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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
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)
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
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
As of February 4, 2022, 271,365,221 shares of common stock were outstanding. The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2021 was approximately $1,255 million based on the closing price of $45.49 per share of the common stock on the New York Stock Exchange on June 30, 2021.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the CNA Financial Corporation Proxy Statement prepared for the 2022 annual meeting of shareholders, pursuant to Regulation 14A, are incorporated by reference into Part III of this report.



Item Number Page
Number
1.
3
1A.
8
1B.
18
2.
18
3.
18
4.
18
PART II
5.
19
6.
20
7.
20
7A.
52
8.
55
9.
135
9A.
135
9B.
135
9C.
135
PART III
10.
136
11.
138
12.
138
13.
138
14.
138
PART IV
15.
139
2

Table of Contents
PART I
ITEM 1. BUSINESS
CNA Financial Corporation (CNAF) was incorporated in 1967 and is an insurance holding company. References to “CNA,” “the Company,” “we,” “our,” “us” or like terms refer to the business of CNAF and its subsidiaries. CNA's property and casualty and remaining life and group insurance operations are primarily conducted by Continental Casualty Company (CCC), The Continental Insurance Company, Western Surety Company, CNA Insurance Company Limited, Hardy Underwriting Bermuda Limited and its subsidiaries (Hardy), and CNA Insurance Company (Europe) S.A. Loews Corporation (Loews) owned approximately 89.6% of our outstanding common stock as of December 31, 2021.
Our insurance products primarily include commercial property and casualty coverages, including surety. Our services include warranty, risk management information services and claims administration. Our products and services are primarily marketed through independent agents, brokers and managing general underwriters to a wide variety of customers, including small, medium and large businesses, insurance companies, associations, professionals and other groups. The property and casualty insurance industry is highly competitive, both as it relates to rate and service. We compete with a large number of stock and mutual insurance companies, as well as other entities, for both distributors and customers.
Our commercial property and casualty underwriting operations presence in the United States of America (U.S.) consists of field underwriting locations and centralized processing operations which handle policy processing, billing and collection activities and also act as call centers to optimize service. Our claim operations in the U.S. consists of primary locations where we handle multiple claim types and key business functions, as well as regional claim offices which are aligned with our underwriting field structure. We also have property and casualty underwriting operations in Canada, the United Kingdom (U.K.) and Continental Europe, as well as access to business placed at Lloyd's of London through Syndicate 382.
Our commercial property and casualty 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 business segments: Life & Group and Corporate & Other. Each segment is managed separately due to differences in their markets and product mix. Discussion of each segment, including the products offered, customers served and distribution channels used, is set forth in the Management's Discussion and Analysis (MD&A) included under Item 7 and in Note O to the Consolidated Financial Statements included under Item 8.
Current Regulation
The insurance industry is subject to comprehensive and detailed regulation and supervision. Regulatory oversight by applicable agencies is exercised through review of submitted filings and information, examinations (both financial and market conduct), direct inquiries and interviews. Each domestic and foreign jurisdiction has established supervisory agencies with broad administrative powers relative to licensing insurers and agents, approving policy forms, establishing reserve requirements, prescribing the form and content of statutory financial reports and regulating capital adequacy and the type, quality and amount of investments permitted. Such regulatory powers also extend to premium rate regulations requiring rates not be excessive, inadequate or unfairly discriminatory. In addition to regulation of dividends by insurance subsidiaries, intercompany transfers of assets or payments may be subject to prior notice or approval by insurance regulators, depending on the size of such transfers and payments in relation to the financial position of the insurance subsidiaries making the transfer or payments.
As our insurance operations are conducted in both domestic and foreign jurisdictions, we are subject to a number of regulatory agency requirements applicable to a portion, or all, of our operations. These include but are not limited to, the State of Illinois Department of Insurance (which is our global group-wide supervisor), the U.K. Prudential Regulatory Authority and Financial Conduct Authority, the Office of Superintendent of Financial Institutions in Canada, the Luxembourg insurance regulator Commissariat aux Assurances (the CAA) and the Bermuda Monetary Authority.
The U.S. and foreign regulatory environment in which we operate is evolving on an ongoing basis and impacts aspects of corporate governance, risk management practices, public disclosures and cyber security. We
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continue to invest in the security of our systems and in our technology infrastructure on an enterprise-wide basis.
Domestic insurers are also required by state insurance regulators to provide coverage to certain insureds who would not otherwise be considered eligible by the insurers. Each state dictates the types of insurance and the level of coverage that must be provided to such involuntary risks. Our share of these involuntary risks is mandatory and generally a function of our respective share of the voluntary market by line of insurance in each state.
Further, domestic insurance companies are subject to state guaranty fund and other insurance-related assessments. Guaranty funds are governed by state insurance guaranty associations which levy assessments to meet the funding needs of insolvent insurer estates. Other insurance-related assessments are generally levied by state agencies to fund various organizations, including disaster relief funds, rating bureaus, insurance departments and workers' compensation second injury funds, and by industry organizations that assist in the statistical analysis and ratemaking process, and we have the ability to recoup certain of these assessments from policyholders.
Although the U.S. federal government does not currently directly regulate the business of insurance, federal legislative and regulatory initiatives can affect the insurance industry. These initiatives and legislation include proposals relating to terrorism and natural catastrophe exposures, cybersecurity risk management, federal financial services reforms and certain tax reforms.
Hardy, a specialized Lloyd's of London (Lloyd's) underwriter, is also supervised by the Council of Lloyd's, which is the franchisor for all Lloyd's operations. The Council of Lloyd's has wide discretionary powers to regulate Lloyd's underwriting, such as establishing the capital requirements for syndicate participation. In addition, the annual business plan of each syndicate is subject to the review and approval of the Lloyd's Franchise Board, which is responsible for business planning and monitoring for all syndicates.
Capital adequacy and risk management regulations, referred to as Solvency II, apply to our European operations and are enacted by the European Commission, the executive body of the E.U. Additionally, the International Association of Insurance Supervisors (IAIS) continues to develop capital requirements as more fully discussed below.
Regulation Outlook
The IAIS has adopted a Common Framework (ComFrame) for the Supervision of Internationally Active Insurance Groups (IAIGs) which is focused on the effective group-wide supervision of internationally active insurance groups, such as CNA. As part of ComFrame, the IAIS is developing a global insurance capital standard for insurance groups. While the general parameters of ComFrame have been finalized, many critical areas of the global insurance capital standard are still under consideration. Certain jurisdictional regulatory regimes are subject to revision in response to these global developments.
The National Association of Insurance Commissioners (NAIC) has developed an approach to group capital regulation and solvency-monitoring activities using the Group Capital Calculation (GCC). While the current U.S. regulatory regime is based on legal entity regulation, the GCC will quantify risk across the insurance group and also provide additional financial information to regulators to assess the financial condition of non-insurance entities. The GCC was adopted by the NAIC along with model legislative language designed to enable the framework once implemented by state legislatures. Alongside the GCC, the NAIC is also working with other interested jurisdictions, both domestic and international, to develop an Aggregation Method (AM) approach to assessing group capital. The AM is influenced by the GCC and calculated in a similar manner. By 2024, the IAIS will be assessing whether the AM provides comparable outcomes to the consolidated group insurance capital standard (ICS) being developed for use with IAIGs.
There have also been definitive developments with respect to prudential insurance supervision unrelated to the IAIS activities. On September 22, 2017, the U.S. Treasury Department, the U.S. Trade Representative (USTR) and the E.U. announced they had formally signed a covered agreement on Prudential Measures Regarding Insurance and Reinsurance (U.S.-E.U. Covered Agreement). The U.S.-E.U. Covered Agreement requires U.S. states to prospectively eliminate the requirement that domestic insurance companies must obtain collateral from
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E.U. reinsurance companies that are not licensed in their state (alien reinsurers) in order to obtain reserve credit under statutory accounting. In exchange, the E.U. will not impose local presence requirements on U.S. firms operating in the E.U., and effectively must defer to U.S. group capital regulation for these firms. On December 18, 2018, the U.S. Treasury Department, the USTR, and the U.K. announced they formally signed the Bilateral Agreement on Prudential Measures Regarding Insurance and Reinsurance (U.S.-U.K. Covered Agreement). This Agreement has similar terms as the U.S.-E.U. Covered Agreement. Because these covered agreements are not self-executing, U.S. state laws will need to be revised to change reinsurance collateral requirements to conform to the provisions within each of the agreements.
The reinsurance collateral requirement change must be effected by the states within five years from the signing of the covered agreements, which is September 1, 2022, or states risk federal preemption in this area. We have been monitoring the modification of state laws and regulations in order to comply with the provisions of the covered agreements and assess potential effects on our operations and prospects. The current expectation is that the necessary state statutory changes will be adopted by the deadline.
The advancement of environment, social and governance (ESG) frameworks intended to promote sustainable and inclusive development of insurance markets has been an area of focus for standard setters and regulatory bodies at the state, federal and international level. We continue to monitor the expansion of policy in this area and have established an internal ESG Committee and Task Force to seek to ensure compliance with future regulation, and assess and seek to implement best practices in response to the emerging guidance.
Human Capital
As of December 31, 2021, we had approximately 5,600 employees. We seek to create a culture of inclusion that challenges and engages our employees and offers them opportunities to learn, grow and achieve their career goals. We believe this will facilitate our ability to continue to attract and retain a highly talented workforce.
Talent Attraction, Retention and Development
CNA focuses on the attraction, retention and development of a highly talented workforce. We strive to maintain a robust talent pool to reflect the specialist nature of our business. Our annual talent and succession planning process culminates in a review with leadership of key talent retention and promotion, as well as a review of our succession plans.
We aim to continually build on the expertise of our workforce. At entry levels, we have implemented trainee and internship programs and we continue to leverage relationships with colleges to attract new talent.
Our approach to cultivating an engaging workplace and continuously improving the employee experience is designed to attract and retain top industry talent. We seek employee feedback through a range of methods, including employee pulse surveys and routine dialogue with our employee resource groups and leaders. In 2021, we refreshed our company flexible working program and implemented hybrid office/home working for most of our employees.
We seek to promote the development of employees, both to optimize current performance and to develop skills for future career growth. We offer eligible employees business unit specific curricula, tuition reimbursement opportunities, and mentoring programs. We focus on leadership development with programs designed for new leaders as well as specialized learning for all leaders. In addition, our performance management cycle seeks to ensure that employees have goals and development plans refreshed at least annually and performance review conversations are held between managers and their direct reports throughout the annual performance period.

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Diversity and Inclusion
Diversity and Inclusion (D&I) is a strategic imperative. Our D&I Vision is to cultivate an inclusive culture that celebrates individuals’ differences, attracts diverse talent, and inspires a work environment that enables all employees to do their best work.
To act on our D&I Vision, we seek to bring together senior leaders, D&I subject matter experts and a diverse spectrum of colleagues across our global network. Our strategy is created and executed by the senior leaders that comprise our D&I Council and the employees that lead our employee resource groups. This structure facilitates D&I thought leadership and employee perspectives. Critical components of our D&I Vision include:
Skill building. In 2021, we launched a new D&I learning program aimed to build allyship across the global enterprise. It includes various forms of allyship training and education for our employees – providing them with opportunities to learn and practice new skills.
Leadership training. CNA requires every people leader and officer to complete inclusive leadership training. We also provide additional networking and learning opportunities for leaders to support the critical role they play in creating an inclusive workplace culture.
Talent development. In 2021, we launched a new talent sponsorship program that seeks to accelerate the development of high performing diverse employees, diversify our leadership ranks, and broadly build inclusive leadership skills.
Representation. We regularly monitor our representation of diverse talent and review our trends in relation to both the labor market generally and industry-specific competitors. We seek to increase diversity throughout our organization.
Partnerships. CNA has a commitment to certain organizations whose D&I objectives align with our own. In 2021, through these partnerships, we delivered training opportunities to employees, uncovered new sources of future talent, contributed to the development of college students from underserved communities, and encouraged our employees to be an ally in their communities through volunteering.
We also have a corporate social responsibility strategy with a focus on four core areas: education, environment, inclusion and well-being. Our employees are encouraged to participate in a wide array of volunteer activities and we support their charitable giving by matching employee contributions to qualified nonprofit organizations.
Compensation and Benefits
We offer comprehensive compensation and benefits packages to eligible employees including a 401k plan, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off and certain family assistance programs, including paid family leave, flexible work arrangements and adoption assistance plans. We also offer stock-based compensation to certain management personnel as a way to attract and retain key talent.
Employee Wellbeing
We offer benefits that seek to support the overall wellbeing of our employees, including physical, mental, financial and social health. In 2021, we deployed a multitude of new benefits with an emphasis on wellbeing. These enhancements included the introduction of a new holistic wellbeing incentive program that provides tools and resources to help our employees and their families achieve their overall wellbeing goals. We also continue to provide access to a variety of mental health resources, such as our employee assistance program and programming focused on stress management and resilience.
The health and safety of our employees and the communities we serve is also a focus at CNA. In March 2020, we pivoted to a remote working environment for nearly all of our employees in response to the COVID-19 pandemic. As pandemic conditions persisted in 2021, remote working broadly remained in place while all of our offices were open for employee use throughout 2021 with enhanced safety protocols. We sought to provide our employees the opportunity to contribute productively and grow and develop, while also managing their physical and mental health.

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Available Information
We file annual, quarterly and current reports, proxy statements and other documents with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934 (Exchange Act). The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers, including CNA. The public can obtain any documents that we file with the SEC at www.sec.gov.
We also make available free of charge on or through our internet website at www.cna.com our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
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ITEM 1A. RISK FACTORS
Our business faces many risks and uncertainties. These risks and uncertainties could lead to events or circumstances that have a material adverse effect on our results of operations, equity, business and insurer financial strength and corporate debt ratings. We have described below material risks that we face. There may be additional risks that we do not yet know of or that we do not currently perceive to be material that may also affect our business. You should carefully consider and evaluate all of the information included in this report and any subsequent reports we may file with the SEC or make available to the public before investing in any securities we issue.
Insurance Risks
If we determine that our recorded insurance reserves are insufficient to cover our estimated ultimate unpaid liability for claim and claim adjustment expenses, we may need to increase our insurance reserves which would result in a charge to our earnings.
We maintain insurance reserves to cover our estimated ultimate unpaid liability for claim and claim adjustment expenses, including the estimated cost of the claims adjudication process, for reported and unreported claims. Insurance reserves are not an exact calculation of liability but instead are complex management estimates developed utilizing a variety of actuarial reserve estimation techniques as of a given reporting date. The reserve estimation process involves a high degree of judgment and variability and is subject to a number of factors which are highly uncertain. These variables can be affected by both changes in internal processes and external events. Key variables include frequency of claims, claim severity, mortality, morbidity, discount rates, economic, social and medical inflation, claim handling policies and procedures, case reserving approach, underwriting and pricing policies, changes in the legal and regulatory environment and the lag time between the occurrence of an insured event and the time of its ultimate settlement. Mortality is the relative incidence of death. Morbidity is the frequency and severity of injury, illness, sickness and diseases contracted.
There is generally a higher degree of variability in estimating required reserves for long-tail coverages, such as workers' compensation, general liability and professional liability, as they require a relatively longer period of time for claims to be reported and settled. The impact of changes in economic and social inflation, and medical costs are also more pronounced for long-tail coverages due to the longer settlement period. Certain risks and uncertainties associated with our insurance reserves are outlined in the Critical Accounting Estimates and the Reserves - Estimates and Uncertainties sections of MD&A in Item 7.
We are subject to the uncertain effects of emerging or potential claims and coverage issues that arise as industry practices and legal, judicial, social, economic and other environmental conditions change. Further, the impact of social inflation continues to be significant and the trajectory of its future impact remains uncertain. These issues, as well as social inflation, have had, and may continue to have, a negative effect on our business, results of operations and financial condition by either extending coverage beyond the original underwriting intent or by increasing the number or size of claims, resulting in further increases in our reserves. The effects of unforeseen emerging claim and coverage issues are extremely difficult to predict and may be material.
In light of the many uncertainties associated with establishing the estimates and making the judgments necessary to establish reserve levels, we continually review and change our reserve estimates in a regular and ongoing process as experience develops from the actual reporting and settlement of claims and as the legal, regulatory and economic environment evolves. If our recorded reserves are insufficient for any reason, the required increase in reserves would be recorded as a charge against our earnings in the period in which reserves are determined to be insufficient. These charges could be substantial.
Our actual experience could vary from the key assumptions used to determine active life reserves for long term care policies.
Our active life reserves for long term care policies are based on our best estimate assumptions as of September 30, 2020, due to a reserve unlocking at that date. Key assumptions include morbidity, persistency (the
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percentage of policies remaining in force), discount rate and future premium rate increases. Estimating future experience for long term care policies is highly uncertain because 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 add reserves. The required increase in reserves would be recorded as a charge against our earnings in the period in which reserves are determined to be insufficient. These charges could be substantial. See the Life & Group Policyholder Reserves portion of Reserves - Estimates and Uncertainties section of MD&A in Item 7 for more information.
Morbidity and persistency experience, inclusive of mortality, can be volatile and may be negatively affected by many factors including, but not limited to, policyholder behavior, judicial decisions regarding policy terms, socioeconomic factors, cost of care inflation, changes in health trends and advances in medical care.
A prolonged period during which investment returns remain at levels lower than those anticipated in our reserving discount rate assumptions could result in shortfalls in investment income on assets supporting our obligations under long term care policies, which may require increases to our reserves. This risk is more significant for our long term care products because the long potential duration of the policy obligations exceeds the duration of the supporting investment assets. Further, changes to the Internal Revenue Code may also affect the rate at which we discount our reserves. In addition, we may not receive regulatory approval for the level of premium rate increases we request. Any adverse deviation between the level of future premium rate increases approved and the level included in our reserving assumptions may require an increase to our reserves.
We are vulnerable to material losses from natural and man-made disasters.
Catastrophe losses are an inevitable part of our business. Various events can cause catastrophe losses. These events can be natural or man-made, and may include hurricanes, windstorms, earthquakes, hail, severe winter weather, fires, floods, riots, strikes, civil unrest, cyber-attacks, pandemics and acts of terrorism. The frequency and severity of these catastrophe events are inherently unpredictable. In addition, longer-term natural catastrophe trends may be changing and new types of catastrophe losses may be developing due to climate change, a phenomenon that has been associated with extreme weather events linked to rising temperatures and includes effects on global weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, rain, hail and snow.
The extent of our losses from catastrophes is a function of the total amount of our insured exposures in the affected areas, the frequency and severity of the events themselves, the level of reinsurance coverage, reinsurance reinstatement premiums and state residual market assessments, if any. It can take a long time for the ultimate cost of any catastrophe losses to us to be finally determined, as a multitude of factors contribute to such costs, including evaluation of general liability and pollution exposures, infrastructure disruption, business interruption and reinsurance collectibility. Further, significant catastrophic events or a series of catastrophic events have the potential to impose financial stress on the reinsurance industry, which could impact our ability to collect amounts owed to us by reinsurers, thereby resulting in higher net incurred losses.
Reinsurance coverage for terrorism events is provided only in limited circumstances, especially in regard to “unconventional” terrorism acts, such as nuclear, biological, chemical or radiological attacks. Our principal reinsurance protection against these large-scale terrorist attacks is the coverage currently provided through the Terrorism Risk Insurance Program Reauthorization Act of 2019 (TRIPRA) through December 31, 2027. However, such coverage is subject to a mandatory deductible and other limitations. It is also possible that future legislation could change or eliminate the program, which could adversely affect our business by increasing our exposure to terrorism losses, or by lowering our business volume through efforts to avoid that exposure. For a further discussion of TRIPRA, see Part II, Item 7, MD&A - Catastrophes and Related Reinsurance.
As a result of the items discussed above, catastrophe losses are particularly difficult to estimate, could cause us to exhaust our available reinsurance limits and could adversely affect the cost and availability of reinsurance.
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Accordingly, catastrophic events could have a material adverse effect on our business, results of operations, financial condition and liquidity.
The COVID-19 pandemic and measures to mitigate the spread of the virus have resulted in increased claims and related litigation risk across our enterprise, which may continue to have adverse impacts on our business, results of operations and financial condition and could be material.
We have experienced, and may continue to experience, increased claim submissions and litigation related to denial of claims based on policy coverage or the facts of the claim, in certain lines of business that are implicated by the pandemic and mitigating actions taken by our customers and governmental authorities in response to its spread. These lines include primarily healthcare professional liability, workers' compensation, commercial property related business interruption coverage, management liability (directors and officers, employment practices, and professional liability lines) and trade credit. We recorded significant losses during 2020, the majority of which are classified as incurred but not reported (IBNR) reserves, in these areas and may experience continued losses, which could be material.
Increased frequency or severity in any or all of the foregoing lines, or others where the exposure has yet to emerge, may have a material impact on our business, results of operations and financial condition.
We have incurred and may continue to incur substantial expenses related to litigation activity in connection with COVID-related legal claims. These actions primarily relate to denial of claims submitted as a result of the pandemic and the mitigating actions under commercial property policies for business interruption coverage, including lockdowns and closing of certain businesses. The significance of such litigation, both in substance and volume, and the resultant activities we have initiated, including external counsel engagement, and the costs related thereto, may have a material impact on our business, results of operations and financial condition.
We have exposures related to asbestos and environmental pollution (A&EP) claims, which could result in material losses.
Our property and casualty insurance subsidiaries have exposures related to A&EP claims. Our experience has been that establishing claim and claim adjustment expense reserves for casualty coverages relating to A&EP claims is subject to uncertainties that are greater than those presented by other claims. Additionally, traditional actuarial methods and techniques employed to estimate the ultimate cost of claims for more traditional property and casualty exposures are less precise in estimating claim and claim adjustment expense reserves for A&EP. As a result, estimating the ultimate cost of both reported and unreported A&EP claims is subject to a higher degree of variability. On August 31, 2010, we completed a retroactive reinsurance transaction under which substantially all of our legacy A&EP liabilities were ceded to National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc., subject to an aggregate limit of $4 billion (Loss Portfolio Transfer). The cumulative amount ceded under the Loss Portfolio Transfer as of December 31, 2021 was $3.4 billion. If the other parties to the Loss Portfolio Transfer do not fully perform their obligations, net losses incurred on A&EP claims covered by the Loss Portfolio Transfer exceed the aggregate limit of $4 billion, or we determine we have exposures to A&EP claims not covered by the Loss Portfolio Transfer, we may need to increase our recorded net reserves which would result in a charge against our earnings. These charges could be substantial. Additionally, if the A&EP claims exceed the limit of the Loss Portfolio Transfer, we will need to assess whether to purchase additional limit or to reassume claim handling responsibility for A&EP claims from an affiliate of NICO. Any additional reinsurance premium or future claim handling costs would also reduce our earnings.
We are exposed to, and may face adverse developments related to, mass tort claims that could arise from our insureds’ sale or use of potentially harmful products or substances, changes to the social and legal environment, issues related to altered interpretation of coverage and other new and emerging claim theories.
We face potential exposure to various types of new and emerging mass tort claims, including those related to exposure to potentially harmful products or substances such as glyphosate, lead paint and opioids; claims arising from changes that expand the right to sue, remove limitations on recovery, extend the statutes of
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limitations or otherwise repeal or weaken tort reforms, such as those related to abuse reviver statutes, including New York reviver statutes; and claims related to new and emerging theories of liability, such as those related to global warming and climate change. Evolving judicial interpretations and new legislation regarding the application of various tort theories and defenses, including application of various theories of joint and several liability, as well as the application of insurance coverage to these claims, give rise to new claimant activity. Emerging mass tort claim activity, including activity based on such changing judicial interpretations and recent and proposed legislation, could have a material adverse effect on our business, results of operations and financial condition.
Strategic Risks
We face intense competition in our industry; we may be adversely affected by the cyclical nature of the property and casualty business and the evolving landscape of our distribution network.
All aspects of the insurance industry are highly competitive and we must continuously allocate resources to refine and improve our insurance products and services to remain competitive. We compete with a large number of stock and mutual insurance companies and other entities, some of which may be larger or have greater financial or other resources than we do, for both distributors and customers. This includes agents, brokers and managing general underwriters who may increasingly compete with us to the extent that markets continue to provide them with direct access to providers of capital seeking exposure to insurance risk. Insurers compete on the basis of many factors, including products, price, services, ratings and financial strength. The competitor landscape has evolved substantially in recent years, with significant consolidation and new market entrants, such as insurtech firms, resulting in increased pressures on our ability to remain competitive, particularly in obtaining pricing that is both attractive to our customer base and risk-appropriate to us.
In addition, the property and casualty market is cyclical and has experienced periods characterized by relatively high levels of price competition, resulting in less restrictive underwriting standards and relatively low premium rates, followed by periods of relatively lower levels of competition, more selective underwriting standards and relatively high premium rates. During periods in which price competition is high, we may lose business to competitors offering competitive insurance products at lower prices. As a result, our premium levels and expense ratio could be materially adversely impacted.
We market our insurance products worldwide primarily through independent insurance agents, insurance brokers, and managing general underwriters who also promote and distribute the products of our competitors. Any change in our relationships with our distribution network agents, brokers or managing general underwriters, including as a result of consolidation and their increased promotion and distribution of our competitors' products, could adversely affect our ability to sell our products. As a result, our business volume and results of operations could be materially adversely impacted.
Our underwriting strategies currently rely on the effectiveness of reinsurance arrangements and we accordingly face risks relating to reinsurance, including obtaining reinsurance at a cost or on terms and conditions we deem acceptable, reinsurance counterparty risk and ineffective reinsurance coverage.
A primary reason we purchase reinsurance is to manage our exposure to risk, thereby facilitating our underwriting strategies in certain key areas. Under our ceded reinsurance arrangements, a reinsurer assumes a specified portion of our exposure in exchange for a specified portion of policy premiums. Market conditions determine the availability and cost of the reinsurance protection we purchase, which affects the volatility of our business and profitability, as well as the level and types of risk we retain. If we are unable to obtain sufficient reinsurance at a cost or on terms and conditions we deem acceptable, our risk exposure will not be mitigated or we may forego such increased risk, thereby adversely impacting our underwriting strategies. In addition, use of reinsurance exposes us to credit risk of the reinsurers, as the reinsurance arrangements do not relieve us of the liability to the customer. If a reinsurer is unable to meet its financial obligations under a reinsurance arrangement, we will remain obligated under the original policies issued to our customers. Furthermore, while we use various risk management methods, including the use of reinsurance, to effectively manage risk, there is the possibility that one or more natural catastrophes and/or terrorism or other events could result in claims
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substantially exceeding expectations, thereby making the reinsurance strategy significantly less effective. Such reinsurance-related risks could have a material adverse effect on our business, results of operations and financial condition and adversely affect our underwriting strategies in certain lines of business.
We may be adversely affected by technological changes or disruptions in the insurance marketplace.
Technological changes in the way insurance transactions are completed in the marketplace, and our ability to react effectively to such change, may present significant competitive risks. For example, more insurers are utilizing "big data" analytics to make underwriting and other decisions that impact product design and pricing. If such utilization is more effective than how we use similar data and information, we will be at a competitive disadvantage. There can be no assurance that we will continue to compete effectively with our industry peers due to technological changes; accordingly, this may have a material adverse effect on our business, results of operations and financial condition.
In addition, agents and brokers, technology companies, or other third parties may create alternate distribution channels for commercial business that may adversely impact product differentiation and pricing. For example, they may create a digitally enabled distribution channel that may adversely impact our competitive position. Our efforts or the efforts of agents and brokers with respect to new products or alternate distribution channels, as well as changes in the way agents and brokers utilize greater levels of data and technology, could adversely impact our business relationship with independent agents and brokers who currently market our products, resulting in a lower volume and/or profitability of business generated from these sources.
We face considerable competition within our industry for qualified, specialized talent and any significant inability to attract and retain talent may adversely affect the execution of our business strategies.
The successful execution of our business plan depends on our ability to attract and retain qualified talent. Due to the intense competition in our industry and from businesses outside the industry for qualified employees, especially those in key positions and those possessing highly specialized knowledge and industry experience in areas such as underwriting, data and analytics and technology, we may encounter obstacles to our ability to attract and retain such employees, which could materially adversely affect our business, results of operations and financial condition.
We are controlled by a single stockholder which could result in potential conflicts of interest.
Loews beneficially owned approximately 89.6% of our outstanding shares of common stock as of December 31, 2021, and is in a position to control actions that require the consent of stockholders, including the election of directors, amendment of our Restated Certificate of Incorporation and any merger or sale of substantially all of our assets. In addition, four officers of Loews, along with the Co-Chairman of the Board of Loews, serve on our Board of Directors. We have also entered into services agreements and a registration rights agreement with Loews, and we may in the future enter into other agreements with Loews. It is possible that potential conflicts of interest could arise in the future for our directors who are also officers and/or directors of Loews with respect to a number of areas relating to the past and ongoing relationships of Loews and us, including tax and insurance matters, financial commitments and sales of common stock pursuant to registration rights or otherwise.
Financial Risks
We may incur significant realized and unrealized investment losses and volatility in net investment income arising from changes in the financial markets.
Our investment portfolio is exposed to various risks, such as interest rate, credit spread, issuer default, equity prices and foreign currency, which are unpredictable. Financial markets are highly sensitive to changes in economic conditions, monetary policies, tax policies, domestic and international geopolitical issues and many other factors. Changes in financial markets including fluctuations in interest rates, credit, equity prices and foreign currency prices and many other factors beyond our control can adversely affect the value of our investments, the realization of investment income and the rate at which we discount certain liabilities. Our investment portfolio is also subject to increased valuation uncertainties when investment markets are illiquid. The valuation of investments is more subjective when markets are illiquid, thereby increasing the risk that the estimated fair value (i.e., the carrying amount) of the portion of our investment portfolio that is carried at fair value in our financial statements is not reflective of the prices at which actual transactions could occur.
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We have significant holdings in fixed maturity investments that are sensitive to changes in interest rates. A decline in interest rates may reduce the returns earned on new fixed maturity investments, thereby reducing our net investment income, while an increase in interest rates may reduce the value of our existing fixed maturity investments, which could reduce our net unrealized gains included in Accumulated other comprehensive income (AOCI). The value of our fixed maturity investments is also subject to risk that certain investments may default or become impaired due to deterioration in the financial condition of issuers of the investments we hold or in the underlying collateral of the security.
In addition, we invest a portion of our assets in limited partnerships and common stock which are subject to greater market volatility than our fixed maturity investments. Limited partnership investments generally provide a lower level of liquidity than fixed maturity or equity investments which may also limit our ability to withdraw funds from these investments. The timing and amount of income or losses on such investments is inherently variable and can contribute to volatility in reported earnings.
Further, we hold a portfolio of commercial mortgage loans. We are subject to risk related to the recoverability of loan balances, which is influenced by declines in the estimated cash flows from underlying property leases, fair value of collateral, refinancing risk and the creditworthiness of tenants of credit tenant loan properties, where lease payments directly service the loan. Any changes in actual or expected collections would result in a charge to earnings.
As a result of these factors, we may not earn an adequate return on our investments, may be required to write down the value of our investments and may incur losses on the disposition of our investments all of which could materially adversely affect our business, results of operations and financial condition.
Operational Risks
We use analytical models to assist our decision making in key areas such as pricing, reserving, catastrophe risks and capital modeling and may be adversely affected if actual results differ materially from the model outputs and related analyses.
We use various modeling techniques and data analytics (e.g. scenarios, predictive, stochastic and/or forecasting) to analyze and estimate exposures, loss trends and other risks associated with our assets and liabilities. This includes both proprietary and third-party modeled outputs and related analyses to assist us in decision-making related to underwriting, pricing, capital allocation, reserving, investing, reinsurance and catastrophe risk, among other things. We incorporate numerous assumptions and forecasts about the future level and variability of policyholder behavior, loss frequency and severity, interest rates, equity markets, inflation, capital requirements, and currency exchange rates, among others. The modeled outputs and related analyses from both proprietary models and third parties are subject to various assumptions, uncertainties, model design errors and the inherent limitations of any statistical analysis. Further, climate change may make modeled outcomes less certain or produce new, non-modeled risks.
In addition, the effectiveness of any model can be degraded by operational risks, including the improper use of the model, input errors, data errors and human error. As a result, actual results may differ materially from our modeled results. Our profitability and financial condition substantially depends on the extent to which our actual experience is consistent with assumptions we use in our models and ultimate model outputs. If, based upon these models or other factors, we misprice our products or fail to appropriately estimate the risks we are exposed to, our business, results of operations and financial condition may be materially adversely affected.
Any significant interruption in the operation of our business functions, facilities and systems or our vendors' facilities and systems could result in a materially adverse effect on our operations.
Our business is highly dependent upon our ability to perform, in an efficient and uninterrupted manner, through our employees or vendor relationships and using our and their facilities and systems, necessary business functions, such as internet support and 24-hour call centers, processing new and renewal business, providing customer service, processing and paying claims and other obligations and issuing financial statements.
Our, or our vendors', facilities and systems could become unavailable, inoperable, or otherwise impaired from a variety of causes, including natural events, such as hurricanes, tornadoes, windstorms, earthquakes, severe winter weather and fires, or other events, such as explosions, terrorist attacks, computer security breaches or
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cyber-attacks, riots, hazardous material releases, medical epidemics or pandemics, utility outages, interruptions of data processing and storage systems or unavailability of communications facilities. An interruption in our system availability occurred in March 2021 as a result of a cybersecurity attack we sustained. Please refer to the immediately following risk factor for further information regarding this incident. Likewise, we could experience a significant failure, interruption or corruption of one or more of our or our vendors' information technology, telecommunications, or other systems for various reasons, including significant failures or interruptions that might occur as existing systems are replaced or upgraded. The shut-down or unavailability of one or more of our or our vendors’ systems or facilities for these or any other reasons could significantly impair our ability to perform critical business functions in a timely basis.
In addition, because our information technology and telecommunications systems interface with and depend on third-party systems, we could experience service denials if demand for such service exceeds capacity or a third-party system fails or experiences an interruption. If sustained or repeated, such events could result in a deterioration of our ability to perform necessary business functions.
The foregoing risks could expose us to monetary and reputational damages. Potential exposures resulting from the March 2021 cybersecurity attack, described in the immediately following risk, as well as any future incidents may include substantially increased compliance costs, as well as increased costs relating to investments in computer system and security-related upgrades, with those costs potentially not recoverable under relevant insurance coverage. We anticipate making continued investments to improve our security and infrastructure, which are not recoverable under relevant insurance coverage. If our business continuity plans or system security do not sufficiently address these risks, they could have a material adverse effect on our business, results of operations and financial condition.
Any significant breach in our data security infrastructure or our vendors’ facilities and systems could disrupt business, cause financial losses and damage our reputation, and insurance coverage may not be available for claims related to a breach.
A significant breach of our data security infrastructure may result from actions by our employees, vendors, third-party administrators, or unknown third parties or through cyber-attacks. The risk of a breach can exist whether software services are in our data centers or are cloud-based software services. Breaches have occurred, and may occur again, in our systems and in the systems of our vendors and third-party administrators.
Such a breach could affect our data framework or cause a failure to protect the personal information of our customers, claimants or employees, or sensitive and confidential information regarding our business and may result in operational impairments and financial losses, as well as significant harm to our reputation. The breach of confidential information also could give rise to legal liability and regulatory action under data protection and privacy laws, as well as evolving regulation in this regard. During the third quarter of 2021, we were notified of a breach of certain systems of a third-party administrator, which resulted in breach notifications sent by such administrator to potentially impacted persons, including a limited number of our claimants. While we do not believe such notifications and resultant actions will have a material adverse effect on our business, this or similar incidents, or any other such breach of our or our vendors’ data security infrastructure could have a material adverse effect on our business, results of operations and financial condition.
We sustained a sophisticated cybersecurity attack in March 2021 involving ransomware that caused a network disruption and impacted certain of our systems. Upon detection, we undertook steps to address the incident, including engaging a team of third-party forensic experts and notifying law enforcement and key regulators. We restored network systems and resumed normal operations. We are continuing to assess all actions that we will take to improve our existing systems.
Our investigation revealed that an unauthorized third party copied some personal information relating to certain current and former employees, contractor workers and their dependents and certain other persons, including some policyholders. In July 2021, we provided notifications to the impacted individuals and to regulators, in accordance with applicable law. Although we currently have no indication that the impacted data has been misused, or that CNA or its policyholder data was specifically targeted by the unauthorized third party, we may be subject to subsequent investigations, claims or actions in addition to other costs, fines, penalties, or other obligations related to impacted data, whether or not such data is misused. In addition, the misuse, or perceived
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misuse, of sensitive or confidential information regarding our business or policyholders could cause harm to our reputation and result in the loss of business with existing or potential customers, which could adversely impact our business, results of operations and financial condition.
Although we maintain cybersecurity insurance coverage insuring against costs resulting from cyber-attacks (including the March 2021 attack), we do not expect the amount available under our coverage policy to cover all losses. Costs and expenses incurred and that we are likely to incur in connection with the March 2021 attack include both direct and indirect costs and are not all covered by our insurance coverage. In addition, potential disputes with our insurers about the availability of insurance coverage for claims relating to the March 2021 attack or any future incident could occur. Further, as a result of the March 2021 attack, we incurred higher costs for the replenishment of our current policy through the end of the term, and we believe we will incur higher costs for future cybersecurity insurance coverage beyond the current term.
Based on the information currently known, we do not believe that the March 2021 cybersecurity attack will have a material impact on our business, results of operations or financial condition, but no assurances can be given as we continue to assess the full impact from the incident, including costs, expenses and insurance coverage. We may also be subject to future incidents that could have a material adverse effect on our business, results of operations or financial condition or may result in operational impairments and financial losses, as well as significant harm to our reputation.
Inability to detect and prevent significant employee or third-party service provider misconduct, inadvertent errors and omissions, or exposure relating to functions performed on our behalf could result in a materially adverse effect on our business, results of operations and financial condition.
We may incur losses which arise from employees or third-party service providers engaging in intentional, negligent or inadvertent misconduct, fraud, errors and omissions, failure to comply with internal guidelines, including with respect to underwriting authority, or failure to comply with regulatory requirements. Our or our third-party service providers' controls may not be able to detect all possible circumstances of such noncompliant activity and the internal structures in place to prevent this activity may not be effective in all cases. Any losses relating to such non-compliant activity could adversely affect our business, results of operations and financial condition.
Portions of our insurance business is underwritten and serviced by third parties. With respect to underwriting, our contractual arrangements with third parties will typically grant them limited rights to write new and renewal policies, subject to contractual restrictions and obligations, including requiring them to underwrite within the terms of our licenses. Should these third parties issue policies that exceed these contractual restrictions, we could be deemed liable for such policies and subject to regulatory fines and penalties for any breach of licensing requirements. It is possible that in such circumstance we might not be fully indemnified for such third parties’ contractual breaches.
Additionally, we rely on certain third-party claims administrators, including the administrators of our long term care claims, to handle policyholder services and perform significant claim administration and claim adjudication functions. Any failure by such administrator to properly perform service functions may result in losses as a result of over-payment of claims, legal claims against us and adverse regulatory enforcement exposure.
We have also licensed certain systems from third parties. We cannot be certain that we will have access to these systems or that our information technology or application systems will continue to operate as intended.
These risks could adversely impact our reputation and client relationships and have a material adverse effect on our business, results of operations and financial condition.

