 2023 as compared with favorable net prior year loss reserve development of $12 million recorded for the three months ended March 31, 2022 related to our Specialty, Commercial and International segments. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.
Results for the three months ended March 31, 2023 were impacted by unfavorable net pension costs related to our legacy United States of America (U.S.) pension plan primarily due to higher interest cost on projected benefit obligations as a result of an increase in discount rates year over year, as well as a lower expected return on plan assets as a result of a lower plan asset base given actual asset returns in 2022. A portion of this additional cost has resulted in an unfavorable impact on our expense ratio for the three months ended March 31, 2023. The components of our net periodic pension cost (benefit) are presented in Note H to the Condensed Consolidated Financial Statements included under Part I, Item I.
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SEGMENT RESULTS
The following discusses the results of operations for our business segments. Our property and casualty commercial insurance operations are managed and reported in three business segments: Specialty, Commercial and International, which we refer to collectively as Property & Casualty Operations. Our operations outside of Property & Casualty Operations are managed and reported in two segments: Life & Group and Corporate & Other.
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Specialty
The following table details the results of operations for Specialty.
Three months ended March 31
(In millions, except ratios, rate, renewal premium change and retention)20232022
Gross written premiums$1,780 $1,846 
Gross written premiums excluding third-party captives886 885 
Net written premiums788 771 
Net earned premiums797 772 
Underwriting gain80 88 
Net investment income129 103 
Core income 171 163 
Other performance metrics:
Loss ratio excluding catastrophes and development58.4 %58.9 %
Effect of catastrophe impacts— — 
Effect of development-related items— (1.3)
Loss ratio58.4 57.6 
Expense ratio31.4 30.9 
Dividend ratio0.2 0.2 
Combined ratio90.0 %88.7 %
Combined ratio excluding catastrophes and development90.0 %90.0 %
Rate%10 %
Renewal premium change11 
Retention88 84 
New business$108 $145 
Gross written premiums, excluding third-party captives, for Specialty for the three months ended March 31, 2023 were largely consistent with the same period in 2022. Net written premiums for Specialty increased $17 million for the three months ended March 31, 2023 as compared with the same period in 2022. The increase in net earned premiums was consistent with the trend in net written premiums.
Core income increased $8 million for the three months ended March 31, 2023 as compared with the same period in 2022 primarily due to higher net investment income partially offset by no net prior year loss reserve development recorded for the three months ended March 31, 2023 as compared with favorable net prior year loss reserve development recorded for the three months ended March 31, 2022.
The combined ratio of 90.0% increased 1.3 points for the three months ended March 31, 2023 as compared with the same period in 2022 due to a 0.8 point increase in the loss ratio and a 0.5 point increase in the expense ratio. The increase in the loss ratio was primarily driven by no net prior year loss reserve development recorded for the three months ended March 31, 2023 as compared with $10 million of favorable net prior year loss reserve development recorded for the three months ended March 31, 2022, partially offset by improved current accident year underwriting results. There were no catastrophe losses for the three months ended March 31, 2023 and 2022. The increase in the expense ratio was primarily driven by employee related costs.
Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.
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The following table summarizes the gross and net carried reserves for Specialty.
(In millions)March 31, 2023December 31, 2022
Gross case reserves$1,444 $1,529 
Gross IBNR reserves5,532 5,349 
Total gross carried claim and claim adjustment expense reserves$6,976 $6,878 
Net case reserves$1,247 $1,310 
Net IBNR reserves4,393 4,253 
Total net carried claim and claim adjustment expense reserves$5,640 $5,563 

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Commercial
The following table details the results of operations for Commercial.
Three months ended March 31
(In millions, except ratios, rate, renewal premium change and retention)20232022
Gross written premiums$1,442 $1,208 
Gross written premiums excluding third-party captives1,440 1,206 
Net written premiums1,188 1,001 
Net earned premiums1,046 904 
Underwriting gain41 48 
Net investment income149 118 
Core income151 132 
Other performance metrics:
Loss ratio excluding catastrophes and development61.5 %61.5 %
Effect of catastrophe impacts4.2 1.8 
Effect of development-related items— — 
Loss ratio65.7 63.3 
Expense ratio29.8 30.7 
Dividend ratio0.5 0.5 
Combined ratio96.0 %94.5 %
Combined ratio excluding catastrophes and development91.8 %92.7 %
Rate%%
Renewal premium change
Retention86 87 
New business$310 $228 
Gross written premiums for Commercial increased $234 million for the three months ended March 31, 2023 as compared with the same period in 2022 driven by higher new business and rate. Net written premiums for Commercial increased $187 million for the three months ended March 31, 2023 as compared with the same period in 2022. The increase in net earned premiums was consistent with the trend in net written premiums.
