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 June 30, 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)

Delaware	36-6169860
(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 class	Trading 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 July 27, 2023, 270,861,737 shares of common stock were outstanding.

Item Number		Page Number
	PART I
1.	Condensed Consolidated Financial Statements:	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2023 and 2022 (Unaudited)	4
	Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (Unaudited)	6
	Condensed Consolidated Statements of Stockholders' Equity for the three and six months ended June 30, 2023 and 2022 (Unaudited)	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	48
3.	Quantitative and Qualitative Disclosures About Market Risk	72
4.	Controls and Procedures	72
	PART II
1	Legal Proceedings	73
6	Exhibits	73

2

PART I

Item 1. Condensed Consolidated Financial Statements

CNA Financial Corporation

Condensed Consolidated Statements of Operations (Unaudited)

Periods ended June 30	Three Months				Six Months
(In millions, except per share data)	2023		2022 (1)		2023		2022 (1)
Revenues
Net earned premiums	$	2,347	$	2,155	$	4,595	$	4,214
Net investment income	575		432		1,100		880
Net investment losses	(32)		(59)		(67)		(70)
Non-insurance warranty revenue	407		392		814		774
Other revenues	7		6		14		13
Total revenues	3,304		2,926		6,456		5,811
Claims, Benefits and Expenses
Insurance claims and policyholders’ benefits (re-measurement gain (loss) of $(33), $1, $(34), and $6)	1,779		1,601		3,432		3,079
Amortization of deferred acquisition costs	403		374		782		718
Non-insurance warranty expense	384		367		768		721
Other operating expenses	346		329		683		655
Interest	31		28		59		56
Total claims, benefits and expenses	2,943		2,699		5,724		5,229
Income before income tax	361		227		732		582
Income tax expense	(78)		(37)		(152)		(97)
Net income	$	283	$	190	$	580	$	485
Basic earnings per share	$	1.04	$	0.70	$	2.14	$	1.79
Diluted earnings per share	$	1.04	$	0.69	$	2.13	$	1.78
Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic	271.2		271.7		271.2		271.8
Diluted	272.0		272.6		272.1		272.7

(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).

3

CNA Financial Corporation

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022 (1)		2023		2022 (1)
Comprehensive Income (Loss)
Net income	$	283	$	190	$	580	$	485
Other Comprehensive (Loss) Income, net of tax
Changes in:
Net unrealized gains and losses on investments with an allowance for credit losses	(1)		(2)		(9)		(6)
Net unrealized gains and losses on other investments	(413)		(2,226)		257		(4,869)
Net unrealized gains and losses on investments	(414)		(2,228)		248		(4,875)
Impact of changes in discount rates used to measure long-duration contract liabilities	256		1,507		(140)		3,142
Foreign currency translation adjustment	34		(68)		51		(82)
Pension and postretirement benefits	7		6		14		12
Other comprehensive (loss) income, net of tax	(117)		(783)		173		(1,803)
Total comprehensive income (loss)	$	166	$	(593)	$	753	$	(1,318)

(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).

4

CNA Financial Corporation

Condensed Consolidated Balance Sheets (Unaudited)

(In millions, except share data)	June 30, 2023		December 31, 2022 (1)
Assets
Investments:
Fixed maturity securities at fair value (amortized cost of $41,838 and $41,032, less allowance for credit loss of $22 and $1)	$	38,728	$	37,627
Equity securities at fair value (cost of $700 and $703)	683		674
Limited partnership investments	2,020		1,926
Other invested assets	71		78
Mortgage loans (less allowance for uncollectible receivables of $30 and $24)	1,009		1,040
Short term investments	1,924		1,832
Total investments	44,435		43,177
Cash	358		475
Reinsurance receivables (less allowance for uncollectible receivables of $22 and $22)	5,581		5,416
Insurance receivables (less allowance for uncollectible receivables of $30 and $29)	3,521		3,158
Accrued investment income	424		402
Deferred acquisition costs	885		806
Deferred income taxes	1,201		1,251
Property and equipment at cost (less accumulated depreciation of $301 and $280)	246		226
Goodwill	146		144
Deferred non-insurance warranty acquisition expense	3,689		3,671
Other assets (includes $15 and $18 due from Loews Corporation)	2,602		2,274
Total assets	$	63,088	$	61,000
Liabilities
Insurance reserves:
Claim and claim adjustment expenses	$	22,802	$	22,120
Unearned premiums	6,978		6,374
Future policy benefits	13,666		13,480
Short term debt	792		243
Long term debt	2,384		2,538
Deferred non-insurance warranty revenue	4,735		4,714
Other liabilities (includes $14 and $26 due to Loews Corporation)	3,005		2,983
Total liabilities	54,362		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; 270,861,737 and 270,895,902 shares outstanding)	683		683
Additional paid-in capital	2,204		2,220
Retained earnings	9,359		9,336
Accumulated other comprehensive loss	(3,425)		(3,598)
Treasury stock (2,178,506 and 2,144,341 shares), at cost	(95)		(93)
Total stockholders’ equity	8,726		8,548
Total liabilities and stockholders' equity	$	63,088	$	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).

5

CNA Financial Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)

Six months ended June 30
(In millions)	2023		2022 (1)
Cash Flows from Operating Activities
Net income	$	580	$	485
Adjustments to reconcile net income to net cash flows provided by operating activities:
Deferred income tax expense	21		(18)
Trading portfolio activity	1		7
Net investment losses	67		70
Equity method investees	(29)		184
Net amortization of investments	(87)		(56)
Depreciation and amortization	28		25
Changes in:
Receivables, net	(497)		(614)
Accrued investment income	(21)		(6)
Deferred acquisition costs	(74)		(63)
Insurance reserves	1,165		1,417
Other, net	(217)		(178)
Net cash flows provided by operating activities	937		1,253
Cash Flows from Investing Activities
Dispositions:
Fixed maturity securities - sales	2,285		3,293
Fixed maturity securities - maturities, calls and redemptions	613		1,715
Equity securities	121		193
Limited partnerships	79		101
Mortgage loans	78		76
Purchases:
Fixed maturity securities	(3,506)		(6,251)
Equity securities	(126)		(195)
Limited partnerships	(245)		(168)
Mortgage loans	(53)		(53)
Change in other investments	6		15
Change in short term investments	(62)		868
Purchases of property and equipment	(43)		(25)
Other, net	(5)		—
Net cash flows used by investing activities	(858)		(431)
Cash Flows from Financing Activities
Dividends paid to common stockholders	(559)		(765)
Proceeds from the issuance of debt	395		—
Purchase of treasury stock	(24)		(21)
Other, net	(12)		—
Net cash flows used by financing activities	(200)		(786)
Effect of foreign exchange rate changes on cash	4		(12)
Net change in cash	(117)		24
Cash, beginning of year	475		536
Cash, end of period	$	358	$	560

(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).

6

CNA Financial Corporation

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022 (1)		2023		2022 (1)
Common Stock
Balance, beginning of period	$	683	$	683	$	683	$	683
Balance, end of period	683		683		683		683
Additional Paid-in Capital
Balance, beginning of period	2,196		2,195		2,220		2,215
Stock-based compensation	8		8		(16)		(12)
Balance, end of period	2,204		2,203		2,204		2,203
Retained Earnings
Balance, beginning of period, as previously reported	9,191		9,319		9,572		9,663
Cumulative effect adjustments from changes in accounting guidance, net of tax	—		(42)		(236)		(24)
Balance, beginning of period, as adjusted	9,191		9,277		9,336		9,639
Dividends to common stockholders ($0.42, $0.40, $2.04, $2.80 per share)	(115)		(109)		(557)		(766)
Net income	283		190		580		485
Balance, end of period	9,359		9,358		9,359		9,358
Accumulated Other Comprehensive (Loss) Income
Balance, beginning of period, as previously reported	(3,308)		(1,303)		(3,557)		320
Cumulative effect adjustments from changes in accounting guidance, net of tax	—		(1,077)		(41)		(1,680)
Balance, beginning of period, as adjusted	(3,308)		(2,380)		(3,598)		(1,360)
Other comprehensive income (loss)	(117)		(783)		173		(1,803)
Balance, end of period	(3,425)		(3,163)		(3,425)		(3,163)
Treasury Stock
Balance, beginning of period	(95)		(77)		(93)		(72)
Stock-based compensation	—		1		22		17
Purchase of treasury stock	—		—		(24)		(21)
Balance, end of period	(95)		(76)		(95)		(76)
Total stockholders' equity	$	8,726	$	9,005	$	8,726	$	9,005

(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).

7

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 June 30, 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 June 30, 2023 and for the three and six months ended June 30, 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 Insurance reserves: Future policy benefits 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

8

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 rate	6,255
Other adjustments	8
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.

9

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 reserves	2,601		—
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 June 30, 2022 were as follows:

(In millions)	Prior to Adoption		Effect of Adoption		As reported
Insurance claims and policyholders’ benefits (1)	$	1,583	$	18	$	1,601
Income (loss) before income tax	245		(18)		227
Income tax (expense) benefit	(40)		3		(37)
Net income	205		(15)		190
Basic earnings (loss) per share	0.75		(0.05)		0.70
Diluted earnings (loss) per share	0.75		(0.06)		0.69

(1) The effect of adopting ASU 2018-12 on Insurance claims and policyholders’ benefits is inclusive of the re-measurement gain (loss) of $1 million, which is presented parenthetically on the Condensed Consolidated Statement of Operations.