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Loss of key vendor relationships and issues relating to the transitioning of vendor relationships could compromise our ability to conduct business.
In the event that one or more of our vendors suffers a bankruptcy, is sold to another entity, sustains a significant business interruption or otherwise becomes unable to continue to provide products or services at the requisite level, we may be adversely affected. We may suffer operational impairments and financial losses associated with transferring business to a new vendor, assisting a vendor with rectifying operational difficulties, failure by vendors to properly perform service functions or assuming previously outsourced operations ourselves. Our inability to provide for appropriate servicing if a vendor becomes unable to fulfill its contractual obligations to us, either through transitioning to another service provider temporarily or permanently or assuming servicing internally, may have a materially adverse effect on our business, results of operations and financial condition.
We are subject to capital adequacy requirements and, if we are unable to maintain or raise sufficient capital to meet these requirements, regulatory agencies may restrict or prohibit us from operating our business.
Insurance companies such as ours are subject to capital adequacy standards set by regulators to help identify companies that merit further regulatory attention. In the U.S., these standards apply specified risk factors to various asset, premium and reserve components of our legal entity statutory basis of accounting financial statements. Current rules, including those promulgated by insurance regulators and specialized markets, such as Lloyd's, require companies to maintain statutory capital and surplus at a specified minimum level determined using the applicable jurisdiction's regulatory capital adequacy formula. If we do not meet these minimum requirements, we may be restricted or prohibited from operating our business in the applicable jurisdictions and specialized markets. If we are required to record a material charge against earnings in connection with a change in estimated insurance reserves or the occurrence of a catastrophic event, or if we incur significant losses related to our investment portfolio, which severely deteriorates our capital position, we may violate these minimum capital adequacy requirements unless we are able to raise sufficient additional capital. We may be limited in our ability to raise significant amounts of capital on favorable terms or at all.
The IAIS has adopted a common framework for the supervision of internationally active insurance groups and continues to develop a group basis ICS. The NAIC is also developing a group capital standard that is intended to be comparable to the ICS. The development and adoption of these capital standards could increase our prescribed capital requirement, the level at which regulatory scrutiny intensifies, as well as significantly increase our cost of regulatory compliance.
Our insurance subsidiaries, upon whom we depend for dividends in order to fund our corporate obligations, are limited by insurance regulators in their ability to pay dividends.
We are a holding company and are dependent upon dividends, loans and other sources of cash from our subsidiaries in order to meet our obligations. Ordinary dividend payments, or dividends that do not require prior approval by the insurance subsidiaries' domiciliary insurance regulator, are generally limited to amounts determined by formulas that vary by jurisdiction. If we are restricted from paying or receiving intercompany dividends, by regulatory rule or otherwise, we may not be able to fund our corporate obligations and debt service requirements or pay our stockholders dividends from available cash. As a result, we would need to pursue other sources of capital which may be more expensive or may not be available at all.
Rating agencies may downgrade their ratings of us, thereby adversely affecting our ability to write insurance at competitive rates or at all and increasing our cost of capital.
Ratings are an important factor in establishing the competitive position of insurance companies. Our insurance company subsidiaries, as well as our public debt, are rated by rating agencies, including, A.M. Best Company (A.M. Best), Moody's Investors Service, Inc. (Moody's), Standard & Poor's (S&P) and Fitch Ratings, Inc. (Fitch). Ratings reflect the rating agency's opinions of an insurance company's or insurance holding company's financial strength, capital adequacy, enterprise risk management practices, operating performance, strategic position and ability to meet its obligations to policyholders and debt holders, and may also reflect opinions on other areas such as information security and ESG matters.

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The rating agencies may take action to lower our ratings in the future as a result of any significant financial loss or changes in the methodology or criteria applied by the rating agencies. The severity of the impact on our business is dependent on the level of downgrade and, for certain products, which rating agency takes the rating action. Among the adverse effects in the event of such downgrades would be the inability to obtain a material volume of business from certain major insurance brokers, the inability to sell a material volume of our insurance products to certain markets and the required collateralization of certain future payment obligations or reserves. Further, if one or more of our corporate debt ratings were downgraded, we may find it more difficult to access the capital markets and we may incur higher borrowing costs.
In addition, it is possible that a significant lowering of the corporate debt ratings of Loews by certain of the rating agencies could result in an adverse effect on our ratings, independent of any change in our circumstances.
For further discussion of our ratings, see the Ratings subsection within the Liquidity and Capital Resources section of MD&A in Item 7.
We are subject to extensive existing state, local, federal and foreign governmental regulations that restrict our ability to do business and generate revenues; additional regulation or significant modification to existing regulations or failure to comply with regulatory requirements may have a materially adverse effect on our business, results of operations and financial condition.
The insurance industry is subject to comprehensive and detailed regulation and supervision. Most insurance regulations are designed to protect the interests of our policyholders and third-party claimants, rather than our investors. Each jurisdiction in which we do business has established supervisory agencies that regulate the manner in which we do business. Any changes in regulation could impose significant burdens on us. In addition, the Lloyd's marketplace sets rules under which its members, including our Hardy syndicate, operate.
These rules and regulations relate to, among other things, the standards of solvency (including risk-based capital measures), government-supported backstops for certain catastrophic events (including terrorism), investment restrictions, accounting and reporting methodology, establishment of reserves and potential assessments of funds to settle covered claims against impaired, insolvent or failed private or quasi-governmental insurers. In addition, rules and regulations have recently been introduced, or are being considered, in the areas of information security and ESG, which may also affect our business.
Regulatory powers also extend to premium rate regulations which require that rates not be excessive, inadequate or unfairly discriminatory. State jurisdictions ensure compliance with such regulations through market conduct exams, which may result in losses to the extent non-compliance is ascertained, either as a result of failure to document transactions properly or failure to comply with internal guidelines, or otherwise. The jurisdictions in which we do business may also require us to provide coverage to persons whom we would not otherwise consider eligible or restrict us from withdrawing from unprofitable lines of business or unprofitable market areas. Each jurisdiction dictates the types of insurance and the level of coverage that must be provided to such involuntary risks. Our share of these involuntary risks is mandatory and generally a function of our respective share of the voluntary market by line of insurance in each jurisdiction.
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ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
We lease our principal executive offices in Chicago, Illinois, as well as other property and casualty insurance offices throughout the U.S.  We also lease offices in Canada, the U.K., Belgium, Denmark, France, Germany, Italy, Luxembourg and the Netherlands, primarily for branch and insurance business operations in those locations.
We consider our properties to be in generally good condition, well maintained and suitable and adequate to carry on our business.
ITEM 3. LEGAL PROCEEDINGS
Information on our legal proceedings is set forth in Note F to the Consolidated Financial Statements included under Item 8.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on the New York Stock Exchange and the Chicago Stock Exchange under the symbol CNA.
As of February 4, 2022, we had 271,365,221 shares of common stock outstanding and approximately 89.6% of our outstanding common stock was owned by Loews. We had 834 stockholders of record as of February 4, 2022 according to the records maintained by our transfer agent.
Our Board of Directors has approved an authorization to purchase, in the open market or through privately negotiated transactions, our outstanding common stock, as our management deems appropriate. No repurchases of our common stock were made in the three months ended December 31, 2021.
The following graph compares the five-year total return of our common stock, the Standard & Poor's 500 (S&P 500) Index and the S&P 500 Property & Casualty Insurance Index. The graph assumes that the value of the investment in our common stock and each index was $100 at the base period, January 1, 2017, and that dividends, if any, were reinvested in the stock or index.
Company / Index Base Period 2017 2018 2019 2020 2021
CNA Financial Corporation $ 100.00  $ 136.94  $ 121.65  $ 133.19  $ 126.01  $ 149.96 
S&P 500 Index 100.00  121.83  116.49  153.17  181.35  233.41 
S&P 500 Property & Casualty Insurance Index 100.00  122.39  116.64  146.82  157.04  187.31 
CNA-20211231_G1.JPG
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ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2020 Compared with 2019
This section of this Form 10-K generally discusses 2021 and 2020 results and year-to-year comparisons between 2021 and 2020. With the exception of our Commercial and Corporate & Other business segments where we changed the segment presentation of a legacy portfolio of excess workers' compensation policies and certain legacy mass tort reserves effective January 1, 2021, a discussion of changes in our results of operations from 2020 to 2019 has been omitted from this Form 10-K, but may be found in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended December 31, 2020, filed with the SEC on February 9, 2021.
Index to this MD&A
Management's discussion and analysis of financial condition and results of operations is comprised of the following sections:
Page No.
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31
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OVERVIEW
The following discussion should be read in conjunction with Part I, Item 1A Risk Factors and Part II, Item 8 Financial Statements and Supplementary Data of this Form 10-K.
CRITICAL ACCOUNTING ESTIMATES
The preparation of 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 Consolidated Financial Statements and the amount of revenues and expenses reported during the period. Actual results may differ from those estimates.
Our Consolidated Financial Statements and accompanying notes have been prepared in accordance with GAAP applied on a consistent basis. We continually evaluate the accounting policies and estimates used to prepare the Consolidated Financial Statements. In general, our estimates are based on historical experience, evaluation of current trends, information from third-party professionals and various other assumptions that 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 Consolidated Financial Statements as their application places the most significant demands on our judgment. Note A to the Consolidated Financial Statements included under Item 8 should be read in conjunction with this section to assist with obtaining an understanding of the underlying accounting policies related to these estimates. 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.
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 are estimated using actuarial estimates about morbidity and persistency as well as assumptions about expected investment returns and future premium rate increases. 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 below.
Long Term Care Reserves
Future policy benefit reserves for our long term care policies are based on certain assumptions, including morbidity, persistency, inclusive of mortality, discount rates and future premium rate increases. 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 add to reserves.
A prolonged period during which investment returns remain at levels lower than those anticipated in our reserving discount rate assumption could result in shortfalls in investment income on assets supporting our obligations under long term care policies, which may require increases to our reserves. In addition, we may not receive regulatory approval for the level of premium rate increases we request.
These changes to our reserves could materially adversely impact our results of operations, financial condition and equity. The reserving process is discussed in further detail in the Reserves - Estimates and Uncertainties section below.
Reinsurance and Insurance Receivables
Exposure exists with respect to the collectibility of ceded property and casualty and life reinsurance to the extent that any reinsurer is unable to meet its obligations or disputes the liabilities we have ceded under reinsurance agreements. An allowance for uncollectible reinsurance is recorded on the basis of periodic evaluations of balances due from reinsurers, reinsurer financial strength rating and solvency, industry
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experience and current and forecast economic conditions. Further information on our reinsurance receivables is in Note G to the Consolidated Financial Statements included under Item 8.
Additionally, exposure exists with respect to the collectibility of amounts due from policyholders related to insurance contracts, including amounts due from insureds under high deductible policies and retrospectively rated policies. An allowance for uncollectible insurance receivables is recorded on the basis of periodic evaluations of balances due from insureds, currently as well as in the future, historical business default data, management's experience and current and forecast economic conditions.
If actual experience differs from the estimates made by management in determining the allowances for uncollectible reinsurance and insurance receivables, net receivables as reflected on our Consolidated Balance Sheets may not be collected. Therefore, our results of operations, financial condition or equity could be materially adversely affected. Further information on our process for determining the allowances for uncollectible reinsurance and insurance receivables is in Note A to the Consolidated Financial Statements included under Item 8.
Valuation of Investments and Impairment of Securities
Our fixed maturity and equity securities are carried at fair value on the balance sheet. Fair value represents the price that would be received in a sale of an asset in an orderly transaction between market participants on the measurement date, the determination of which may require us to make a significant number of assumptions and judgments. Securities with the greatest level of subjectivity around valuation are those that rely on inputs that are significant to the estimated fair value and that are not observable in the market or cannot be derived principally from or corroborated by observable market data. These unobservable inputs are based on assumptions consistent with what we believe other market participants would use to price such securities. Further information on our fair value measurements is in Note C to the Consolidated Financial Statements included under Item 8.
Our fixed maturity securities are subject to market declines below amortized cost that may result in the recognition of impairment losses in earnings. Factors considered in the determination of whether or not an impairment loss is recognized in earnings include a current intention or need to sell the security or an indication that a credit loss exists. Significant judgment is required in the determination of whether a credit loss has occurred for a security. We consider all available evidence when determining whether a security requires a credit allowance to be recorded, including the financial condition and expected near-term and long-term prospects of the issuer, whether the issuer is current with interest and principal payments, credit ratings on the security or changes in ratings over time, general market conditions, industry, sector or other specific factors and whether we expect to receive cash flows sufficient to recover the entire amortized cost basis of the security.
Our mortgage loan portfolio is subject to the expected credit loss model, which requires immediate recognition of estimated credit losses over the life of the asset and the presentation of the asset at the net amount expected to be collected. Significant judgment is required in the determination of estimated credit losses and any changes in our expectation of the net amount to be collected are recognized in earnings.
Further information on our process for evaluating impairments and expected credit losses is in Note A to the Consolidated Financial Statements included under Item 8.
Income Taxes
We account for income taxes under the asset and liability method. Under this method, deferred income taxes are recognized for temporary differences between the financial statement and tax return basis of assets and liabilities. Any resulting future tax benefits are recognized to the extent that realization of such benefits is more likely than not, and a valuation allowance is established for any portion of a deferred tax asset that management believes will not be realized. The assessment of the need for a valuation allowance requires management to make estimates and assumptions about future earnings, reversal of existing temporary differences and available tax planning strategies. If actual experience differs from these estimates and assumptions, the recorded deferred tax asset may not be fully realized resulting in an increase to income tax expense in our results of operations. In addition, the ability to record deferred tax assets in the future could be limited, resulting in a higher effective tax rate in that future period.
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RESERVES - ESTIMATES AND UNCERTAINTIES
The level of reserves we maintain represents our best estimate, as of a particular point in time, of what the ultimate settlement and administration of claims will cost based on our assessment of facts and circumstances known at that time. Reserves are not an exact calculation of liability but instead are complex estimates that we derive, generally utilizing a variety of actuarial reserve estimation techniques, from numerous assumptions and expectations about future events, both internal and external, many of which are highly uncertain. As noted below, we review our reserves for each segment of our business periodically, and any such review could result in the need to increase reserves in amounts which could be material and could adversely affect our results of operations, equity, business and insurer financial strength and corporate debt ratings. Further information on reserves is provided in Note E to the Consolidated Financial Statements included under Item 8.
Property and Casualty Claim and Claim Adjustment Expense Reserves
We maintain loss reserves to cover our estimated ultimate unpaid liability for claim and claim adjustment expenses, including the estimated cost of the claims adjudication process, for claims that have been reported but not yet settled (case reserves) and claims that have been incurred but not reported (IBNR). IBNR includes a provision for development on known cases as well as a provision for late reported incurred claims. Claim and claim adjustment expense reserves are reflected as liabilities and are included on the Consolidated Balance Sheets under the heading “Insurance Reserves.” Adjustments to prior year reserve estimates, if necessary, are reflected in results of operations in the period that the need for such adjustments is determined. The carried case and IBNR reserves as of each balance sheet date are provided in the Segment Results section of this MD&A and in Note E to the Consolidated Financial Statements included under Item 8.
As discussed in the Risk Factors discussion within Item 1A, there is a risk that our recorded reserves are insufficient to cover our estimated ultimate unpaid liability for claims and claim adjustment expenses. Unforeseen emerging or potential claims and coverage issues are also difficult to predict and could materially adversely affect the adequacy of our claim and claim adjustment expense reserves and could lead to future reserve additions.
In addition, our property and casualty insurance subsidiaries also have actual and potential exposures related to A&EP claims, which could result in material losses. To mitigate the risks posed by our exposure to A&EP claims and claim adjustment expenses, we completed a transaction with NICO under which substantially all of our legacy A&EP liabilities were ceded to NICO effective January 1, 2010. See Note E to the Consolidated Financial Statements included under Item 8 for further discussion about the transaction with NICO, its impact on our results of operations and the deferred retroactive reinsurance gains and the amount of remaining reinsurance limit.
Establishing Property & Casualty Reserve Estimates
In developing claim and claim adjustment expense (loss or losses) reserve estimates, our actuaries perform detailed reserve analyses that are staggered throughout the year. The data is organized at a reserve group level. A reserve group typically can be a line of business covering a subset of insureds such as commercial automobile liability for small or middle market customers or it can be a particular type of claim such as construction defect. Every reserve group is reviewed at least once during the year, but most are reviewed more frequently. The analyses generally review losses gross of ceded reinsurance and apply the ceded reinsurance terms to the gross estimates to establish estimates net of reinsurance. In addition to the detailed analyses, we review actual loss emergence for all products each quarter.
Most of our business can be characterized as long-tail. For long-tail business, it will generally be several years between the time the business is written and the time when all claims are settled. Our long-tail exposures include commercial automobile liability, workers' compensation, general liability, medical professional liability, other professional liability and management liability coverages, assumed reinsurance run-off and products liability. Short-tail exposures include property, commercial automobile physical damage, marine, surety and
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warranty. Specialty, Commercial and International contain both long-tail and short-tail exposures. Corporate & Other contains run-off long-tail exposures.
Various methods are used to project ultimate losses for both long-tail and short-tail exposures.
The paid development method estimates ultimate losses by reviewing paid loss patterns and applying them to accident or policy years with further expected changes in paid losses. Selection of the paid loss pattern may require consideration of several factors, including the impact of economic, social and medical inflation on claim costs, the rate at which claims professionals make claim payments and close claims, the impact of judicial decisions, the impact of underwriting changes, the impact of large claim payments and other factors. Claim cost inflation itself may require evaluation of changes in the cost of repairing or replacing property, changes in the cost of medical care, changes in the cost of wage replacement, judicial decisions, legislative changes and other factors. Because this method assumes that losses are paid at a consistent rate, changes in any of these factors can affect the results. Since the method does not rely on case reserves, it is not directly influenced by changes in their adequacy.
For many reserve groups, paid loss data for recent periods may be too immature or erratic for accurate predictions. This situation often exists for long-tail exposures. In addition, changes in the factors described above may result in inconsistent payment patterns. Finally, estimating the paid loss pattern subsequent to the most mature point available in the data analyzed often involves considerable uncertainty for long-tail products such as workers' compensation.
The incurred development method is similar to the paid development method, but it uses case incurred losses instead of paid losses. Since the method uses more data (case reserves in addition to paid losses) than the paid development method, the incurred development patterns may be less variable than paid patterns. However, selection of the incurred loss pattern typically requires analysis of all of the same factors described above. In addition, the inclusion of case reserves can lead to distortions if changes in case reserving practices have taken place, and the use of case incurred losses may not eliminate the issues associated with estimating the incurred loss pattern subsequent to the most mature point available.
The loss ratio method multiplies earned premiums by an expected loss ratio to produce ultimate loss estimates for each accident or policy year. This method may be useful for immature accident or policy periods or if loss development patterns are inconsistent, losses emerge very slowly or there is relatively little loss history from which to estimate future losses. The selection of the expected loss ratio typically requires analysis of loss ratios from earlier accident or policy years or pricing studies and analysis of inflationary trends, frequency trends, rate changes, underwriting changes and other applicable factors.
The Bornhuetter-Ferguson method using paid loss is a combination of the paid development method and the loss ratio method. This method normally determines expected loss ratios similar to the approach used to estimate the expected loss ratio for the loss ratio method and typically requires analysis of the same factors described above. This method assumes that future losses will develop at the expected loss ratio level. The percent of paid loss to ultimate loss implied from the paid development method is used to determine what percentage of ultimate loss is yet to be paid. The use of the pattern from the paid development method typically requires consideration of the same factors listed in the description of the paid development method. The estimate of losses yet to be paid is added to current paid losses to estimate the ultimate loss for each year. For long-tail lines, this method will react very slowly if actual ultimate loss ratios are different from expectations due to changes not accounted for by the expected loss ratio calculation.
The Bornhuetter-Ferguson method using incurred loss is similar to the Bornhuetter-Ferguson method using paid loss except that it uses case incurred losses. The use of case incurred losses instead of paid losses can result in development patterns that are less variable than paid patterns. However, the inclusion of case reserves can lead to distortions if changes in case reserving have taken place, and the method typically requires analysis of the same factors that need to be reviewed for the loss ratio and incurred development methods.
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The frequency times severity method multiplies a projected number of ultimate claims by an estimated ultimate average loss for each accident or policy year to produce ultimate loss estimates. Since projections of the ultimate number of claims are often less variable than projections of ultimate loss, this method can provide more reliable results for reserve groups where loss development patterns are inconsistent or too variable to be relied on exclusively. In addition, this method can more directly account for changes in coverage that affect the number and size of claims. However, this method can be difficult to apply to situations where very large claims or a substantial number of unusual claims result in volatile average claim sizes. Projecting the ultimate number of claims may require analysis of several factors, including the rate at which policyholders report claims to us, the impact of judicial decisions, the impact of underwriting changes and other factors. Estimating the ultimate average loss may require analysis of the impact of large losses and claim cost trends based on changes in the cost of repairing or replacing property, changes in the cost of medical care, changes in the cost of wage replacement, judicial decisions, legislative changes and other factors.
Stochastic modeling produces a range of possible outcomes based on varying assumptions related to the particular reserve group being modeled. For some reserve groups, we use models which rely on historical development patterns at an aggregate level, while other reserve groups are modeled using individual claim variability assumptions supplied by the claims department. In either case, multiple simulations using varying assumptions are run and the results are analyzed to produce a range of potential outcomes. The results will typically include a mean and percentiles of the possible reserve distribution which aid in the selection of a point estimate.
For many exposures, especially those that can be considered long-tail, a particular accident or policy year may not have a sufficient volume of paid losses to produce a statistically reliable estimate of ultimate losses. In such a case, our actuaries typically assign more weight to the incurred development method than to the paid development method. As claims continue to settle and the volume of paid loss increases, the actuaries may assign additional weight to the paid development method. For most of our products, even the incurred losses for accident or policy years that are early in the claim settlement process will not be of sufficient volume to produce a reliable estimate of ultimate losses. In these cases, we may not assign much, if any, weight to the paid and incurred development methods. We may use the loss ratio, Bornhuetter-Ferguson and/or frequency times severity methods. For short-tail exposures, the paid and incurred development methods can often be relied on sooner, primarily because our history includes a sufficient number of years to cover the entire period over which paid and incurred losses are expected to change. However, we may also use the loss ratio, Bornhuetter-Ferguson and/or frequency times severity methods for short-tail exposures.
For other more complex reserve groups where the above methods may not produce reliable indications, we use additional methods tailored to the characteristics of the specific situation.
Periodic Reserve Reviews
The reserve analyses performed by our actuaries result in point estimates. Each quarter, the results of the detailed reserve reviews are summarized and discussed with senior management to determine the best estimate of reserves. Senior management considers many factors in making this decision. Our recorded reserves reflect our best estimate as of a particular point in time based upon known facts and circumstances, consideration of the factors cited above and our judgment. The carried reserve differs from the actuarial point estimate as discussed further below.
Currently, our recorded reserves are modestly higher than the actuarial point estimate. For Commercial, Specialty and International, the difference between our reserves and the actuarial point estimate is primarily driven by uncertainty with respect to immature accident years, claim cost inflation, changes in claims handling, changes to the tort environment which may adversely affect claim costs and the effects from the economy. For Corporate & Other, the difference between our reserves and the actuarial point estimate is primarily driven by the potential tail volatility of run-off exposures.
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The key assumptions fundamental to the reserving process are often different for various reserve groups and accident or policy years. Some of these assumptions are explicit assumptions that are required of a particular method, but most of the assumptions are implicit and cannot be precisely quantified. An example of an explicit assumption is the pattern employed in the paid development method. However, the assumed pattern is itself based on several implicit assumptions such as the impact of inflation on medical costs and the rate at which claim professionals close claims. As a result, the effect on reserve estimates of a particular change in assumptions typically cannot be specifically quantified, and changes in these assumptions cannot be tracked over time.
Our recorded reserves are management's best estimate. In order to provide an indication of the variability associated with our net reserves, the following discussion provides a sensitivity analysis that shows the approximate estimated impact of variations in significant factors affecting our reserve estimates for particular types of business. These significant factors are the ones that we believe could most likely materially affect the reserves. This discussion covers the major types of business for which we believe a material deviation to our reserves is reasonably possible. There can be no assurance that actual experience will be consistent with the current assumptions or with the variation indicated by the discussion. In addition, there can be no assurance that other factors and assumptions will not have a material impact on our reserves.
The three areas for which we believe a significant deviation to our net reserves is reasonably possible are (i) professional liability, management liability and surety products; (ii) workers' compensation; and (iii) general liability.
Professional liability, management liability and surety products include US professional liability coverages provided to various professional firms, including architects, real estate agents, small and mid-sized accounting firms, law firms and other professional firms. They also include directors and officers (D&O), employment practices, fiduciary, fidelity and surety coverages, and medical liability. The most significant factor affecting reserve estimates for these liability coverages is claim severity. Claim severity is driven by the cost of medical care, the cost of wage replacement, legal fees, judicial decisions, legislative changes and other factors. Underwriting and claim handling decisions, such as the classes of business written and individual claim settlement decisions, can also affect claim severity. If the estimated claim severity increases by 9%, we estimate that net reserves would increase by approximately $450 million. If the estimated claim severity decreases by 3%, we estimate that net reserves would decrease by approximately $150 million. Our net reserves for these products were approximately $5.0 billion as of December 31, 2021.
For workers' compensation, since many years will pass from the time the business is written until all claim payments have been made, the most significant factor affecting workers' compensation reserve estimates is claim cost inflation on claim payments. Workers' compensation claim cost inflation is driven by the cost of medical care, the cost of wage replacement, expected claimant lifetimes, judicial decisions, legislative changes and other factors. If estimated workers' compensation claim cost inflation increases by 100 basis points for the entire period over which claim payments will be made, we estimate that our net reserves would increase by approximately $350 million. If estimated workers' compensation claim cost inflation decreases by 100 basis points for the entire period over which claim payments will be made, we estimate that our net reserves would decrease by approximately $350 million. Our net reserves for workers' compensation were approximately $3.9 billion as of December 31, 2021.
For general liability, the most significant factor affecting reserve estimates is claim severity. Claim severity is driven by changes in the cost of repairing or replacing property, the cost of medical care, the cost of wage replacement, judicial decisions, legislation and other factors. If the estimated claim severity for general liability increases by 6%, we estimate that our net reserves would increase by approximately $200 million. If the estimated claim severity for general liability decreases by 3%, we estimate that our net reserves would decrease by approximately $100 million. Our net reserves for general liability were approximately $3.2 billion as of December 31, 2021.
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Given the factors described above, it is not possible to quantify precisely the ultimate exposure represented by claims and related litigation. As a result, we regularly review the adequacy of our reserves and reassess our reserve estimates as historical loss experience develops, additional claims are reported and settled and additional information becomes available in subsequent periods. In reviewing our reserve estimates, we make adjustments in the period that the need for such adjustments is determined. These reviews have resulted in our identification of information and trends that have caused us to change our reserves in prior periods and could lead to our identification of a need for additional material increases or decreases in claim and claim adjustment expense reserves, which could materially affect our results of operations, equity, business and insurer financial strength and corporate debt ratings positively or negatively. See discussion within Note E to the Consolidated Financial Statements included under Item 8 for additional information about reserve development and the Ratings section of this MD&A for further information regarding our financial strength and corporate debt ratings.
Life & Group Policyholder Reserves
Our Life & Group segment includes our run-off long term care business as well as structured settlement obligations not funded by annuities related to certain property and casualty claimants. Long term care policies provide benefits for nursing homes, assisted living facilities and home health care subject to various daily and lifetime caps. Generally, policyholders must continue to make periodic premium payments to keep the policy in force and we have the ability to increase policy premiums, subject to state regulatory approval.
We maintain both claim and claim adjustment expense reserves as well as future policy benefit reserves for policyholder benefits for our Life & Group segment. Claim and claim adjustment expense reserves consist of estimated reserves for long term care policyholders that are currently receiving benefits, including claims that have been incurred but are not yet reported. In developing the claim and claim adjustment expense reserve estimates for our long term care policies, our actuaries perform a detailed claim reserve review on an annual basis. The review analyzes the sufficiency of existing reserves for policyholders currently on claim and includes an evaluation of expected benefit utilization and claim duration. In addition, claim and claim adjustment expense reserves are also maintained for the structured settlement obligations. In developing the claim and claim adjustment expense reserve estimates for our structured settlement obligations, our actuaries monitor mortality experience on an annual basis. Our recorded claim and claim adjustment expense reserves reflect management's best estimate after incorporating the results of the most recent reviews. Claim and claim adjustment expense reserves for long term care policies and structured settlement obligations are discounted as discussed in Note A to the Consolidated Financial Statements included under Item 8.
Future policy benefit reserves consist of the active life reserves related to our long term care policies for policyholders that are not currently receiving benefits and represent the present value of expected future benefit payments and expenses less expected future premium. The determination of these reserves requires management to make estimates and assumptions about expected investment and policyholder experience over the life of the contract. Since many of these contracts may be in force for several decades, these assumptions are subject to significant estimation risk.
The actuarial assumptions that management believes are subject to the most variability are morbidity, persistency, discount rates and anticipated future premium rate increases. Morbidity is the frequency and severity of injury, illness, sickness and diseases contracted. Persistency is the percentage of policies remaining in force and can be affected by policy lapses, benefit reductions and death. Discount rates are influenced by the investment yield on assets supporting long term care reserves which is subject to interest rate and market volatility and may also be affected by changes to the Internal Revenue Code. Future premium rate increases are generally subject to regulatory approval, and therefore the exact timing and size of the approved rate increases are unknown. As a result of this variability, our long term care reserves may be subject to material increases if actual experience develops adversely to our expectations.
Annually, in the third quarter, management assesses the adequacy of its long term care future policy benefit reserves by performing a gross premium valuation (GPV) to determine if there is a premium deficiency. Under the GPV, management estimates required reserves using best estimate assumptions as of the date of the assessment without provisions for adverse deviation. The GPV required reserves are then compared to the existing recorded reserves. If the GPV required reserves are greater than the existing recorded reserves, the
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existing assumptions are unlocked and future policy benefit reserves are increased to the greater amount. Any such increase is reflected in our results of operations in the period in which the need for such adjustment is determined. If the GPV required reserves are less than the existing recorded reserves, assumptions remain locked in and no adjustment is required.
The September 30, 2021 GPV indicated that our recorded reserves included a margin of approximately $72 million. A summary of the changes in the estimated reserve margin is presented in the table below:
Long Term Care Active Life Reserve - Change in estimated reserve margin (In millions)
September 30, 2020 Estimated Margin $ — 
Changes in underlying discount rate assumptions(1)
65 
Changes in underlying morbidity assumptions 205 
Changes in underlying persistency assumptions (233)
Changes in underlying premium rate action assumptions 27 
Changes in underlying expense and other assumptions
September 30, 2021 Estimated Margin $ 72 
(1) Including cost of care inflation assumption.
The increase in the margin in 2021 was primarily driven by changes in discount rate assumptions due to higher near-term expected reinvestment rates and favorable changes to underlying morbidity assumptions. These favorable drivers were partially offset by unfavorable changes to underlying persistency assumptions.
We have determined that additional future policy benefit reserves for profits followed by losses are not currently required based on the most recent projection.
The table below summarizes the estimated pretax impact on our results of operations from various hypothetical revisions to our active life reserve assumptions. The annual GPV process involves updating all assumptions to management's then current best estimate, and historically all significant assumptions have been revised each year. In the table below, we have assumed that revisions to such assumptions would occur in each policy type, age and duration within each policy group and would occur absent any changes, mitigating or otherwise, in the other assumptions. Although such hypothetical revisions are not currently required or anticipated, we believe they could occur based on past variances in experience and our expectations of the ranges of future experience that could reasonably occur. Any required increase in the recorded reserves resulting from a hypothetical revision in the table below would first reduce the margin in our carried reserves before it would affect results from operations. Any actual adjustment would be dependent on the specific policies affected and, therefore, may differ from the estimates summarized below. The estimated impacts to results of operations in the table below are after consideration of the existing margin.
2021 GPV
Estimated reduction to pretax income
Hypothetical revisions (In millions)
Morbidity:
2.5% increase in morbidity $ 300 
5% increase in morbidity 600 
Persistency:
5% decrease in active life mortality and lapse $ 100 
10% decrease in active life mortality and lapse 300 
Discount Rates:
25 basis point decline in new money interest rates $ 100 
50 basis point decline in new money interest rates 200 
Premium Rate Actions:
50% decrease in anticipated future premium rate increases — 
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CATASTROPHES AND RELATED REINSURANCE
Various events can cause catastrophe losses. These events can be natural or man-made, including hurricanes, windstorms, earthquakes, hail, severe winter weather, fires, floods, riots, strikes, civil unrest, cyber-attacks, pandemics and acts of terrorism that produce unusually large aggregate losses. In most, but not all cases, our catastrophe losses from these events in the U.S. are defined consistent with the definition of the Property Claims Service (PCS). PCS defines a catastrophe as an event that causes damage of $25 million or more in direct insured losses to property and affects a significant number of policyholders and insurers. For events outside of the U.S., we define a catastrophe as an industry recognized event that generates an accumulation of claims amounting to more than $1 million for the International segment.
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 reported catastrophe losses, net of reinsurance, of $397 million and $550 million for the years ended December 31, 2021 and 2020. Net catastrophe losses for the year ended December 31, 2021 were driven by severe weather related events, primarily Hurricane Ida and Winter Storms Uri and Viola. Net catastrophe losses for the year ended December 31, 2020 included $294 million related primarily to severe weather related events, $195 million related to the COVID-19 pandemic and $61 million related to civil unrest.
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 have catastrophe reinsurance treaties that cover property and workers’ compensation losses. We conduct an ongoing review of our risk and catastrophe reinsurance coverages and from time to time make changes as we deem appropriate.
During the second quarter of 2021, we added a quota share treaty to our property reinsurance program, which covers policies written during the treaty term and in-force as of June 1, 2021. As a result of the coverage of in-force policies, net written premiums were reduced by $122 million during the second quarter for the one-time catch-up under the treaty of unearned premium on policies previously written as of the June 1, 2021 treaty inception. This ceded premium will earn in future quarters consistent with the underlying gross policies.
The following discussion summarizes our most significant catastrophe reinsurance coverage at January 1, 2022.
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, 2021 to June 1, 2022 and provides coverage for the accumulation of covered losses from catastrophe occurrences above our per occurrence retention of $190 million up to $900 million for all losses other than earthquakes. Earthquakes are covered up to $1.0 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, 2022 to January 1, 2023 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 $475 million of coverage for the accumulation of covered losses related to terrorism events above our retention of $25 million. Of this $475 million in Terrorism coverage, $200 million is provided for nuclear, biological chemical and radiation events. One full reinstatement is available for the first $275 million above the retention, regardless of the covered peril.
Terrorism Risk Insurance Program Reauthorization Act of 2019 (TRIPRA)
Our principal reinsurance protection against large-scale terrorist attacks, including nuclear, biological, chemical or radiological attacks, is the coverage currently provided through TRIPRA which runs through the end of 2027. TRIPRA provides a U.S. government backstop for insurance-related losses resulting from any “act of
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terrorism,” which is certified by the Secretary of Treasury in consultation with the Secretary of Homeland Security for losses that exceed a threshold of $200 million industry-wide for the calendar year 2022. Under the current provisions of the program, in 2022, the federal government will reimburse 80% of our covered losses in excess of our applicable deductible up to a total industry program cap of $100 billion. Our deductible is based on eligible commercial property and casualty earned premiums for the preceding calendar year. Based on 2021 earned premiums, our estimated deductible under the program is $915 million for 2022. If an act of terrorism or acts of terrorism result in covered losses exceeding the $100 billion annual industry aggregate limit, Congress would be responsible for determining how additional losses in excess of $100 billion will be paid.
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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.