Core income increased $19 million for the three months ended March 31, 2023 as compared with the same period in 2022, driven by higher net investment income and improved non-catastrophe underwriting results partially offset by higher catastrophe losses.
The combined ratio of 96.0% increased 1.5 points for the three months ended March 31, 2023 as compared with the same period in 2022 due to a 2.4 increase in the loss ratio partially offset by a 0.9 point improvement in the expense ratio. The increase in the loss ratio was driven by higher catastrophe losses. Catastrophe losses were $44 million, or 4.2 points of the loss ratio, for the three months ended March 31, 2023, as compared with $16 million, or 1.8 points of the loss ratio, for the three months ended March 31, 2022. The improvement in the expense ratio was driven by higher net earned premiums partially offset by employee related costs.
Favorable net prior year loss reserve development of $2 million was recorded for the three months ended March 31, 2023 and 2022. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.

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The following table summarizes the gross and net carried reserves for Commercial.
(In millions)March 31, 2023December 31, 2022
Gross case reserves$3,213 $3,156 
Gross IBNR reserves6,315 6,239 
Total gross carried claim and claim adjustment expense reserves$9,528 $9,395 
Net case reserves$2,825 $2,809 
Net IBNR reserves5,700 5,621 
Total net carried claim and claim adjustment expense reserves$8,525 $8,430 
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International
The following table details the results of operations for International.
Three months ended March 31
(In millions, except ratios, rate, renewal premium change and retention)20232022
Gross written premiums$398 $363 
Net written premiums271 251 
Net earned premiums290 264 
Underwriting gain20 
Net investment income23 14 
Core income24 26 
Other performance metrics:
Loss ratio excluding catastrophes and development57.5 %58.6 %
Effect of catastrophe impacts2.8 1.2 
Effect of development-related items5.1 — 
Loss ratio65.4 59.8 
Expense ratio31.8 32.6 
Combined ratio97.2 %92.4 %
Combined ratio excluding catastrophes and development89.3 %91.2 %
Rate%%
Renewal premium change12 
Retention83 73 
New business$85 $78 
Gross written premiums for International increased $35 million for the three months ended March 31, 2023 as compared with the same period in 2022. Excluding the effect of foreign currency exchange rates, gross written premiums increased $55 million driven by retention and higher new business. Net written premiums for International increased $20 million for the three months ended March 31, 2023 as compared with the same period in 2022. Excluding the effect of foreign currency exchange rates, net written premiums increased $35 million for the three months ended March 31, 2023 as compared with the same period in 2022. The increase in net earned premiums was consistent with the trend in net written premiums.
Core income for the three months ended March 31, 2023 was largely consistent with the same period in 2022.
The combined ratio of 97.2% increased 4.8 points for the three months ended March 31, 2023 as compared with the same period in 2022 due to a 5.6 point increase in the loss ratio partially offset by a 0.8 point improvement in the expense ratio. The increase in the loss ratio was largely driven by unfavorable net prior period loss reserve development. Catastrophe losses were $8 million, or 2.8 points of the loss ratio, for the three months ended March 31, 2023, as compared with $3 million, or 1.2 points of the loss ratio, for the three months ended March 31, 2022. The improvement in the expense ratio was largely driven by higher net earned premiums.
Unfavorable net prior year loss reserve development of $15 million was recorded for the three months ended March 31, 2023 as compared with no net prior year loss reserve development for the three months ended March 31, 2022. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.




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The following table summarizes the gross and net carried reserves for International.
(In millions)March 31, 2023December 31, 2022
Gross case reserves$822 $817 
Gross IBNR reserves1,680 1,586 
Total gross carried claim and claim adjustment expense reserves$2,502 $2,403 
Net case reserves$678 $686 
Net IBNR reserves1,425 1,317 
Total net carried claim and claim adjustment expense reserves$2,103 $2,003 
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Life & Group
The following table summarizes the results of operations for Life & Group.