The effects of adoption of ASU 2018-12 on the Condensed Consolidated Statement of Operations for the six months ended June 30, 2022 were as follows:

(In millions)	Prior to Adoption		Effect of Adoption		As reported
Insurance claims and policyholders’ benefits (1)	$	3,038	$	41	$	3,079
Income (loss) before income tax	623		(41)		582
Income tax (expense) benefit	(105)		8		(97)
Net income	518		(33)		485
Basic earnings (loss) per share	1.91		(0.12)		1.79
Diluted earnings (loss) per share	1.90		(0.12)		1.78

(1) The effect of adopting ASU 2018-12 on Insurance claims and policyholders’ benefits is inclusive of the re-measurement gain (loss) of $6 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 Adoption		Effect of Adoption		As reported
Deferred income taxes	$	1,178	$	73	$	1,251
Total assets	60,927		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 liabilities	52,102		350		52,452
Retained earnings	9,572		(236)		9,336
Accumulated other comprehensive income (loss)	(3,557)		(41)		(3,598)
Total stockholders' equity	8,825		(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.

10

The effects of adoption of ASU 2018-12 on the Condensed Consolidated Statement of Comprehensive Income (Loss) for the three months ended June 30, 2022 were as follows:

(In millions)	Prior to Adoption		Effect of Adoption		As reported
Changes in: Net unrealized gains and losses on other investments	$	(1,346)	$	(880)	$	(2,226)
Net unrealized gains and losses on investments	(1,348)		(880)		(2,228)
Impact of changes in discount rates used to measure long-duration contract liabilities	—		1,507		1,507
Other comprehensive income (loss), net of tax	(1,410)		627		(783)
Total comprehensive income (loss)	(1,205)		612		(593)

The effects of adoption of ASU 2018-12 on the Condensed Consolidated Statement of Comprehensive Income (Loss) for the six months ended June 30, 2022 were as follows:

(In millions)	Prior to Adoption		Effect of Adoption		As reported
Changes in: Net unrealized gains and losses on other investments	$	(2,957)	$	(1,912)	$	(4,869)
Net unrealized gains and losses on investments	(2,963)		(1,912)		(4,875)
Impact of changes in discount rates used to measure long-duration contract liabilities	—		3,142		3,142
Other comprehensive income (loss), net of tax	(3,033)		1,230		(1,803)
Total comprehensive income (loss)	(2,515)		1,197		(1,318)

The effects of adoption of ASU 2018-12 on the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2022 were as follows:

(In millions)	Prior to Adoption		Effect of Adoption		As reported
Net income	$	518	$	(33)	$	485
Deferred income tax expense (benefit)	(10)		(8)		(18)
Changes in: Insurance reserves	1,376		41		1,417

The effects of adoption of ASU 2018-12 on segment results of operations of the Life & Group segment for the three months ended June 30, 2022 were as follows:

(In millions)	Prior to Adoption		Effect of Adoption		As reported
Net incurred claims and benefits (1)	$	293	$	18	$	311
Core income (loss) before income tax	(4)		(18)		(22)
Income tax (expense) benefit on core income (loss)	10		3		13
Core income (loss)	6		(15)		(9)

(1) The effect of adopting ASU 2018-12 on Net incurred claims and benefits is inclusive of the re-measurement gain (loss) of $1 million, which is presented parenthetically on the Condensed Consolidated Statement of Operations.

The effects of adoption of ASU 2018-12 on segment results of operations of the Life & Group segment for the six months ended June 30, 2022 were as follows:

(In millions)	Prior to Adoption		Effect of Adoption		As reported
Net incurred claims and benefits (1)	$	574	$	41	$	615
Core income (loss) before income tax	12		(41)		(29)
Income tax (expense) benefit on core income (loss)	17		8		25
Core income (loss)	29		(33)		(4)

(1) The effect of adopting ASU 2018-12 on Net incurred claims and benefits is inclusive of the re-measurement gain (loss) of $6 million, which is presented parenthetically on the Condensed Consolidated Statement of Operations.

11

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 Adoption		Effect of Adoption		As 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.

12

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.

Periods ended June 30	Three Months				Six Months
(In millions, except per share data)	2023		2022		2023		2022
Net income (loss) (1)	$	283	$	190	$	580	$	485
Common Stock and Common Stock Equivalents
Basic
Weighted average shares outstanding	271.2		271.7		271.2		271.8
Diluted
Weighted average shares outstanding	271.2		271.7		271.2		271.8
Dilutive effect of stock-based awards under compensation plans	0.8		0.9		0.9		0.9
Total	272.0		272.6		272.1		272.7
Earnings (loss) per share (1)
Basic	$	1.04	$	0.70	$	2.14	$	1.79
Diluted	$	1.04	$	0.69	$	2.13	$	1.78

(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 six months ended June 30, 2023 and 2022.

13

Note C. Investments

The significant components of Net investment income are presented in the following table.

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022		2023		2022
Fixed maturity securities	$	482	$	441	$	952	$	870
Equity securities	21		(11)		33		(9)
Limited partnership investments	55		6		80		24
Mortgage loans	14		12		28		27
Short term investments	13		2		28		2
Trading portfolio	—		—		3		1
Other	9		—		14		—
Gross investment income	594		450		1,138		915
Investment expense	(19)		(18)		(38)		(35)
Net investment income	$	575	$	432	$	1,100	$	880
Net investment income (loss) recognized due to the change in fair value of common stock held as of June 30, 2023 and 2022	$	10	$	(22)	$	7	$	(23)

Net investment gains (losses) are presented in the following table.

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022		2023		2022
Net investment gains (losses):
Fixed maturity securities:
Gross gains	$	8	$	45	$	43	$	71
Gross losses	(35)		(60)		(92)		(88)
Net investment gains (losses) on fixed maturity securities	(27)		(15)		(49)		(17)
Equity securities	3		(71)		(11)		(109)
Derivatives	—		26		—		55
Mortgage loans	(6)		—		(6)		—
Short term investments and other	(2)		1		(1)		1
Net investment gains (losses)	$	(32)	$	(59)	$	(67)	$	(70)
Net investment gains (losses) recognized due to the change in fair value of non-redeemable preferred stock held as of June 30, 2023 and 2022	$	3	$	(70)	$	—	$	(108)

14

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.

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022		2023		2022
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	9	$	21	$	17	$	29
Asset-backed	8		(1)		8		1
Impairment losses (gains) recognized in earnings	$	17	$	20	$	25	$	30

The Company also recognized $6 million of losses on mortgage loans during the three and six months ended June 30, 2023 due to changes in expected credit losses. There were no losses recognized on mortgage loans during the three and six months ended June 30, 2022.

15

The following tables present a summary of fixed maturity securities.

June 30, 2023	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated Fair Value
(In millions)
Fixed maturity securities available-for-sale:
Corporate and other bonds	$	24,194	$	339	$	1,909	$	13	$	22,611
States, municipalities and political subdivisions	8,262		341		793		—		7,810
Asset-backed:
Residential mortgage-backed	3,133		4		444		—		2,693
Commercial mortgage-backed	1,843		4		257		7		1,583
Other asset-backed	3,571		9		330		2		3,248
Total asset-backed	8,547		17		1,031		9		7,524
U.S. Treasury and obligations of government-sponsored enterprises	130		—		3		—		127
Foreign government	700		1		50		—		651
Redeemable preferred stock	5		—		—		—		5
Total fixed maturity securities available-for-sale	41,838		698		3,786		22		38,728
Total fixed maturity securities trading	—		—		—		—		—
Total fixed maturity securities	$	41,838	$	698	$	3,786	$	22	$	38,728

December 31, 2022	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Estimated 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 subdivisions	8,918		338		939		—		8,317
Asset-backed:
Residential mortgage-backed	3,073		5		447		—		2,631
Commercial mortgage-backed	1,886		4		255		—		1,635
Other asset-backed	3,287		2		361		1		2,927
Total asset-backed	8,246		11		1,063		1		7,193
U.S. Treasury and obligations of government-sponsored enterprises	111		1		2		—		110
Foreign government	617		1		43		—		575
Redeemable preferred stock	3		—		—		—		3
Total fixed maturity securities available-for-sale	41,032		652		4,056		1		37,627
Total fixed maturity securities trading	—		—		—		—		—
Total fixed maturity securities	$	41,032	$	652	$	4,056	$	1	$	37,627

16

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 Months				12 Months or Longer				Total
June 30, 2023	Estimated 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	$	7,681	$	350	$	10,087	$	1,559	$	17,768	$	1,909
States, municipalities and political subdivisions	1,486		64		2,783		729		4,269		793
Asset-backed:
Residential mortgage-backed	822		35		1,810		409		2,632		444
Commercial mortgage-backed	325		15		1,171		242		1,496		257
Other asset-backed	739		32		1,982		298		2,721		330
Total asset-backed	1,886		82		4,963		949		6,849		1,031
U.S. Treasury and obligations of government-sponsored enterprises	84		2		34		1		118		3
Foreign government	213		8		395		42		608		50
Total	$	11,350	$	506	$	18,262	$	3,280	$	29,612	$	3,786

	Less than 12 Months				12 Months or Longer				Total
December 31, 2022	Estimated 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 subdivisions	4,079		769		456		170		4,535		939
Asset-backed:
Residential mortgage-backed	1,406		144		1,143		303		2,549		447
Commercial mortgage-backed	1,167		159		408		96		1,575		255
Other asset-backed	2,087		262		542		99		2,629		361
Total asset-backed	4,660		565		2,093		498		6,753		1,063
U.S. Treasury and obligations of government-sponsored enterprises	76		1		16		1		92		2
Foreign government	473		26		78		17		551		43
Total	$	25,234	$	2,946	$	4,277	$	1,110	$	29,511	$	4,056

17

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.

	June 30, 2023				December 31, 2022
(In millions)	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses
U.S. Government, Government agencies and Government-sponsored enterprises	$	2,479	$	334	$	2,355	$	337
AAA	1,662		283		1,559		298
AA	4,404		746		4,327		817
A	6,937		703		6,615		749
BBB	12,960		1,513		13,226		1,621
Non-investment grade	1,170		207		1,429		234
Total	$	29,612	$	3,786	$	29,511	$	4,056

Based on current facts and circumstances, the Company believes the unrealized losses presented in the June 30, 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 June 30, 2023.