Years ended December 31
(In millions) 2021 2020
Operating Revenues
Net earned premiums $ 8,175  $ 7,649 
Net investment income 2,159  1,935 
Non-insurance warranty revenue 1,430  1,252 
Other revenues 24  26 
Total operating revenues 11,788  10,862 
Claims, Benefits and Expenses
Net incurred claims and benefits 6,327  6,149 
Policyholders' dividends 22  21 
Amortization of deferred acquisition costs 1,443  1,410 
Non-insurance warranty expense 1,328  1,159 
Other insurance related expenses 1,062  1,028 
Other expenses 242  220 
Total claims, benefits and expenses 10,424  9,987 
Core income before income tax 1,364  875 
Income tax expense on core income (258) (140)
Core income 1,106  735 
Net investment gains (losses) 120  (54)
Income tax (expense) benefit on net investment gains (losses) (24)
Net investment gains (losses), after tax 96  (45)
Net income $ 1,202  $ 690 
2021 Compared with 2020
Core income increased $371 million in 2021 as compared with 2020. Core income for our Property & Casualty Operations increased $344 million primarily due to improved current accident year underwriting results and higher net investment income driven by limited partnership and common stock returns. Core income for our Life & Group segment improved $117 million. Core loss for our Corporate & Other segment increased $90 million.
Net catastrophe losses were $397 million in 2021 as compared with $550 million in 2020. Catastrophe losses for the year ended December 31, 2021 were driven by severe weather related events, primarily Hurricane Ida and Winter Storms Uri and Viola. Net catastrophe losses for the year ended December 31, 2020 included $294 million related primarily to severe weather related events, $195 million related to the COVID-19 pandemic and $61 million related to civil unrest.
Unfavorable net prior year loss reserve development of $11 million was recorded in 2021 as compared with favorable net prior year loss reserve development of $20 million in 2020 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 Consolidated Financial Statements included under Item 8.
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SEGMENT RESULTS
The following discusses the results of operations for our business segments.
Our property and casualty commercial insurance operations are managed and reported in three business segments: Specialty, Commercial and International, which we refer to collectively as Property & Casualty Operations. Specialty provides management and professional liability and other coverages through property and casualty products and services using a network of brokers, independent agencies and managing general underwriters. Commercial works with a network of brokers and independent agents to market a broad range of property and casualty insurance products to all types of insureds targeting small business, construction, middle markets and other commercial customers. The International segment underwrites property and casualty coverages on a global basis through a branch operation in Canada, a European business consisting of insurance companies based in the U.K. and Luxembourg and Hardy, our Lloyd's syndicate.
Our operations outside of Property & Casualty Operations are managed and reported in two segments: Life & Group and Corporate & Other. Life & Group primarily includes the results of our long term care business that is in run-off. Corporate & Other primarily includes certain corporate expenses, including interest on corporate debt, and the results of certain property and casualty businesses in run-off, including CNA Re, A&EP, a legacy portfolio of excess workers' compensation (EWC) policies and certain legacy mass tort reserves. Intersegment eliminations are also included in this segment.
Effective January 1, 2021, we changed the segment presentation of a legacy portfolio of excess workers compensation policies and certain legacy mass tort reserves. These businesses were previously reported in the Commercial business segment and are now reported as part of the Corporate & Other business segment. Prior period information has been conformed to the new segment presentation. See Note O to the Consolidated Financial Statements included under Item 8 for more information on the changes to our business segments.
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 and any cumulative effects of changes in accounting guidance. 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. See further discussion regarding how we manage our business and reconciliations of non-GAAP measures to the most comparable GAAP measures and other information in Note O to the Consolidated Financial Statements included under Item 8.
In evaluating the results of our Specialty, Commercial and International segments, we utilize the loss ratio, the loss ratio excluding catastrophes and development, the expense ratio, the dividend ratio, the combined ratio and the combined ratio excluding catastrophes and development. 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 loss ratio excluding catastrophes and development excludes net catastrophes losses and changes in estimates of claim and claim adjustment expense reserves, net of reinsurance, for prior years from the loss ratio. 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 combined ratio excluding catastrophes and development is the sum of the loss ratio excluding catastrophes and development, 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. Retention represents the percentage of premium dollars renewed in comparison to the expiring premium dollars from policies available to renew. Renewal premium change, rate and retention presented for the prior year are updated to reflect subsequent activity on policies written in the period. New business represents premiums from policies written with new customers and additional policies written with existing customers. Gross written premiums, excluding
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third-party captives, excludes business which is ceded to third-party captives, including business related to large warranty programs.
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 Consolidated Financial Statements included under Item 8.

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Specialty
Specialty provides management and professional liability and other coverages through property and casualty products and services using a network of brokers, independent agencies and managing general underwriters. Specialty includes the following business groups:
Management & Professional Liability consists of the following coverages and products:
Professional liability coverages and risk management services to various professional firms, including architects, real estate agents, accounting firms and law firms.
D&O, employment practices, fiduciary and fidelity coverages. Specific areas of focus include small and mid-size firms, public as well as privately held firms and not-for-profit organizations.
Insurance products to serve the healthcare industry, including professional and general liability as well as associated standard property and casualty coverages. Key customer groups include aging services, allied medical facilities, dentists, physicians, hospitals, nurses and other medical practitioners.
Surety offers small, medium and large contract and commercial surety bonds. Surety provides surety and fidelity bonds in all 50 states.
Warranty and Alternative Risks provides extended service contracts and insurance products that provide protection from the financial burden associated with mechanical breakdown and other related losses, primarily for vehicles, portable electronic communication devices and other consumer goods. Service contracts are generally distributed by commission-based independent representatives and sold by auto dealerships and retailers in North America to customers in conjunction with the purchase of a new or used vehicle or new consumer goods. Additionally, our insurance companies may issue contractual liability insurance policies or guaranteed asset protection reimbursement insurance policies to cover the liabilities of these service contracts issued by affiliated entities or third parties.
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The following table details the results of operations for Specialty.
Years ended December 31
(In millions, except ratios, rate, renewal premium change and retention) 2021 2020
Gross written premiums $ 7,665  $ 7,180 
Gross written premiums excluding third-party captives 3,672  3,296 
Net written premiums 3,225  3,040 
Net earned premiums 3,076  2,883 
Net investment income 497  449 
Core income 704  535 
Other performance metrics:
Loss ratio excluding catastrophes and development 59.1  % 59.9  %
Effect of catastrophe impacts 0.4  4.3 
Effect of development-related items (1.4) (2.1)
Loss ratio 58.1  62.1 
Expense ratio 30.5  31.3 
Dividend ratio 0.1  0.1 
Combined ratio 88.7  % 93.5  %
Combined ratio excluding catastrophes and development 89.7  % 91.3  %
Rate 11  % 12  %
Renewal premium change 11  13 
Retention 83  86 
New business $ 551  $ 389 
2021 Compared with 2020
Gross written premiums, excluding third-party captives, for Specialty increased $376 million in 2021 as compared with 2020 driven by rate and higher new business. Net written premiums for Specialty increased $185 million in 2021 as compared with 2020. The increase in net earned premiums was consistent with the trend in net written premiums.
Core income increased $169 million in 2021 as compared with 2020 primarily due to lower net catastrophe losses, improved non-catastrophe current accident year underwriting results and higher net investment income driven by limited partnership and common stock returns.
The combined ratio of 88.7% improved 4.8 points in 2021 as compared with 2020 due to a 4.0 point improvement in the loss ratio and a 0.8 point improvement in the expense ratio. The improvement in the loss ratio was primarily due to lower net catastrophe losses. Net catastrophe losses were $12 million, or 0.4 points of the loss ratio, for 2021, as compared with $125 million, or 4.3 points of the loss ratio, for 2020. The improvement in the expense ratio was driven by higher net earned premiums.
Favorable net prior year loss reserve development of $45 million and $61 million was recorded in 2021 and 2020. Further information on net prior year loss reserve development is in Note E to the Consolidated Financial Statements included under Item 8.
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The following table summarizes the gross and net carried reserves for Specialty.
December 31
(In millions) 2021 2020
Gross case reserves $ 1,578  $ 1,567 
Gross IBNR reserves 4,855  4,181 
Total gross carried claim and claim adjustment expense reserves $ 6,433  $ 5,748 
Net case reserves $ 1,338  $ 1,410 
Net IBNR reserves 3,927  3,488 
Total net carried claim and claim adjustment expense reserves $ 5,265  $ 4,898 

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Commercial
Commercial works with a network of brokers and independent agents to market a broad range of property and casualty insurance products to all types of insureds targeting small business, construction, middle markets and other commercial customers. Property products include standard and excess property, marine and boiler and machinery coverages. Casualty products include standard casualty insurance products such as workers' compensation, general and product liability, commercial auto and umbrella coverages. Most insurance programs are provided on a guaranteed cost basis; however, we also offer specialized loss-sensitive insurance programs and total risk management services relating to claim and information services to the large commercial insurance marketplace.
Effective January 1, 2021, we changed the segment presentation of a legacy portfolio of excess workers' compensation policies and certain legacy mass tort reserves. These businesses were previously reported in the Commercial business segment and are now reported as part of the Corporate & Other business segment. Prior period information has been conformed to the new segment presentation.

The following table details the results of operations for Commercial.
Years ended December 31
(In millions, except ratios, rate, renewal premium change and retention) 2021 2020 2019
Gross written premiums $ 4,445  $ 4,086  $ 3,693 
Gross written premiums excluding third-party captives 4,334  3,993  3,609 
Net written premiums 3,595  3,565  3,315 
Net earned premiums 3,552  3,323  3,162 
Net investment income 624  513  605 
Core income 394  267  480 
Other performance metrics:
Loss ratio excluding catastrophes and development 61.0  % 60.4  % 61.5  %
Effect of catastrophe impacts 10.0  10.7  4.9 
Effect of development-related items 0.5  0.5  (0.4)
Loss ratio 71.5  71.6  66.0 
Expense ratio 31.1  33.0  32.9 
Dividend ratio 0.5  0.5  0.6 
Combined ratio 103.1  % 105.1  % 99.5  %
Combined ratio excluding catastrophes and development 92.6  % 93.9  % 95.0  %
Rate % 10  % %
Renewal premium change 10 
Retention 82  84  86 
New business $ 843  $ 761  $ 682 
2021 Compared with 2020
Gross written premiums for Commercial increased $359 million in 2021 as compared with 2020 driven by rate and higher new business. Net written premiums for Commercial increased $30 million in 2021 as compared with 2020. Net written premiums for 2021 were unfavorably impacted by the June 1, 2021 written premium catch-up resulting from the addition of the quota share treaty to our property reinsurance program. Excluding the impact of the June 1, 2021 written premium catch-up, net written premiums increased $142 million for 2021 as compared with 2020. Net earned premiums for Commercial increased $229 million in 2021 as compared with 2020. The increase in net earned premiums was partially impacted by a reduction in estimated audit premiums related to COVID-19 in 2020.
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Core income increased $127 million in 2021 as compared with 2020, primarily due to higher net investment income driven by limited partnership and common stock returns and improved current accident year underwriting results.
The combined ratio of 103.1% improved 2.0 points in 2021 as compared with 2020 primarily due to a 1.9 point improvement in the expense ratio. The improvement in the expense ratio was primarily due to higher net earned premiums and lower acquisition costs. Net catastrophe losses were $358 million, or 10.0 points of the loss ratio, for 2021, as compared with $358 million, or 10.7 points of the loss ratio, for 2020.
Favorable net prior year loss reserve development of $6 million and $7 million was recorded in 2021 and 2020. Further information on net prior year loss reserve development is in Note E to the Consolidated Financial Statements included under Item 8.
The following table summarizes the gross and net carried reserves for Commercial.
December 31
(In millions) 2021 2020
Gross case reserves $ 3,184  $ 3,215 
Gross IBNR reserves 5,706  5,035 
Total gross carried claim and claim adjustment expense reserves $ 8,890  $ 8,250 
Net case reserves $ 2,850  $ 2,885 
Net IBNR reserves 5,215  4,590 
Total net carried claim and claim adjustment expense reserves $ 8,065  $ 7,475 
2020 Compared with 2019
Gross written premiums for Commercial increased $393 million in 2020 as compared with 2019 driven by strong rate and higher new business. Net written premiums for Commercial increased $250 million in 2020 as compared with 2019. The increase in net earned premiums was consistent with the trend in net written premiums partially offset by a reduction in estimated audit premiums as a result of the economic slowdown arising from COVID-19 and premium rate adjustments impacting certain general liability policies.
Core income decreased $213 million in 2020 as compared with 2019, primarily due to higher net catastrophe losses and lower net investment income partially offset by improved non-catastrophe current accident year underwriting results.
The combined ratio of 105.1% increased 5.6 points in 2020 as compared with 2019 due to an increase in the loss ratio primarily driven by higher net catastrophe losses. Net catastrophe losses were $358 million, or 10.7 points of the loss ratio, for 2020, as compared with $154 million, or 4.9 points of the loss ratio, for 2019. Net catastrophe losses in 2020 included $252 million related primarily to severe weather related events, $58 million related to civil unrest and $48 million related to the COVID-19 pandemic. The expense ratio in 2020 was consistent with 2019 as higher acquisition expenses were offset by higher net earned premiums and lower underwriting expenses.
Favorable net prior year loss reserve development of $7 million and $40 million was recorded in 2020 and 2019. Further information on net prior year loss reserve development is in Note E to the Consolidated Financial Statements included under Item 8.
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International
The International segment underwrites property and casualty coverages on a global basis through a branch operation in Canada, a European business consisting of insurance companies based in the U.K. and Luxembourg and Hardy, our Lloyd's syndicate.
Canada provides standard commercial and specialty insurance products, primarily in the marine, oil & gas, construction, manufacturing and life science industries.
Europe provides a diverse range of specialty products as well as commercial insurance products primarily in the marine, property, financial services and healthcare & technology industries in the U.K. and Continental Europe on both a domestic and cross-border basis.
Hardy operates through Lloyd’s Syndicate 382 underwriting energy, marine, property, casualty and specialty lines with risks located in many countries around the world. The capacity of, and results from the syndicate, are 100% attributable to CNA.
The following table details the results of operations for International.
Years ended December 31
(In millions, except ratios, rate, renewal premium change and retention) 2021 2020
Gross written premiums $ 1,297  $ 1,133 
Net written premiums 1,101  961 
Net earned premiums 1,057  940 
Net investment income 57  58 
Core income 86  38 
Other performance metrics:
Loss ratio excluding catastrophes and development 59.0  % 60.1  %
Effect of catastrophe impacts 2.6  7.1 
Effect of development-related items 0.1  (0.3)
Loss ratio 61.7  66.9 
Expense ratio 33.1  35.5 
Combined ratio 94.8  % 102.4  %
Combined ratio excluding catastrophes and development 92.1  % 95.6  %
Rate 13  % 14  %
Renewal premium change 13  12 
Retention 78  73 
New business $ 274  $ 245 
2021 Compared with 2020
Gross written premiums for International increased $164 million in 2021 as compared with 2020. Excluding the effect of foreign currency exchange rates, gross written premiums increased $104 million driven by rate and higher new business. Net written premiums for International increased $140 million in 2021 as compared with 2020. Excluding the effect of foreign currency exchange rates, net written premiums increased $85 million. The increase in net earned premiums was consistent with the trend in net written premiums.
Core income increased $48 million in 2021 as compared with 2020 primarily due to improved current accident year underwriting results.
The combined ratio of 94.8% improved 7.6 points in 2021 as compared with 2020 due to a 5.2 point improvement in the loss ratio and a 2.4 point improvement in the expense ratio. The improvement in the loss ratio was driven by lower net catastrophe losses and improved non-catastrophe current accident year underwriting results. Net catastrophe losses were $27 million, or 2.6 points of the loss ratio, for 2021, as
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compared with $67 million, or 7.1 points of the loss ratio, for 2020. The improvement in the expense ratio was driven by lower acquisition costs.
Unfavorable net prior year loss reserve development of $2 million was recorded in 2021 as compared with favorable net prior year loss reserve development of $2 million in 2020. Further information on net prior year loss reserve development is in Note E to the Consolidated Financial Statements included under Item 8.
The following table summarizes the gross and net carried reserves for International.
December 31
(In millions) 2021 2020
Gross case reserves $ 859  $ 892 
Gross IBNR reserves 1,421  1,199 
Total gross carried claim and claim adjustment expense reserves $ 2,280  $ 2,091 
Net case reserves $ 744  $ 777 
Net IBNR reserves 1,196  1,045 
Total net carried claim and claim adjustment expense reserves $ 1,940  $ 1,822 
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Life & Group
The Life & Group segment includes our run-off long term care business as well as structured settlement obligations not funded by annuities related to certain property and casualty claimants. Long term care policies were sold on both an individual and group basis.
The following table summarizes the results of operations for Life & Group.
Years ended December 31
(In millions) 2021 2020
Net earned premiums $ 491  $ 504 
Net investment income 966  851 
Core income (loss) before income tax 105  (47)
Income tax benefit on core income 21  56 
Core income 126 
2021 Compared with 2020
Core income increased $117 million in 2021 as compared with 2020 primarily due to higher net investment income driven by limited partnership returns.
Core income for 2021 included a $31 million favorable impact from the reduction in long term care claim reserves resulting from the annual claim reserve reviews in the third quarter of 2021. Core income for 2020 included a $59 million charge related to the recognition of an active life reserve premium deficiency for long term care policies. Core income for 2020 also included a $36 million charge related to an increase in the structured settlement claim reserves partially offset by a $30 million impact from the reduction in long term care claim reserves, both resulting from the annual claim reserve reviews in the third quarter of 2020.

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The following tables summarize policyholder reserves for Life & Group.
December 31, 2021
(In millions) Claim and claim adjustment expenses Future policy benefits Total
Long term care $ 2,905  $ 10,012  $ 12,917 
Structured settlement obligations 526 —  526 
Other 10 —  10 
Total 3,441  10,012  13,453 
Shadow adjustments (1)
200 2,936 3,136 
Ceded reserves (2)
113  288  401 
Total gross reserves $ 3,754  $ 13,236  $ 16,990 
December 31, 2020
(In millions) Claim and claim adjustment expenses Future policy benefits Total
Long term care $ 2,844  $ 9,762  $ 12,606 
Structured settlement obligations 543 —  543 
Other 10 —  10 
Total 3,397  9,762  13,159 
Shadow adjustments (1)
218 3,293 3,511 
Ceded reserves (2)
128  263  391 
Total gross reserves $ 3,743  $ 13,318  $ 17,061 
(1)    To the extent that unrealized gains on fixed maturity securities supporting structured settlements not funded by annuities were realized, or that unrealized gains on fixed maturity securities supporting long term care products would result in a premium deficiency if realized, a related increase in Insurance reserves is recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (Shadow Adjustments).
(2)     Ceded reserves relate to claim or policy reserves fully reinsured in connection with a sale or exit from the underlying business.