Three months ended March 31
(In millions)2023
2022 (1)
Net earned premiums$115 $120 
Net investment income214 212 
Core loss before income tax (12)(7)
Income tax benefit on core loss12 
Core (loss) income (3)
(1) As of January 1, 2023, we adopted ASU 2018-12 using the modified retrospective method applied as of the transition date of January 1, 2021. Prior period amounts presented in the financial statements have been adjusted to reflect application of the new guidance. See Note A and Note F to the Condensed Consolidated Financial Statements for additional information.
Core results decreased $8 million for the three months ended March 31, 2023 as compared with the same period in 2022 primarily due to long term care policy buyouts.
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Corporate & Other
The following table summarizes the results of operations for the Corporate & Other segment, including intersegment eliminations.
Three months ended March 31
(In millions)20232022
Net investment income$10 $
Insurance claims and policyholders' benefits(7)(8)
Interest expense28 28 
Core loss(18)(28)
Core loss decreased $10 million for the three months ended March 31, 2023 as compared with the same period in 2022 driven by higher net investment income.
The following table summarizes the gross and net carried reserves for Corporate & Other.
(In millions)March 31, 2023December 31, 2022
Gross case reserves$1,434 $1,428 
Gross IBNR reserves1,265 1,321 
Total gross carried claim and claim adjustment expense reserves$2,699 $2,749 
Net case reserves$137 $137 
Net IBNR reserves193 202 
Total net carried claim and claim adjustment expense reserves$330 $339 
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INVESTMENTS
Net Investment Income
The significant components of Net investment income are presented in the following table. Fixed income securities, as presented, include both fixed maturity securities and non-redeemable preferred stock.
Three Months Ended March 31
(In millions)20232022
Fixed income securities:
Taxable fixed income securities$430 $368 
Tax-exempt fixed income securities49 73 
Total fixed income securities479 441 
Limited partnership and common stock investments28 
Other, net of investment expense18 (1)
Net investment income$525 $448 
Effective income yield for the fixed income securities portfolio4.6 %4.3 %
Limited partnership and common stock return1.3 %0.4 %
Net investment income increased $77 million for the three months ended March 31, 2023 as compared with the same period in 2022 driven by higher income from fixed income securities and other, and higher limited partnership and common stock returns.
Net Investment (Losses) Gains
The components of Net investment (losses) gains are presented in the following table.
Three Months Ended March 31
(In millions)20232022
Fixed maturity securities:
Corporate bonds and other$(23)$
States, municipalities and political subdivisions10 
Asset-backed(9)(8)
Total fixed maturity securities(22)(2)
Non-redeemable preferred stock(14)(38)
Derivatives, short term and other29 
Net investment losses(35)(11)
Income tax benefit on net investment losses7 
Net investment losses, after tax$(28)$(3)
Pretax net investment results decreased $24 million for three months ended March 31, 2023 as compared with the same period in 2022. The decrease was driven by higher net losses on fixed maturity securities partially offset by the favorable relative change in fair value of non-redeemable preferred stock in the three months ended March 31, 2023 as compared with the same period in 2022. The three months ended March 31, 2022 also included gains on a funds withheld embedded derivative which related to a coinsurance agreement on our legacy annuity business that was novated in the fourth quarter of 2022.
Further information on our investment gains and losses is set forth in Note C to the Condensed Consolidated Financial Statements included under Part I, Item 1.
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Portfolio Quality
The following table presents the estimated fair value and net unrealized gains (losses) of our fixed maturity securities by rating distribution.
March 31, 2023December 31, 2022

(In millions)
Estimated Fair ValueNet Unrealized Gains (Losses)Estimated Fair ValueNet Unrealized Gains (Losses)
U.S. Government, Government agencies and Government-sponsored enterprises$2,481 $(300)$2,419 $(336)
AAA2,420 (160)2,398 (208)
AA 6,410 (473)6,342 (663)
A9,413 (342)9,043 (531)
BBB16,509 (1,090)15,651 (1,447)
Non-investment grade1,874 (186)1,774 (219)
Total$39,107 $(2,551)$37,627 $(3,404)
As of March 31, 2023 and December 31, 2022, 1% of our fixed maturity portfolio was rated internally. AAA rated securities included $0.3 billion of prefunded municipal bonds as of March 31, 2023 and December 31, 2022.