18

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 $413 million, $394 million, and $374 million as of June 30, 2023, December 31, 2022, and June 30, 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 bonds		Asset-backed		Total
Allowance for credit losses:
Balance as of April 1, 2023	$	1	$	1	$	2
Additions to the allowance for credit losses:
Securities for which credit losses were not previously recorded	1		7		8
Available-for-sale securities accounted for as PCD assets	11		—		11
Reductions to the allowance for credit losses:
Write-offs charged against the allowance	—		—		—
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	—		1		1
Balance as of June 30, 2023	$	13	$	9	$	22

(In millions)	Corporate and other bonds		Asset-backed		Total
Allowance for credit losses:
Balance as of April 1, 2022	$	12	$	5	$	17
Additions to the allowance for credit losses:
Securities for which credit losses were not previously recorded	—		—		—
Available-for-sale securities accounted for as PCD assets	—		3		3
Reductions to the allowance for credit losses:
Write-offs charged against the allowance	12		—		12
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	—		(3)		(3)
Balance as of June 30, 2022	$	—	$	5	$	5

19

(In millions)	Corporate and other bonds		Asset-backed		Total
Allowance for credit losses:
Balance as of January 1, 2023	$	—	$	1	$	1
Additions to the allowance for credit losses:
Securities for which credit losses were not previously recorded	1		7		8
Available-for-sale securities accounted for as PCD assets	20		—		20
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 basis	3		—		3
Write-offs charged against the allowance	—		—		—
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	1		1		2
Balance as of June 30, 2023	$	13	$	9	$	22

(In millions)	Corporate and other bonds		Asset-backed		Total
Allowance for credit losses:
Balance as of January 1, 2022	$	11	$	7	$	18
Additions to the allowance for credit losses:
Securities for which credit losses were not previously recorded	—		—		—
Available-for-sale securities accounted for as PCD assets	—		3		3
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	—		—		—
Write-offs charged against the allowance	12		—		12
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period	1		(5)		(4)
Balance as of June 30, 2022	$	—	$	5	$	5

20

Contractual Maturity

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

	June 30, 2023				December 31, 2022
(In millions)	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value
Due in one year or less	$	988	$	972	$	1,012	$	1,001
Due after one year through five years	11,072		10,443		9,880		9,399
Due after five years through ten years	13,445		12,226		13,788		12,453
Due after ten years	16,333		15,087		16,352		14,774
Total	$	41,838	$	38,728	$	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 June 30, 2023, the Company had commitments to purchase or fund approximately $1,480 million and sell approximately $60 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).

June 30, 2023	Mortgage Loans Amortized Cost Basis by Origination Year (1)(2)
(In millions)	2023		2022		2021		2020		2019		Prior		Total
DSCR ≥1.6x
LTV less than 55%	$	—	$	9	$	13	$	111	$	33	$	245	$	411
LTV 55% to 65%	—		—		—		—		8		—		8
LTV greater than 65%	—		31		11		—		—		—		42
DSCR 1.2x - 1.6x
LTV less than 55%	28		5		49		14		42		51		189
LTV 55% to 65%	12		43		—		24		—		9		88
LTV greater than 65%	—		58		—		—		—		—		58
DSCR ≤1.2
LTV less than 55%	—		35		—		—		34		—		69
LTV 55% to 65%	13		41		—		—		43		—		97
LTV greater than 65%	13		27		21		—		23		7		91
Total	$	66	$	249	$	94	$	149	$	183	$	312	$	1,053

(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.

(2) The amortized cost basis of Mortgage loans as presented in the table above differs from the amount reported in the Condensed Consolidated Balance Sheets because Mortgage loans with a term to maturity of less than one year at the time of origination are classified as Short term investments.

As of June 30, 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.

21

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.

22

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.

June 30, 2023							Total Assets/Liabilities at Fair Value
(In millions)	Level 1		Level 2		Level 3
Assets
Fixed maturity securities:
Corporate bonds and other	$	137	$	22,286	$	971	$	23,394
States, municipalities and political subdivisions	—		7,767		43		7,810
Asset-backed	—		6,641		883		7,524
Total fixed maturity securities	137		36,694		1,897		38,728
Equity securities:
Common stock	179		—		26		205
Non-redeemable preferred stock	56		422		—		478
Total equity securities	235		422		26		683
Short term and other	1,711		42		—		1,753
Total assets	$	2,083	$	37,158	$	1,923	$	41,164
Liabilities
Other liabilities	$	—	$	1	$	—	$	1
Total liabilities	$	—	$	1	$	—	$	1

December 31, 2022							Total Assets/Liabilities at Fair Value
(In millions)	Level 1		Level 2		Level 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 stock	150		—		35		185
Non-redeemable preferred stock	54		435		—		489
Total equity securities	204		435		35		674
Short term and other	1,608		71		—		1,679
Total assets	$	1,932	$	36,372	$	1,676	$	39,980
Liabilities
Other liabilities	$	—	$	1	$	—	$	1
Total liabilities	$	—	$	1	$	—	$	1

23

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 other		States, municipalities and political subdivisions		Asset-backed		Equity securities		Total
Balance as of April 1, 2023	$	912	$	44	$	859	$	29	$	1,844
Total realized and unrealized investment gains (losses):
Reported in Net investment gains (losses)	—		—		(1)		—		(1)
Reported in Net investment income	—		—		5		(1)		4
Reported in Other comprehensive income (loss)	(15)		(1)		(7)		—		(23)
Total realized and unrealized investment gains (losses)	(15)		(1)		(3)		(1)		(20)
Purchases	68		—		87		—		155
Sales	—		—		—		(2)		(2)
Settlements	(5)		—		(17)		—		(22)
Transfers into Level 3	11		—		—		—		11
Transfers out of Level 3	—		—		(43)		—		(43)
Balance as of June 30, 2023	$	971	$	43	$	883	$	26	$	1,923
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2023 recognized in Net income (loss) in the period	$	—	$	—	$	—	$	(1)	$	(1)
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2023 recognized in Other comprehensive income (loss) in the period	(15)		(1)		(7)		—		(23)

Level 3 (In millions)	Corporate bonds and other		States, municipalities and political subdivisions		Asset-backed		Equity securities		Total
Balance as of April 1, 2022	$	915	$	51	$	604	$	44	$	1,614
Total realized and unrealized investment gains (losses):
Reported in Net investment gains (losses)	(1)		—		3		(2)		—
Reported in Net investment income	—		—		5		(1)		4
Reported in Other comprehensive income (loss)	(82)		(5)		(52)		—		(139)
Total realized and unrealized investment gains (losses)	(83)		(5)		(44)		(3)		(135)
Purchases	51		—		92		—		143
Sales	—		—		(2)		(3)		(5)
Settlements	(37)		—		(23)		9		(51)
Transfers into Level 3	—		—		14		—		14
Transfers out of Level 3	—		—		—		—		—
Balance as of June 30, 2022	$	846	$	46	$	641	$	47	$	1,580
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2022 recognized in Net income (loss) in the period	$	—	$	—	$	—	$	(3)	$	(3)
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2022 recognized in Other comprehensive income (loss) in the period	(81)		(5)		(52)		—		(138)

24

Level 3 (In millions)	Corporate bonds and other		States, municipalities and political subdivisions		Asset-backed		Equity securities		Total
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)	—		—		(1)		—		(1)
Reported in Net investment income	—		—		10		(7)		3
Reported in Other comprehensive income (loss)	9		—		—		—		9
Total realized and unrealized investment gains (losses)	9		—		9		(7)		11
Purchases	149		—		142		—		291
Sales	—		—		—		(2)		(2)
Settlements	(8)		—		(26)		—		(34)
Transfers into Level 3	11		—		23		—		34
Transfers out of Level 3	—		—		(53)		—		(53)
Balance as of June 30, 2023	$	971	$	43	$	883	$	26	$	1,923
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2023 recognized in Net income (loss) in the period	$	—	$	—	$	—	$	(7)	$	(7)
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2023 recognized in Other comprehensive income (loss) in the period	9		—		(1)		—		8

Level 3 (In millions)	Corporate bonds and other		States, municipalities and political subdivisions		Asset-backed		Equity securities		Total
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)	(2)		—		5		(3)		—
Reported in Net investment income	—		—		6		3		9
Reported in Other comprehensive income (loss)	(153)		(10)		(84)		—		(247)
Total realized and unrealized investment gains (losses)	(155)		(10)		(73)		—		(238)
Purchases	118		—		232		12		362
Sales	(5)		—		(2)		(3)		(10)
Settlements	(59)		—		(40)		9		(90)
Transfers into Level 3	10		—		19		—		29
Transfers out of Level 3	—		—		(51)		—		(51)
Balance as of June 30, 2022	$	846	$	46	$	641	$	47	$	1,580
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2022 recognized in Net income (loss) in the period	$	—	$	—	$	—	$	(1)	$	(1)
Unrealized gains (losses) on Level 3 assets and liabilities held as of June 30, 2022 recognized in Other comprehensive income (loss) in the period	(153)		(10)		(83)		—		(246)

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.

25

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 and mortgage loans with a term to maturity of less than one year at the time of origination, are not measured at fair value.

As of June 30, 2023 and December 31, 2022, there were $65 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.

June 30, 2023	Estimated Fair Value (In millions)		Valuation Technique(s)	Unobservable Input(s)	Range  (Weighted Average)
Fixed maturity securities	$	1,415	Discounted cash flow	Credit spread	1% - 7% (2%)

December 31, 2022	Estimated Fair Value (In millions)		Valuation Technique(s)	Unobservable Input(s)	Range  (Weighted Average)
Fixed maturity securities	$	1,177	Discounted cash flow	Credit 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.