42

Corporate & Other
Corporate & Other primarily includes certain corporate expenses, including interest on corporate debt and the results of certain property and casualty business in run-off, including CNA Re, A&EP, a legacy portfolio of EWC policies and certain legacy mass tort reserves.
The following table summarizes the results of operations for the Corporate & Other segment, including intersegment eliminations.
Years ended December 31
(In millions) 2021 2020 2019
Net investment income $ 15  $ 64  $ 74 
Interest expense 112  122  131 
Core loss (204) (114) (93)
2021 Compared with 2020
Core loss increased $90 million for 2021 as compared with 2020 driven by lower net investment income, unfavorability related to the A&EP Loss Portfolio Transfer (LPT), expenses related to the March 2021 cybersecurity attack, the recognition of a $12 million after-tax loss resulting from the legacy EWC LPT and higher unfavorable net prior year loss reserve development on legacy mass tort exposures.
The application of retroactive reinsurance accounting to additional cessions to the A&EP LPT in both periods resulted in after-tax charges of $25 million and $5 million in 2021 and 2020, respectively, which have no economic impact. The A&EP LPT, EWC LPT and net prior year loss reserve development are further discussed in Note E to the Condensed Consolidated Financial Statements included under Item 8.
The following table summarizes the gross and net carried reserves for Corporate & Other.
December 31
(In millions) 2021 2020
Gross case reserves $ 1,551  $ 1,614 
Gross IBNR reserves 1,266  1,260 
Total gross carried claim and claim adjustment expense reserves $ 2,817  $ 2,874 
Net case reserves $ 146  $ 560 
Net IBNR reserves 148  331 
Total net carried claim and claim adjustment expense reserves $ 294  $ 891 
2020 Compared with 2019
Core loss increased $21 million in 2020 as compared with 2019 primarily driven by higher unfavorable net prior year loss reserve development on legacy mass tort exposures and lower net investment income partially offset by a decrease in interest expense on corporate debt and favorability related to the A&EP LPT.
The application of retroactive reinsurance accounting to additional cessions to the A&EP LPT in both periods resulted in after-tax charges of $5 million and $14 million in 2020 and 2019, respectively, which have no economic impact. The net prior year loss reserve development and A&EP LPT are further discussed in Note E to the Consolidated Financial Statements included under Item 8.
43

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.
Years ended December 31
(In millions) 2021 2020
Fixed income securities:
Taxable fixed income securities $ 1,439  $ 1,451 
Tax-exempt fixed income securities 311  319 
Total fixed income securities 1,750  1,770 
Limited partnership and common stock investments 402  144 
Other, net of investment expense 21 
Net investment income $ 2,159  $ 1,935 
Effective income yield for the fixed income securities portfolio 4.3  % 4.5  %
Limited partnership and common stock return 22.3  % 8.3  %
Net investment income increased $224 million in 2021 as compared with 2020 driven by higher limited partnership and common stock returns partially offset by lower yields in our fixed income portfolio.
Net Investment Gains (Losses)
The components of Net investment gains (losses) are presented in the following table.
Years ended December 31
(In millions) 2021 2020
Fixed maturity securities:
Corporate and other bonds $ 134  $ (71)
States, municipalities and political subdivisions —  40 
Asset-backed (38) 31 
Total fixed maturity securities 96  — 
Non-redeemable preferred stock (3)
Short term and other 10  (30)
Mortgage loans 10  (21)
Net investment gains (losses) 120  (54)
Income tax (expense) benefit on net investment gains (losses) (24)
Net investment gains (losses), after tax $ 96  $ (45)
Net investment gains (losses) increased $174 million for 2021 as compared with 2020 driven by lower impairment losses recognized in earnings. Additionally, Short term and other for 2020 included a $20 million loss on the redemption of our $400 million senior notes due August 2021.
Further information on our investment gains and losses is set forth in Notes A and B to the Consolidated Financial Statements included under Item 8.
44

Portfolio Quality
The following table presents the estimated fair value and net unrealized gains (losses) of our fixed maturity securities by rating distribution.
December 31 2021 2020

(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 $ 2,600  $ 42  $ 3,672  $ 117 
AAA 3,784  360  3,627  454 
AA 7,665  823  7,159  1,012 
A 9,511  1,087  9,543  1,390 
BBB 18,458  2,043  18,007  2,596 
Non-investment grade 2,362  91  2,623  149 
Total $ 44,380  $ 4,446  $ 44,631  $ 5,718 
As of December 31, 2021 and 2020, 1% of our fixed maturity portfolio was rated internally. AAA rated securities included $1.7 billion and $1.8 billion of pre-refunded municipal bonds as of December 31, 2021 and 2020.
The following table presents available-for-sale fixed maturity securities in a gross unrealized loss position by ratings distribution.
December 31, 2021
(In millions) Estimated Fair Value Gross Unrealized Losses
U.S. Government, Government agencies and Government-sponsored enterprises $ 898  $
AAA 368 
AA 875  17 
A 1,516  23 
BBB 1,812  42 
Non-investment grade 596  16 
Total $ 6,065  $ 112 
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.
December 31, 2021
(In millions) Estimated Fair Value Gross Unrealized Losses
Due in one year or less $ 144  $
Due after one year through five years 1,191  22 
Due after five years through ten years 2,803  44 
Due after ten years 1,927  42 
Total $ 6,065  $ 112 
45

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.
December 31 2021 2020
(In millions) Estimated Fair Value Effective
Duration
(In years)
Estimated Fair Value Effective
Duration
(In years)
Investments supporting Life & Group $ 18,458  9.2  $ 18,518  9.2 
Other investments 28,915  4.9  28,839  4.5 
Total $ 47,373  6.6  $ 47,357  6.3 
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.
46

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 2021, net cash provided by operating activities was $1,997 million as compared with $1,775 million for 2020. The increase in cash provided by operating activities was driven by an increase in net premiums collected and lower net claim payments, which were impacted by a slowdown in court dockets. These items were partially offset by the payment of the EWC LPT premium. The EWC LPT is further discussed in Note E to the Consolidated Financial Statements included under Part II, Item 8.
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.
Net cash used by investing activities was $1,228 million for 2021, as compared with $705 million for 2020. Net cash used or provided by investing activities is primarily driven by cash available from operations and by other factors, such as financing activities.
Cash flows from financing activities may include proceeds from the issuance of debt and equity securities, and outflows for stockholder dividends, repayment of debt and purchases of treasury stock.
Net cash used by financing activities was $648 million and $902 million for 2021 and 2020. Financing activities for the periods presented include:
In 2021, we paid dividends of $621 million and repurchased 377,615 shares of our common stock at an aggregate cost of $18 million.
In 2020, we paid dividends of $950 million and repurchased 435,376 shares of our common stock at an aggregate cost of $18 million.
In the third quarter of 2020, we issued $500 million of 2.05% senior notes due August 15, 2030 and redeemed the $400 million outstanding aggregate principal balance of our 5.75% senior notes due August 15, 2021.
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).
CCC paid dividends of $880 million and $975 million to CNAF during 2021 and 2020.
We have an effective automatic shelf registration statement on file with the Securities and Exchange Commission under which we may publicly issue debt, equity or hybrid securities from time to time.
47

Common Stock Dividends
Cash dividends of $2.27 per share on our common stock, including a special cash dividend of $0.75 per share, were declared and paid in 2021. On February 4, 2022, our Board of Directors declared a quarterly cash dividend of $0.40 per share and a special cash dividend of $2.00 per share, payable March 10, 2022 to stockholders of record on February 22, 2022. 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.
Our ability to pay dividends and other credit obligations is significantly dependent on receipt of dividends from our subsidiaries. The payment of dividends to us by our insurance subsidiaries without prior approval of the insurance department of each subsidiary's domiciliary jurisdiction is limited by formula. Dividends in excess of these amounts are subject to prior approval by the respective state insurance departments.
Further information on our dividends from subsidiaries is provided in Note M to the Consolidated Financial Statements included under Item 8.
Commitments, Contingencies and Guarantees
We have various commitments, contingencies and guarantees which arose in the ordinary course of business. The impact of these commitments, contingencies and guarantees should be considered when evaluating our liquidity and capital resources.
A summary of our commitments is presented in the following table.
December 31, 2021
(In millions) Total Less than 1 year 1-3 years 3-5 years More than 5 years
Debt (1)
$ 3,300  $ 109  $ 977  $ 620  $ 1,594 
Lease obligations (2)
297  42  67  47  141 
Claim and claim adjustment expense reserves (3)
24,955  6,015  6,719  3,401  8,820 
Future policy benefit reserves (4)
25,581  (301) 158  909  24,815 
Total (5)
$ 54,133  $ 5,865  $ 7,921  $ 4,977  $ 35,370 
(1)    Includes estimated future interest payments.
(2)    The lease obligations reflected above are not discounted.
(3)    The Claim and claim adjustment expense reserves reflected above are not discounted and represent our estimate of the amount and timing of the ultimate settlement and administration of gross claims based on our assessment of facts and circumstances known as of December 31, 2021. See the Reserves - Estimates and Uncertainties section of this MD&A for further information.
(4)    The Future policy benefit reserves reflected above are not discounted and represent our estimate of the ultimate amount and timing of the settlement of benefits net of expected premiums, and are based on our assessment of facts and circumstances known as of December 31, 2021. See the Reserves - Estimates and Uncertainties section of this MD&A for further information.
(5)    Does not include investment commitments of approximately $1,230 million related to future capital calls from various third-party limited partnerships, signed and accepted mortgage loan applications, and obligations related to private placement securities.
Further information on our commitments, contingencies and guarantees is provided in Notes A, B, E, F, H and L to the Consolidated Financial Statements included under Item 8.
48

Ratings
Ratings are an important factor in establishing the competitive position of insurance companies. Our insurance company subsidiaries are rated by major rating agencies and these ratings reflect the rating agency's opinion of the insurance company's financial strength, operating performance, strategic position and ability to meet its obligations to policyholders. Agency ratings are not a recommendation to buy, sell or hold any security and may be revised or withdrawn at any time by the issuing organization. Each agency's rating should be evaluated independently of any other agency's rating. One or more of these agencies could take action in the future to change the ratings of our insurance subsidiaries.
The table below reflects the Insurer Financial Strength Ratings of CNA's insurance company subsidiaries issued by A.M. Best, Moody's, S&P and Fitch. The table also includes the ratings for CNAF's senior debt.
December 31, 2021 Insurer Financial Strength Ratings Senior Debt Ratings
A.M. Best A bbb+
Moody's A2 Baa2
S&P A+ A-
Fitch A+ BBB+
A.M. Best, Moody’s, S&P and Fitch maintain stable outlooks across the Company’s Financial Strength and Senior Debt Ratings.
CNA Insurance Company Limited and CNA Insurance Company (Europe) S.A. are included within S&P’s Insurer Financial Strength Rating for the Company. Syndicate 382 benefits from the Financial Strength Rating of Lloyd’s, which is rated A+ by S&P and A by A.M. Best with stable outlooks.

49

ACCOUNTING STANDARDS UPDATE
For a discussion of Accounting Standards, see Note A to the Consolidated Financial Statements included under Item 8.
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 are conducting; 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 statement. We cannot control many of these risks and uncertainties. These risks and uncertainties include, but are not limited to, the following:
Company-Specific Factors
the risks and uncertainties associated with our insurance reserves, as outlined in the Critical Accounting Estimates and the Reserves - Estimates and Uncertainties sections of this report, 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 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
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;
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 and decline or non-renew underpriced accounts, to achieve premium targets and profitability and to realize growth and retention estimates;
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, as well as social inflation, that increase the severity of claims;
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.
50


Regulatory and Legal Factors
regulatory and legal initiatives and compliance with governmental regulations and other legal requirements, including with respect to cyber security protocols (which may be enhanced following completion of work relating to the sophisticated cyber incident sustained by the Company in March 2021 as discussed in Risk Factors, Part I, Item 1A of this report), 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 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 and opioids; and claims arising from changes that repeal or weaken tort reforms, such as those related to abuse reviver statutes.
Our forward-looking statements speak only as of the date of the filing of this Annual Report on Form 10-K 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 filing of this Annual Report on Form 10-K, even if our expectations or any related events or circumstances change.
51

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our financial instruments are exposed to various market risks, such as interest rate risk, equity price risk and foreign currency risk. Due to the level of risk associated with certain invested assets and the level of uncertainty related to changes in the value of these assets, it is possible that changes in these risks in the near term could have a material adverse impact on our results of operations, financial condition or equity.
Discussions herein regarding market risk focus on only one element of market risk, which is price risk. Price risk relates to changes in the level of prices due to changes in interest rates, equity prices, foreign exchange rates or other factors such as credit spreads. The fair value of our financial instruments is generally adversely affected when interest rates rise, equity markets decline or the dollar strengthens against foreign currency.
Active management of market risk is integral to our operations. We may take the following actions to manage our exposure to market risk within defined tolerance ranges: (1) change the character of future investments purchased or sold or (2) use derivatives to offset the market behavior of existing assets and liabilities or assets expected to be purchased and liabilities expected to be incurred.
Sensitivity Analysis
We monitor our sensitivity to interest rate changes by revaluing financial assets and liabilities using a variety of different interest rates. The Company uses duration and convexity at the security level to estimate the change in fair value that would result from a change in each security's yield. Duration measures the price sensitivity of an asset to changes in yield. Convexity measures how the duration of the asset changes with interest rates. The duration and convexity analysis takes into account the unique characteristics (e.g., call and put options and prepayment expectations) of each security in determining the hypothetical change in fair value. The analysis is performed at the security level and aggregated up to the asset category levels for reporting in the tables below.
The evaluation is performed by applying an instantaneous change in yield rates of varying magnitudes on a static balance sheet to determine the effect such a change in rates would have on our fair value at risk and the resulting effect on stockholders' equity. The analysis presents the sensitivity of the fair value of our financial instruments to selected changes in capital market rates and index levels. The range of change chosen reflects our view of changes that are reasonably possible over a one-year period. The selection of the range of values chosen to represent changes in interest rates should not be construed as our prediction of future market events, but rather an illustration of the impact of such events.
The sensitivity analysis estimates the decline in the fair value of our interest sensitive assets and liabilities that were held as of December 31, 2021 and 2020 due to an instantaneous change in the yield of the security at the end of the period of 100 and 150 basis points, with all other variables held constant.
The sensitivity analysis also assumes an instantaneous 10% and 20% decline in the foreign currency exchange rates versus the United States dollar from their levels as of December 31, 2021 and 2020, with all other variables held constant.
Equity price risk was measured assuming an instantaneous 10% and 25% decline in the S&P 500 from its level as of December 31, 2021 and 2020, with all other variables held constant. Our common stock holdings, which are included in equity securities, were assumed to be highly and positively correlated with the S&P 500 index. For our limited partnership holdings, the estimated change in value was largely derived from a beta analysis calculation of historical experience of our portfolio and indices with similar strategies relative to the S&P 500.
52

Table of Contents
The following tables present the estimated effects on the fair value of our financial instruments as of December 31, 2021 and 2020 due to an increase in yield rates of 100 basis points, a 10% decline in foreign currency exchange rates and a 10% decline in the S&P 500, with all other variables held constant.
Market Risk Scenario 1
December 31, 2021 Increase (Decrease)
(In millions) Estimated Fair Value Interest Rate Risk Foreign Currency Risk Equity Price Risk
Assets:
Fixed maturity securities (1)
$ 44,380  $ (3,061) $ (265) $ — 
Equity securities 1,035  (28) (1) (27)
Limited partnership investments 1,859  —  —  (74)
Other invested assets 91  —  (8) — 
Mortgage loans (2)
1,018  (44) —  — 
Short term investments 1,990  (3) (19) — 
Total assets 50,373  (3,136) (293) (101)
Derivative financial instruments, included in Other liabilities (12) 35  —  — 
Total $ 50,361  $ (3,101) $ (293) $ (101)
Long term debt (3)
$ 2,978  $ (134) $ —  $ — 
December 31, 2020 Increase (Decrease)
(In millions) Estimated Fair Value Interest Rate Risk Foreign Currency Risk Equity Price Risk
Assets:
Fixed maturity securities (1)
$ 44,631  $ (2,963) $ (257) $ — 
Equity securities 992  (30) (1) (23)
Limited partnership investments 1,619  —  —  (65)
Other invested assets 76  —  (6) — 
Mortgage loans (2)
1,151  (51) —  — 
Short term investments 1,907  (2) (13) — 
Total assets 50,376  (3,046) (277) (88)
Derivative financial instruments, included in Other liabilities (19) 20  —  — 
Total $ 50,357  $ (3,026) $ (277) $ (88)
Long term debt (3)
$ 3,148  $ (169) $ —  $ — 
(1)    From a financial reporting perspective, Shadow Adjustments related to Life & Group reserves would reduce the impact of the decrease in fixed maturity securities.
(2)    Reported at amortized value, less allowance for uncollectible receivables, in the Consolidated Balance Sheets included under Item 8 and not adjusted for fair value changes.
(3)    Reported at amortized value in the Consolidated Balance Sheets included under Item 8 and not adjusted for fair value changes.
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Table of Contents
The following tables present the estimated effects on the fair value of our financial instruments as of December 31, 2021 and 2020 due to an increase in yield rates of 150 basis points, a 20% decline in foreign currency exchange rates and a 25% decline in the S&P 500, with all other variables held constant.
Market Risk Scenario 2
December 31, 2021 Increase (Decrease)
(In millions) Estimated Fair Value Interest Rate Risk Foreign Currency Risk Equity Price Risk
Assets:
Fixed maturity securities (1)
$ 44,380  $ (4,590) $ (530) $ — 
Equity securities 1,035  (42) (1) (66)
Limited partnership investments 1,859  —  —  (186)
Other invested assets 91  —  (17) — 
Mortgage loans (2)
1,018  (65) —  — 
Short term investments 1,990  (4) (37) — 
Total assets 50,373  (4,701) (585) (252)
Derivative financial instruments, included in Other liabilities (12) 53  —  — 
Total $ 50,361  $ (4,648) $ (585) $ (252)
Long term debt (3)
$ 2,978  $ (202) $ —  $ — 
December 31, 2020 Increase (Decrease)
(In millions) Estimated Fair Value Interest Rate Risk Foreign Currency Risk Equity Price Risk
Assets:
Fixed maturity securities (1)
$ 44,631  $ (4,443) $ (513) $ — 
Equity securities 992  (45) (2) (57)
Limited partnership investments 1,619  —  —  (162)
Other invested assets 76  —  (12) — 
Mortgage loans (2)
1,151  (76) —  — 
Short term investments 1,907  (3) (26) — 
Total assets 50,376  (4,567) (553) (219)
Derivative financial instruments, included in Other liabilities (19) 30  —  — 
Total $ 50,357  $ (4,537) $ (553) $ (219)
Long term debt (3)
$ 3,148  $ (254) $ —  $ — 
(1)    From a financial reporting perspective, Shadow Adjustments related to Life & Group reserves would reduce the impact of the decrease in fixed maturity securities.
(2)    Reported at amortized value, less allowance for uncollectible receivables, in the Consolidated Balance Sheets included under Item 8 and not adjusted for fair value changes.
(3)    Reported at amortized value in the Consolidated Balance Sheets included under Item 8 and not adjusted for fair value changes.

54

Table of Contents
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CNA Financial Corporation
Consolidated Statements of Operations
Years ended December 31
(In millions, except per share data) 2021 2020 2019
Revenues
Net earned premiums $ 8,175  $ 7,649  $ 7,428 
Net investment income 2,159  1,935  2,118 
Net investment gains (losses) 120  (54) 29 
Non-insurance warranty revenue 1,430  1,252  1,161 
Other revenues 24  26  31 
Total revenues 11,908  10,808  10,767 
Claims, Benefits and Expenses
Insurance claims and policyholders’ benefits 6,349  6,170  5,806 
Amortization of deferred acquisition costs 1,443  1,410  1,383 
Non-insurance warranty expense 1,328  1,159  1,082 
Other operating expenses 1,191  1,126  1,142 
Interest 113  122  131 
Total claims, benefits and expenses 10,424  9,987  9,544 
Income before income tax 1,484  821  1,223 
Income tax expense (282) (131) (223)
Net income $ 1,202  $ 690  $ 1,000 
Basic earnings per share $ 4.42  $ 2.54  $ 3.68 
Diluted earnings per share $ 4.41  $ 2.53  $ 3.67 
Weighted Average Outstanding Common Stock and Common Stock Equivalents
Basic 271.8 271.6 271.6
Diluted 272.8 272.4 272.5
The accompanying Notes are an integral part of these Consolidated Financial Statements.

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Table of Contents
CNA Financial Corporation
Consolidated Statements of Comprehensive Income (Loss)
Years ended December 31
(In millions) 2021 2020 2019
Comprehensive Income (Loss)
Net income $ 1,202  $ 690  $ 1,000 
Other Comprehensive Income (Loss), net of tax
Changes in:
Net unrealized gains and losses on investments with an allowance for credit losses (2) —  — 
Net unrealized gains and losses on other investments (706) 720  948 
Net unrealized gains and losses on investments (708) 720  948 
Foreign currency translation adjustment (19) 47  39 
Pension and postretirement benefits 244  (15) (58)
Other comprehensive (loss) income, net of tax (483) 752  929 
Total comprehensive income $ 719  $ 1,442  $ 1,929 
The accompanying Notes are an integral part of these Consolidated Financial Statements.
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Table of Contents
CNA Financial Corporation
Consolidated Balance Sheets
December 31
(In millions, except share data) 2021 2020
Assets    
Investments:    
Fixed maturity securities at fair value (amortized cost of $39,952 and $38,953, less allowance for credit loss of $18 and $40)
$ 44,380  $ 44,631 
Equity securities at fair value (cost of $964 and $941)
1,035  992 
Limited partnership investments 1,859  1,619 
Other invested assets 91  76 
Mortgage loans (less allowance for uncollectible receivables of $16 and $26)
973  1,068 
Short term investments 1,990  1,907 
Total investments 50,328  50,293 
Cash 536  419 
Reinsurance receivables (less allowance for uncollectible receivables of $21 and $21)
5,463  4,457 
Insurance receivables (less allowance for uncollectible receivables of $29 and $33)
2,945  2,607 
Accrued investment income 377  380 
Deferred acquisition costs 737  708 
Deferred income taxes 142  66 
Property and equipment at cost (less accumulated depreciation of $255 and $231)
226  252 
Goodwill 148  148 
Deferred non-insurance warranty acquisition expense 3,476  3,068 
Other assets 2,261  1,628 
Total assets $ 66,639  $ 64,026 
Liabilities    
Insurance reserves:  
Claim and claim adjustment expenses $ 24,174  $ 22,706 
Unearned premiums 5,761  5,119 
Future policy benefits 13,236  13,318 
Long term debt 2,779  2,776 
Deferred non-insurance warranty revenue 4,503  4,023 
Other liabilities (includes $56 and $89 due to Loews Corporation)
3,377  3,377 
Total liabilities 53,830  51,319 
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; 271,363,999 and 271,391,603 shares outstanding)
683  683 
Additional paid-in capital 2,215  2,211 
Retained earnings 9,663  9,081 
Accumulated other comprehensive income 320  803 
Treasury stock (1,676,244 and 1,648,640 shares), at cost
(72) (71)
Total stockholders’ equity 12,809  12,707 
Total liabilities and stockholders' equity $ 66,639  $ 64,026 
The accompanying Notes are an integral part of these Consolidated Financial Statements.
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Table of Contents
CNA Financial Corporation
Consolidated Statements of Cash Flows
Years ended December 31
(In millions) 2021 2020 2019
Cash Flows from Operating Activities    
Net income $ 1,202  $ 690  $ 1,000 
Adjustments to reconcile net income to net cash flows provided by operating activities:
Deferred income tax expense (benefit) 47  (49) (46)
Trading portfolio activity 20  (5) (16)
Net investment (gains) losses (120) 54  (29)
Equity method investees (127) (8) 11 
Net amortization of investments (81) (67) (89)
Depreciation and amortization 54  60  68 
Changes in:
Receivables, net (1,358) (409) 137 
Accrued investment income 16  (3)
Deferred acquisition costs (30) (43) (26)
Insurance reserves 2,463  1,681  358 
Other, net (76) (145) (225)
Net cash flows provided by operating activities 1,997  1,775  1,140 
Cash Flows from Investing Activities    
Dispositions:
Fixed maturity securities - sales 3,816  5,904  5,842 
Fixed maturity securities - maturities, calls and redemptions 4,464  3,760  2,997 
Equity securities 316  355  214 
Limited partnerships 246  373  479 
Mortgage loans 190  74  143 
Purchases:
Fixed maturity securities (9,307) (10,269) (8,661)
Equity securities (304) (452) (186)
Limited partnerships (440) (224) (198)
Mortgage loans (95) (172) (298)
Change in other investments (6) (8) (11)
Change in short term investments (83) (39) (535)
Purchases of property and equipment (26) (23) (26)
Other, net 16  15 
Net cash flows used by investing activities (1,228) (705) (225)
Cash Flows from Financing Activities
Dividends paid to common stockholders (621) (950) (929)
Proceeds from the issuance of debt —  495  496 
Repayment of debt —  (419) (520)
Purchase of treasury stock (18) (18) (23)
Other, net (9) (10) (12)
Net cash flows used by financing activities (648) (902) (988)
Effect of foreign exchange rate changes on cash (4)
Net change in cash 117  177  (68)
Cash, beginning of year 419  242  310 
Cash, end of period $ 536  $ 419  $ 242 
The accompanying Notes are an integral part of these Consolidated Financial Statements.
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Table of Contents
CNA Financial Corporation
Consolidated Statements of Stockholders' Equity
Years ended December 31
(In millions) 2021 2020 2019
Common Stock
Balance, beginning of year $ 683  $ 683  $ 683 
Balance, end of year 683  683  683 
Additional Paid-in Capital
Balance, beginning of year 2,211  2,203  2,192 
Stock-based compensation 11 
Balance, end of year 2,215  2,211  2,203 
Retained Earnings
Balance, beginning of year, as previously reported 9,081  9,348  9,277 
Cumulative effect adjustments from changes in accounting guidance, net of tax —  (5) — 
Balance, beginning of year, as adjusted 9,081  9,343  9,277 
Dividends to common stockholders ($2.27, $3.48, and $3.40 per share)
(620) (952) (929)
Net income 1,202  690  1,000 
Balance, end of year 9,663  9,081  9,348 
Accumulated Other Comprehensive Income (Loss)
Balance, beginning of year, as previously reported 803  51  (878)
Other comprehensive (loss) income (483) 752  929 
Balance, end of year 320  803  51 
Treasury Stock
Balance, beginning of year (71) (70) (57)
Stock-based compensation 17  17  10 
Purchase of treasury stock (18) (18) (23)
Balance, end of year (72) (71) (70)
Total stockholders' equity $ 12,809  $ 12,707  $ 12,215 
The accompanying Notes are an integral part of these Consolidated Financial Statements.