The following table presents available-for-sale fixed maturity securities in a gross unrealized loss position by ratings distribution.
March 31, 2023
(In millions)Estimated Fair ValueGross Unrealized Losses
U.S. Government, Government agencies and Government-sponsored enterprises$2,357 $302 
AAA1,424 260 
AA4,053 670 
A6,440 619 
BBB12,651 1,360 
Non-investment grade1,341 207 
Total$28,266 $3,418 
The following table presents the maturity profile for these available-for-sale fixed maturity securities. Securities not due to mature on a single date are allocated based on weighted average life.
March 31, 2023
(In millions)Estimated Fair ValueGross Unrealized Losses
Due in one year or less$852 $23 
Due after one year through five years8,096 525 
Due after five years through ten years9,870 1,291 
Due after ten years9,448 1,579 
Total$28,266 $3,418 
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Commercial Real Estate
Our investment portfolio has exposure to the commercial real estate sector primarily through our fixed maturity securities and mortgage loan portfolios. The performance of these assets is dependent on a number of factors, including the performance of the underlying collateral (which is influenced by cash flows from underlying property leases), changes in the fair value of collateral, refinancing risk, and the creditworthiness of tenants of credit tenant loan properties (where lease payments directly service the loan).
Within our fixed maturity securities portfolio, our exposure is primarily through our commercial mortgage-backed securities portfolio and our corporate and other bonds portfolio, which contains obligations of real estate investment trust (REIT) issuers. Commercial mortgage-backed securities include both single asset, single borrower collateral that is securitized independently and conduit collateral that is securitized in diversified pools.
The following tables present the estimated fair value and net unrealized gains (losses) of our commercial mortgage-backed securities by property type and by ratings distribution.
March 31, 2023
(In millions)Estimated Fair ValueNet Unrealized Gains (Losses)
Commercial mortgage-backed:
Single asset, single borrower:
Office$323 $(67)
Retail304 (40)
Lodging201 (22)
Industrial84 (7)
Multifamily53 (4)
Total single asset, single borrower965 (140)
Conduits (multi property, multi borrower pools)666 (97)
Total commercial mortgage-backed$1,631 $(237)
March 31, 2023
(In millions)Estimated Fair ValueNet Unrealized Gains (Losses)
Commercial mortgage-backed:
AAA$367 $(29)
AA630 (97)
A214 (34)
BBB283 (51)
Non-investment grade137 (26)
Total commercial mortgage-backed$1,631 $(237)

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The following tables present the estimated fair value and net unrealized gains (losses) of the REIT issuer exposure within our corporate and other bonds portfolio by property type and by ratings distribution.
March 31, 2023
(In millions)Estimated Fair ValueNet Unrealized Gains (Losses)
Corporate and other bonds - REITs:
Retail$452 $(43)
Office261 (30)
Industrial85 (3)
Other (1)
418 (34)
Total corporate and other bonds - REITs$1,216 $(110)
(1) Other includes a diversified mix of property type strategies including self-storage, healthcare and apartments.
March 31, 2023
(In millions)Estimated Fair ValueNet Unrealized Gains (Losses)
Corporate and other bonds - REITs:
AA$11 $(1)
A239 (10)
BBB948 (97)
Non-investment grade18 (2)
Total corporate and other bonds - REITs$1,216 $(110)
Mortgage loans are commercial in nature and are carried at unpaid principal balance, net of unamortized fees and an allowance for expected credit losses. The allowance for expected credit losses is developed by assessing the credit quality of pools of mortgage loans in good standing using debt service coverage ratios (DSCR) and loan-to-value ratios (LTV). This assessment utilizes historical credit loss experience adjusted to reflect current conditions and reasonable and supportable forecasts. As of March 31, 2023 the allowance for expected credit losses on our mortgage portfolio was $24 million, or 2% of our amortized cost basis.
The following table presents the amortized cost basis of mortgage loans by property type.
March 31, 2023
(In millions)Amortized CostPercentage of Total
Mortgage loans:
Retail$461 44 %
Office263 26 %
Industrial119 12 %
Other 187 18 %
Total mortgage loans$1,030 100 %

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In addition to our mortgage loan portfolio, we invest in securitized credit tenant loans and ground lease financings that are classified as fixed maturity securities, all of which are investment grade quality. As of March 31, 2023, these holdings had an estimated fair value of $484 million and net unrealized losses of $82 million.