June 30, 2023	Carrying Amount		Estimated Fair Value
(In millions)			Level 1		Level 2		Level 3		Total
Assets
Mortgage loans	$	1,009	$	—	$	—	$	954	$	954
Liabilities
Short term debt	$	792	$	—	$	785	$	—	$	785
Long term debt	2,384		—		2,196		—		2,196

December 31, 2022	Carrying Amount		Estimated Fair Value
(In millions)			Level 1		Level 2		Level 3		Total
Assets
Mortgage loans	$	1,040	$	—	$	—	$	973	$	973
Liabilities
Short term debt	$	243	$	—	$	248	$	—	$	248
Long term debt	2,538		—		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.

27

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 $68 million and $120 million for the three and six months ended June 30, 2023 and $37 million and $57 million for the three and six months ended June 30, 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.

For the six months ended June 30
(In millions)	2023		2022 (1)
Reserves, beginning of year:
Gross	$	22,120	$	21,269
Ceded	5,191		4,969
Net reserves, beginning of year	16,929		16,300
Net incurred claim and claim adjustment expenses:
Provision for insured events of current year	2,746		2,452
Increase (decrease) in provision for insured events of prior years	37		30
Amortization of discount	22		22
Total net incurred (2)	2,805		2,504
Net payments attributable to:
Current year events	(287)		(233)
Prior year events	(2,014)		(1,882)
Total net payments	(2,301)		(2,115)
Foreign currency translation adjustment and other	57		(222)
Net reserves, end of period	17,490		16,467
Ceded reserves, end of period	5,312		5,156
Gross reserves, end of period	$	22,802	$	21,623

(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.

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022		2023		2022
Pretax (favorable) unfavorable development:
Specialty	$	(4)	$	(10)	$	(4)	$	(20)
Commercial	(13)		(22)		(15)		(24)
International	—		(5)		15		(5)
Corporate & Other	35		64		35		64
Total pretax (favorable) unfavorable development	$	18	$	27	$	31	$	15

Following the second quarter annual review of legacy mass tort exposures, unfavorable development of $35 million was recorded within the Corporate & Other segment for the three and six months ended June 30, 2023, primarily driven by higher than expected frequency and severity in abuse claims in older accident years. Unfavorable development of $64 million was recorded within the Corporate & Other segment for the three and six months ended June 30, 2022 largely associated with legacy mass tort abuse claims, including the Diocese of Rochester proposed settlement.

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Specialty

The following table presents further detail of the development recorded for the Specialty segment.

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022		2023		2022
Pretax (favorable) unfavorable development:
Medical Professional Liability	$	—	$	1	$	9	$	9
Other Professional Liability and Management Liability	(1)		13		(1)		13
Surety	(7)		(19)		(7)		(28)
Warranty	—		—		(9)		(9)
Other	4		(5)		4		(5)
Total pretax (favorable) unfavorable development	$	(4)	$	(10)	$	(4)	$	(20)

Three and Six Months

2022

Unfavorable development in other professional liability and management liability was due to higher than expected claim severity and frequency in the Company’s cyber and professional E&O businesses in multiple accident years.

Favorable development in surety was primarily due to lower than expected frequency and lack of systemic activity in recent accident years.

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Commercial

The following table presents further detail of the development recorded for the Commercial segment.

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022		2023		2022
Pretax (favorable) unfavorable development:
Commercial Auto	$	11	$	21	$	11	$	21
General Liability	70		41		70		41
Workers' Compensation	(96)		(82)		(98)		(84)
Property and Other	2		(2)		2		(2)
Total pretax (favorable) unfavorable development	$	(13)	$	(22)	$	(15)	$	(24)

Three and Six Months

2023

Unfavorable development in commercial auto was due to higher than expected claim severity in the Company’s construction business in a recent accident year.

Unfavorable development in general liability was due to higher than expected claim severity in the Company's construction and middle market businesses across multiple accident years.

Favorable development in workers' compensation was due to favorable medical trends driving lower than expected severity in multiple accident years.

2022

Unfavorable development in commercial auto was due to higher than expected claim severity in the Company’s construction business in multiple accident years.

Unfavorable development in general liability was due to higher than expected claim severity in the Company's construction, middle market and small businesses across multiple accident years.

Favorable development in workers’ compensation was due to favorable medical trends driving lower than expected severity in multiple accident years.

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International

The following table presents further detail of the development recorded for the International segment.

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022		2023		2022
Pretax (favorable) unfavorable development:
Commercial	$	(3)	$	(4)	$	(5)	$	(4)
Specialty	3		(1)		22		(1)
Other	—		—		(2)		—
Total pretax (favorable) unfavorable development	$	—	$	(5)	$	15	$	(5)

Six Months

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 $15 million and $11 million for the three months ended June 30, 2023 and 2022 and $23 million for each of the six months ended June 30, 2023 and 2022. As of June 30, 2023 and December 31, 2022, the cumulative amounts ceded under the LPT were $3.5 billion. The unrecognized deferred retroactive reinsurance benefit was $402 million and $425 million as of June 30, 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 $2.4 billion as of June 30, 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.

34

The following table summarizes balances and changes in the LFPB.

(In millions)	2023		2022
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 rate	3,919		3,855
Effect of changes in cash flow assumptions (1)	—		—
Effect of actual variances from expected experience (1)	(85)		(37)
Adjusted balance, January 1	3,834		3,818
Interest accrual	103		105
Net premiums: earned during period	(225)		(225)
Balance, end of period at original locked in discount rate	3,712		3,698
Effect of changes in discount rate	78		246
Balance, June 30	$	3,790	$	3,944
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 rate	17,347		16,803
Effect of changes in cash flow assumptions (1)	—		—
Effect of actual variances from expected experience (1)	(51)		(43)
Adjusted balance, January 1	17,296		16,760
Interest accrual	482		482
Benefit & expense payments	(629)		(470)
Balance, end of period at original locked in discount rate	17,149		16,772
Effect of changes in discount rate	307		1,329
Balance, June 30	$	17,456	$	18,101
Net LFPB	$	13,666	$	14,157

(1) As of June 30, 2023 and 2022, the re-measurement gain (loss) of $(34) million and $6 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.

35

The following table presents earned premiums and interest expense associated with the Company’s long term care business recognized on the Condensed Consolidated Statement of Operations.

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022		2023		2022
Earned premiums	$	113	$	118	$	228	$	238
Interest expense	189		189		379		377

The following table presents undiscounted expected future benefit and expense payments, and undiscounted expected future gross premiums.

	As of June 30
(In millions)	2023		2022
Expected future benefit and expense payments	$	33,287	$	33,429
Expected future gross premiums	5,536		5,848

Discounted expected future gross premiums at the upper-medium grade fixed income instrument yield discount rate were $3,853 million and $4,204 million as of June 30, 2023 and 2022.

The weighted average effective duration of the LFPB calculated using the original locked in discount rate was 12 years as of June 30, 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 June 30				As of December 31
	2023		2022		2022
Original locked in discount rate	5.25	%	5.29	%	5.27	%
Upper-medium grade fixed income instrument discount rate	5.10		4.64		5.23

For the three and six months ended June 30, 2023, immediate charges to net income resulting from adverse development that caused the NPR to exceed 100% were $29 million and $42 million. For the three and six months ended June 30, 2022, immediate charges to net income resulting from adverse development that caused the NPR to exceed 100% were less than $1 million.

For the three and six months ended June 30, 2023, the portion of losses recognized in a prior period due to NPR exceeding 100% which, due to favorable development, was reversed through net income were less than $1 million and $11 million. For the six months ended June 30, 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 was $1 million. There were no such reversals for the three months ended June 30, 2022.

36

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 June 30, 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.

37

Note H. Benefit Plans

The components of net periodic pension cost (benefit) are presented in the following table.

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022		2023		2022
Net periodic pension cost (benefit)
Interest cost on projected benefit obligation	$	24	$	16	$	49	$	33
Expected return on plan assets	(30)		(38)		(60)		(76)
Amortization of net actuarial loss	9		8		17		15
Total net periodic pension cost (benefit)	$	3	$	(14)	$	6	$	(28)

The following table indicates the line items in which the non-service cost (benefit) is presented on the Condensed Consolidated Statements of Operations.

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022		2023		2022
Non-Service Cost (Benefit):
Insurance claims and policyholder's benefits	$	—	$	(4)	$	1	$	(8)
Other operating expenses	3		(10)		5		(20)
Total net periodic pension cost (benefit)	$	3	$	(14)	$	6	$	(28)

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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 adjustment		Total
Balance as of April 1, 2023	$	(15)	$	(2,068)	$	(584)	$	(437)	$	(204)	$	(3,308)
Other comprehensive income (loss) before reclassifications	(8)		(427)		—		256		34		(145)
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $2, $4, $2, $—, $— and $8	(7)		(14)		(7)		—		—		(28)
Other comprehensive income (loss) net of tax (expense) benefit of $—, $112, $(2), $(68), $— and $42	(1)		(413)		7		256		34		(117)
Balance as of June 30, 2023	$	(16)	$	(2,481)	$	(577)	$	(181)	$	(170)	$	(3,425)

(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 adjustment		Total
Balance as of April 1, 2022, as previously reported	$	(6)	$	(572)	$	(598)	$	—	$	(127)	$	(1,303)
Cumulative effect adjustment from accounting change for adoption of ASU 2018-12(1) net of tax (expense) benefit of $—, $270, $—, $(497), $— and $(227)	—		1,288		—		(2,365)		—		(1,077)
Balance as of April 1, 2022	(6)		716		(598)		(2,365)		(127)		(2,380)
Other comprehensive income (loss) before reclassifications	(1)		(2,240)		—		1,507		(68)		(802)
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $(1), $3, $1, $—, $— and $3	1		(14)		(6)		—		—		(19)
Other comprehensive income (loss) net of tax (expense) benefit of $—, $590,$(1), $(400), $— and $189	(2)		(2,226)		6		1,507		(68)		(783)
Balance as of June 30, 2022	$	(8)	$	(1,510)	$	(592)	$	(858)	$	(195)	$	(3,163)