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Table of Contents
CNA Financial Corporation
Notes to Consolidated Financial Statements
Note A. Summary of Significant Accounting Policies
Basis of Presentation
The 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 approximately 89.6% of the outstanding common stock of CNAF as of December 31, 2021.
The accompanying 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. The preparation of 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 Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
Recently Adopted Accounting Standards Updates (ASU)
ASU 2016-13: In June 2016 the Financial Accounting Standards Board (FASB) issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The updated accounting guidance required changes to the recognition of credit losses on financial instruments not accounted for at fair value through the Company’s results of operations. For financial assets measured at cost, the expected credit loss model requires immediate recognition of estimated credit losses over the life of the asset and presentation of the asset at the net amount expected to be collected. This updated guidance applies to mortgage loan investments, reinsurance and insurance receivables and other financing receivables. For available-for-sale fixed maturity securities carried at fair value, estimated credit losses will continue to be measured at the present value of expected cash flows, however, the other than temporary impairment (OTTI) concept has been eliminated. Under the previous guidance, estimated credit impairments resulted in a write-down of amortized cost. Under the updated guidance, estimated credit losses are recognized through an allowance and reversals of the allowance are permitted if the estimate of credit losses declines. For available-for-sale fixed maturity securities where the Company has an intent to sell, impairment will continue to result in a write-down of amortized cost.
On January 1, 2020, the Company adopted the updated guidance using a modified retrospective method with a cumulative effect adjustment recorded to beginning Retained earnings. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. A prospective transition approach is required for available-for-sale fixed maturity securities that were purchased with credit deterioration (PCD assets) or have recognized an OTTI write-down prior to the effective date. The cumulative effect of the accounting change resulted in a $5 million decrease in Retained earnings, with a corresponding $7 million allowance for credit losses recorded for Mortgage loans partially offset by a $2 million tax impact.
The allowance for uncollectible reinsurance and insurance receivables was unchanged as a result of adopting the updated guidance. At adoption, an allowance for credit losses of $6 million was established for available-for-sale fixed maturity securities that were PCD assets, with a corresponding increase to amortized cost, resulting in no adjustment to the carrying value of the securities.
See the accounting policy discussion within this Note, as well as Notes B and G to the Consolidated Financial Statements for additional information regarding credit losses.
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Accounting Standards Pending Adoption
In August 2018, the FASB issued ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The updated accounting guidance requires changes to the measurement and disclosure of long-duration contracts. Entities will be required to update cash flow assumptions (including morbidity and persistency) at least annually, and to update discount rate assumptions quarterly using an upper-medium grade fixed-income instrument yield. The effect of changes in cash flow assumptions will be recorded in the Company's results of operations and the effect of changes in discount rate assumptions will be recorded in Other comprehensive income. The guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted, and may be applied using either a modified retrospective transition method or a full retrospective transition method. Restatement of prior periods presented is required.
The Company will adopt the new guidance effective January 1, 2023, using the modified retrospective method applied as of the transition date of January 1, 2021. The most significant impact at the transition date will be the effect of updating the discount rate assumption to reflect an upper-medium grade fixed-income instrument yield, which will be partially offset by the de-recognition of shadow adjustments associated with long duration contracts. The Company expects the net impact of these changes will be a material decrease in Accumulated other comprehensive income as of the transition date. The requirement to update cash flow assumptions at least annually is expected to change the pattern of earnings emergence being recognized. Adoption will also significantly expand the Company’s disclosures, and will impact systems, processes, and controls. While the requirements of the new guidance represent a material change from existing GAAP, the new guidance will not impact capital and surplus under statutory accounting practices, related cash flows, or the underlying economics of the business.
The Company continues to make progress in connection with these matters and is in process of refining key accounting policy decisions, technology solutions and updates to internal controls associated with adoption of the new guidance. These in-progress activities include modifications of actuarial valuation systems, data sourcing, analytical procedures and reporting processes.
Insurance Operations
Premiums: Insurance premiums on property and casualty insurance contracts are recognized in proportion to the underlying risk insured and are principally earned ratably over the term of the policies. Premiums on long term care contracts are earned ratably over the policy year in which they are due. The reserve for unearned premiums represents the portion of premiums written relating to the unexpired terms of coverage.
Property and casualty contracts that are retrospectively rated or subject to audit premiums contain provisions that result in an adjustment to the initial policy premium depending on the contract provisions. These provisions stipulate the adjustment due to loss experience of the insured during the coverage period, or changes in the level of exposure to insurance risk. For such contracts, the Company estimates the amount of ultimate premiums that the Company may earn upon completion of the coverage period and recognizes either an asset or a liability for the difference between the initial policy premium and the estimated ultimate premium. The Company either adjusts such estimated ultimate premium amounts during the course of the coverage period based on actual results to date, or by conducting premium audits after the policy has expired to determine the final exposure to insured risks. The resulting adjustment is recorded as either a reduction of or an increase to the earned premiums for the period.
Insurance receivables include balances due currently or in the future, including amounts due from insureds related to paid losses under high deductible policies, and are presented at unpaid balances, net of an allowance for uncollectible receivables. A loss rate methodology is used to determine expected credit losses for premium receivables. This methodology uses the Company’s historical annual credit losses relative to gross premium written to develop a range of credit loss rates for each dollar of gross written premium underwritten. Additionally, an expected credit loss for amounts due from insureds under high deductible and retrospectively rated policies is calculated on a pool basis, informed by historical default rate data obtained from major rating agencies. Changes in the allowance are presented as a component of Other operating expenses on the Consolidated Statements of Operations. Amounts are considered past due based on policy payment terms. Insurance receivables and any related allowance are written off after collection efforts are exhausted or a
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negotiated settlement is reached. See the Credit Losses section of this note for additional information on the Company’s allowances for expected credit losses.
Claim and claim adjustment expense reserves: Claim and claim adjustment expense reserves, except reserves for structured settlements not associated with asbestos and environmental pollution (A&EP), workers' compensation lifetime claims and long term care claims, are not discounted and are based on i) case basis estimates for losses reported on direct business, adjusted in the aggregate for ultimate loss expectations; ii) estimates of incurred but not reported (IBNR) losses; iii) estimates of losses on assumed reinsurance; iv) estimates of future expenses to be incurred in the settlement of claims; v) estimates of salvage and subrogation recoveries and vi) estimates of amounts due from insureds related to losses under high deductible policies. Management considers current conditions and trends as well as past Company and industry experience in establishing these estimates. The effects of inflation, which can be significant, are implicitly considered in the reserving process and are part of the recorded reserve balance. Ceded claim and claim adjustment expense reserves are reported as a component of Reinsurance receivables on the Consolidated Balance Sheets.
Claim and claim adjustment expense reserves are presented net of anticipated amounts due from insureds related to losses under deductible policies of $1.1 billion and $1.2 billion as of December 31, 2021 and 2020. A significant portion of these amounts are supported by collateral. The Company has an allowance for uncollectible deductible amounts, which is presented as a component of the allowance for doubtful accounts included in Insurance receivables on the Consolidated Balance Sheets.
Structured settlements have been negotiated for certain property and casualty insurance claims. Structured settlements are agreements to provide fixed periodic payments to claimants. The Company's obligations for structured settlements not funded by annuities are included in claim and claim adjustment expense reserves and are discounted at a weighted average interest rate of 6.4% and 6.5% as of December 31, 2021 and 2020. As of December 31, 2021 and 2020, the discounted reserves for unfunded structured settlements were $503 million and $520 million, net of discount of $621 million and $657 million. For the years ended December 31, 2021, 2020 and 2019, the amount of interest recognized on the discounted reserves of unfunded structured settlements was $36 million, $35 million and $36 million, respectively. This interest accretion is presented as a component of Insurance claims and policyholders’ benefits on the Consolidated Statements of Operations, but is excluded from the Company’s disclosure of prior year loss reserve development.
Workers' compensation lifetime claim reserves are calculated using mortality assumptions determined through statutory regulation and economic factors. As of December 31, 2021 and 2020, workers' compensation lifetime claim reserves are discounted at a 3.5% interest rate. As of December 31, 2021 and 2020, the discounted reserves for workers’ compensation lifetime claim reserves were $228 million and $258 million, net of discount of $97 million and $113 million. For the years ended December 31, 2021, 2020 and 2019, the amount of interest accretion recognized on the discounted reserves of workers’ compensation lifetime claim reserves was $12 million, $15 million and $21 million, respectively. This interest accretion is presented as a component of Insurance claims and policyholders' benefits on the Consolidated Statements of Operations, but is excluded from the Company's disclosure of prior year loss reserve development.
Long term care claim reserves for policyholders that are currently receiving benefits are calculated using mortality and morbidity assumptions based on Company and industry experience. These long term care claim reserves are discounted at a weighted average interest rate of 5.8% as of December 31, 2021 and 2020. As of December 31, 2021 and 2020, such discounted reserves totaled $2.7 billion, net of discount of $428 million and $439 million.
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Future policy benefit reserves: Future policy benefit reserves represent the active life reserves related to the Company's long term care policies for policyholders that are not currently receiving benefits and are computed using the net level premium method, which incorporates actuarial assumptions as to morbidity, persistency, inclusive of mortality, discount rate, future premium rate adjustments and expenses. Expense assumptions primarily relate to claim adjudication. These assumptions are locked in over the life of the policy; however if a premium deficiency emerges, the assumptions are unlocked and the future policy benefit reserves are increased. The September 30, 2021 gross premium valuation (GPV) indicated that recorded reserves included a margin of approximately $72 million. Long term care active life reserves for policy holders not currently receiving benefits are discounted at a weighted average interest rate of 5.3% and 5.4% as of December 31, 2021 and 2020.
In circumstances where the cash flow projections supporting future policy benefit reserves are expected to result in profits being recognized in early future years followed by losses in later future years, the future policy benefit reserves are increased by an amount necessary to offset losses that are projected to be recognized in later future years. The Company has not recorded additional future policy benefit reserves for profits followed by losses.
Insurance-related assessments: Liabilities for insurance-related assessments are accrued when an assessment is probable, when it can be reasonably estimated and when the event obligating the entity to pay an imposed or probable assessment has occurred. Liabilities for insurance-related assessments are not discounted and are included as part of Other liabilities on the Consolidated Balance Sheets. As of December 31, 2021 and 2020, the liability balances were $79 million and $82 million.
Reinsurance: Reinsurance accounting allows for contractual cash flows to be reflected as premiums and losses. To qualify for reinsurance accounting, reinsurance agreements must include risk transfer. To meet risk transfer requirements, a reinsurance contract must include both insurance risk, consisting of underwriting and timing risk, and a reasonable possibility of a significant loss for the assuming entity.
Reinsurance receivables related to paid losses are presented at unpaid balances. Reinsurance receivables related to unpaid losses are estimated in a manner consistent with claim and claim adjustment expense reserves or future policy benefit reserves. Reinsurance receivables are reported net of an allowance for uncollectible amounts on the Consolidated Balance Sheets. The cost of reinsurance is primarily accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies or over the reinsurance contract period. The ceding of insurance does not discharge the primary liability of the Company.
The Company has established an allowance for uncollectible reinsurance receivables which relates to both amounts already billed on ceded paid losses as well as ceded reserves that will be billed when losses are paid in the future. For assessing expected credit losses, the Company separates reinsurance receivables into two pools: voluntary reinsurance receivables and involuntary receivables related to mandatory pools. The Company has not recorded an allowance for involuntary pools as there is no perceived credit risk. The principal credit quality indicator used in the valuation of the allowance on voluntary reinsurance receivables is the financial strength rating of the reinsurer sourced from major rating agencies. If the reinsurer is unrated, an internal financial strength rating is assigned based on the Company’s historical loss experience and the Company’s assessment of reinsurance counterparty risk profile, which generally corresponds with a B rating. Reinsurer financial strength ratings are updated and reviewed on an annual basis or sooner if the Company becomes aware of significant changes related to a reinsurer. The allowance for uncollectible reinsurance receivables is estimated on the basis of periodic evaluations of balances due from reinsurers, reinsurer financial strength rating and solvency, industry experience and current and forecast economic conditions. Because billed receivables generally approximate 5% or less of total reinsurance receivables, the age of the reinsurance receivables related to paid losses is not a significant input into the allowance analysis. Changes in the allowance for uncollectible reinsurance receivables are presented as a component of Insurance claims and policyholders' benefits on the Consolidated Statements of Operations. See the Credit Losses section of this note for additional information on the Company's allowances for expected credit losses.
Amounts are considered past due based on the reinsurance contract terms. Reinsurance receivables related to paid losses and any related allowance are written off after collection efforts have been exhausted or a negotiated settlement is reached with the reinsurer. Reinsurance receivables from insolvent insurers related to paid losses are written off when the settlement due from the estate can be reasonably estimated. At the time reinsurance
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receivables related to paid losses are written off, any required adjustment to reinsurance receivables related to unpaid losses is recorded as a component of Insurance claims and policyholders' benefits on the Consolidated Statements of Operations.
A loss portfolio transfer is a retroactive reinsurance contract. If the cumulative claim and allocated claim adjustment expenses ceded under a loss portfolio transfer exceed the consideration paid, the resulting gain from such excess is deferred and amortized into earnings in future periods in proportion to actual recoveries under the loss portfolio transfer. In any period in which there is a revised estimate of claim and allocated claim adjustment expenses and the loss portfolio transfer is in a gain position, the deferred gain is recalculated as if the revised estimate was available at the inception date of the loss portfolio transfer and the change in the deferred gain is recognized in earnings.
Deferred acquisition costs: Deferrable acquisition costs include commissions, premium taxes and certain underwriting and policy issuance costs which are incremental direct costs of successful contract acquisitions. Acquisition costs related to property and casualty business are deferred and amortized ratably over the period the related premiums are earned. Deferred acquisition costs are presented net of ceding commissions and other ceded acquisition costs.
The Company evaluates deferred acquisition costs for recoverability. Anticipated investment income is considered in the determination of the recoverability of deferred acquisition costs. Adjustments, if necessary, are recorded in current period results of operations.
Policyholder dividends: Policyholder dividends are paid to participating policyholders within the workers' compensation and surety lines of business. Net written premiums for participating dividend policies were approximately 1% of total net written premiums for each of the years ended December 31, 2021, 2020 and 2019. Dividends to policyholders are accrued according to the Company's best estimate of the amount to be paid in accordance with contractual provisions and applicable state laws. Dividends to policyholders are presented as a component of Insurance claims & policyholders' benefits on the Consolidated Statements of Operations and Other liabilities on the Consolidated Balance Sheets.
Investments
The Company classifies its fixed maturity securities as either available-for-sale or trading, and as such, they are carried at fair value. Changes in fair value of trading securities are reported within Net investment income on the Consolidated Statements of Operations. Changes in fair value related to available-for-sale securities are reported as a component of Other comprehensive income.
The cost of fixed maturity securities classified as available-for-sale is adjusted for amortization of premiums and accretion of discounts, which are included in Net investment income on the Consolidated Statements of Operations. The amortization of premium and accretion of discount for fixed maturity securities takes into consideration call and maturity dates that produce the lowest yield.
For asset-backed securities included in fixed maturity securities, the Company recognizes income using an effective yield based on anticipated prepayments and the estimated economic life of the securities. When estimates of prepayments change, the effective yield is recalculated to reflect actual payments to date and anticipated future payments predominantly using the retrospective method.
To the extent that unrealized gains on fixed maturity securities supporting structured settlements not funded by annuities were realized, or that unrealized gains on fixed maturity securities supporting long term care products would result in a premium deficiency if realized, a related increase in Insurance reserves is recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (Shadow Adjustments). Shadow Adjustments, net of tax, decreased $296 million and increased $575 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, net unrealized gains on investments included in Accumulated other comprehensive income (AOCI) were correspondingly reduced by Shadow Adjustments of $2,477 million and $2,773 million, respectively.
Equity securities are carried at fair value. The Company's non-redeemable preferred stock contain characteristics of debt securities, are priced similarly to bonds and are held primarily for income generation through periodic dividends. While recognition of gains and losses on these securities is not discretionary,
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management does not consider the changes in fair value of non-redeemable preferred stock to be reflective of our primary operations. As such, the changes in the fair value of these securities are recorded through Net investment gains (losses) on the Consolidated Statements of Operations. The Company owns certain common stock with the intention of holding the securities primarily for market appreciation and as such, the changes in the fair value of these securities are recorded through Net investment income.
The Company's carrying value of investments in limited partnerships is its share of the net asset value of each partnership, as determined by the general partner. Certain partnerships for which results are not available on a timely basis are reported on a lag, primarily three months or less. Changes in net asset values are accounted for under the equity method and recorded within Net investment income on the Consolidated Statements of Operations.
Mortgage loans are commercial in nature, are carried at unpaid principal balance, net of unamortized fees and an allowance for expected credit losses, and are recorded once funded. 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). The DSCR compares a property’s net operating income to its debt service payments, including principal and interest. The LTV ratio compares the current unpaid principal balance of the loan to the estimated fair value of the underlying property collateralizing the loan. The pools developed to measure the credit loss allowance use increments of DSCR and LTV to draw distinctions between risk levels. The Company applies expected credit loss rates by pool to the outstanding receivable balances. Changes in the allowance for mortgage loans are presented as a component of Net investment gains (losses) on the Consolidated Statements of Operations. Prior to 2020, mortgage loans were evaluated on an individual loan basis considering the collection experience of each loan and other credit quality indicators such as DSCR and the credit-worthiness of the borrower or tenants of credit tenant loan properties. Mortgage loans were considered to be impaired loans and a loss incurred when it was probable that contractual principal and interest payments would not be collected and any impairment losses were recognized as a direct write-down of amortized cost. See the Credit Losses section of this note for additional information on the Company’s allowances for expected credit losses. Interest income from mortgage loans is recognized on an accrual basis using the effective yield method.
Other invested assets include overseas deposits. Overseas deposits are valued using the net asset value per share (or equivalent) practical expedient. They are primarily short-term government securities, agency securities and corporate bonds held in trusts that are managed by Lloyd's of London. These funds are required of Lloyd's syndicates to protect policyholders in overseas markets and may be denominated in local currency.
Short term investments are carried at fair value, with the exception of cash accounts earning interest, which are carried at cost and approximate fair value. Changes in fair value are reported as a component of Other comprehensive income.
Purchases and sales of all securities are recorded on the trade date, except for private placement securities, including bank loan participations, which are recorded once funded. Net investment gains and losses are determined on the basis of the cost or amortized cost of the specific securities sold.
In the normal course of investing activities, the Company enters into relationships with variable interest entities (VIEs), as both an investor in limited partnerships and asset-backed securities issued by third-party VIEs. The Company is not the primary beneficiary of these VIEs, and therefore does not consolidate them. The Company determines whether it is the primary beneficiary of a VIE based on a qualitative assessment of the relative power and benefits of the Company and the other participants in the VIE. The Company’s maximum exposure to loss with respect to these investments is limited to the investment carrying values included in the Company’s Consolidated Balance Sheets and any unfunded commitments.
An available-for-sale security is impaired if the fair value of the security is less than its cost adjusted for accretion, amortization and allowance for credit losses. When a security is impaired, it is evaluated to determine whether the Company intends to sell the security before recovery of amortized cost or whether a credit loss exists. Losses on securities that the Company intends to sell are recognized as impairment losses within Net investment gains (losses) on the Consolidated Statements of Operations. If a credit loss exists, an allowance is established and the corresponding amount is recognized as an impairment loss within Net
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investment gains (losses) on the Consolidated Statements of Operations. The allowance for credit losses related to available-for-sale fixed maturity securities is the difference between the present value of cash flows expected to be collected and the amortized cost basis, limited by the amount that the fair value is less than the amortized cost basis. In subsequent periods, the allowance is reviewed, with any changes in the allowance presented as a component of Net investment gains (losses) on the Consolidated Statements of Operations. Changes in the difference between the amortized cost basis, net of the allowance, and the fair value, are recognized in Other comprehensive income.
Significant judgment is required in the determination of whether an impairment loss has occurred for a security. The Company follows a consistent and systematic process for determining and recording an impairment loss, including the evaluation of securities in an unrealized loss position and securities with an allowance for credit losses on at least a quarterly basis.
The Company’s assessment of whether an impairment loss has occurred incorporates both quantitative and qualitative information. A credit loss exists if the present value of cash flows expected to be collected is less than the amortized cost basis. Significant assumptions enter into these cash flow projections including delinquency rates, probable risk of default, loss severity upon a default, over collateralization and interest coverage triggers and credit support from lower level tranches. The Company considers all available evidence when determining whether an investment requires a credit loss write-down or allowance to be recorded. Examples of such evidence may include the financial condition and near-term and long-term prospects of the issuer, whether the issuer is current with interest and principal payments, credit ratings on the security or changes in ratings over time, general market conditions and industry, sector or other specific factors and whether it is likely that the Company will recover its amortized cost through the collection of cash flows. See the Credit Losses section of this note for additional information on the Company’s allowances for expected credit losses.
Prior to 2020, the Company’s assessment of whether an impairment loss occurred also incorporated both quantitative and qualitative information. Fixed maturity securities in an unrealized loss position that the Company intended to sell, or it more likely than not would be required to sell before recovery of amortized cost, were considered to be impaired and the entire difference between the amortized cost basis and fair value of the security was recognized as an impairment loss in earnings as a direct write-down of amortized cost. The remaining fixed maturity securities in an unrealized loss position were evaluated to determine if a credit loss existed. If a credit loss was determined to exist, the credit loss was recognized in earnings as a direct write-down of amortized cost.
Credit Losses
The allowances for credit losses on fixed maturity securities, mortgage loans, reinsurance receivables and insurance receivables are valuation accounts that are reported as a reduction of a financial asset’s cost basis and are measured on a pool basis when similar risk characteristics exist. Management estimates the allowance using relevant available information from both internal and external sources. Historical credit loss experience provides the basis for the estimation of expected credit losses and adjustments may be made to reflect current conditions and reasonable and supportable forecasts. Adjustments to historical loss information are made for any additional factors that come to the Company’s attention. This could include significant shifts in counterparty financial strength ratings, aging of past due receivables, amounts sent to collection agencies, or other underlying portfolio changes. Amounts are considered past due when payments have not been received according to contractual terms. The Company also considers current and forecast economic conditions, using a variety of economic metrics and forecast indices. The sensitivity of expected credit losses relative to changes to these forecast economic conditions can vary by financial asset class. The Company considers a reasonable and supportable forecast period to be up to 24 months from the balance sheet date. After the forecast period, the Company reverts to historical credit experience. The Company uses collateral arrangements such as letters of credit and amounts held in beneficiary trusts to mitigate credit risk, which are considered in the estimate of net amount expected to be collected. Amounts are written off against the allowance when determined to be uncollectible.
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The Company has made a policy election to present accrued interest balances separately from the amortized cost basis of assets and has elected the practical expedient to exclude the accrued interest from the tabular disclosures for mortgage loans and available-for-sale securities. The Company has elected not to estimate an allowance for credit losses on accrued interest receivable. The accrual of interest income is discontinued and the asset is placed on nonaccrual status within 90 days of the interest becoming delinquent. Interest accrued but not received for assets on nonaccrual status is reversed through investment income. Interest received for assets that are on nonaccrual status is recognized as payment is received. The asset is returned to accrual status when the principal and interest amounts contractually due are brought current and future payments are expected. Interest receivable is presented as a component of accrued investment income on the Consolidated Balance Sheet.
Prior to 2020, the allowance for uncollectible reinsurance and insurance receivables was measured using an incurred loss methodology.
Deferred Non-Insurance Warranty Revenue and Acquisition Expense
Non-insurance warranty revenue is primarily generated from separately-priced service contracts that provide mechanical breakdown and other coverages to vehicle or consumer goods owners. The warranty contracts generally provide coverage from 1 month to 10 years. For warranty products where the Company acts as the principal in the transaction, Non-insurance warranty revenue is reported on a gross basis, with amounts paid by customers reported as Non-insurance warranty revenue and commissions paid to agents reported as Non-insurance warranty expense.
Non-insurance warranty revenue is reported net of any premiums related to contractual liability coverage issued by the Company's insurance operations. Additionally, the Company provides warranty administration services for dealer and manufacturer obligor warranty products, which include limited warranties and guaranteed asset protection waivers. The Company recognizes Non-insurance warranty revenue over the service period in proportion to the actuarially determined expected claims emergence pattern. Customers predominantly pay in full at the inception of the warranty contract. The liability for deferred revenue represents the unearned portion of revenue in advance of the Company's performance. The deferred revenue balance includes amounts which are refundable on a pro rata basis upon cancellation.
Dealers, retailers and agents earn commission for assisting the Company in obtaining non-insurance warranty contracts. Additionally, the Company utilizes third-parties to perform warranty administrator services for its consumer goods warranties. These costs, which are deferred and recorded as Deferred non-insurance warranty acquisition expense, are amortized to Non-insurance warranty expense consistent with how the related revenue is recognized. The Company evaluates deferred costs for recoverability including consideration of anticipated investment income. Adjustments to deferred costs, if necessary, are recorded in the current period results of operations.
Income Taxes
The Company and its eligible subsidiaries (CNA Tax Group) are included in the consolidated federal income tax return of Loews and its eligible subsidiaries. The Company accounts for income taxes under the asset and liability method. Under the asset and liability method, deferred income taxes are recognized for temporary differences between the financial statement and tax return bases of assets and liabilities, based on enacted tax rates and other provisions of the tax law. The effect of a change in tax laws or rates on deferred tax assets and liabilities is recognized in income in the period in which such change is enacted. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not, and a valuation allowance is established for any portion of a deferred tax asset that management believes will not be realized. The Company releases tax effects from AOCI utilizing the security-by-security approach for Net unrealized gains (losses) on investments with an allowance for credit losses and Net unrealized gains (losses) on other investments. For Pension and postretirement benefits, tax effects from AOCI are released at enacted tax rates based on the pre-tax adjustments to pension liabilities or assets recognized within Other comprehensive income.


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Pension and Postretirement Benefits
The Company recognizes the overfunded or underfunded status of its defined benefit plans in Other assets or Other liabilities on the Consolidated Balance Sheets. Changes in funded status related to prior service costs and credits, and actuarial gains and losses arising from differences between actual experience and actuarial assumptions, are recognized in the year in which the changes occur through Other comprehensive income. Unrecognized actuarial gains and losses in excess of 10% of the greater of the beginning of the year projected benefit obligation or fair value of plan assets (the corridor) are amortized as a component of net periodic pension cost (benefit) over the average remaining life expectancy of the plan participants. Annual service cost, interest cost, expected return on plan assets, amortization of prior service costs and credits and amortization of actuarial gains and losses are recognized on the Consolidated Statements of Operations.
The vested benefit obligation for the CNA Retirement Plan is determined based on eligible compensation and accrued service for previously entitled employees. Effective June 30, 2015, future benefit accruals under the CNA Retirement Plan were eliminated and the benefit obligations were frozen.
Stock-Based Compensation
The Company records compensation expense using the fair value method for all awards it grants, modifies or cancels primarily on a straight-line basis over the requisite service period, generally three years.
Foreign Currency
The Company's foreign subsidiaries' balance sheet accounts are translated at the exchange rates in effect at each reporting date and income statement accounts are either translated at the exchange rates on the date of the transaction or at average exchange rates. Foreign currency translation gains and losses are reflected in Stockholders' equity as a component of AOCI. Foreign currency transaction gains (losses) of less than $(1) million, $13 million and $1 million were included in determining Net income for the years ended December 31, 2021, 2020 and 2019, respectively.
Leases
A lease provides the lessee the right to control the use of an identified asset for a period of time in exchange for consideration. Operating lease right-of-use (ROU) assets and lease liabilities are included in Other assets and Other liabilities on the Company's Consolidated Balance Sheets.
ROU assets represent the Company's right to use an underlying asset for the lease term and operating lease liabilities represent the Company's obligation to make lease payments arising from the lease. The Company determines if an arrangement is a lease at inception. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Most operating leases contain renewal options that provide for rent increases based on prevailing market conditions. Certain leases contain options to terminate before maturity. The lease term used to calculate the ROU asset includes any renewal options or lease termination options that the Company expects to exercise. The discount rate used to determine the commencement date present value of lease payments is typically the Company’s secured borrowing rate, as most of the Company’s leases do not provide an implicit rate. ROU assets include any lease payments required to be made prior to commencement and exclude lease incentives. The Company has elected to account for its lease and non-lease components as a single lease component. The Company’s non-lease components consist of variable lease costs not based on an index or rate and are excluded from the measurement of ROU assets and lease liabilities. Variable lease costs not based on an index or rate are treated as period costs, and represent charges for services provided by the landlord and the Company's reimbursement to the landlord for costs such as real estate taxes and insurance.
The Company occupies office facilities under lease agreements that expire at various dates. The Company's lease agreements do not contain significant residual value guarantees, restrictions or covenants. The Company does not have any significant finance leases.

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Property and Equipment
Property and equipment are carried at cost less accumulated depreciation. Depreciation is based on the estimated useful lives of the various classes of property and equipment and is determined principally on the straight-line method. Furniture and fixtures are depreciated over seven years. Office equipment is depreciated over five years. The estimated lives for data processing equipment and software generally range from three to five years, but can be as long as ten years. Leasehold improvements are depreciated over the corresponding lease terms not to exceed the underlying asset life.
Goodwill
Goodwill represents the excess of purchase price over the fair value of the net assets of acquired entities and businesses. Goodwill in the International segment may change from period to period as a result of foreign currency translation.
Goodwill is tested for impairment annually or when certain triggering events require such tests. As a result of reviews completed for the year ended December 31, 2021, the Company determined that the estimated fair value of the reporting units were in excess of their carrying value including Goodwill. Changes in future periods in assumptions about the level of economic capital, business growth, earnings projections or the weighted average cost of capital could result in goodwill impairment.
Other Intangible Assets
Other intangible assets are reported within Other assets on the Consolidated Balance Sheets. Finite-lived intangible assets are amortized over their estimated useful lives. Indefinite-lived other intangible assets are tested for impairment annually or when certain triggering events require such tests.
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.
For the years ended December 31, 2021, 2020 and 2019, approximately 1 million, 770 thousand and 960 thousand potential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were included in the calculation of diluted earnings per share. For those same periods, 1 thousand, 8 thousand and 1 thousand potential shares attributable to exercises or conversions into common stock under stock-based employee compensation plans were not included in the calculation of diluted earnings per share, because the effect would have been antidilutive.
Supplementary Cash Flow Information
Cash payments made for interest were $110 million, $124 million and $136 million for the years ended December 31, 2021, 2020 and 2019. Cash payments made for income taxes were $278 million, $108 million and $255 million for the years ended December 31, 2021, 2020 and 2019.
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Note B. Investments
The significant components of Net investment income are presented in the following table.
Years ended December 31
(In millions) 2021 2020 2019
Fixed maturity securities $ 1,707  $ 1,728  $ 1,817 
Equity securities 83  65  85 
Limited partnership investments 362  121  180 
Mortgage loans 61  57  51 
Short term investments 34 
Trading portfolio 18 
Other — 
Gross investment income 2,223  1,999  2,181 
Investment expense (64) (64) (63)
Net investment income $ 2,159  $ 1,935  $ 2,118 
For the years ended December 31, 2021 and 2020, $28 million and $34 million of Net investment income was recognized due to the change in fair value of common stock still held as of December 31, 2021 and 2020.
As of December 31, 2021 and 2020, the Company held less than $1 million of non-income producing fixed maturity securities. As of December 31, 2021 and 2020, the Company held $7 million and $0 of non-income producing mortgage loans. As of December 31, 2021 and 2020, no investments in a single issuer exceeded 10% of stockholders' equity, other than investments in securities issued by the U.S. Treasury and obligations of government-sponsored enterprises.
Net investment gains (losses) are presented in the following table.
Years ended December 31
(In millions) 2021 2020 2019
Net investment gains (losses):
Fixed maturity securities:
Gross gains $ 186  $ 220  $ 125 
Gross losses (90) (220) (131)
Net investment gains (losses) on fixed maturity securities 96  —  (6)
Equity securities (3) 66 
Derivatives (10) (11)
Mortgage loans 10  (21) — 
Short term investments and other (20) (20)
Net investment gains (losses) $ 120  $ (54) $ 29 
For the years ended December 31, 2021 and 2020, $2 million of gains and $3 million of losses were recognized in Net investment gains (losses) due to the change in fair value of non-redeemable preferred stock still held as of December 31, 2021 and 2020, respectively. Short term investments and other included a $20 million loss for the year ended December 31, 2020 related to the redemption of the Company's $400 million senior notes due August 2021 and a $21 million loss for the year ended December 31, 2019 related to the redemption of the Company's $500 million senior notes due August 2020.





70


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 $369 million and $371 million as of December 31, 2021 and 2020 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 January 1, 2021 $ 23  $ 17  $ 40 
Additions to the allowance for credit losses:
Securities for which credit losses were not previously recorded 14  —  14 
Available-for-sale securities accounted for as PCD assets 11 
Reductions to the allowance for credit losses:
Securities sold during the period (realized) 17  24 
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 16  —  16 
Recoveries of amounts previously written off —  —  — 
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period (8) (7)
Balance as of December 31, 2021
$ 11  $ $ 18 
(In millions) Corporate and other bonds Asset-backed Total
Allowance for credit losses:
Balance as of January 1, 2020 $ —  $ —  $ — 
Additions to the allowance for credit losses:
Impact of adopting ASC 326 — 
Securities for which credit losses were not previously recorded 67  12  79 
Available-for-sale securities accounted for as PCD assets — 
Reductions to the allowance for credit losses:
Securities sold during the period (realized) 22  —  22 
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 —  —  — 
Recoveries of amounts previously written off —  —  — 
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period (32) (27)
Balance as of December 31, 2020
$ 23  $ 17  $ 40 







71

The components of available-for-sale impairment losses recognized in earnings by asset type are presented in the following table. The table includes losses on securities with an intention to sell and changes in the allowance for credit losses on securities since acquisition date.
Years ended December 31
(In millions) 2021 2020 2019
Fixed maturity securities available-for-sale:
Corporate and other bonds $ 11  $ 87  $ 33 
Asset-backed 20  24  11 
Impairment (gains) losses recognized in earnings $ 31  $ 111  $ 44 
For the years ended December 31, 2021 and 2020, the Company also recognized $10 million of gains and $21 million of losses related to mortgage loans primarily due to changes in expected credit losses.
The net change in unrealized gains on investments, which consists solely of the change in unrealized gains on fixed maturity securities, was $(1,272) million, $1,637 million and $2,620 million for the years ended December 31, 2021, 2020 and 2019.
72

The following tables present a summary of fixed maturity securities.
December 31, 2021 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 $ 21,444  $ 2,755  $ 56  $ 11  $ 24,132 
States, municipalities and political subdivisions 10,358  1,599  14  —  11,943 
Asset-backed:
Residential mortgage-backed 2,893  71  —  2,956 
Commercial mortgage-backed 1,987  63  19  —  2,031 
Other asset-backed 2,561  54  10  2,598 
Total asset-backed 7,441  188  37  7,585 
U.S. Treasury and obligations of government-sponsored enterprises 132  —  130 
Foreign government 570  15  —  583 
Total fixed maturity securities available-for-sale 39,945  4,558  112  18  44,373 
Total fixed maturity securities trading —  —  — 
Total fixed maturity securities $ 39,952  $ 4,558  $ 112  $ 18  $ 44,380 
December 31, 2020 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 $ 20,792  $ 3,578  $ 22  $ 23  $ 24,325 
States, municipalities and political subdivisions 9,729  1,863  —  —  11,592 
Asset-backed:
Residential mortgage-backed 3,442  146  —  3,587 
Commercial mortgage-backed 1,933  93  42  17  1,967 
Other asset-backed 2,179  81  —  2,251 
Total asset-backed 7,554  320  52  17  7,805 
U.S. Treasury and obligations of government-sponsored enterprises 339  —  338 
Foreign government 512  32  —  —  544 
Total fixed maturity securities available-for-sale 38,926  5,795  77  40  44,604 
Total fixed maturity securities trading 27  —  —  —  27 
Total fixed maturity securities $ 38,953  $ 5,795  $ 77  $ 40  $ 44,631 

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The following tables present the estimated fair value and gross unrealized losses of 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
December 31, 2021 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 $ 2,389  $ 48  $ 136  $ $ 2,525  $ 56 
States, municipalities and political subdivisions 730  14  —  —  730  14 
Asset-backed:
Residential mortgage-backed 1,043  —  —  1,043 
Commercial mortgage-backed 527  167  12  694  19 
Other asset-backed 840  10  62  —  902  10 
Total asset-backed 2,410  25  229  12  2,639  37 
U.S. Treasury and obligations of government-sponsored enterprises 69  —  74 
Foreign government 97  —  —  97 
Total $ 5,695  $ 92  $ 370  $ 20  $ 6,065  $ 112 
Less than 12 Months 12 Months or Longer Total
December 31, 2020 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 $ 609  $ 21  $ 12  $ $ 621  $ 22 
States, municipalities and political subdivisions 33  —  —  —  33  — 
Asset-backed:
Residential mortgage-backed 71  11  —  82 
Commercial mortgage-backed 533  40  28  561  42 
Other asset-backed 344  13  —  357 
Total asset-backed 948  50  52  1,000  52 
U.S. Treasury and obligations of government-sponsored enterprises 63  —  —  63 
   Foreign government 13  —  —  —  13  — 
Total $ 1,666  $ 74  $ 64  $ $ 1,730  $ 77 
Based on current facts and circumstances, the Company believes the unrealized losses presented in the December 31, 2021 securities in a gross unrealized loss position table above are not indicative of the ultimate collectibility of the current amortized cost of the securities, but rather are attributable to changes in interest rates, credit spreads and other factors. The Company has no current intent to sell securities with unrealized losses, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost; accordingly, the Company has determined that there are no additional impairment losses to be recorded as of December 31, 2021.