We own other fixed maturity securities which have exposure to cell towers, data centers and other collateral types that could be viewed as having real estate characteristics. We view these securities to have risks more akin to operating enterprises that do not share the same risks as the broader commercial real estate market.
We do not hold any direct investments in commercial real estate. Additionally, we do not have significant exposure through our limited partnership portfolio to funds whose primary strategy is real estate focused.
Duration
A primary objective in the management of the investment portfolio is to optimize return relative to the corresponding liabilities and respective liquidity needs. Our views on the current interest rate environment, tax regulations, asset class valuations, specific security issuer and broader industry segment conditions as well as domestic and global economic conditions, are some of the factors that enter into an investment decision. We also continually monitor exposure to issuers of securities held and broader industry sector exposures and may from time to time adjust such exposures based on our views of a specific issuer or industry sector.
A further consideration in the management of the investment portfolio is the characteristics of the corresponding liabilities and the ability to align the duration of the portfolio to those liabilities and to meet future liquidity needs, minimize interest rate risk and maintain a level of income sufficient to support the underlying insurance liabilities. For portfolios where future liability cash flows are determinable and typically long term in nature, we segregate investments for asset/liability management purposes. The segregated investments support the long term care and structured settlement liabilities in the Life & Group segment.
The effective durations of fixed income securities and short term investments are presented in the following table. Amounts presented are net of payable and receivable amounts for securities purchased and sold, but not yet settled.
March 31, 2023December 31, 2022
(In millions)Estimated Fair ValueEffective
Duration
(In years)
Estimated Fair ValueEffective
Duration
(In years)
Investments supporting Life & Group$14,990 10.1 $14,511 9.9 
Other investments25,759 4.8 25,445 4.7 
Total$40,749 6.8 $39,956 6.6 
The investment portfolio is periodically analyzed for changes in duration and related price risk. Certain securities have duration characteristics that are variable based on market interest rates, credit spreads and other factors that may drive variability in the amount and timing of cash flows. Additionally, we periodically review the sensitivity of the portfolio to the level of foreign exchange rates and other factors that contribute to market price changes. A summary of these risks and specific analysis on changes is included in the Quantitative and Qualitative Disclosures About Market Risk included under Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2022.
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LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Our primary operating cash flow sources are premiums and investment income. Our primary operating cash flow uses are payments for claims, policy benefits and operating expenses, including interest expense on corporate debt. Additionally, cash may be paid or received for income taxes.
For the three months ended March 31, 2023, net cash provided by operating activities was $436 million as compared with $645 million for the same period in 2022. The decrease in cash provided by operating activities was driven by higher net claim payments, including long term care policy buyouts, and lower distributions from limited partnerships partially offset by an increase in premiums collected.
Cash flows from investing activities include the purchase and disposition of financial instruments, excluding those held as trading, and may include the purchase and sale of businesses, equipment and other assets not generally held for resale.
For the three months ended March 31, 2023, net cash provided by investing activities was $51 million as compared with net cash used by investing activities of $129 million for the same period in 2022. Net cash used or provided by investing activities is primarily driven by cash available from operations and by other factors, such as financing activities.
Cash flows from financing activities may include proceeds from the issuance of debt and equity securities, and outflows for stockholder dividends, repayment of debt and purchases of our common stock.
For the three months ended March 31, 2023, net cash used by financing activities was $480 million as compared with $688 million for the same period in 2022. In the first quarter of 2023, we paid dividends of $445 million and repurchased 550,000 shares of our common stock at an aggregate cost of $24 million. In the first quarter of 2022, we paid dividends of $657 million and repurchased 445,000 shares of our common stock at an aggregate cost of $21 million.
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Common Stock Dividends
Cash dividends of $1.62 per share on our common stock, including a special cash dividend of $1.20 per share, were declared and paid during the three months ended March 31, 2023. On April 28, 2023, our Board of Directors declared a quarterly cash dividend of $0.42 per share, payable June 1, 2023 to stockholders of record on May 15, 2023. The declaration and payment of future dividends to holders of our common stock will be at the discretion of our Board of Directors and will depend on many factors, including our earnings, financial condition, business needs and regulatory constraints.