39

(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 adjustment		Total
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, as adjusted	(7)		(2,738)		(591)		(41)		(221)		(3,598)
Other comprehensive income (loss) before reclassifications	(16)		225		—		(140)		51		120
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $2, $8, $4, $—, $— and $14	(7)		(32)		(14)		—		—		(53)
Other comprehensive income (loss) net of tax (expense) benefit of $2, $(68), $(4), $37, $— and $(33)	(9)		257		14		(140)		51		173
Balance as of June 30, 2023	$	(16)	$	(2,481)	$	(577)	$	(181)	$	(170)	$	(3,425)

(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 adjustment		Total
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	(5)		(4,884)		—		3,142		(82)		(1,829)
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $(1), $4, $3, $—, $— and $6	1		(15)		(12)		—		—		(26)
Other comprehensive income (loss) net of tax (expense) benefit of $1, $1,288, $(3), $(835), $— and $451	(6)		(4,869)		12		3,142		(82)		(1,803)
Balance as of June 30, 2022	$	(8)	$	(1,510)	$	(592)	$	(858)	$	(195)	$	(3,163)

(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 AOCI	Condensed 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 investments	Net investment gains (losses)
Pension and postretirement benefits	Other operating expenses and Insurance claims and policyholders' benefits

40

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.

41

The Company's results of operations and selected balance sheet items by segment are presented in the following tables.

Three months ended June 30, 2023	Specialty		Commercial		International		Life & Group		Corporate & Other
(In millions)											Eliminations		Total
Operating revenues
Net earned premiums	$	812	$	1,120	$	302	$	113	$	—	$	—	$	2,347
Net investment income	142		165		25		229		14		—		575
Non-insurance warranty revenue	407		—		—		—		—		—		407
Other revenues	—		6		1		—		2		(2)		7
Total operating revenues	1,361		1,291		328		342		16		(2)		3,336
Claims, benefits and expenses
Net incurred claims and benefits	474		740		185		344		29		—		1,772
Policyholders’ dividends	2		5		—		—		—		—		7
Amortization of deferred acquisition costs	168		175		60		—		—		—		403
Non-insurance warranty expense	384		—		—		—		—		—		384
Other insurance related expenses	94		158		35		31		—		—		318
Other expenses	12		10		(5)		—		44		(2)		59
Total claims, benefits and expenses	1,134		1,088		275		375		73		(2)		2,943
Core income (loss) before income tax	227		203		53		(33)		(57)		—		393
Income tax (expense) benefit on core income (loss)	(50)		(44)		(15)		13		11		—		(85)
Core income (loss)	$	177	$	159	$	38	$	(20)	$	(46)	$	—	308
Net investment gains (losses)													(32)
Income tax (expense) benefit on net investment gains (losses)													7
Net investment gains (losses), after tax													(25)
Net income (loss)													$	283

42

Three months ended June 30, 2022	Specialty		Commercial		International		Life & Group (1)		Corporate & Other
(In millions)											Eliminations		Total (1)
Operating revenues
Net earned premiums	$	794	$	974	$	269	$	118	$	—	$	—	$	2,155
Net investment income	100		113		14		201		4		—		432
Non-insurance warranty revenue	392		—		—		—		—		—		392
Other revenues	—		4		1		1		1		(1)		6
Total operating revenues	1,286		1,091		284		320		5		(1)		2,985
Claims, benefits and expenses
Net incurred claims and benefits	456		610		160		311		57		—		1,594
Policyholders’ dividends	2		5		—		—		—		—		7
Amortization of deferred acquisition costs	162		156		56		—		—		—		374
Non-insurance warranty expense	367		—		—		—		—		—		367
Other insurance related expenses	81		134		30		29		1		—		275
Other expenses	12		11		13		2		45		(1)		82
Total claims, benefits and expenses	1,080		916		259		342		103		(1)		2,699
Core income (loss) before income tax	206		175		25		(22)		(98)		—		286
Income tax (expense) benefit on core income (loss)	(45)		(37)		(7)		13		20		—		(56)
Core income (loss)	$	161	$	138	$	18	$	(9)	$	(78)	$	—	230
Net investment gains (losses)													(59)
Income tax (expense) benefit on net investment gains (losses)													19
Net investment gains (losses), after tax													(40)
Net income (loss)													$	190

(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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Six months ended June 30, 2023	Specialty		Commercial		International		Life & Group		Corporate & Other
(In millions)											Eliminations		Total
Operating revenues
Net earned premiums	$	1,609	$	2,166	$	592	$	228	$	—	$	—	$	4,595
Net investment income	271		314		48		443		24		—		1,100
Non-insurance warranty revenue	814		—		—		—		—		—		814
Other revenues	—		13		1		—		5		(5)		14
Total operating revenues	2,694		2,493		641		671		29		(5)		6,523
Claims, benefits and expenses
Net incurred claims and benefits	939		1,428		374		655		22		—		3,418
Policyholders’ dividends	3		11		—		—		—		—		14
Amortization of deferred acquisition costs	333		344		105		—		—		—		782
Non-insurance warranty expense	768		—		—		—		—		—		768
Other insurance related expenses	180		300		82		60		1		—		623
Other expenses	26		16		(4)		1		85		(5)		119
Total claims, benefits and expenses	2,249		2,099		557		716		108		(5)		5,724
Core income (loss) before income tax	445		394		84		(45)		(79)		—		799
Income tax (expense) benefit on core income (loss)	(97)		(84)		(22)		22		15		—		(166)
Core income (loss)	$	348	$	310	$	62	$	(23)	$	(64)	$	—	633
Net investment gains (losses)													(67)
Income tax (expense) benefit on net investment gains (losses)													14
Net investment gains (losses), after tax													(53)
Net income (loss)													$	580

June 30, 2023
(In millions)
Reinsurance receivables	$	1,530	$	1,153	$	445	$	100	$	2,375	$	—	$	5,603
Insurance receivables	1,034		2,050		462		4		1		—		3,551
Deferred acquisition costs	395		359		131		—		—		—		885
Goodwill	117		—		29		—		—		—		146
Deferred non-insurance warranty acquisition expense	3,689		—		—		—		—		—		3,689
Insurance reserves
Claim and claim adjustment expenses	7,183		9,674		2,583		688		2,674		—		22,802
Unearned premiums	3,194		2,882		790		112		—		—		6,978
Future policy benefits	—		—		—		13,666		—		—		13,666
Deferred non-insurance warranty revenue	4,735		—		—		—		—		—		4,735

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Six months ended June 30, 2022	Specialty		Commercial		International		Life & Group (1)		Corporate & Other
(In millions)											Eliminations		Total (1)
Operating revenues
Net earned premiums	$	1,566	$	1,878	$	533	$	238	$	(1)	$	—	$	4,214
Net investment income	203		231		28		413		5		—		880
Non-insurance warranty revenue	774		—		—		—		—		—		774
Other revenues	1		12		—		—		3		(3)		13
Total operating revenues	2,544		2,121		561		651		7		(3)		5,881
Claims, benefits and expenses
Net incurred claims and benefits	901		1,183		318		615		49		—		3,066
Policyholders’ dividends	3		10		—		—		—		—		13
Amortization of deferred acquisition costs	319		304		95		—		—		—		718
Non-insurance warranty expense	721		—		—		—		—		—		721
Other insurance related expenses	162		264		77		60		3		—		566
Other expenses	25		18		14		5		86		(3)		145
Total claims, benefits and expenses	2,131		1,779		504		680		138		(3)		5,229
Core income (loss) before income tax	413		342		57		(29)		(131)		—		652
Income tax (expense) benefit on core income (loss)	(89)		(72)		(13)		25		25		—		(124)
Core income (loss)	$	324	$	270	$	44	$	(4)	$	(106)	$	—	528
Net investment gains (losses)													(70)
Income tax (expense) benefit on net investment gains (losses)													27
Net investment gains (losses), after tax													(43)
Net income (loss)													$	485

December 31, 2022
(In millions)
Reinsurance receivables	$	1,384	$	1,062	$	414	$	101	$	2,477	$	—	$	5,438
Insurance receivables	1,082		1,728		369		8		—		—		3,187
Deferred acquisition costs	381		321		104		—		—		—		806
Goodwill	117		—		27		—		—		—		144
Deferred non-insurance warranty acquisition expense	3,671		—		—		—		—		—		3,671
Insurance reserves
Claim and claim adjustment expenses	6,878		9,395		2,403		695		2,749		—		22,120
Unearned premiums	3,193		2,425		653		103		—		—		6,374
Future policy benefits	—		—		—		13,480		—		—		13,480
Deferred non-insurance warranty revenue	4,714		—		—		—		—		—		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.