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Contractual Maturity
The following table presents available-for-sale fixed maturity securities by contractual maturity.
December 31 2021 2020
(In millions) Cost or
Amortized
Cost
Estimated
Fair
Value
Cost or
Amortized
Cost
Estimated
Fair
Value
Due in one year or less $ 1,603  $ 1,624  $ 1,456  $ 1,458 
Due after one year through five years 10,637  11,229  12,304  13,098 
Due after five years through ten years 13,294  14,338  12,319  13,878 
Due after ten years 14,411  17,182  12,847  16,170 
Total $ 39,945  $ 44,373  $ 38,926  $ 44,604 
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.
Limited Partnerships
The carrying value of limited partnerships as of December 31, 2021 and 2020 was $1,859 million and $1,619 million, which includes net undistributed earnings of $266 million and $235 million. Limited partnerships comprising 32% of the total carrying value are reported on a current basis through December 31, 2021 with no reporting lag, 6% are reported on a one month lag and the remainder are reported on more than a one month lag. The number of limited partnerships held and the strategies employed provide diversification to the limited partnership portfolio and the overall invested asset portfolio.
Limited partnerships comprising 68% and 49% of the carrying value as of December 31, 2021 and 2020 were invested in private debt and equity. Limited partnerships comprising 32% and 51% of the carrying value as of December 31, 2021 and 2020 employ hedge fund strategies. Private debt and equity funds cover a broad range of investment strategies including buyout, co-investment, private credit, growth capital, distressed investing and real estate. Hedge fund strategies include both long and short positions in fixed income, equity and derivative instruments.
The ten largest limited partnership positions held totaled $665 million and $775 million as of December 31, 2021 and 2020. Based on the most recent information available regarding the Company’s percentage ownership of the individual limited partnerships, the carrying value reflected on the Consolidated Balance Sheets represents approximately 1% and 2% of the aggregate partnership equity as of December 31, 2021 and 2020, and the related income reflected on the Consolidated Statements of Operations represents approximately 2%, 2% and 2% of the changes in aggregate partnership equity for the years ended December 31, 2021, 2020 and 2019.
There are risks inherent in limited partnership investments which may result in losses due to short-selling, derivatives or other speculative investment practices. The use of leverage increases volatility generated by the underlying investment strategies.

The Company’s private debt, private equity and other non-hedge fund limited partnership investments generally do not permit voluntary withdrawals. The Company’s hedge fund limited partnership investments contain withdrawal provisions that generally limit liquidity for a period of thirty days up to one year or longer. Typically, hedge fund withdrawals require advance written notice of up to 90 days.

75

Derivative Financial Instruments
The Company may use derivatives in the normal course of business, primarily in an attempt to reduce its exposure to market risk (principally interest rate risk and foreign currency risk) stemming from various assets and liabilities. The Company's principal objective under such strategies is to achieve the desired reduction in economic risk, even if the position does not receive hedge accounting treatment.
The Company may enter into interest rate swaps, futures and forward commitments to purchase securities to manage interest rate risk. The Company may use foreign currency forward contracts to manage foreign currency risk.
Credit exposure associated with non-performance by the counterparties to derivative instruments is generally limited to the uncollateralized fair value of the asset related to the instruments recognized on the Consolidated Balance Sheets. The Company generally requires that all over-the-counter derivative contracts be governed by an International Swaps and Derivatives Association Master Agreement, and exchanges collateral under the terms of these agreements with its derivative investment counterparties depending on the amount of the exposure and the credit rating of the counterparty. Gross estimated fair values of derivative positions are presented in Other invested assets and Other liabilities on the Consolidated Balance Sheets. The Company does not offset derivative positions against the fair value of collateral provided or positions subject to netting arrangements. There would be no significant difference in the balance included in such accounts if the estimated fair values were presented net as of December 31, 2021 and 2020.
There was no cash collateral provided by the Company or cash collateral received from counterparties as of December 31, 2021 or 2020.
The Company holds an embedded derivative on a funds withheld liability with a notional value of $270 million and $190 million and a fair value of $(12) million and $(19) million as of December 31, 2021 and 2020. The embedded derivative on the funds withheld liability is accounted for separately and reported with the funds withheld liability in Other liabilities on the Consolidated Balance Sheets.
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 December 31, 2021, the Company had commitments to purchase or fund approximately $1,230 million and sell approximately $90 million under the terms of these investments.
Investments on Deposit
Securities with carrying values of approximately $3.0 billion were deposited by the Company’s insurance subsidiaries under requirements of regulatory authorities and others as of December 31, 2021 and 2020.
Cash and securities with carrying values of approximately $1.2 billion and $1.1 billion were deposited with financial institutions in trust accounts or as collateral for letters of credit to secure obligations with various third parties as of December 31, 2021 and 2020.

76

Mortgage Loans
The following table presents the amortized cost basis of mortgage loans for each credit quality indicator by year of origination.
December 31, 2021
Mortgage Loans Amortized Cost Basis by Origination Year (1)
(In millions) 2021 2020 2019 2018 2017 Prior Total
DSCR ≥1.6x
LTV less than 55% $ $ 75  $ $ 38  $ 99  $ 181  $ 401 
LTV 55% to 65% 38 15 17 —  24  99
LTV greater than 65% 17  —  8 —  —  —  25
DSCR 1.2x - 1.6x
LTV less than 55% 14  14  95  —  42  170
LTV 55% to 65% 36  —  —  24  10  —  70
LTV greater than 65% —  24  —  —  —  32
DSCR ≤1.2
LTV less than 55% —  —  35  —  30  —  65
LTV 55% to 65% —  —  28  —  —  —  28
LTV greater than 65% 21  62  —  —  99
Total $ 95  $ 160  $ 249  $ 79  $ 152  $ 254  $ 989 
(1) The values in the table above reflect DSCR on a standardized amortization period and LTV based on the most recent appraised values trended forward using changes in a commercial real estate price index.

As of December 31, 2021, accrued interest receivable on mortgage loans totaled $3 million and is excluded from the amortized cost basis disclosed in the table above and the estimate of expected credit losses.

77

Note C. Fair Value
Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable.
Level 1 - Quoted prices for identical instruments in active markets.
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are not observable.
Prices may fall within Level 1, 2 or 3 depending upon the methodology and inputs used to estimate fair value for each specific security. In general, the Company seeks to price securities using third-party pricing services. Securities not priced by pricing services are submitted to independent brokers for valuation and, if those are not available, internally developed pricing models are used to value assets using a methodology and inputs the Company believes market participants would use to value the assets. Prices obtained from third-party pricing services or brokers are not adjusted by the Company.
The Company performs control procedures over information obtained from pricing services and brokers to ensure prices received represent a reasonable estimate of fair value and to confirm representations regarding whether inputs are observable or unobservable. Procedures may include i) the review of pricing service methodologies or broker pricing qualifications, ii) back-testing, where past fair value estimates are compared to actual transactions executed in the market on similar dates, iii) exception reporting, where period-over-period changes in price are reviewed and challenged with the pricing service or broker based on exception criteria, and iv) deep dives, where the Company performs an independent analysis of the inputs and assumptions used to price individual securities.
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Assets and Liabilities Measured at Fair Value
Assets and liabilities measured at fair value on a recurring basis are presented in the following tables. Corporate bonds and other includes obligations of the U.S. Treasury, government-sponsored enterprises, foreign governments and redeemable preferred stock.
December 31, 2021       Total
Assets/Liabilities
at Fair Value
(In millions) Level 1 Level 2 Level 3
Assets        
Fixed maturity securities:        
Corporate bonds and other $ 140  $ 23,775  $ 937  $ 24,852 
States, municipalities and political subdivisions —  11,887  56  11,943 
Asset-backed —  7,029  556  7,585 
Total fixed maturity securities 140  42,691  1,549  44,380 
Equity securities:
Common stock 220  —  13  233 
Non-redeemable preferred stock 65  721  16  802 
Total equity securities 285  721  29  1,035 
Short term and other 1,798  74  —  1,872 
Total assets $ 2,223  $ 43,486  $ 1,578  $ 47,287 
Liabilities
Other liabilities $ —  $ 12  $ —  $ 12 
Total liabilities $ —  $ 12  $ —  $ 12 

December 31, 2020       Total
Assets/Liabilities
at Fair Value
(In millions) Level 1 Level 2 Level 3
Assets        
Fixed maturity securities:        
Corporate bonds and other $ 355  $ 24,109  $ 770  $ 25,234 
States, municipalities and political subdivisions —  11,546  46  11,592 
Asset-backed —  7,497  308  7,805 
Total fixed maturity securities 355  43,152  1,124  44,631 
Equity securities:
Common stock 175  —  20  195 
Non-redeemable preferred stock 68  722  797 
Total equity securities 243  722  27  992 
Short term and other 1,761  28  —  1,789 
Total assets $ 2,359  $ 43,902  $ 1,151  $ 47,412 
Liabilities    
Other liabilities $ —  $ 19  $ —  $ 19 
Total liabilities $ —  $ 19  $ —  $ 19 
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The tables below present a reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3).
Level 3
(In millions)
Corporate bonds and other States, municipalities and political subdivisions Asset-backed Equity securities Total
Balance as of January 1, 2021 $ 770  $ 46  $ 308  $ 27  $ 1,151 
Total realized and unrealized investment gains (losses):
Reported in Net investment gains (losses) (10) —  —  (2) (12)
Reported in Net investment income —  — 
Reported in Other comprehensive income (loss) (32) (1) (10) —  (43)
Total realized and unrealized investment gains (losses) (42) (1) (3) —  (46)
Purchases 312  12  287  612 
Sales (3) —  (9) (20) (32)
Settlements (68) (1) (61) —  (130)
Transfers into Level 3 20  —  109  21  150 
Transfers out of Level 3 (52) —  (75) —  (127)
Balance as of December 31, 2021 $ 937  $ 56  $ 556  $ 29  $ 1,578 
Unrealized gains (losses) on Level 3 assets and liabilities held as of December 31, 2021 recognized in Net income (loss) in the period $ —  $ —  $ —  $ (2) $ (2)
Unrealized gains (losses) on Level 3 assets and liabilities held as of December 31, 2021 recognized in Other comprehensive income (loss) in the period (32) (1) (11) —  (44)

Level 3
(In millions)
Corporate bonds and other States, municipalities and political subdivisions Asset-backed Equity securities Total
Balance as of January 1, 2020 $ 468  $ —  $ 165  $ 18  $ 651 
Total realized and unrealized investment gains (losses):
Reported in Net investment gains (losses) —  (1) (4) (4)
Reported in Net investment income —  —  (2) — 
Reported in Other comprehensive income (loss) 43  16  —  60 
Total realized and unrealized investment gains (losses) 44  17  (6) 56 
Purchases 264  45  154  15  478 
Sales (3) —  (9) —  (12)
Settlements (13) —  (32) —  (45)
Transfers into Level 3 10  —  30  —  40 
Transfers out of Level 3 —  —  (17) —  (17)
Balance as of December 31, 2020 $ 770  $ 46  $ 308  $ 27  $ 1,151 
Unrealized gains (losses) on Level 3 assets and liabilities held as of December 31, 2020 recognized in Net income (loss) in the period $ —  $ —  $ —  $ (6) $ (6)
Unrealized gains (losses) on Level 3 assets and liabilities held as of December 31, 2020 recognized in Other comprehensive income (loss) in the period 43  18  —  62 
Securities may be transferred in or out of levels within the fair value hierarchy based on the availability of observable market information and quoted prices used to determine the fair value of the security. The availability of observable market information and quoted prices varies based on market conditions and trading volume.
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Valuation Methodologies and Inputs
The following section describes the valuation methodologies and relevant inputs used to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which the instruments are generally classified.
Fixed Maturity Securities
Level 1 securities include highly liquid government securities and exchange traded bonds, valued using quoted market prices. Level 2 securities include most other fixed maturity securities as the significant inputs are observable in the marketplace. All classes of Level 2 fixed maturity securities are valued using a methodology based on information generated by market transactions involving identical or comparable assets, a discounted cash flow methodology, or a combination of both when necessary. Common inputs for all classes of fixed maturity securities include prices from recently executed transactions of similar securities, marketplace quotes, benchmark yields, spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. Specifically for asset-backed securities, key inputs include prepayment and default projections based on past performance of the underlying collateral and current market data. Fixed maturity securities are primarily assigned to Level 3 in cases where broker/dealer quotes are significant inputs to the valuation and there is a lack of transparency as to whether these quotes are based on information that is observable in the marketplace. Level 3 securities also include private placement debt securities whose fair value is determined using internal models with some inputs that are not market observable.
Equity Securities
Level 1 equity securities include publicly traded securities valued using quoted market prices. Level 2 securities are primarily valued using pricing for similar securities, recently executed transactions and other pricing models utilizing market observable inputs. Level 3 securities are primarily priced using broker/dealer quotes and internal models with some inputs that are not market observable.
Short Term and Other Invested Assets
Securities that are actively traded or have quoted prices are classified as Level 1. These securities include money market funds and treasury bills. Level 2 primarily includes non-U.S. government securities and commercial paper, for which all inputs are market observable. Fixed maturity securities purchased within one year of maturity are classified consistent with fixed maturity securities discussed above. Short term investments as presented in the tables above differ from the amounts presented on the Consolidated Balance Sheets because certain short term investments, such as time deposits, are not measured at fair value.
As of December 31, 2021 and December 31, 2020, there were $74 million and $71 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.
Derivative Financial Investments
The embedded derivative on funds withheld liability is valued using the change in fair value of the assets supporting the funds withheld liability, which are fixed maturity securities primarily valued with observable inputs.
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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.
December 31, 2021 Estimated Fair Value
(In millions)
Valuation Technique(s) Unobservable Input(s) Range
 (Weighted Average)
Fixed maturity securities $ 1,225  Discounted cash flow Credit spread
1% - 7% (2%)
December 31, 2020 Estimated Fair Value
(In millions)
Valuation Technique(s) Unobservable Input(s) Range
 (Weighted Average)
Fixed maturity securities $ 966  Discounted cash flow Credit spread
1% - 8% (3%)
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 Consolidated Balance Sheets are presented in the following tables.
December 31, 2021 Carrying
Amount
Estimated Fair Value
(In millions) Level 1 Level 2 Level 3 Total
Assets
Mortgage loans $ 973  $ —  $ —  $ 1,018  $ 1,018 
Liabilities
Long term debt $ 2,779  $ —  $ 2,978  $ —  $ 2,978 
December 31, 2020 Carrying
Amount
Estimated Fair Value
(In millions) Level 1 Level 2 Level 3 Total
Assets
Mortgage loans $ 1,068  $ —  $ —  $ 1,151  $ 1,151 
Liabilities
Long term debt $ 2,776  $ —  $ 3,148  $ —  $ 3,148 
The carrying amounts reported on the Consolidated Balance Sheets for Cash, Short term investments not carried at fair value, Accrued investment income and certain Other assets and Other liabilities approximate fair value due to the short term nature of these items. These assets and liabilities are not listed in the tables above.
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Note D. Income Taxes
The CNA Tax Group is included in the consolidated federal income tax return of Loews and its eligible subsidiaries. Loews and the Company have agreed that for each taxable year, the Company will 1) be paid by Loews the amount, if any, by which the Loews consolidated federal income tax liability is reduced by virtue of the inclusion of the CNA Tax Group in the Loews consolidated federal income tax return, or 2) pay to Loews an amount, if any, equal to the federal income tax that would have been payable by the CNA Tax Group filing a separate consolidated tax return. In the event that Loews should have a net operating loss in the future computed on the basis of filing a separate consolidated tax return without the CNA Tax Group, the Company may be required to repay tax recoveries previously received from Loews. This agreement may be canceled by either party upon 30 days written notice.
For the years ended December 31, 2021, 2020 and 2019, the Company paid $238 million, $65 million and $239 million to Loews related to federal income taxes.
For 2019 through 2021, Loews and the Company participated in the Internal Revenue Service (IRS) Compliance Assurance Process (CAP), which is a voluntary program for large corporations. Under CAP, the IRS conducted a real-time audit and worked contemporaneously with the Company to resolve any issues prior to the filing of the 2019 tax return. The 2019 examination has been completed. For 2020 and 2021, the Company was selected to participate in the phase of CAP reserved for taxpayers whose risk of noncompliance does not warrant use of IRS resources. The Company believes that participation in CAP should reduce tax-related uncertainties, if any.
As of December 31, 2021 and 2020, there were no unrecognized tax benefits.
The Company recognizes interest accrued related to unrecognized tax benefits and tax refund claims in Income tax (expense) benefit on the Consolidated Statements of Operations. The Company recognizes penalties (if any) in Income tax (expense) benefit on the Consolidated Statements of Operations. During 2021, 2020 and 2019 the Company recognized no interest and no penalties. There were no amounts accrued for interest or penalties as of December 31, 2021 or 2020.
The following table presents a reconciliation between the Company's income tax expense at statutory rates and the recorded income tax expense.
Years ended December 31
(In millions) 2021 2020 2019
Income tax expense at statutory rates $ (312) $ (172) $ (257)
Tax benefit from tax exempt income 51  52  53 
Foreign taxes and credits (3) (1)
State income tax expense (13) (6) (14)
Other tax expense (5) (7) (4)
Income tax expense $ (282) $ (131) $ (223)
As of December 31, 2021, no deferred taxes are required on the undistributed earnings of subsidiaries subject to tax.
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The following table presents the current and deferred components of the Company's income tax expense.
Years ended December 31
(In millions) 2021 2020 2019
Current tax expense $ (235) $ (180) $ (269)
Deferred tax (expense) benefit (47) 49  46 
Total income tax expense $ (282) $ (131) $ (223)
Total income tax presented above includes foreign tax expense of approximately $18 million, $16 million and $19 million related to pretax income from foreign operations of approximately $124 million, $45 million and $43 million for the years ended December 31, 2021, 2020 and 2019.
The deferred tax effects of the significant components of the Company's deferred tax assets and liabilities are presented in the following table.
December 31
(In millions) 2021 2020
Deferred Tax Assets:
Insurance reserves:
Property and casualty claim and claim adjustment expense reserves $ 173  $ 157 
Unearned premium reserves 193  174 
Deferred Revenue 64  62 
Employee benefits 46  122 
Deferred retroactive reinsurance benefit 90  83 
Other assets 88  92 
Gross deferred tax assets 654  690 
Deferred Tax Liabilities:
Investment valuation differences 93  28 
Deferred acquisition costs 99  93 
Net unrealized gains 272  453 
Software and hardware 27  31 
Other liabilities 21  19 
Gross deferred tax liabilities 512  624 
Net deferred tax asset $ 142  $ 66 
As of December 31, 2021, the CNA Tax Group had no loss carryforwards and no tax credit carryforward. The foreign operations had loss carryforwards of $138 million, of which $1 million expires in 2035 and $137 million has no expiration. The foreign operations had a tax credit carryforward of $4 million, which has no expiration.
Although realization of deferred tax assets is not assured, management believes it is more likely than not that the recognized net deferred tax asset will be realized through recoupment of ordinary and capital taxes paid in prior carryback years and through future earnings, reversal of existing temporary differences and available tax planning strategies. As a result, no valuation allowance was recorded as of December 31, 2021 or 2020.
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Note E. Claim, Claim Adjustment Expense and Future Policy Benefit Reserves
Property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including 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, including inflation, and public attitudes. All of these factors can affect the estimation of claim and claim adjustment expense reserves.
Establishing claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves for catastrophic events that have occurred, is an estimation process. Many factors can ultimately affect the final settlement of a claim and, therefore, the necessary reserve. Changes in the law, results of litigation, medical costs, the cost of repair materials and labor rates can affect ultimate claim costs. In addition, time can be a critical part of reserving determinations since the longer the span between the incidence of a loss and the payment or settlement of the claim, the more variable the ultimate settlement amount can be. Accordingly, short-tail claims, such as property damage claims, tend to be more reasonably estimable than long-tail claims, such as workers' compensation, general liability and professional liability claims. Adjustments to prior year reserve estimates, if necessary, are reflected in the results of operations in the period that the need for such adjustments is determined. There can be no assurance that the Company's ultimate cost for insurance losses will not exceed current estimates.
Liability for Unpaid Claim and Claim Adjustment Expenses
The table below reconciles the net liability for unpaid claim and claim adjustment expenses to the amount presented on the Consolidated Balance Sheets.
As of December 31
(In millions) 2021
Net liability for unpaid claim and claim adjustment expenses:
Specialty $ 5,265 
Commercial 8,065 
International 1,940 
Life & Group (1)
3,641 
Corporate & Other 294 
Total net claim and claim adjustment expenses 19,205 
Reinsurance receivables: (2)
Specialty 1,168 
Commercial 825 
International 340 
Life & Group 113 
Corporate & Other (3)
2,523 
Total reinsurance receivables 4,969 
Total gross liability for unpaid claim and claim adjustment expenses $ 24,174 
(1) The Life & Group segment amounts are primarily related to long term care claim reserves, but also include amounts related to unfunded structured settlements arising from short-duration contracts. Long term care policies are long-duration contracts.
(2) Reinsurance receivables presented are gross of the allowance for uncollectible reinsurance and do not include reinsurance receivables related to paid losses.
(3) The Corporate & Other Reinsurance receivables are primarily related to A&EP claims covered under the Loss Portfolio Transfer (LPT).
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The following table presents a reconciliation between beginning and ending claim and claim adjustment expense reserves, including claim and claim adjustment expense reserves of the Life & Group segment.
As of or for the years ended December 31
(In millions) 2021 2020 2019
Reserves, beginning of year:
Gross $ 22,706  $ 21,720  $ 21,984 
Ceded 4,005  3,835  4,019 
Net reserves, beginning of year 18,701  17,885  17,965 
Reduction of net reserves due to Excess Workers' Compensation Loss Portfolio Transfer (632) —  — 
Net incurred claim and claim adjustment expenses:
Provision for insured events of current year 5,970  5,793  5,356 
Increase (decrease) in provision for insured events of prior years (104) (119) (127)
Amortization of discount 174  183  184 
Total net incurred (1)
6,040  5,857  5,413 
Net payments attributable to:
Current year events (1,014) (948) (992)
Prior year events (3,830) (4,216) (4,584)
Total net payments (4,844) (5,164) (5,576)
Foreign currency translation adjustment and other (60) 123  83 
Net reserves, end of year 19,205  18,701  17,885 
Ceded reserves, end of year 4,969  4,005  3,835 
Gross reserves, end of year $ 24,174  $ 22,706  $ 21,720 
(1) Total net incurred above does not agree to Insurance claims and policyholders' benefits as reflected on the Consolidated Statements of Operations due to amounts related to retroactive reinsurance deferred gain accounting, the loss on the Excess Workers' Compensation LPT, uncollectible reinsurance and benefit expenses related to future policy benefits, which are not reflected in the table above.
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Reserving Methodology
In developing claim and claim adjustment expense (loss or losses) reserve estimates, the Company's actuaries perform detailed reserve analyses that are staggered throughout the year. The data is organized at a reserve group level. Every reserve group is reviewed at least once during the year, but most are reviewed more frequently. The analyses generally review losses gross of ceded reinsurance and apply the ceded reinsurance terms to the gross estimates to establish estimates net of reinsurance. Factors considered include, but are not limited to, the historical pattern and volatility of the actuarial indications, the sensitivity of the actuarial indications to changes in paid and incurred loss patterns, the consistency of claims handling processes, the consistency of case reserving practices, changes in the Company's pricing and underwriting, pricing and underwriting trends in the insurance market and legal, judicial, social and economic trends. In addition to the detailed analyses, the Company reviews actual loss emergence for all products each quarter.
In developing the loss reserve estimates for property and casualty contracts, the Company generally projects ultimate losses using several common actuarial methods as listed below. The Company reviews the various indications from the various methods and applies judgment to select an actuarial point estimate. The carried reserve may differ from the actuarial point estimate as a result of the Company's consideration of the factors noted above as well as the potential volatility of the projections associated with the specific product being analyzed and other factors affecting claims costs that may not be quantifiable through traditional actuarial analysis. The indicated required reserve is the difference between the selected ultimate loss and the inception-to-date paid losses. The difference between the selected ultimate loss and the case incurred or reported loss is IBNR. IBNR includes a provision for development on known cases as well as a provision for late reported incurred claims.
The most frequently utilized methods to project ultimate losses include the following:
Paid development: The paid development method estimates ultimate losses by reviewing paid loss patterns and applying them to accident years with further expected changes in paid loss.
Incurred development: The incurred development method is similar to the paid development method, but it uses case incurred losses instead of paid losses.
Loss ratio: The loss ratio method multiplies premiums by an expected loss ratio to produce ultimate loss estimates for each accident year.
Bornhuetter-Ferguson paid loss: The Bornhuetter-Ferguson paid loss method is a combination of the paid development approach and the loss ratio approach. This method normally determines expected loss ratios similar to the approach used to estimate the expected loss ratio for the loss ratio method.
Bornhuetter-Ferguson incurred loss: The Bornhuetter-Ferguson incurred loss method is similar to the Bornhuetter-Ferguson using premiums and paid loss method except that it uses case incurred losses.
Frequency times severity: The frequency times severity method multiplies a projected number of ultimate claims by an estimated ultimate average loss for each accident year to produce ultimate loss estimates.
Stochastic modeling: The stochastic modeling produces a range of possible outcomes based on varying assumptions related to the particular product being modeled.
For many exposures, especially those that can be considered long-tail, a particular accident or policy year may not have a sufficient volume of paid losses to produce a statistically reliable estimate of ultimate losses. In such a case, the Company's actuaries typically assign more weight to the incurred development method than to the paid development method. As claims continue to settle and the volume of paid loss increases, the actuaries may assign additional weight to the paid development method. For most of the Company's products, even the incurred losses for accident or policy years that are early in the claim settlement process will not be of sufficient volume to produce a reliable estimate of ultimate losses. In these cases, the Company may not assign much, if any weight to the paid and incurred development methods. The Company may use the loss ratio, Bornhuetter-Ferguson and/or frequency times severity methods. For short-tail exposures, the paid and incurred development methods can often be relied on sooner, primarily because the Company's history includes a sufficient number of years to cover the entire period over which paid and incurred losses are expected to change. However, the
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Company may also use the loss ratio, Bornhuetter-Ferguson and/or frequency times severity methods for short-tail exposures. For other more complex reserve groups where the above methods may not produce reliable indications, the Company uses additional methods tailored to the characteristics of the specific situation.
The Company's reserving methodologies for mass tort and A&EP are similar as both are based on detailed reviews of large accounts with estimates of ultimate payments based on the facts in each case and the Company's view of applicable law and coverage litigation.
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Gross and Net Carried Reserves
The following tables present the gross and net carried reserves.
December 31, 2021  Specialty  Commercial International Life & Group Corporate & Other Total
(In millions)
Gross Case Reserves $ 1,578  $ 3,184  $ 859  $ 3,383  $ 1,551  $ 10,555 
Gross IBNR Reserves 4,855  5,706  1,421  371  1,266  13,619 
Total Gross Carried Claim and Claim Adjustment Expense Reserves $ 6,433  $ 8,890  $ 2,280  $ 3,754  $ 2,817  $ 24,174 
Net Case Reserves $ 1,338  $ 2,850  $ 744  $ 3,291  $ 146  $ 8,369 
Net IBNR Reserves 3,927  5,215  1,196  350  148  10,836 
Total Net Carried Claim and Claim Adjustment Expense Reserves $ 5,265  $ 8,065  $ 1,940  $ 3,641  $ 294  $ 19,205 
December 31, 2020  Specialty  Commercial International Life & Group Corporate & Other Total
(In millions)
Gross Case Reserves $ 1,567  $ 3,215  $ 892  $ 3,406  $ 1,614  $ 10,694 
Gross IBNR Reserves 4,181  5,035  1,199  337  1,260  12,012 
Total Gross Carried Claim and Claim Adjustment Expense Reserves $ 5,748  $ 8,250  $ 2,091  $ 3,743  $ 2,874  $ 22,706 
Net Case Reserves $ 1,410  $ 2,885  $ 777  $ 3,298  $ 560  $ 8,930 
Net IBNR Reserves 3,488  4,590  1,045  317  331  9,771 
Total Net Carried Claim and Claim Adjustment Expense Reserves $ 4,898  $ 7,475  $ 1,822  $ 3,615  $ 891  $ 18,701 
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.
Years ended December 31
(In millions) 2021 2020 2019
Pretax (favorable) unfavorable development:
Specialty $ (45) $ (61) $ (92)
Commercial (6) (7) (40)
International (2) 21 
Corporate & Other 60  50  38 
Total pretax (favorable) unfavorable development $ 11  $ (20) $ (73)
Unfavorable development of $60 million and $50 million was recorded within the Corporate & Other segment for the years ended 2021 and 2020 due to higher than expected emergence in mass tort exposures in older accident years primarily related to abuse. Unfavorable development of $38 million was recorded within the Corporate & Other segment for the year ended 2019 primarily due to higher than expected emergence in environmental mass tort exposures in older accident years.
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Segment Development Tables
For the Specialty, Commercial and International segments, the following tables present further detail and commentary on the development reflected in the financial statements for each of the periods presented. Also presented are loss reserve development tables that illustrate the change over time of reserves established for claim and allocated claim adjustment expenses arising from short-duration insurance contracts for certain lines of business within each of these segments. Not all lines of business or segments are presented based on their context to the Company's overall loss reserves, calendar year reserve development, or calendar year net earned premiums. Insurance contracts are considered to be short-duration contracts when the contracts are not expected to remain in force for an extended period of time.
The Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses tables, reading across, show the cumulative net incurred claim and allocated claim adjustment expenses relating to each accident year at the end of the stated calendar year. Changes in the cumulative amount across time are the result of the Company's expanded awareness of additional facts and circumstances that pertain to the unsettled claims. The Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses tables, reading across, show the cumulative amount paid for claims in each accident year as of the end of the stated calendar year. The Net Strengthening or (Releases) of Prior Accident Year Reserves tables, reading across, show the net increase or decrease in the cumulative net incurred accident year claim and allocated claim adjustment expenses during each stated calendar year and indicates whether the reserves for that accident year were strengthened or released.
The information in the tables is reported on a net basis after reinsurance and does not include the effects of discounting. The information contained in calendar years 2020 and prior is unaudited. Information contained in the tables pertaining to the Company's International segment has been presented at the year-end 2021 foreign currency exchange rates for all periods presented to remove the effects of foreign currency exchange rate changes between calendar years. The Company has presented development information for the Hardy business prospectively from the date of acquisition and is presented as a separate table within the Company's International segment. To the extent the Company enters into a commutation, the transaction is reported on a prospective basis. To the extent that the Company enters into a disposition, the effects of the disposition are reported on a retrospective basis by removing the balances associated with the disposed of business.
The amounts reported for the cumulative number of reported claims include direct and assumed open and closed claims by accident year at the claimant level. The number excludes claim counts for claims within a policy deductible where the insured is responsible for payment of losses in the deductible layer. Claim count data for certain assumed reinsurance contracts is unavailable.
IBNR includes reserves for incurred but not reported losses and expected development on case reserves. The Company does not establish case reserves for allocated loss adjusted expenses (ALAE), therefore ALAE reserves are also included in the estimate of IBNR.