Liquidity
We believe that our present cash flows from operating, investing and financing activities are sufficient to fund our current and expected working capital and debt obligation needs and we do not expect this to change in the near term. There are currently no amounts outstanding under our $250 million senior unsecured revolving credit facility and no borrowings outstanding through our membership in the Federal Home Loan Bank of Chicago (FHLBC).
Dividends from Continental Casualty Company (CCC) are subject to the insurance holding company laws of the State of Illinois, the domiciliary state of CCC. Under these laws, ordinary dividends, or dividends that do not require prior approval by the Illinois Department of Insurance (the Department), are determined based on the greater of the prior year's statutory net income or 10% of statutory surplus as of the end of the prior year, as well as timing and amount of dividends paid in the preceding twelve months. Additionally, ordinary dividends may only be paid from earned surplus, which is calculated by removing unrealized gains from unassigned surplus. As of March 31, 2023, CCC was in a positive earned surplus position. CCC paid dividends of $475 million and $535 million during the three months ended March 31, 2023 and 2022. The actual level of dividends paid in any year is determined after an assessment of available dividend capacity, holding company liquidity and cash needs as well as the impact the dividends will have on the statutory surplus of the applicable insurance company.
We have an effective automatic shelf registration statement on file with the Securities and Exchange Commission under which we may publicly issue an unspecified amount of debt, equity or hybrid securities from time to time.
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ACCOUNTING STANDARDS UPDATE
In August 2018, the FASB issued ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts (ASU 2018-12). The updated accounting guidance requires changes to the measurement and disclosure of long-duration contracts. For us, this includes our long term care business in the Life & Group segment. For a discussion of Accounting Standards, see Note A to the Condensed Consolidated Financial Statements included under Part I, Item 1.
The following table presents the effect of adoption of ASU 2018-12 on selected 2022 and 2021 financial data.
20222021
(In millions, except per share data)Q1Q2Q3Q4Full YearFull Year
Components of Income (Loss)
Core income (loss)
Prior to adoption$316 $245 $213 $274 $1,048 $1,106 
Effect of adoption(18)(15)(170)(9)(212)(18)
As reported$298 $230 $43 $265 $836 $1,088 
Net income (Loss)
Prior to adoption$313 $205 $128 $248 $894 $1,202 
Effect of adoption(18)(15)(170)(9)(212)(18)
As reported$295 $190 $(42)$239 $682 $1,184 
Other comprehensive (loss) income, net of tax
Prior to adoption$(1,623)$(1,410)$(1,426)$582 $(3,877)$(483)
Effect of adoption603 627 586 (177)1,639 660 
As reported$(1,020)$(783)$(840)$405 $(2,238)$177 
Diluted Earnings (Loss) Per Common Share
Core income (loss)
Prior to adoption$1.16 $0.90 $0.78 $1.01 $3.84 $4.06 
Effect of adoption(0.07)(0.06)(0.62)(0.04)(0.77)(0.07)
As reported$1.09 $0.84 $0.16 $0.97 $3.07 $3.99 
Net income (loss)
Prior to adoption$1.15 $0.75 $0.47 $0.91 $3.28 $4.41 
Effect of adoption(0.07)(0.06)(0.62)(0.04)(0.77)(0.07)
As reported$1.08 $0.69 $(0.15)$0.87 $2.51 $4.34 
Core income for 2022 decreased from what was previously reported generally driven by the cumulative effect of assumption differences and differences in reserving methodologies between legacy and new accounting guidance.
Core income for the third quarter of 2022 decreased $170 million from what was previously reported under legacy accounting guidance, primarily related to our third quarter 2022 annual review of cash flow reserving assumptions. Under legacy accounting guidance, the third quarter 2022 gross premium valuation assessment indicated a pretax margin of $125 million and no unlocking event occurred. Under the new guidance favorable changes to the upper-medium grade fixed income instrument discount rate were recorded through Accumulated other comprehensive income quarterly, while the net unfavorable impact of increased cost of care inflation offset by favorable premium rate action assumptions was recorded in income.
Other comprehensive loss decreased from what was previously reported driven by increases in the upper-medium grade fixed-income instrument yield beginning in 2021 and through 2022, which was used as the discount rate to re-measure the LFPB.
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The following table presents the effect of adoption of ASU 2018-12 on selected 2022 and 2021 balance sheet data.