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022		2023		2022
Specialty
Management & Professional Liability	$	718	$	680	$	1,423	$	1,353
Surety	183		162		351		310
Warranty & Alternative Risks	460		444		920		881
Specialty revenues	1,361		1,286		2,694		2,544
Commercial
Middle Market	419		374		817		736
Construction	420		350		805		674
Small Business	160		143		310		281
Other Commercial	292		224		561		430
Commercial revenues	1,291		1,091		2,493		2,121
International
Canada	96		91		189		179
Europe	135		118		262		238
Hardy	97		75		190		144
International revenues	328		284		641		561
Life & Group revenues	342		320		671		651
Corporate & Other revenues	16		5		29		7
Eliminations	(2)		(1)		(5)		(3)
Total operating revenues	3,336		2,985		6,523		5,881
Net investment gains (losses)	(32)		(59)		(67)		(70)
Total revenues	$	3,304	$	2,926	$	6,456	$	5,811

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Note K. Non-Insurance Revenues from Contracts with Customers

The Company had balances of $4.7 billion reported in Deferred non-insurance warranty revenue as of June 30, 2023 and December 31, 2022. For the three and six months ended June 30, 2023, the Company recognized $0.2 billion and $0.6 billion of revenues that were included in the deferred revenue balance as of January 1, 2023. For the three and six months ended June 30, 2022, the Company recognized $0.3 billion and $0.7 billion of revenues that were included in the deferred revenue balance as of January 1, 2022. For the three and six months ended June 30, 2023, non-insurance warranty revenue recognized from performance obligations related to prior periods due to a change in estimate was not material. The Company expects to recognize approximately $0.9 billion of the deferred revenue in the remainder of 2023, $1.2 billion in 2024, $0.9 billion in 2025 and $1.7 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. Underlying underwriting gain (loss) represents underwriting results excluding catastrophe losses and development-related items.

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.

Changes to our reserves could materially adversely impact our results of operations, financial condition and equity.

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CATASTROPHES AND RELATED REINSURANCE

Various events can cause catastrophe losses. These events can be natural or man-made, including hurricanes, tornadoes, windstorms, earthquakes, hail, severe winter weather, fires, floods, riots, strikes, civil unrest, cyber-attacks, pandemics and acts of terrorism that produce unusually large aggregate losses.

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. We use various analyses and methods, including using one of the industry standard natural catastrophe models to estimate hurricane and earthquake losses at various return periods, to inform underwriting and reinsurance decisions designed to manage our exposure to catastrophic events. We generally seek to manage our exposure through the purchase of catastrophe reinsurance and utilize various reinsurance programs to mitigate catastrophe losses including excess-of-loss occurrence and aggregate treaties covering property and workers’ compensation, a property quota share treaty and the Terrorism Risk Insurance Program Reauthorization Act of 2019 (TRIPRA), as well as individual risk agreements that reinsure from losses from specific classes or lines of business. We conduct an ongoing review of our risk and catastrophe reinsurance coverages and from time to time make changes as we deem appropriate. In the second quarter of 2023, we renewed our excess-of-loss property catastrophe reinsurance as described below.

Group North American Property Treaty

We purchased corporate catastrophe excess-of-loss treaty reinsurance covering our U.S. states and territories and Canadian property exposures underwritten in our North American and European companies. Exposures underwritten through Hardy are excluded and covered under a separate treaty. The treaty has a term of June 1, 2023 to June 1, 2024 and provides coverage for the accumulation of covered losses from catastrophe occurrences above our per occurrence retention of $235 million up to $1.06 billion for all losses other than earthquakes. Earthquakes are covered up to $1.16 billion. Losses stemming from terrorism events are covered unless they are due to a nuclear, biological or chemical attack. All layers of the treaty provide for one full reinstatement.

Group Workers' Compensation Treaty

We also purchased corporate Workers' Compensation catastrophe excess-of-loss treaty reinsurance for the period January 1, 2023 to January 1, 2024 providing $275 million of coverage for the accumulation of covered losses related to natural catastrophes above our per occurrence retention of $25 million. The treaty also provides $600 million of coverage for the accumulation of covered losses related to terrorism events above our per occurrence retention of $25 million. Of this $600 million in Terrorism coverage, $200 million is provided for nuclear, biological, chemical and radiation events. One full reinstatement is available for the first $275 million above the retention, regardless of the covered peril.

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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.

Six months ended June 30	Three Months				Six Months
(In millions)	2023		2022 (1)		2023		2022 (1)
Operating Revenues
Net earned premiums	$	2,347	$	2,155	$	4,595	$	4,214
Net investment income	575		432		1,100		880
Non-insurance warranty revenue	407		392		814		774
Other revenues	7		6		14		13
Total operating revenues	3,336		2,985		6,523		5,881
Claims, Benefits and Expenses
Net incurred claims and benefits (re-measurement gain (loss) of $(33), $1, $(34), and $6)	1,772		1,594		3,418		3,066
Policyholders' dividends	7		7		14		13
Amortization of deferred acquisition costs	403		374		782		718
Non-insurance warranty expense	384		367		768		721
Other insurance related expenses	318		275		623		566
Other expenses	59		82		119		145
Total claims, benefits and expenses	2,943		2,699		5,724		5,229
Core income before income tax	393		286		799		652
Income tax expense on core income	(85)		(56)		(166)		(124)
Core income	308		230		633		528
Net investment losses	(32)		(59)		(67)		(70)
Income tax benefit on net investment losses	7		19		14		27
Net investment losses, after tax	(25)		(40)		(53)		(43)
Net income	$	283	$	190	$	580	$	485

(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.

Three Month Comparison

Core income increased $78 million for the three months ended June 30, 2023 as compared with the same period in 2022. Core income for our Property & Casualty Operations increased $57 million primarily due to higher net investment income and improved underlying underwriting results partially offset by higher catastrophe losses and lower favorable net prior year loss reserve development. Core loss for our Life & Group segment increased $11 million, while core loss for our Corporate & Other segment improved $32 million.

Catastrophe losses were $68 million and $37 million for the three months ended June 30, 2023 and 2022. Unfavorable net prior year loss reserve development of $18 million and $27 million was recorded for the three months ended June 30, 2023 and 2022 related to our Specialty, Commercial, International and Corporate & Other 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.

51

Six Month Comparison

Core income increased $105 million for the six months ended June 30, 2023 as compared with the same period in 2022. Core income for our Property & Casualty Operations increased $82 million primarily due to higher net investment income and improved underlying underwriting results partially offset by higher catastrophe losses and lower favorable net prior year loss reserve development. Core loss for our Life & Group segment increased $19 million, while core loss for our Corporate & Other segment improved $42 million.

Catastrophe losses were $120 million and $57 million for the six months ended June 30, 2023 and 2022. Unfavorable net prior year loss reserve development of $31 million and $15 million was recorded for the six months ended June 30, 2023 and 2022 related to our Specialty, Commercial, International and Corporate & Other 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 and six months ended June 30, 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 and six months ended June 30, 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.

52

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.

53

Specialty

The following table details the results of operations for Specialty.

Periods ended June 30	Three Months						Six Months
(In millions, except ratios, rate, renewal premium change and retention)	2023			2022			2023			2022
Gross written premiums	$	1,769		$	1,904		$	3,549		$	3,750
Gross written premiums excluding third-party captives	961			973			1,847			1,858
Net written premiums	825			832			1,613			1,603
Net earned premiums	812			794			1,609			1,566
Underwriting gain	74			93			154			181
Net investment income	142			100			271			203
Core income	177			161			348			324
Other performance metrics:
Loss ratio excluding catastrophes and development	58.6		%	58.6		%	58.5		%	58.7		%
Effect of catastrophe impacts	—			0.1			—			0.1
Effect of development-related items	(0.3)			(1.2)			(0.2)			(1.3)
Loss ratio	58.3			57.5			58.3			57.5
Expense ratio	32.4			30.4			31.9			30.7
Dividend ratio	0.2			0.2			0.2			0.2
Combined ratio	90.9		%	88.1		%	90.4		%	88.4		%
Combined ratio excluding catastrophes and development	91.2		%	89.2		%	90.6		%	89.6		%
Rate	(1)		%	7		%	—		%	8		%
Renewal premium change	—			9			2			9
Retention	89			85			89			85
New business	$	120		$	132		$	228		$	277

Three Month Comparison

Gross written premiums, excluding third-party captives, for Specialty decreased $12 million for the three months ended June 30, 2023 as compared with the same period in 2022 driven by lower new business and rate. Net written premiums for Specialty decreased $7 million for the three months ended June 30, 2023 as compared with the same period in 2022. The increase in net earned premiums was consistent with the trend in net written premiums in recent quarters.

Core income increased $16 million for the three months ended June 30, 2023 as compared with the same period in 2022 primarily due to higher net investment income partially offset by lower underlying underwriting results and lower favorable net prior year loss reserve development.

The combined ratio of 90.9% increased 2.8 points for the three months ended June 30, 2023 as compared with the same period in 2022 due to a 2.0 point increase in the expense ratio and 0.8 point increase in the loss ratio. The increase in the expense ratio was primarily driven by higher employee related and acquisition costs. The increase in the loss ratio was primarily driven by lower favorable net prior year loss reserve development. There were no catastrophe losses for the three months ended June 30, 2023, as compared with $1 million, or 0.1 points of the loss ratio, for the three months ended June 30, 2022.

Favorable net prior year loss reserve development of $4 million and $10 million was recorded for the three months ended June 30, 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.

54

Six Month Comparison

Gross written premiums, excluding third-party captives, for Specialty decreased $11 million for the six months ended June 30, 2023 as compared with the same period in 2022 driven by lower new business and rate. Net written premiums for Specialty increased $10 million for the six months ended June 30, 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 $24 million for the six months ended June 30, 2023 as compared with the same period in 2022 primarily due to higher net investment income partially offset by lower favorable net prior year loss reserve development and lower underlying underwriting results.

The combined ratio of 90.4% increased 2.0 points for the six months ended June 30, 2023 as compared with the same period in 2022 due to a 1.2 point increase in the expense ratio and a 0.8 point increase in the loss ratio. The increase in the expense ratio was primarily driven by higher employee related costs. The increase in the loss ratio was primarily driven by lower favorable net prior year loss reserve development. There were no catastrophe losses for the six months ended June 30, 2023, as compared with $1 million, or 0.1 points of the loss ratio, for the six months ended June 30, 2022.

Favorable net prior year loss reserve development of $4 million and $20 million was recorded for the six months ended June 30, 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.

The following table summarizes the gross and net carried reserves for Specialty.