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Specialty
The following table presents further detail of the development recorded for the Specialty segment.
Years ended December 31
(In millions) 2021 2020 2019
Pretax (favorable) unfavorable development:
Medical Professional Liability $ 23  $ 35  $ 75 
Other Professional Liability and Management Liability 24  (15) (69)
Surety (73) (69) (92)
Warranty (14) (7) (15)
Other (5) (5)
Total pretax (favorable) unfavorable development $ (45) $ (61) $ (92)
2021
Unfavorable development in medical professional liability was due to higher than expected large loss activity in recent accident years.
Unfavorable development in other professional liability and management liability was due to higher than expected frequency of large losses in multiple accident years, and higher than expected claim severity and frequency in the Company’s cyber business in recent accident years.
Favorable development in surety was primarily due to lower than expected frequency and lack of systemic activity in recent accident years.
Favorable development in warranty was due to lower than expected loss emergence in a recent accident year.
2020
Unfavorable development in medical professional liability was primarily due to higher than expected frequency of large losses in recent accident years and unfavorable outcomes on specific claims in older accident years.
Favorable development in other professional liability and management liability was primarily due to lower than expected loss emergence in accident year 2017 and accident years prior to 2010.
Favorable development in surety was due to lower than expected frequency and lack of systemic loss activity for accident years 2019 and prior.
2019
Unfavorable development in medical professional liability was primarily due to higher than expected severity in accident years 2016 through 2018 in the Company's aging services business, higher than expected severity in accident year 2013 in the Company's allied healthcare business, unfavorable outcomes on individual claims and higher than expected severity in accident year 2017 in the Company's dentists business.
Favorable development in other professional liability and management liability was primarily due to lower than expected claim frequency and favorable outcomes on individual claims in accident years 2017 and prior related to financial institutions, lower than expected large claim losses in recent accident years in the Company's public company directors and officers liability (D&O) business and lower than expected loss adjustment expenses across accident years 2010 through 2018.
Favorable development in surety was due to lower than expected frequency for accident years 2018 and prior.
Favorable development in warranty was due to lower than expected paid loss emergence on vehicle products.
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Specialty - Line of Business Composition
The table below provides the line of business composition of the net liability for unpaid claim and claim adjustment expenses for the Specialty segment.
As of December 31
(In millions) 2021
Net liability for unpaid claim and claim adjustment expenses:
Medical Professional Liability $ 1,556 
Other Professional Liability and Management Liability 3,159 
Surety 406 
Warranty 44 
Other 100 
Total net liability for unpaid claim and claim adjustment expenses $ 5,265 

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Specialty - Medical Professional Liability
Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year As of December 31, 2021
(In millions, except reported claims data)
2012(1)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021 IBNR Cumulative Number of Claims
Accident Year
2012 $ 464  $ 469  $ 508  $ 498  $ 493  $ 484  $ 493  $ 499  $ 497  $ 497  $ 17,755 
2013 462  479  500  513  525  535  545  531  530  11  19,565 
2014 450  489  537  530  535  529  527  524  19,800 
2015 433  499  510  494  488  510  501  28  18,170 
2016 427  487  485  499  508  510  24  16,085 
2017 412  449  458  460  455  41  15,197 
2018 404  429  431  448  60  14,997 
2019 430  445  458  156  13,804 
2020 477  476  347  9,935 
2021 377  337  6,761 
Total $ 4,776  $ 1,016 
Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year
(In millions)
2012(1)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021
Accident Year
2012 $ 14  $ 117  $ 221  $ 323  $ 388  $ 427  $ 457  $ 479  $ 482  $ 487 
2013 17  119  255  355  414  462  495  508  512 
2014 23  136  258  359  417  472  489  497 
2015 22  101  230  313  384  420  444 
2016 18  121  246  339  401  436 
2017 19  107  235  308  355 
2018 21  115  211  290 
2019 17  91  183 
2020 11  61 
2021 11 
Total $ 3,276 
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented $ 1,500 
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2012 28 
Liability for unallocated claim adjustment expenses for accident years presented 28 
Total net liability for unpaid claim and claim adjustment expenses $ 1,556 
Net strengthening (releases) of prior accident year reserves is presented in the following table.
For the years ended December 31 Calendar Year
(In millions)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021 Total
Accident Year
2012 $ $ 39  $ (10) $ (5) $ (9) $ $ $ (2) $ —  $ 33 
2013 17  21  13  12  10  10  (14) (1) 68 
2014 39  48  (7) (6) (2) (3) 74 
2015 66  11  (16) (6) 22  (9) 68 
2016 60  (2) 14  83 
2017 37  (5) 43 
2018 25  17  44 
2019 15  13  28 
2020 (1) (1)
Total net development for the accident years presented above 52  32  13 
Total net development for accident years prior to 2012 21 
Total unallocated claim adjustment expense development — 
Total $ 75  $ 35  $ 23 
(1) Data presented for these calendar years is required supplemental information, which is unaudited.

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Specialty - Other Professional Liability and Management Liability
Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year As of December 31, 2021
(In millions, except reported claims data)
2012(1)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021 IBNR Cumulative Number of Claims
Accident Year
2012 $ 923  $ 909  $ 887  $ 878  $ 840  $ 846  $ 833  $ 831  $ 850  $ 848  $ 18  18,506 
2013 884  894  926  885  866  863  850  846  833  30  17,950 
2014 878  898  885  831  835  854  845  841  37  17,577 
2015 888  892  877  832  807  813  836  41  17,436 
2016 901  900  900  904  907  891  84  17,968 
2017 847  845  813  791  775  152  18,159 
2018 850  864  869  906  202  19,926 
2019 837  845  856  283  19,357 
2020 930  944  568  19,095 
2021 1,037  911  15,487 
Total $ 8,767  $ 2,326 
Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year
(In millions)
2012(1)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021
Accident Year
2012 $ 56  $ 248  $ 400  $ 573  $ 651  $ 711  $ 755  $ 792  $ 812  $ 816 
2013 54  249  447  618  702  754  771  779  787 
2014 51  223  392  515  647  707  743  787 
2015 60  234  404  542  612  677  725 
2016 64  248  466  625  701  736 
2017 57  222  394  498  557 
2018 54  282  473  599 
2019 64  263  422 
2020 67  248 
2021 58 
Total $ 5,735 
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented $ 3,032 
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2012 74 
Liability for unallocated claim adjustment expenses for accident years presented 53 
Total net liability for unpaid claim and claim adjustment expenses $ 3,159 
Net strengthening (releases) of prior accident year reserves is presented in the following table.
For the years ended December 31 Calendar Year
(In millions)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021 Total
Accident Year
2012 $ (14) $ (22) $ (9) $ (38) $ $ (13) $ (2) $ 19  $ (2) $ (75)
2013 10  32  (41) (19) (3) (13) (4) (13) (51)
2014 20  (13) (54) 19  (9) (4) (37)
2015 (15) (45) (25) 23  (52)
2016 (1) —  (16) (10)
2017 (2) (32) (22) (16) (72)
2018 14  37  56 
2019 11  19 
2020 14  14 
Total net development for the accident years presented above (35) 34 
Total net development for accident years prior to 2012 (20) (21) (12)
Total unallocated claim adjustment expense development (14) — 
Total $ (69) $ (15) $ 24 
(1) Data presented for these calendar years is required supplemental information, which is unaudited.

94

Specialty - Surety
Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year As of December 31, 2021
(In millions, except reported claims data)
2012(1)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021 IBNR Cumulative Number of Claims
Accident Year
2012 $ 120  $ 122  $ 98  $ 70  $ 52  $ 45  $ 39  $ 38  $ 37  $ 36  $ 5,586 
2013 120  121  115  106  91  87  83  82  82  5,088 
2014 123  124  94  69  60  45  45  43  5,118 
2015 131  131  104  79  63  58  53  5,055 
2016 124  124  109  84  67  64  10  5,521 
2017 120  115  103  84  71  5,795 
2018 114  108  91  62  19  6,097 
2019 119  112  98  44  5,816 
2020 128  119  104  4,006 
2021 137  129  2,592 
Total $ 765  $ 328 
Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year
(In millions)
2012(1)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021
Accident Year
2012 $ $ 32  $ 34  $ 35  $ 35  $ 36  $ 37  $ 37  $ 36  $ 36 
2013 16  40  69  78  78  78  77  78  79 
2014 30  38  36  38  38  39  39 
2015 26  38  40  42  44  42 
2016 37  45  45  43  43 
2017 23  37  41  46  49 
2018 25  34  39 
2019 12  34  44 
2020 20 
2021
Total $ 396 
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented $ 369 
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2012 17 
Liability for unallocated claim adjustment expenses for accident years presented 20 
Total net liability for unpaid claim and claim adjustment expenses $ 406 
Net strengthening (releases) of prior accident year reserves is presented in the following table.
For the years ended December 31 Calendar Year
(In millions)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021 Total
Accident Year
2012 $ $ (24) $ (28) $ (18) $ (7) $ (6) $ (1) $ (1) $ (1) $ (84)
2013 (6) (9) (15) (4) (4) (1) —  (38)
2014 (30) (25) (9) (15) —  (2) (80)
2015 —  (27) (25) (16) (5) (5) (78)
2016 —  (15) (25) (17) (3) (60)
2017 (5) (12) (19) (13) (49)
2018 (6) (17) (29) (52)
2019 (7) (14) (21)
2020 (9) (9)
Total net development for the accident years presented above (79) (67) (76)
Total net development for accident years prior to 2012 (3) (2)
Total unallocated claim adjustment expense development (10) —  — 
Total $ (92) $ (69) $ (73)
(1) Data presented for these calendar years is required supplemental information, which is unaudited.

95

Commercial
The following table presents further detail of the development recorded for the Commercial segment.
Years ended December 31
(In millions) 2021 2020 2019
Pretax (favorable) unfavorable development:
Commercial Auto $ 53  $ 33  $ (25)
General Liability 15  15  16 
Workers' Compensation (82) (96) (13)
Property and Other 41  (18)
Total pretax (favorable) unfavorable development $ (6) $ (7) $ (40)
2021
Unfavorable development in commercial auto was due to higher than expected claim severity in the Company’s middle market and construction businesses in multiple accident years.
Unfavorable development in general liability was due to higher than expected claim severity in the Company’s construction and umbrella businesses in multiple accident years.
Favorable development in workers’ compensation was due to favorable medical trends driving lower than expected severity in multiple accident years.
2020
Unfavorable development in commercial auto was due to higher than expected claim severity in the Company's middle market and construction business in recent accident years.
Unfavorable development in general liability was driven by increased bodily injury severities in accident years 2012 through 2016 and higher than expected frequency and severity in the Company’s umbrella business in accident years 2015 through 2019.
Favorable development in workers’ compensation was due to favorable medical trends driving lower than expected severity in multiple accident years.
Unfavorable development in property and other was primarily due to higher than expected large loss activity in accident year 2019 in the Company's middle market, national accounts and marine business units.
2019
Favorable development in commercial auto was primarily due to continued lower than expected severity across accident years 2015 and prior and a decline in bodily injury frequency in accident year 2018.
Unfavorable development in general liability was driven by higher than expected large loss emergence in the Company's umbrella business in multiple accident years.
Favorable development in workers’ compensation was due to favorable medical trends driving lower than expected severity in accident years 2012 through 2018.
Favorable development in property and other was primarily driven by lower than expected claim severity related to catastrophe events in accident years 2017 and 2018.
96

Commercial - Line of Business Composition
The table below provides the line of business composition of the net liability for unpaid claim and claim adjustment expenses for the Commercial segment.
As of December 31
(In millions) 2021
Net Claim and claim adjustment expenses:
Commercial Auto $ 673 
General Liability 2,911 
Workers' Compensation 3,850 
Property and Other 631 
Total net liability for claim and claim adjustment expenses $ 8,065 

97

Commercial - Commercial Auto
Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year As of December 31, 2021
(In millions, except reported claims data)
2012(1)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021 IBNR Cumulative Number of Claims
Accident Year
2012 $ 275  $ 289  $ 299  $ 303  $ 307  $ 299  $ 299  $ 297  $ 296  $ 295  $ 46,288 
2013 246  265  265  249  245  245  241  241  241  39,430 
2014 234  223  212  205  205  201  201  202  33,628 
2015 201  199  190  190  183  181  183  30,427 
2016 198  186  186  186  190  195  30,449 
2017 199  198  200  221  232  30,940 
2018 229  227  227  245  34,292 
2019 257  266  289  31  37,142 
2020 310  303  107  28,837 
2021 397  271  27,182 
Total $ 2,582  $ 433 
Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year
(In millions)
2012(1)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021
Accident Year
2012 $ 78  $ 160  $ 220  $ 259  $ 282  $ 285  $ 290  $ 291  $ 291  $ 292 
2013 74  135  168  200  225  234  238  239  239 
2014 64  102  137  166  187  196  198  199 
2015 52  96  130  153  172  175  178 
2016 52  93  126  154  175  185 
2017 58  107  150  178  203 
2018 66  128  175  212 
2019 77  147  203 
2020 71  134 
2021 83 
Total $ 1,928 
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented $ 654 
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2012
Liability for unallocated claim adjustment expenses for accident years presented 14 
Total net liability for unpaid claim and claim adjustment expenses $ 673 
Net strengthening (releases) of prior accident year reserves is presented in the following table.
For the years ended December 31 Calendar Year
(In millions)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021 Total
Accident Year
2012 $ 14  $ 10  $ $ $ (8) $ —  $ (2) $ (1) $ (1) $ 20 
2013 19  —  (16) (4) —  (4) —  —  (5)
2014 (11) (11) (7) —  (4) —  (32)
2015 (2) (9) —  (7) (2) (18)
2016 (12) —  —  (3)
2017 (1) 21  11  33 
2018 (2) —  18  16 
2019 23  32 
2020 (7) (7)
Total net development for the accident years presented above (17) 31  52 
Total net development for accident years prior to 2012 (7)
Total unallocated claim adjustment expense development (1) —  — 
Total $ (25) $ 33  $ 53 
(1) Data presented for these calendar years is required supplemental information, which is unaudited.

98

Commercial - General Liability
Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year As of December 31, 2021
(In millions, except reported claims data)
2012(1)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021 IBNR Cumulative Number of Claims
Accident Year
2012 $ 587  $ 611  $ 639  $ 636  $ 619  $ 635  $ 635  $ 630  $ 632  $ 632  $ 20  35,313 
2013 650  655  650  655  613  623  620  623  624  24  33,706 
2014 653  658  654  631  635  658  659  659  28  28,064 
2015 581  576  574  589  600  602  617  42  24,118 
2016 623  659  667  671  673  683  68  24,511 
2017 632  632  632  634  630  67  22,195 
2018 653  644  646  639  205  19,917 
2019 680  682  682  330  18,602 
2020 723  722  516  13,028 
2021 782  706  9,759 
Total $ 6,670  $ 2,006 
Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year
(In millions)
2012(1)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021
Accident Year
2012 $ 28  $ 132  $ 247  $ 374  $ 454  $ 510  $ 559  $ 579  $ 597  $ 602 
2013 31  128  240  352  450  510  551  572  582 
2014 31  119  247  376  481  547  569  607 
2015 19  110  230  357  446  501  530 
2016 32  163  279  407  481  524 
2017 23  118  250  399  471 
2018 33  107  228  307 
2019 25  98  181 
2020 23  99 
2021 26 
Total $ 3,929 
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented $ 2,741 
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2012 119 
Liability for unallocated claim adjustment expenses for accident years presented 51 
Total net liability for unpaid claim and claim adjustment expenses $ 2,911 
Net strengthening (releases) of prior accident year reserves is presented in the following table.
For the years ended December 31 Calendar Year
(In millions)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021 Total
Accident Year
2012 $ 24  $ 28  $ (3) $ (17) $ 16  $ —  $ (5) $ $ —  $ 45 
2013 (5) (42) 10  (3) (26)
2014 (4) (23) 23  — 
2015 (5) (2) 15  11  15  36 
2016 36  10  60 
2017 —  —  (4) (2)
2018 (9) (7) (14)
2019 — 
2020 (1) (1)
Total net development for the accident years presented above 21  16  14 
Total net development for accident years prior to 2012 (4) (1) (1)
Total unallocated claim adjustment expense development (1) — 
Total $ 16  $ 15  $ 15 
(1) Data presented for these calendar years is required supplemental information, which is unaudited.

99

Commercial - Workers' Compensation
Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year As of December 31, 2021
(In millions, except reported claims data)
2012(1)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021 IBNR Cumulative Number of Claims
Accident Year
2012 $ 601  $ 627  $ 659  $ 669  $ 678  $ 673  $ 671  $ 668  $ 663  $ 664  $ 66  42,804 
2013 537  572  592  618  593  582  561  552  548  91  38,867 
2014 467  480  479  452  450  446  439  448  105  33,502 
2015 422  431  406  408  394  382  372  101  31,894 
2016 426  405  396  382  366  355  104  31,981 
2017 440  432  421  400  402  92  33,121 
2018 450  440  428  415  104  34,851 
2019 452  449  437  134  34,248 
2020 477  466  228  29,188 
2021 468  300  25,711 
Total $ 4,575  $ 1,325 
Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year
(In millions)
2012(1)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021
Accident Year
2012 $ 87  $ 232  $ 342  $ 416  $ 470  $ 509  $ 524  $ 536  $ 538  $ 541 
2013 80  213  300  370  417  419  411  414  417 
2014 61  159  215  258  282  290  297  306 
2015 51  131  180  212  231  243  251 
2016 53  129  169  198  219  227 
2017 63  151  207  243  265 
2018 68  163  229  259 
2019 71  169  223 
2020 65  147 
2021 67 
Total $ 2,703 
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented $ 1,872 
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2012 1,941 
Other (2)
(14)
Liability for unallocated claim adjustment expenses for accident years presented 51 
Total net liability for unpaid claim and claim adjustment expenses $ 3,850 
Net strengthening (releases) of prior accident year reserves is presented in the following table.
For the years ended December 31 Calendar Year
(In millions)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021 Total
Accident Year
2012 $ 26  $ 32  $ 10  $ $ (5) $ (2) $ (3) $ (5) $ $ 63 
2013 35  20  26  (25) (11) (21) (9) (4) 11 
2014 13  (1) (27) (2) (4) (7) (19)
2015 (25) (14) (12) (10) (50)
2016 (21) (9) (14) (16) (11) (71)
2017 (8) (11) (21) (38)
2018 (10) (12) (13) (35)
2019 (3) (12) (15)
2020 (11) (11)
Total net development for the accident years presented above (77) (85) (49)
Adjustment for development on a discounted basis
Total net development for accident years prior to 2012 38  (13) (35)
Total unallocated claim adjustment expense development 23  —  — 
Total $ (13) $ (96) $ (82)
(1) Data presented for these calendar years is required supplemental information, which is unaudited.
(2) Other includes the effect of discounting lifetime claim reserves.
100

International
The following table presents further detail of the development recorded for the International segment.
Years ended December 31
(In millions) 2021 2020 2019
Pretax (favorable) unfavorable development:
Commercial $ (35) (2) $ (8)
Specialty 36  37 
Other (3) (8)
Total pretax (favorable) unfavorable development $ $ (2) $ 21 
(1) Effective December 31, 2021 the International lines of business were consolidated to align with domestic operations. Prior period information has been conformed to the new line of business presentation.
2021
Favorable development in commercial was due to lower than expected loss emergence across multiple accident years.
Unfavorable development in specialty was due to higher than expected claim severity in the Company’s medical treatment and professional liability businesses in multiple accident years.
2019
Unfavorable development in specialty was primarily driven by professional indemnity within Europe financial lines in accident years 2017 and 2018 due to potential design and construct exposures.
101

International - Line of Business Composition
The table below provides the composition of the net liability for unpaid claim and claim adjustment expenses for the International segment.
As of December 31
(In millions) 2021
Net Claim and claim adjustment expenses:
International excluding Hardy $ 1,400 
Hardy 540 
Total net liability for claim and claim adjustment expenses $ 1,940 

102

International, Excluding Hardy
Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year As of December 31, 2021
(In millions, except reported claims data)
2012(1)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021 IBNR Cumulative Number of Claims
Accident Year
2012 $ 278  $ 285  $ 269  $ 262  $ 261  $ 254  $ 247  $ 241  $ 236  $ 250  $ 16  24,998 
2013 285  301  293  273  269  260  251  247  251  12  23,967 
2014 288  303  303  291  283  300  301  294  16  24,946 
2015 301  317  316  298  292  294  297  27  23,357 
2016 296  315  300  297  287  302  37  17,776 
2017 312  378  401  393  388  84  18,470 
2018 384  402  407  406  81  20,726 
2019 357  371  368  91  17,974 
2020 398  389  184  13,909 
2021 426  297  10,401 
Total $ 3,371  $ 845 
Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year
(In millions)
2012(1)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021
Accident Year
2012 $ 46  $ 117  $ 151  $ 172  $ 188  $ 200  $ 210  $ 213  $ 215  $ 218 
2013 51  116  144  161  176  186  206  218  224 
2014 54  126  154  173  190  211  245  250 
2015 58  137  168  189  213  228  239 
2016 68  136  164  188  200  223 
2017 67  152  193  223  247 
2018 94  173  221  252 
2019 76  171  209 
2020 62  133 
2021 58 
Total $ 2,053 
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented $ 1,318 
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2012 47 
Liability for unallocated claim adjustment expenses for accident years presented 35 
Total net liability for unpaid claim and claim adjustment expenses $ 1,400 
Net strengthening (releases) of prior accident year reserves is presented in the following table.
For the years ended December 31 Calendar Year
(In millions)
2013(1)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021
Total (2)
Accident Year
2012 $ $ (16) $ (7) $ (1) $ (7) $ (7) $ (6) $ (5) $ 14  $ (28)
2013 16  (8) (20) (4) (9) (9) (4) (34)
2014 15  —  (12) (8) 17  (7)
2015 16  (1) (18) (6) (4)
2016 19  (15) (3) (10) 15 
2017 66  23  (8) (5) 76 
2018 18  (1) 22 
2019 14  (3) 11 
2020 (9) (9)
(1) Data presented for these calendar years is required supplemental information, which is unaudited.
(2) The amounts included in the loss reserve development tables above are presented at the year-end 2021 foreign currency exchange rates for all periods presented to remove the effects of foreign currency exchange rate fluctuations between calendar years. The amounts included within the table on page 101 presenting the detail of the development recorded within the International segment include the impact of fluctuations in foreign currency exchange rates.
103

International - Hardy
Cumulative Net Incurred Claim and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year As of December 31, 2021
(In millions, except reported claims data) Net Claim and Allocated Claim Adjustment Expense Reserves at Acquisition
Net Incurred Claim and Allocated Claim Adjustment Expenses in 2012(1)(2)
Total Acquired Net Claim and Allocated Claim Adjustment Expense Reserves and 2012 Incurreds
2013(1)(2)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021 IBNR Cumulative Number of Claims
Accident Year
2012 $ 34  $ 71  $ 105  $ 105  $ 112  $ 120  $ 113  $ 114  $ 116  $ 115  $ 113  $ 114  $ (3) 7,045 
2013 132  147  139  140  142  145  146  146  144  7,893 
2014 186  184  178  171  172  173  172  169  (6) 8,493 
2015 191  181  179  180  178  180  181  (1) 9,669 
2016 231  249  238  226  228  222  (1) 10,746 
2017 246  256  244  246  253  13,029 
2018 275  306  310  316  36  14,868 
2019 224  228  223  42  10,891 
2020 215  205  87  5,963 
2021 181  128  2,244 
Total $ 2,008  $ 297 
Cumulative Net Paid Claims and Allocated Claim Adjustment Expenses are presented in the following table.
As of December 31 Calendar Year
(In millions)
2012(1)
2013(1)(2)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021
Accident Year
2012 $ 14  $ 80  $ 100  $ 109  $ 107  $ 109  $ 110  $ 111  $ 112  $ 115 
2013 38  102  122  128  132  135  139  140  141 
2014 56  124  142  152  157  163  165  166 
2015 30  99  130  146  158  166  164 
2016 64  146  174  183  196  208 
2017 53  152  185  207  215 
2018 55  176  205  236 
2019 44  104  142 
2020 28  79 
2021 13 
Total $ 1,479 
Net liability for unpaid claim and allocated claim adjustment expenses for the accident years presented $ 529 
Net liability for unpaid claim and claim adjustment expenses for accident years prior to 2012
Liability for unallocated claim adjustment expenses for accident years presented
Total net liability for unpaid claim and claim adjustment expenses $ 540 
Net strengthening (releases) of prior accident year reserves is presented in the following table.
For the years ended December 31 Calendar Year
(In millions)
2013(1)(2)
2014(1)
2015(1)
2016(1)
2017(1)
2018(1)
2019(1)
2020(1)
2021
Total(3)
Accident Year
2012 $ —  $ $ $ (7) $ $ $ (1) $ (2) $ $
2013 15  (8) —  (2) 12 
2014 (2) (6) (7) (1) (3) (17)
2015 (10) (2) (2) (10)
2016 18  (11) (12) (6) (9)
2017 10  (12)
2018 31  41 
2019 (5) (1)
2020 (10) (10)
(1) Data presented for these calendar years is required supplemental information, which is unaudited.
(2) Data presented for this calendar year is post-acquisition of Hardy.
(3) The amounts included in the loss reserve development tables above are presented at the year-end 2021 foreign currency exchange rates for all periods presented to remove the effects of foreign currency exchange rate fluctuations between calendar years. The amounts included within the table on page 101 presenting the detail of the development recorded within the International segment include the impact of fluctuations in foreign currency exchange rates.
104

The table below presents information about average historical claims duration as of December 31, 2021 and is presented as required supplementary information, which is unaudited.
Average Annual Percentage Payout of Ultimate Net Incurred Claim and Allocated Claim Adjustment Expenses in Year:
1 2 3 4 5 6 7 8 9 10
Specialty
Medical Professional Liability 3.6  % 18.3  % 23.7  % 18.2  % 12.0  % 8.3  % 5.1  % 2.8  % 0.7  % 1.0  %
Other Professional Liability and Management Liability 6.7  % 21.9  % 21.1  % 16.7  % 9.9  % 6.4  % 4.3  % 3.5  % 1.7  % 0.5  %
Surety(1)
14.1  % 48.7  % 18.9  % 2.6  % 1.1  % 1.3  % —  % 0.4  % (0.8) % —  %
Commercial
Commercial Auto 26.7  % 23.2  % 18.0  % 13.6  % 10.1  % 3.2  % 1.5  % 0.4  % —  % 0.3  %
General Liability 4.1  % 14.1  % 18.0  % 19.0  % 13.5  % 8.7  % 5.6  % 4.1  % 2.2  % 0.8  %
Workers' Compensation 14.7  % 21.7  % 13.9  % 9.5  % 6.4  % 2.7  % 1.1  % 1.5  % 0.4  % 0.5  %
International
International - Excluding Hardy 19.0  % 23.7  % 10.8  % 7.4  % 6.1  % 5.7  % 6.8  % 2.6  % 1.6  % 1.2  %
International - Hardy (2)
20.4  % 36.1  % 13.4  % 6.9  % 4.4  % 3.9  % 1.0  % 0.6  % 0.7  %
(1) Due to the nature of the Surety business, average annual percentage payout of ultimate net incurred claim and allocated claim adjustment expenses has been calculated using only the payouts of mature accident years presented in the loss reserve development tables.
(2) Average historical claims duration for Hardy is presented prospectively beginning with the first full year subsequent to acquisition, 2013.
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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 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 in the Consolidated Statements of Operations.
The following table presents the impact of the Loss Portfolio Transfer on the Consolidated Statements of Operations.
Years ended December 31
(In millions) 2021 2020 2019
Additional amounts ceded under LPT:
Net A&EP adverse development before consideration of LPT $ 143  $ 125  $ 150 
Provision for uncollectible third-party reinsurance on A&EP (5) (25) (25)
Total additional amounts ceded under LPT 138  100  125 
Retroactive reinsurance benefit recognized (107) (94) (107)
Pretax impact of deferred retroactive reinsurance $ 31  $ $ 18 
Net unfavorable prior year development of $143 million, $125 million and $150 million was recognized before consideration of cessions to the LPT for the years ended December 31, 2021, 2020 and 2019. The unfavorable development in 2021, 2020 and 2019 was primarily driven by higher than anticipated defense and indemnity costs on known direct asbestos and environmental accounts and a reduction in estimated reinsurance recoverable. Additionally, in 2021, 2020 and 2019, the Company released $5 million, $25 million and $25 million of its provision for uncollectible third-party reinsurance.
As of December 31, 2021 and 2020, the cumulative amounts ceded under the LPT were $3.4 billion and $3.3 billion. The unrecognized deferred retroactive reinsurance benefit was $429 million and $398 million as of December 31, 2021 and 2020 and is included within Other liabilities on the 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 $3.1 billion as of December 31, 2021. 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.
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Excess Workers' Compensation LPT
On February 5, 2021, CCC completed a transaction with Cavello Bay Reinsurance Limited (Cavello), a subsidiary of Enstar Group Limited, under which certain legacy excess workers' compensation (EWC) liabilities were ceded to Cavello. Under the terms of the transaction, based on reserves in place as of January 1, 2020, the Company ceded approximately $690 million of net EWC claim and allocated claim adjustment expense reserves to Cavello under an LPT with an aggregate limit of $1 billion. The Company paid Cavello a reinsurance premium of $697 million, less claims paid between January 1, 2020 and the closing date of the agreement of $64 million. After transaction costs, the Company recognized an after-tax loss of approximately $12 million in the Corporate & Other segment in the first quarter of 2021 related to the EWC LPT.
As of December 31, 2021, the cumulative amount ceded under the EWC LPT was $690 million.
Cavello established a collateral trust account as security for its obligations to the Company. The fair value of the collateral trust account was $634 million as of December 31, 2021.