(In millions)December 31, 2022December 31, 2021
Total Assets
Prior to adoption$60,927 $66,639 
Effect of adoption73 453 
As reported$61,000 $67,092 
Insurance Reserves:
Claim and claim adjustment expenses
Prior to adoption$25,099 $24,174 
Effect of adoption(2,979)(2,905)
As reported$22,120 $21,269 
Future policy benefits
Prior to adoption$10,151 $13,236 
Effect of adoption3,329 5,062 
As reported$13,480 $18,298 
Total Liabilities
Prior to adoption$52,102 $53,830 
Effect of adoption350 2,157 
As reported$52,452 $55,987 
Accumulated other comprehensive income (loss)
Prior to adoption$(3,557)$320 
Effect of adoption(41)(1,680)
As reported$(3,598)$(1,360)
Total stockholders' equity
Prior to adoption$8,825 $12,809 
Effect of adoption(277)(1,704)
As reported$8,548 $11,105 

FORWARD-LOOKING STATEMENTS
This report contains a number of forward-looking statements which relate to anticipated future events rather than actual present conditions or historical events. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and generally include words such as “believes,” “expects,” “intends,” “anticipates,” “estimates” and similar expressions. Forward-looking statements in this report include any and all statements regarding expected developments in our insurance business, including losses and loss reserves (note that loss reserves for long term care, A&EP and other mass tort claims are more uncertain, and therefore more difficult to estimate than loss reserves respecting traditional property and casualty exposures); the impact of routine ongoing insurance reserve reviews we conduct; our expectations concerning our revenues, earnings, expenses and investment activities; volatility in investment returns; and our proposed actions in response to trends in our business. Forward-looking statements, by their nature, are subject to a variety of inherent risks and uncertainties that could cause actual results to differ materially from the results projected in the forward-looking statements. We cannot control many of these risks and uncertainties. These risks and uncertainties include, but are not limited to, the following as well as those risks contained in the Risk Factors section of our 2022 Annual Report on Form 10-K:
Company-Specific Factors
the risks and uncertainties associated with our insurance reserves, as outlined in the Critical Accounting Estimates sections of our 2022 Annual Report on Form 10-K and this report, and the Reserves - Estimates
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and Uncertainties section of our 2022 Annual Report on Form 10-K, including the sufficiency of the reserves and the possibility for future increases, which would be reflected in the results of operations in the period that the need for such adjustment is determined;
the risk that the other parties to the transactions in which, subject to certain limitations, we ceded our legacy A&EP and excess workers' compensation (EWC) liabilities, respectively, will not fully perform their respective obligations to CNA, the uncertainty in estimating loss reserves for A&EP and EWC liabilities and the possible continued exposure of CNA to liabilities for A&EP and EWC claims that are not covered under the terms of the respective transactions;
the performance of reinsurance companies under reinsurance contracts with us; and
the risks and uncertainties associated with potential acquisitions and divestitures, including the consummation of such transactions, the successful integration of acquired operations and the potential for subsequent impairment of goodwill or intangible assets.
Industry and General Market Factors
general economic and business conditions, including recessionary conditions that may decrease the size and number of our insurance customers and create losses to our lines of business and inflationary pressures on medical care costs, construction costs and other economic sectors;
the effects of social inflation, including frequency of nuclear verdicts and increased litigation activity, on the severity of claims;
the impact of competitive products, policies and pricing and the competitive environment in which we operate, including changes in our book of business;
product and policy availability and demand and market responses, including the level of ability to obtain rate increases;
the COVID-19 pandemic and measures to mitigate the spread of the virus may continue to result in increased claims and related litigation risk across our enterprise;
conditions in the capital and credit markets, including uncertainty and instability in these markets, as well as the overall economy, and their impact on the returns, types, liquidity and valuation of our investments;
conditions in the capital and credit markets that may limit our ability to raise significant amounts of capital on favorable terms; and
the possibility of changes in our ratings by ratings agencies, including the inability to access certain markets or distribution channels and the required collateralization of future payment obligations as a result of such changes, and changes in rating agency policies and practices.