(In millions)	June 30, 2023		December 31, 2022
Gross case reserves	$	1,476	$	1,529
Gross IBNR reserves	5,707		5,349
Total gross carried claim and claim adjustment expense reserves	$	7,183	$	6,878
Net case reserves	$	1,270	$	1,310
Net IBNR reserves	4,448		4,253
Total net carried claim and claim adjustment expense reserves	$	5,718	$	5,563

55

Commercial

The following table details the results of operations for Commercial.

Periods ended June 30	Three Months						Six Months
(In millions, except ratios, rate, renewal premium change and retention)	2023			2022			2023			2022
Gross written premiums	$	1,719		$	1,429		$	3,161		$	2,637
Gross written premiums excluding third-party captives	1,604			1,321			3,044			2,527
Net written premiums	1,329			1,134			2,517			2,135
Net earned premiums	1,120			974			2,166			1,878
Underwriting gain	42			69			83			117
Net investment income	165			113			314			231
Core income	159			138			310			270
Other performance metrics:
Loss ratio excluding catastrophes and development	61.5		%	61.5		%	61.5		%	61.5		%
Effect of catastrophe impacts	5.2			3.0			4.7			2.4
Effect of development-related items	(0.5)			(1.8)			(0.3)			(0.9)
Loss ratio	66.2			62.7			65.9			63.0
Expense ratio	29.6			30.0			29.8			30.3
Dividend ratio	0.5			0.5			0.5			0.5
Combined ratio	96.3		%	93.2		%	96.2		%	93.8		%
Combined ratio excluding catastrophes and development	91.6		%	92.0		%	91.8		%	92.3		%
Rate	8		%	5		%	8		%	5		%
Renewal premium change	11			7			10			8
Retention	85			87			85			86
New business	$	343		$	280		$	653		$	508

Three Month Comparison

Gross written premiums for Commercial increased $290 million for the three months ended June 30, 2023 as compared with the same period in 2022 driven by favorable renewal premium change and higher new business. Net written premiums for Commercial increased $195 million for the three months ended June 30, 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 $21 million for the three months ended June 30, 2023 as compared with the same period in 2022, driven by higher net investment income and improved underlying underwriting results partially offset by higher catastrophe losses and lower favorable net prior year loss reserve development.

The combined ratio of 96.3% increased 3.1 points for the three months ended June 30, 2023 as compared with the same period in 2022 due to a 3.5 point increase in the loss ratio partially offset by a 0.4 point improvement in the expense ratio. The increase in the loss ratio was driven by higher catastrophe losses and lower favorable net prior year loss reserve development. Catastrophe losses were $59 million, or 5.2 points of the loss ratio, for the three months ended June 30, 2023, as compared with $29 million, or 3.0 points of the loss ratio, for the three months ended June 30, 2022. The improvement in the expense ratio was driven by higher net earned premiums partially offset by higher employee related costs.

Favorable net prior year loss reserve development of $13 million and $22 million was recorded for the three months ended June 30, 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.

56

Six Month Comparison

Gross written premiums for Commercial increased $524 million for the six months ended June 30, 2023 as compared with the same period in 2022 driven by favorable renewal premium change and higher new business. Net written premiums for Commercial increased $382 million for the six months ended June 30, 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 $40 million for the six months ended June 30, 2023 as compared with the same period in 2022, driven by higher net investment income and improved underlying underwriting results partially offset by higher catastrophe losses and lower favorable net prior year loss reserve development.

The combined ratio of 96.2% increased 2.4 points for the six months ended June 30, 2023 as compared with the same period in 2022 due to a 2.9 point increase in the loss ratio partially offset by a 0.5 point improvement in the expense ratio. The increase in the loss ratio was driven by higher catastrophe losses and lower favorable net prior year loss reserve development. Catastrophe losses were $103 million, or 4.7 points of the loss ratio, for the six months ended June 30, 2023, as compared with $45 million, or 2.4 points of the loss ratio, for the six months ended June 30, 2022. The improvement in the expense ratio was driven by higher net earned premiums partially offset by higher employee related costs.

Favorable net prior year loss reserve development of $15 million and $24 million was recorded for the six months ended June 30, 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.

The following table summarizes the gross and net carried reserves for Commercial.

(In millions)	June 30, 2023		December 31, 2022
Gross case reserves	$	3,265	$	3,156
Gross IBNR reserves	6,408		6,239
Total gross carried claim and claim adjustment expense reserves	$	9,673	$	9,395
Net case reserves	$	2,839	$	2,809
Net IBNR reserves	5,809		5,621
Total net carried claim and claim adjustment expense reserves	$	8,648	$	8,430

57

International

The following table details the results of operations for International.

Periods ended June 30	Three Months						Six Months
(In millions, except ratios, rate, renewal premium change and retention)	2023			2022			2023			2022
Gross written premiums	$	421		$	382		$	819		$	745
Net written premiums	359			330			630			581
Net earned premiums	302			269			592			533
Underwriting gain	22			23			31			43
Net investment income	25			14			48			28
Core income	38			18			62			44
Other performance metrics:
Loss ratio excluding catastrophes and development	57.9		%	58.5		%	57.7		%	58.6		%
Effect of catastrophe impacts	3.1			2.8			2.9			2.0
Effect of development-related items	—			(1.8)			2.5			(1.0)
Loss ratio	61.0			59.5			63.1			59.6
Expense ratio	31.2			32.1			31.5			32.4
Combined ratio	92.2		%	91.6		%	94.6		%	92.0		%
Combined ratio excluding catastrophes and development	89.1		%	90.6		%	89.2		%	91.0		%
Rate	4		%	6		%	4		%	8		%
Renewal premium change	7			10			7			10
Retention	83			84			83			79
New business	$	92		$	88		$	177		$	166

Three Month Comparison

Gross written premiums for International increased $39 million, or $44 million excluding the effect of foreign currency exchange rates, for the three months ended June 30, 2023 as compared with the same period in 2022 driven by favorable renewal premium change. Net written premiums for International increased $29 million, or $31 million excluding the effect of foreign currency exchange rates, for the three months ended June 30, 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 $20 million for the three months ended June 30, 2023 as compared with the same period in 2022, driven by a favorable impact from changes in foreign currency exchange rates, higher net investment income and improved underlying underwriting results, partially offset by no net prior year loss reserve development recorded for the three months ended June 30, 2023 as compared with favorable net prior year loss reserve development recorded for the three months ended June 30, 2022.

The combined ratio of 92.2% increased 0.6 points for the three months ended June 30, 2023 as compared with the same period in 2022 due to a 1.5 point 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 no net prior period loss reserve development recorded for the three months ended June 30, 2023 as compared with $5 million of favorable net prior year loss reserve for the three months ended June 30, 2022. Catastrophe losses were $9 million, or 3.1 points of the loss ratio, for the three months ended June 30, 2023, as compared with $7 million, or 2.8 points of the loss ratio, for the three months ended June 30, 2022. The improvement in the expense ratio was primarily driven by higher net earned premiums and lower acquisition costs partially offset by higher 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.

58

Six Month Comparison

Gross written premiums for International increased $74 million for the six months ended June 30, 2023 as compared with the same period in 2022. Excluding the effect of foreign currency exchange rates, gross written premiums increased $99 million driven by favorable renewal premium change. Net written premiums for International increased $49 million for the six months ended June 30, 2023 as compared with the same period in 2022. Excluding the effect of foreign currency exchange rates, net written premiums increased $66 million for the six months ended June 30, 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 $18 million for the six months ended June 30, 2023 as compared with the same period in 2022 driven by higher net investment income, a favorable impact from changes in foreign currency exchange rates and improved underlying underwriting results, partially offset by unfavorable net prior year loss reserve development.

The combined ratio of 94.6% increased 2.6 points for the six months ended June 30, 2023 as compared with the same period in 2022 due to a 3.5 point 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 unfavorable net prior period loss reserve development and higher catastrophe losses. Catastrophe losses were $17 million, or 2.9 points of the loss ratio, for the six months ended June 30, 2023, as compared with $11 million, or 2.0 points of the loss ratio, for the six months ended June 30, 2022. The improvement in the expense ratio was driven by higher net earned premiums.

Unfavorable net prior year loss reserve development of $15 million was recorded for the six months ended June 30, 2023 compared to favorable net prior year loss reserve development of $5 million recorded for the six months ended June 30, 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.

The following table summarizes the gross and net carried reserves for International.

(In millions)	June 30, 2023		December 31, 2022
Gross case reserves	$	818	$	817
Gross IBNR reserves	1,765		1,586
Total gross carried claim and claim adjustment expense reserves	$	2,583	$	2,403
Net case reserves	$	687	$	686
Net IBNR reserves	1,491		1,317
Total net carried claim and claim adjustment expense reserves	$	2,178	$	2,003

59

Life & Group

The following table summarizes the results of operations for Life & Group.

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022 (1)		2023		2022 (1)
Net earned premiums	$	113	$	118	$	228	$	238
Claims, benefits and expenses	375		342		716		680
Net investment income	229		201		443		413
Core loss	(20)		(9)		(23)		(4)

(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.

Three Month Comparison

Core loss increased $11 million for the three months ended June 30, 2023 as compared with the same period in

2022 primarily due to long term care policy buyouts. Policy buyouts generally result in an unfavorable impact on Core loss, as the cash payments are linked to higher statutory reserve levels.

Six Month Comparison

Results for the six months ended June 30, 2023 were generally consistent with the three month summary above. Excluding the impacts of long term care policy buyouts, underwriting results are generally in line with expectations. We expect to continue offering policy buyouts for the remainder of 2023 and into future years.

60

Corporate & Other

The following table summarizes the results of operations for the Corporate & Other segment, including intersegment eliminations.

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022		2023		2022
Insurance claims and policyholders' benefits	$	29	$	57	$	22	$	49
Net investment income	14		4		24		5
Interest expense	30		28		58		56
Core loss	(46)		(78)		(64)		(106)

Three Month Comparison

Core loss decreased $32 million for the three months ended June 30, 2023 as compared with the same period in 2022 driven by lower net prior year loss reserve development and higher net investment income. Core loss for the three months ended June 30, 2023 includes a $28 million after-tax charge related to unfavorable prior year loss reserve development largely associated with legacy mass tort claims compared with a $51 million after-tax charge related to unfavorable prior year loss reserve development for the three months ended June 30, 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.

Six Month Comparison

Core loss decreased $42 million for the six months ended June 30, 2023 as compared with the same period in 2022 driven by lower net prior year loss reserve development associated with legacy mass tort abuse claims and higher net investment income. 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.

The following table summarizes the gross and net carried reserves for Corporate & Other.

(In millions)	June 30, 2023		December 31, 2022
Gross case reserves	$	1,411	$	1,428
Gross IBNR reserves	1,263		1,321
Total gross carried claim and claim adjustment expense reserves	$	2,674	$	2,749
Net case reserves	$	129	$	137
Net IBNR reserves	229		202
Total net carried claim and claim adjustment expense reserves	$	358	$	339

61

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.

Periods ended June 30	Three Months						Six Months
(In millions)	2023			2022			2023			2022
Fixed income securities:
Taxable fixed income securities	$	444		$	385		$	874		$	753
Tax-exempt fixed income securities	46			66			95			139
Total fixed income securities	490			451			969			892
Limited partnership and common stock investments	68			(15)			96			(7)
Other, net of investment expense	17			(4)			35			(5)
Net investment income	$	575		$	432		$	1,100		$	880
Effective income yield for the fixed income securities portfolio	4.6		%	4.3		%	4.6		%	4.3		%
Limited partnership and common stock return	3.1		%	(0.7)		%	4.5		%	(0.3)		%

Net investment income increased $143 million and $220 million for the three and six months ended June 30, 2023 as compared with the same periods in 2022 driven by higher limited partnership and common stock returns and higher income from fixed income securities and other.

Net Investment (Losses) Gains

The components of Net investment (losses) gains are presented in the following table.

Periods ended June 30	Three Months				Six Months
(In millions)	2023		2022		2023		2022
Fixed maturity securities:
Corporate bonds and other	$	(12)	$	(30)	$	(35)	$	(27)
States, municipalities and political subdivisions	(3)		19		7		22
Asset-backed	(12)		(4)		(21)		(12)
Total fixed maturity securities	(27)		(15)		(49)		(17)
Non-redeemable preferred stock	3		(71)		(11)		(109)
Derivatives, short term and other	(2)		27		(1)		56
Mortgage loans	(6)		—		(6)		—
Net investment losses	(32)		(59)		(67)		(70)
Income tax benefit on net investment losses	7		19		14		27
Net investment losses, after tax	$	(25)	$	(40)	$	(53)	$	(43)

Pretax net investment results improved $27 million and $3 million for three and six months ended June 30, 2023 as compared with the same periods in 2022. The improvement was driven by the favorable relative change in fair value of non-redeemable preferred stock in the three and six months ended June 30, 2023 as compared with the same periods in 2022 partially offset by higher net losses on disposals of fixed maturity securities. The three and six months ended June 30, 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.

62

Portfolio Quality

The following table presents the estimated fair value and net unrealized gains (losses) of our fixed maturity securities by rating distribution.

	June 30, 2023				December 31, 2022
(In millions)	Estimated Fair Value		Net Unrealized Gains (Losses)		Estimated Fair Value		Net Unrealized Gains (Losses)
U.S. Government, Government agencies and Government-sponsored enterprises	$	2,530	$	(333)	$	2,419	$	(336)
AAA	2,492		(205)		2,398		(208)
AA	6,385		(588)		6,342		(663)
A	9,579		(463)		9,043		(531)
BBB	16,061		(1,310)		15,651		(1,447)
Non-investment grade	1,681		(189)		1,774		(219)
Total	$	38,728	$	(3,088)	$	37,627	$	(3,404)

As of June 30, 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 June 30, 2023 and December 31, 2022.

The following table presents available-for-sale fixed maturity securities in a gross unrealized loss position by ratings distribution.

	June 30, 2023
(In millions)	Estimated Fair Value		Gross Unrealized Losses
U.S. Government, Government agencies and Government-sponsored enterprises	$	2,479	$	334
AAA	1,662		283
AA	4,404		746
A	6,937		703
BBB	12,960		1,513
Non-investment grade	1,170		207
Total	$	29,612	$	3,786

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.

	June 30, 2023
(In millions)	Estimated Fair Value		Gross Unrealized Losses
Due in one year or less	$	841	$	20
Due after one year through five years	8,895		669
Due after five years through ten years	9,866		1,397
Due after ten years	10,010		1,700
Total	$	29,612	$	3,786

63

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.

	June 30, 2023
(In millions)	Estimated Fair Value		Net Unrealized Gains (Losses)
Commercial mortgage-backed:
Single asset, single borrower:
Office	$	289	$	(77)
Retail	278		(38)
Lodging	218		(20)
Industrial	90		(6)
Multifamily	51		(4)
Total single asset, single borrower	926		(145)
Conduits (multi property, multi borrower pools)	657		(108)
Total commercial mortgage-backed	$	1,583	$	(253)

	June 30, 2023
(In millions)	Estimated Fair Value		Net Unrealized Gains (Losses)
Commercial mortgage-backed:
AAA	$	425	$	(35)
AA	620		(107)
A	209		(35)
BBB	256		(56)
Non-investment grade	73		(20)
Total commercial mortgage-backed	$	1,583	$	(253)

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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.

	June 30, 2023
(In millions)	Estimated Fair Value		Net Unrealized Gains (Losses)
Corporate and other bonds - REITs:
Retail	$	455	$	(48)
Office	255		(30)
Industrial	86		(5)
Other (1)	416		(39)
Total corporate and other bonds - REITs	$	1,212	$	(122)

(1) Other includes a diversified mix of property type strategies including self-storage, healthcare and apartments.

	June 30, 2023
(In millions)	Estimated Fair Value		Net Unrealized Gains (Losses)
Corporate and other bonds - REITs:
AA	$	11	$	(1)
A	249		(13)
BBB	936		(106)
Non-investment grade	16		(2)
Total corporate and other bonds - REITs	$	1,212	$	(122)

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 June 30, 2023 the allowance for expected credit losses on our mortgage portfolio was $30 million, or 2.9% of our amortized cost basis.

The following table presents the amortized cost basis of mortgage loans by property type.

	June 30, 2023
(In millions)	Amortized Cost		Percentage of Total
Mortgage loans:
Retail	$	470	44	%
Office	255		25	%
Industrial	131		13	%
Other	183		18	%
Total mortgage loans	1,039		100	%
Less: Allowance for expected credit losses	(30)
Total mortgage loans - net of allowance	$	1,009

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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 June 30, 2023, these holdings had an estimated fair value of $474 million and net unrealized losses of $92 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.

	June 30, 2023			December 31, 2022
(In millions)	Estimated Fair Value		Effective Duration (In years)	Estimated Fair Value		Effective Duration (In years)
Investments supporting Life & Group	$	14,691	9.9	$	14,511	9.9
Other investments	26,480		4.6	25,445		4.7
Total	$	41,171	6.5	$	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 six months ended June 30, 2023, net cash provided by operating activities was $937 million as compared with $1,253 million for the same period in 2022. The decrease in cash provided by operating activities was driven by higher net claim payments, which includes 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 six months ended June 30, 2023, net cash used by investing activities was $858 million as compared with net cash used by investing activities of $431 million for the same period in 2022. Net cash used 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 six months ended June 30, 2023, net cash used by financing activities was $200 million as compared with $786 million for the same period in 2022. Financing activities for the periods presented include:

•During the six months ended June 30, 2023, we paid dividends of $559 million and repurchased 550,000 shares of our common stock at an aggregate cost of $24 million.

•In the second quarter of 2023, we issued $400 million of 5.50% senior notes due June 15, 2033.

•During the six months ended June 30, 2022, we paid dividends of $765 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 $2.04 per share on our common stock, including a special cash dividend of $1.20 per share, were declared and paid during the six months ended June 30, 2023. On July 28, 2023, our Board of Directors declared a quarterly cash dividend of $0.42 per share, payable August 31, 2023 to stockholders of record on August 14, 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 June 30, 2023, CCC was in a positive earned surplus position. CCC paid dividends of $660 million and $690 million during the six months ended June 30, 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.

Prior period amounts in the financial statements have been adjusted to reflect application of ASU 2018-12. 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. Excluding the third quarter of 2022, Core income did not change materially from what was reported prior to adoption of ASU 2018-12.

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 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;

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•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.

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.

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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 June 30, 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 June 30, 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 June 30, 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 June 30, 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 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: July 31, 2023	By	/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 Exhibit	Exhibit Number
First Amendment to Amended and Restated Credit Agreement, dated May 3, 2023, among CNA Financial Corporation and Wells Fargo Bank, National Association)	10.1
General Release and Separation Agreement, dated July 7, 2023 between CNA Financial Corporation and Gerald S. Haase	10.2
Certification of Chief Executive Officer	31.1
Certification of Chief Financial Officer	31.2
Written Statement of the Chief Executive Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)	32.1
Written Statement of the Chief Financial Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)	32.2
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document	101.INS
Inline XBRL Taxonomy Extension Schema	101.SCH
Inline XBRL Taxonomy Extension Calculation Linkbase	101.CAL
Inline XBRL Taxonomy Extension Definition Linkbase	101.DEF
Inline XBRL Taxonomy Label Linkbase	101.LAB
Inline XBRL Taxonomy Extension Presentation Linkbase	101.PRE
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)	104.1

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