Regulatory and Legal Factors
regulatory and legal initiatives and compliance with governmental regulations and other legal requirements, which are increasing in complexity and number, change frequently, sometimes conflict, and could expose us to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution in one or more jurisdictions, including regulations related to cyber security protocols (which continue to evolve in breadth, sophistication and maturity in response to an ever-evolving threat landscape), legal inquiries by state authorities, judicial interpretations within the regulatory framework, including interpretation of policy provisions, decisions regarding coverage and theories of liability, legislative actions that increase claimant activity, including those revising applicability of statutes of limitations, trends in litigation and the outcome of any litigation involving us and rulings and changes in tax laws and regulations;
regulatory limitations, impositions and restrictions upon us, including with respect to our ability to increase premium rates, and the effects of assessments and other surcharges for guaranty funds and second-injury funds, other mandatory pooling arrangements and future assessments levied on insurance companies;
regulatory limitations and restrictions, including limitations upon our ability to receive dividends from our insurance subsidiaries, imposed by regulatory authorities, including regulatory capital adequacy standards; and
regulatory and legal implications relating to the sophisticated cyber incident sustained by the Company in March 2021 that may arise.

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Impact of Natural and Man-Made Disasters and Mass Tort Claims
weather and other natural physical events, including the severity and frequency of storms, hail, snowfall and other winter conditions, natural disasters such as hurricanes, tornados and earthquakes, as well as climate change, including effects on global weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, wildfires, rain, hail and snow;
regulatory requirements imposed by coastal state regulators in the wake of hurricanes or other natural disasters, including limitations on the ability to exit markets or to non-renew, cancel or change terms and conditions in policies, as well as mandatory assessments to fund any shortfalls arising from the inability of quasi-governmental insurers to pay claims;
man-made disasters, including the possible occurrence of terrorist attacks, the unpredictability of the nature, targets, severity or frequency of such events, and the effect of the absence or insufficiency of applicable terrorism legislation on coverages;
the occurrence of epidemics and pandemics; and
mass tort claims, including those related to exposure to potentially harmful products or substances such as glyphosate, lead paint, per- and polyfluoroalkyl substances (PFAS) and opioids; and claims arising from changes that repeal or weaken tort reforms, such as those related to abuse reviver statutes.
Our forward-looking statements speak only as of the date of the filing of this Quarterly Report on Form 10-Q and we do not undertake any obligation to update or revise any forward-looking statement to reflect events or circumstances after the date of the statement, even if our expectations or any related events or circumstances change.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes in our market risk components for the three months ended March 31, 2023. See the Quantitative and Qualitative Disclosures About Market Risk included in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2022 for further information. Additional information related to portfolio duration is discussed in the Investments section of our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part I, Item 2.
Item 4. Controls and Procedures
The Company maintains a system of disclosure controls and procedures which are designed to ensure that information required to be disclosed by the Company in reports that it files or submits to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including this report, is recorded, processed, summarized and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to the Company's management on a timely basis to allow decisions regarding required disclosure.
As of March 31, 2023, the Company's management, including the Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO), conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on this evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective as of March 31, 2023.
There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15 (f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II. Other Information
Item 1. Legal Proceedings
Information on our legal proceedings is set forth in Note G to the Condensed Consolidated Financial Statements included under Part I, Item 1.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Items 2 (a) and (b) are not applicable
(c) The table below details the repurchases of our common stock made during the three months ended March 31, 2022.
Period(a) Total number of shares purchased(b) Average price paid per share(c) Total number of shares purchased as part of publicly announced plans or programs(d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (in millions)
February 1, 2023 - February 28, 2023550,000 $44.07 N/AN/A
Total550,000 N/AN/A

Item 6. Exhibits
See Exhibit Index.








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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CNA Financial Corporation
Dated: May 1, 2023By/s/ Scott R. Lindquist
Scott R. Lindquist
Executive Vice President and
Chief Financial Officer
(Duly authorized officer and principal financial officer)




























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EXHIBIT INDEX
Description of ExhibitExhibit Number
31.1
  
31.2
  
32.1
  
32.2
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document101.INS
Inline XBRL Taxonomy Extension Schema101.SCH
Inline XBRL Taxonomy Extension Calculation Linkbase101.CAL
Inline XBRL Taxonomy Extension Definition Linkbase101.DEF
Inline XBRL Taxonomy Label Linkbase101.LAB
Inline XBRL Taxonomy Extension Presentation Linkbase101.PRE
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)104.1 
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