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Life & Group Policyholder Reserves
The Company’s Life & Group segment includes its run-off long term care business as well as structured settlement obligations not funded by annuities related to certain property and casualty claimants. Long term care policies provide benefits for nursing homes, assisted living facilities and home health care subject to various daily and lifetime caps. Generally, policyholders must continue to make periodic premium payments to keep the policy in force and the Company has the ability to increase policy premiums, subject to state regulatory approval.
The Company maintains both claim and claim adjustment expense reserves as well as future policy benefit reserves for policyholder benefits for the Life & Group segment. Claim and claim adjustment expense reserves consist of estimated reserves for long term care policyholders that are currently receiving benefits, including claims that have been incurred but are not yet reported. In developing the claim and claim adjustment expense reserve estimates for long term care policies, the Company’s actuaries perform a detailed claim reserve review on an annual basis. The review analyzes the sufficiency of existing reserves for policyholders currently on claim and includes an evaluation of expected benefit utilization and claim duration. In addition, claim and claim adjustment expense reserves are also maintained for the 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. The Company’s recorded claim and claim adjustment expense reserves reflect management's best estimate after incorporating the results of the most recent reviews.
The Company completed its annual claim reserve reviews in the third quarter of 2021, 2020 and 2019 resulting in $40 million, $37 million and $56 million pretax reductions in long term care reserves primarily due to lower claim severity than anticipated in the reserve estimates. The Company's 2021 and 2020 annual claim reserve reviews also resulted in $2 million and $46 million pretax increases in the structured settlement claim reserves primarily due to lower discount rate assumptions and mortality assumption changes.
Future policy benefit reserves consist of active life reserves related to the Company’s long term care policies for policyholders that are not currently receiving benefits and represent the present value of expected future benefit payments and expenses less expected future premium. The determination of these reserves requires management to make estimates and assumptions about expected investment and policyholder experience over the life of the contract. Since many of these contracts may be in force for several decades, these assumptions are subject to significant estimation risk.
The actuarial assumptions that management believes are subject to the most variability are morbidity, persistency, discount rates and anticipated future premium rate increases. Morbidity is the frequency and severity of injury, illness, sickness and diseases contracted. Persistency is the percentage of policies remaining in force and can be affected by policy lapses, benefit reductions and death. Discount rates are influenced by the investment yield on assets supporting long term care reserves which is subject to interest rate and market volatility and may also be affected by changes to the Internal Revenue Code. Future premium rate increases are generally subject to regulatory approval, and therefore the exact timing and size of the approved rate increases are unknown. As a result of this variability, the Company’s long term care reserves may be subject to material increases if actual experience develops adversely to the Company’s expectations.
Annually, in the third quarter, management assesses the adequacy of its long term care future policy benefit reserves by performing a GPV to determine if there is a premium deficiency. Under the GPV, management estimates required reserves using best estimate assumptions as of the date of the assessment without provisions for adverse deviation. The GPV required reserves are then compared to the existing recorded reserves. If the GPV required reserves are greater than the existing recorded reserves, the existing assumptions are unlocked and future policy benefit reserves are increased to the greater amount. Any such increase is reflected in the Company’s results of operations in the period in which the need for such adjustment is determined. If the GPV required reserves are less than the existing recorded reserves, assumptions remain locked in and no adjustment is required.
The GPV for the long term care future policy benefit reserves, performed in the third quarter of 2021, indicated that recorded reserves included a pretax margin of approximately $72 million.
The GPV for the long term care future policy benefit reserves, performed in the third quarter of 2020 and 2019, indicated a premium deficiency primarily driven by lower discount rate assumptions. Recognition of the
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premium deficiency resulted in a $74 million and a $216 million pretax increase in policyholders' benefits reflected in the Company's results of operations.
Note F. 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.
Data Breach-related Contingency
As previously disclosed, the Company sustained a sophisticated cybersecurity attack in March 2021 involving ransomware. The Company’s investigation revealed that an unauthorized third party copied some personal information relating to certain current and former employees, contractor workers and their dependents and certain other persons, including some policyholders. In July 2021, we provided notifications to the impacted individuals and to regulators, in accordance with applicable law. The Company may be subject to subsequent investigations, fines or penalties, as well as other legal claims and actions, related to the foregoing. The likelihood is reasonably possible, but the amount of such fines, penalties or costs, if any, cannot be estimated at this time.
Based on the information currently known, we do not believe that the March 2021 cybersecurity attack will have a material impact on our business, results of operations or financial condition, but no assurances can be given as we continue to assess the full impact from the incident, including costs, expenses and insurance coverage.
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 December 31, 2021, the potential amount of future payments the Company could be required to pay under these guarantees was approximately $1.6 billion, which will be paid over the lifetime of the annuitants. The Company does not believe any payment is likely under these guarantees, as the Company is the beneficiary of a trust that must be maintained at a level that approximates the discounted reserves for these annuities.
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Note G. Reinsurance
The Company cedes insurance to reinsurers to limit its maximum loss, provide greater diversification of risk, minimize exposures on larger risks and to exit certain lines of business. The ceding of insurance does not discharge the primary liability of the Company. A credit exposure exists with respect to reinsurance ceded to the extent that any reinsurer is unable to meet its obligations. A collectibility exposure also exists to the extent that the reinsurer disputes the liabilities assumed under reinsurance agreements. Property and casualty reinsurance coverages are tailored to the specific risk characteristics of each product line and the Company's retained amount varies by type of coverage. Reinsurance contracts are purchased to protect specific lines of business such as property and workers' compensation. Corporate catastrophe reinsurance is also purchased for property and workers' compensation exposure. The Company also utilizes facultative reinsurance in certain lines. In addition, the Company assumes reinsurance primarily through Hardy and as a member of various reinsurance pools and associations.
The following table presents the amounts receivable from reinsurers.
December 31
(In millions) 2021 2020
Reinsurance receivables related to insurance reserves:
Ceded claim and claim adjustment expenses $ 4,969  $ 4,005 
Ceded future policy benefits 288  263 
Reinsurance receivables related to paid losses 227  210 
Reinsurance receivables 5,484  4,478 
Allowance for uncollectible reinsurance (21) (21)
Reinsurance receivables, net of allowance for uncollectible reinsurance $ 5,463  $ 4,457 
The Company has established an allowance for uncollectible voluntary reinsurance receivables which relates to both amounts already billed on ceded paid losses as well as ceded reserves that will be billed when losses are paid in the future. The following table summarizes the outstanding amount of voluntary reinsurance receivables, gross of any collateral arrangements, by financial strength rating.
(In millions) December 31, 2021
A- to A++ 3,812 
B- to B++ 987
Insolvent 3
Total voluntary reinsurance outstanding balance(1)
$ 4,802 
(1)    Expected credit losses for legacy A&EP receivables are ceded to NICO and the reinsurance limit on the LPT has not been exhausted, therefore no allowance is recorded for these receivables and they are excluded from the table above. Refer to Note E to the Consolidated Financial Statements for information regarding the LPT. The Company has also excluded receivables from involuntary pools.
The Company attempts to mitigate its credit risk related to reinsurance by entering into reinsurance arrangements with reinsurers that have credit ratings above certain levels and by obtaining collateral. On a limited basis, the Company may enter into reinsurance agreements with reinsurers that are not rated, primarily captive reinsurers. Receivables from captive reinsurers are backed by collateral arrangements and comprise the majority of the voluntary reinsurance receivables within the B- to B++ rating distribution in the table above. The primary methods of obtaining collateral are through reinsurance trusts, letters of credit and funds withheld balances. Such collateral, limited by the balance of open recoverables, was approximately $4.0 billion and $3.3 billion as of December 31, 2021 and 2020.
The Company's largest recoverables from a single reinsurer as of December 31, 2021, including ceded unearned premium reserves, were approximately $1.8 billion from subsidiaries of the Berkshire Hathaway Insurance Group, $612 million from Cavello Bay Reinsurance Limited and $425 million from the Gateway Rivers Insurance Company. These amounts are substantially collateralized or otherwise secured. The recoverable
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from subsidiaries of the Berkshire Hathaway Insurance Group includes amounts related to third-party reinsurance for which NICO has assumed the credit risk under the terms of the LPT as discussed in Note E to the Consolidated Financial Statements.
The effects of reinsurance on earned premiums and written premiums are presented in the following tables.
(In millions) Direct Assumed Ceded Net Assumed/
Net %
2021 Earned Premiums
Property and casualty $ 12,554  $ 240  $ 5,110  $ 7,684  3.1  %
Long term care 443  48  —  491  9.8  %
Total earned premiums $ 12,997  $ 288  $ 5,110  $ 8,175  3.5  %
2020 Earned Premiums
Property and casualty $ 11,547  $ 238  $ 4,640  $ 7,145  3.3  %
Long term care 454  50  —  504  9.9  %
Total earned premiums $ 12,001  $ 288  $ 4,640  $ 7,649  3.8  %
2019 Earned Premiums
Property and casualty $ 11,021  $ 288  $ 4,401  $ 6,908  4.2  %
Long term care 470  50  —  520  9.6  %
Total earned premiums $ 11,491  $ 338  $ 4,401  $ 7,428  4.6  %
(In millions) Direct Assumed Ceded Net Assumed/
Net %
2021 Written Premiums
Property and casualty $ 13,150  $ 255  $ 5,485  $ 7,920  3.2  %
Long term care 437  48  —  485  9.9  %
Total written premiums $ 13,587  $ 303  $ 5,485  $ 8,405  3.6  %
2020 Written Premiums
Property and casualty $ 12,168  $ 229  $ 4,832  $ 7,565  3.0  %
Long term care 444  50  —  494  10.1  %
Total written premiums $ 12,612  $ 279  $ 4,832  $ 8,059  3.5  %
2019 Written Premiums
Property and casualty $ 11,421  $ 281  $ 4,569  $ 7,133  3.9  %
Long term care 473  50  —  523  9.6  %
Total written premiums $ 11,894  $ 331  $ 4,569  $ 7,656  4.3  %
Included in the direct and ceded earned premiums for the years ended December 31, 2021, 2020 and 2019 are $3,638 million, $3,543 million and $3,578 million related to property business that is 100% reinsured under a significant third-party captive program. The third-party captives that participate in this program are affiliated with the non-insurance company policyholders, therefore this program provides a means for the policyholders to self-insure this property risk. The Company receives and retains a ceding commission.
Long term care premiums are from long-duration contracts; property and casualty premiums are from short-duration contracts.
Insurance claims and policyholders' benefits reported on the Consolidated Statements of Operations are net of estimated reinsurance recoveries of $3,058 million, $3,158 million and $2,733 million for the years ended December 31, 2021, 2020 and 2019, including $2,003 million, $2,375 million and $2,080 million, respectively, related to the significant third-party captive program discussed above.
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Note H. Debt
Debt is composed of the following long term obligations.
December 31
(In millions) 2021 2020
Senior notes of CNAF:
3.950%, face amount of $550, due May 15, 2024
549  548 
4.500%, face amount of $500, due March 1, 2026
499  499 
3.450%, face amount of $500, due August 15, 2027
497  496 
3.900%, face amount of $500, due May 1, 2029
496  496 
2.050%, face amount of $500, due August 15, 2030
495  495 
Debenture of CNAF, 7.250%, face amount of $243, due November 15, 2023
243  242 
Total $ 2,779  $ 2,776 
CCC is a member of the Federal Home Loan Bank of Chicago (FHLBC). FHLBC membership provides participants with access to additional sources of liquidity through various programs and services. As a requirement of membership in the FHLBC, CCC held $5 million of FHLBC stock as of December 31, 2021 giving it immediate access to approximately $106 million of additional liquidity. As of December 31, 2021 and 2020, CCC had no outstanding borrowings from the FHLBC.
During 2019, the Company amended and restated its existing credit agreement with a syndicate of banks. The agreement provides a five-year $250 million senior unsecured revolving credit facility which is intended to be used for general corporate purposes. At the Company's election, the commitments under the agreement may be increased from time to time up to an additional aggregate amount of $100 million, and two one-year extensions are available prior to any anniversary of the closing date, each subject to applicable consents. Under the agreement, the Company is required to pay a facility fee which will adjust automatically in the event of a change in the Company's financial ratings. The agreement includes several covenants, including maintenance of a minimum consolidated net worth and a specified ratio of consolidated indebtedness to consolidated total capitalization. The minimum consolidated net worth, as defined, at December 31, 2021, was $8.7 billion.  As of December 31, 2021 and 2020, the Company had no outstanding borrowings under the credit agreement.
The Company's debt obligations contain customary covenants for investment grade issuers. The Company was in compliance with all covenants as of and for the years ended December 31, 2021 and 2020.
The combined aggregate maturities for debt as of December 31, 2021 are presented in the following table.
(In millions)
2022 $ — 
2023 243 
2024 550 
2025 — 
2026 500 
Thereafter 1,500 
Less: discount (14)
Total $ 2,779 
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Note I. Benefit Plans
Pension and Postretirement Health Care Benefit Plans
CNA sponsors noncontributory defined benefit pension plans, primarily through the CNA Retirement Plan, covering certain eligible employees. These plans are closed to new entrants. CNA's funding policy for defined benefit pension plans is to make contributions in accordance with applicable governmental regulatory requirements with consideration of the funded status of the plans.
Effective January 1, 2000, the CNA Retirement Plan was closed to new participants. Existing participants at that time were given a choice to either continue to accrue benefits under the CNA Retirement Plan or to cease accruals effective December 31, 1999. Employees who chose to continue to accrue benefits under the plan received benefits in accordance with plan provisions through June 30, 2015 as discussed further below. Participants who elected to cease accruals effective December 31, 1999 received the present value of their accrued benefit in an accrued pension account that is credited with interest based on the annual rate of interest on 30-year Treasury securities. These employees also receive certain enhanced employer contributions in the CNA 401k Plan.
Effective June 30, 2015, the Company eliminated future benefit accruals associated with the CNA Retirement Plan. Participants continuing to accrue benefits under the CNA Retirement Plan up until that date are entitled to an accrued benefit payable based on their eligible compensation and accrued service through June 30, 2015. These affected participants now also receive enhanced employer contributions in the CNA 401k Plan similar to participants who elected to cease accruals effective December 31, 1999. Employees who elected to cease accruals effective December 31, 1999 were not affected by this curtailment.
CNA provides certain postretirement health care benefits to eligible retired employees, their covered dependents and their beneficiaries primarily through the CNA Health and Group Benefits Program. These postretirement benefits have largely been eliminated for active employees.
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The following table presents a reconciliation of benefit obligations and plan assets.
Pension Benefits Postretirement Benefits
(In millions) 2021 2020 2021 2020
Benefit obligation as of January 1 $ 2,769  $ 2,661  $ $
Changes in benefit obligation:
Interest cost 62  80  —  — 
Participants' contributions —  — 
Actuarial (gain) loss (84) 205 
Benefits paid (182) (173) (5) (5)
Foreign currency translation and other (2) —  — 
Settlements (2) (7) —  — 
Benefit obligation as of December 31 2,561  2,769 
Fair value of plan assets as of January 1 2,420  2,285  —  — 
Change in plan assets:
Actual return on plan assets 332  295  —  — 
Company contributions 10  16 
Participants' contributions —  — 
Benefits paid (182) (173) (5) (5)
Foreign currency translation and other (1) —  — 
Settlements (2) (7) —  — 
Fair value of plan assets as of December 31 2,577  2,420  —  — 
Funded status $ 16  $ (349) $ (6) $ (7)
Amounts recognized on the Consolidated Balance Sheets as of December 31:
Other assets $ 77  $ $ —  $ — 
Other liabilities (61) (351) (6) (7)
Net amount recognized $ 16  $ (349) $ (6) $ (7)
Amounts recognized in Accumulated other comprehensive income, not yet recognized in net periodic cost (benefit):
Net actuarial (gain) loss $ 763  $ 1,073  $ $ — 
Net amount recognized $ 763  $ 1,073  $ $ — 
The accumulated benefit obligation for all defined benefit pension plans was $2,561 million and $2,769 million as of December 31, 2021 and 2020. Changes for the year ended December 31, 2021 include actuarial gains of $(84) million driven by investment returns and changes in the discount rate used to determine the defined benefit pension obligations. Changes for the year ended December 31, 2020 include actuarial losses of $205 million primarily driven by changes in the discount rate used to determine defined benefit pension obligations.
For pension plans with a benefit obligation in excess of plan assets, the benefit obligation was $61 million and the aggregate plan assets were $0 at December 31, 2021.

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The components of net periodic pension cost (benefit) are presented in the following table.
Years ended December 31
(In millions) 2021 2020 2019
Net periodic pension cost (benefit)
Interest cost on projected benefit obligation $ 62  $ 80  $ 100 
Expected return on plan assets (154) (155) (142)
Amortization of net actuarial (gain) loss 46  45  39 
Settlement loss — 
Total net periodic pension cost (benefit) $ (45) $ (27) $ (3)
The following table indicates the line items in which the non-service cost (benefit) is presented in the Consolidated Statements of Operations.
Years ended December 31
(In millions) 2021 2020 2019
Non-Service Cost (benefit):
Insurance claims and policyholder's benefits $ (13) $ (8) $ (1)
Other operating expenses (32) (19) (2)
Total net periodic pension cost (benefit) $ (45) $ (27) $ (3)
The amounts recognized in Other comprehensive income are presented in the following table.
Years ended December 31
(In millions) 2021 2020 2019
Pension and postretirement benefits
Amounts arising during the period $ 262  $ (67) $ (112)
Settlement — 
Reclassification adjustment relating to prior service credit —  —  — 
Reclassification adjustment relating to actuarial loss 46  45  39 
Total increase (decrease) in Other comprehensive income $ 309  $ (19) $ (73)
    
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Actuarial assumptions used for the CNA Retirement Plan and CNA Health and Group Benefits Program to determine benefit obligations are presented in the following table. The interest crediting rate is the weighted average interest rate applied to the individual pension balances for employees who elected to cease accruals effective December 31, 1999.
December 31 2021 2020
Pension benefits
Discount rate 2.750  % 2.350  %
Interest crediting rate 3.000  3.000 
Postretirement benefits
Discount rate 2.250  % 1.600  %
Actuarial assumptions used for the CNA Retirement Plan and CNA Health and Group Benefits Program to determine net cost or benefit are presented in the following table.
Years ended December 31 2021 2020 2019
Pension benefits
Discount rate 2.350  % 3.150  % 4.250  %
Expected long term rate of return 6.750  7.250  7.500 
Interest crediting rate 3.000  5.000  5.000 
Postretirement benefits
Discount rate 1.600  % 2.300  % 3.550  %
To determine the discount rate assumption as of the year-end measurement date for the CNA Retirement Plan and CNA Health and Group Benefits Program, the Company considered the estimated timing of plan benefit payments and available yields on high quality fixed income debt securities. For this purpose, high quality is considered a rating of Aa or better by Moody's Investors Service, Inc. (Moody's) or a rating of AA or better from Standard & Poor's (S&P). The Company reviewed several yield curves constructed using the cash flow characteristics of the plans as well as bond indices as of the measurement date. The trend of those data points was also considered.
In determining the expected long term rate of return on plan assets assumption for the CNA Retirement Plan, CNA considered the historical performance of the benefit plan investment portfolio as well as long term market return expectations based on the investment mix of the portfolio and the expected investment horizon.
The CNA Health and Group Benefits Program has limited its share of the health care trend rate to a cost-of-living adjustment of 4% per year. For all participants, the employer subsidy on health care costs will not increase by more than 4% per year. As a result, the assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation for the CNA Health and Group Benefits Program was 4% per year in 2021, 2020 and 2019.
CNA employs a total return approach whereby a mix of equity, limited partnerships and fixed maturity securities are used to maximize the long term return of retirement plan assets for a prudent level of risk and to manage cash flows according to plan requirements. The target allocation of plan assets is 40% to 60% invested in equity securities and limited partnerships, with the remainder primarily invested in fixed maturity securities. Alternative investments, including limited partnerships, are used to enhance risk adjusted long term returns while improving portfolio diversification. The intent of this strategy is to minimize the Company's expense related to funding the plan by generating investment returns that exceed the growth of the plan liabilities over the long run. Risk tolerance is established after careful consideration of the plan liabilities, plan funded status and corporate financial conditions.
As of December 31, 2021, the Plan had committed approximately $160 million to future capital calls from various third-party limited partnership investments in exchange for an ownership interest in the related partnerships. Derivatives may be used to gain market exposure in an efficient and timely manner. Investment risk is measured and monitored on an ongoing basis through annual liability measurements, periodic asset/liability studies and quarterly investment portfolio reviews.
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Pension plan assets measured at fair value on a recurring basis as well as cash are presented in the following tables.
December 31, 2021
(In millions) Level 1 Level 2 Level 3 Total
Assets
Fixed maturity securities:
Corporate bonds and other $ —  $ 645  $ $ 653 
States, municipalities and political subdivisions —  30  —  30 
Asset-backed —  110  —  110 
Total fixed maturity securities —  785  793 
Equity securities 732  141  —  873 
Short term investments 45  —  —  45 
Other assets —  — 
Cash —  —  —  — 
Total assets measured at fair value $ 777  $ 934  $ 1,719 
Total equity securities measured at net asset value(1)
20 
Total limited partnerships measured at net asset value (1)
838 
Total $ 2,577 
December 31, 2020
(In millions) Level 1 Level 2 Level 3 Total
Assets
Fixed maturity securities:
Corporate bonds and other $ —  $ 643  $ $ 652 
States, municipalities and political subdivisions —  32  —  32 
Asset-backed —  98  —  98 
Total fixed maturity securities —  773  782 
Equity securities 666  137  —  803 
Short term investments 20  38  —  58 
Other assets —  — 
Cash 13  —  —  13 
Total assets measured at fair value $ 699  $ 956  $ 1,664 
Total limited partnerships measured at net asset value (1)
756 
Total $ 2,420 
(1) Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table for these investments are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Plan's Statement of Financial Position.
The limited partnership investments held within the plan are recorded at fair value, which represents the plan's share of net asset value of each partnership, as determined by each limited partnership's general partner. Limited partnerships comprising 65% and 75% of the carrying value as of December 31, 2021 and 2020 employ hedge fund strategies that generate returns through investing in marketable securities in the public fixed income and equity markets and the remainder were primarily invested in private debt and equity. Within hedge fund strategies, approximately 76% were equity related, 19% pursued a multi-strategy approach and 5% were focused on distressed investments as of December 31, 2021.
For a discussion of the fair value levels and the valuation methodologies used to measure fixed maturity securities, equities, derivatives and short term investments, see Note C to the Consolidated Financial Statements.
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The table below presents the estimated future minimum benefit payments to participants as of December 31, 2021.
(In millions) Pension Benefits Postretirement Benefits
2022 $ 182  $
2023 179 
2024 177 
2025 175  — 
2026 173  — 
2027-2031 798 
In 2022, CNA expects to contribute $5 million to its pension plans and $1 million to its postretirement health care benefit plans.
Savings Plans
CNA sponsors savings plans, which are generally contributory plans that allow most employees to contribute a maximum of 50% of their eligible compensation, subject to certain limitations prescribed by the IRS. The Company contributes matching amounts to participants amounting to 100% of the first 6% of eligible compensation contributed by the employee. In addition, eligible employees also receive a Company contribution of 5% of their eligible compensation, referred to as a basic contribution. Company contributions vest ratably over participants first five years of service.
Benefit expense for the Company's savings plans was $65 million, $70 million and $71 million for the years ended December 31, 2021, 2020 and 2019.

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Note J. Stock-Based Compensation
The current CNAF Incentive Compensation Plan (the Plan) authorizes the grant of stock-based compensation to certain management personnel for up to 16 million shares of CNAF common stock. The Plan currently provides for awards of stock options, stock appreciation rights (SARs), restricted shares, restricted stock units (RSUs), performance-based RSUs and performance share units. These grants to employees are not designed to be spring-loaded. The number of shares available for the granting of stock-based compensation under the Plan as of December 31, 2021 was approximately 5.6 million.
Substantially all of the Company's stock-based compensation is awarded under the Annual Performance Share Plan (PSP). The PSP provides officers with an opportunity to earn an award based upon attainment of specific performance goals achieved over a one-year performance period. Awards are granted in the form of performance share units at the beginning of each performance year and are generally subject to a two-year cliff vesting period after the Company’s annual performance has been determined. The performance share units become payable within a range of 0% to 200% of the number of performance share units initially granted.
Additionally, the Company may grant RSUs under the Plan in certain circumstances. These awards generally vest over a one to three-year service period following the grant date.
Stock-based compensation that is not fully vested prior to termination is generally forfeited upon termination, except in cases of retirement, death or disability, and as otherwise provided by contractual obligations. The fair value of stock-based compensation awards is based on the market value of the Company's common stock as of the date of grant, except for awards made to foreign participants, which is based on the current market value of the Company’s common stock. Payments made under the PSP are made entirely in shares of common stock granted under the Plan, except for awards made to foreign participants, which are paid in cash.
The Company recorded stock-based compensation expense related to the Plan of $32 million, $37 million and $34 million for the years ended December 31, 2021, 2020 and 2019. The related income tax benefit recognized was $6 million, $6 million and $8 million for the years ended December 31, 2021, 2020 and 2019. The compensation cost not yet recognized was $41 million, and the weighted average period over which it is expected to be recognized is 1.7 years as of December 31, 2021.
The total fair value of RSUs and performance shares that vested during the years ended December 31, 2021, 2020 and 2019 was $36 million, $35 million and $31 million, respectively.
The weighted average grant date fair value for RSUs and performance shares granted during the years ended December 31, 2021, 2020 and 2019 was $45.82, $34.36 and $43.86, respectively.
The following table presents activity for non-vested RSUs and performance share units under the Plan in 2021.
Number of Awards Weighted Average Grant Date Fair Value
Balance as of January 1, 2021 2,439,141  $ 40.56 
Awards granted 1,044,772  45.82 
Awards vested (789,495) 46.13 
Awards forfeited, canceled or expired (355,881) 40.19 
Performance-based adjustment 37,061  43.70 
Balance as of December 31, 2021 2,375,598  41.21 
119

Note K. Other Intangible Assets
Other intangible assets are presented in the following table.
December 31 2021 2020
(In millions) Economic Useful Life Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization
Finite-lived intangible assets:
Trade name 8 years $ $ $
Distribution channel 15 years 11  11 
Total finite-lived intangible assets 18  14  18  13 
Indefinite-lived intangible assets:
Syndicate capacity 47  48 
Agency force 16  16 
Total indefinite-lived intangible assets 63  64 
Total other intangible assets $ 81  $ 14  $ 82  $ 13 
The Company's other intangible assets primarily relate to the purchase of Hardy, and the amortization of the finite-lived intangible assets is included in the Statement of Operations for the International segment. Amortization expense of $1 million was included in Other operating expenses for each of the years ended December 31, 2021, 2020 and 2019. The gross carrying amounts and accumulated amortization in the table above may change from period to period as a result of foreign currency translation. Estimated future annual amortization expense for other intangible assets is $1 million in each of the years 2022 through 2026.

120

Note L. Leases
Total lease expense was $57 million, $57 million and $55 million for the years ended December 31, 2021, 2020 and 2019. Total lease expense includes operating lease expense of $38 million, $38 million and $37 million and variable lease expense of $19 million, $19 million and $18 million for the years ended December 31, 2021, 2020 and 2019. Cash paid for amounts included in operating lease liabilities was $44 million, $41 million and $34 million for the years ended December 31, 2021, 2020 and 2019. Operating lease ROU assets obtained in exchange for lease obligations was $11 million, $6 million and $12 million for the years ended December 31, 2021, 2020 and 2019.
The following table presents operating lease ROU assets and lease liabilities.
(In millions) December 31, 2021 December 31, 2020
Operating lease ROU assets $ 175  $ 199 
Operating lease liabilities 248  279 
The following table presents the maturities of operating lease liabilities
(In millions) December 31, 2021
2022 $ 42 
2023 37 
2024 30 
2025 25 
2026 22 
Thereafter 141 
Total lease payments 297 
Less: Discount (49)
Total operating lease liabilities $ 248 
The following table presents the weighted average remaining lease term for operating leases and weighted average discount rate used in calculating operating lease ROU assets.
December 31, 2021 December 31, 2020
Weighted average remaining lease term 9.8 years 10.3 years
Weighted average discount rate 3.4  % 3.4  %

121

Note M. Stockholders’ Equity and Statutory Accounting Practices
Common Stock Dividends
There are no restrictions on the retained earnings or net income of CNAF with regard to payment of dividends to its stockholders. However, given the holding company nature of CNAF, its ability to pay a dividend is significantly dependent on the receipt of dividends from its subsidiaries, particularly CCC, which directly or indirectly owns the vast majority of all significant subsidiaries. See the Statutory Accounting Practices section below for a discussion of the regulatory restrictions on CCC's availability to pay dividends.
CNAF's ability to pay dividends may be indirectly limited by the minimum consolidated net worth covenant in the Company's line of credit agreement. See Note H to the Consolidated Financial Statements for further discussion of the Company's debt obligations.
Statutory Accounting Practices
CNAF’s insurance subsidiaries are domiciled in various jurisdictions. These subsidiaries prepare statutory financial statements in accordance with accounting practices prescribed or permitted by the respective jurisdictions’ insurance regulators. Domestic prescribed statutory accounting practices are set forth in a variety of publications of the National Association of Insurance Commissioners (NAIC) as well as state laws, regulations and general administrative rules. These statutory accounting principles vary in certain respects from GAAP. In converting from statutory accounting principles to GAAP, the more significant adjustments include deferral of policy acquisition costs and the inclusion of net unrealized holding gains or losses in stockholders’ equity relating to certain fixed maturity securities.
The Company has a prescribed practice as it relates to the accounting under Statement of Statutory Accounting Principles No. 62R, Property and Casualty Reinsurance, paragraphs 88 and 89 in conjunction with the 2010 LPT with NICO which is further discussed in Note E to the Consolidated Financial Statements.  The prescribed practice allows the Company to aggregate all third-party A&EP reinsurance balances administered by NICO in Schedule F and to utilize the LPT as collateral for the underlying third-party reinsurance balances for purposes of calculating the statutory reinsurance penalty. This prescribed practice increased statutory capital and surplus by $67 million and $91 million at December 31, 2021 and 2020.
The payment of dividends by CNAF's insurance subsidiaries without prior approval of the insurance department of each subsidiary’s domiciliary jurisdiction is generally limited by formula. Dividends in excess of these amounts are subject to prior approval by the respective insurance regulator.
Dividends from 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 the 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 December 31, 2021, CCC is in a positive earned surplus position. The maximum allowable dividend CCC could pay during 2022 that would not be subject to the Department’s prior approval is $1,201 million, less dividends paid during the preceding twelve months measured at that point in time. CCC paid dividends of $880 million in 2021. 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.
122

Combined statutory capital and surplus and statutory net income (loss) for the Combined Continental Casualty Companies are presented in the table below, determined in accordance with accounting practices prescribed or permitted by insurance and/or other regulatory authorities
Statutory Capital and Surplus Statutory Net Income (Loss)
December 31 Years ended December 31
(In millions)
2021 (1)
2020
2021 (1)
2020 2019
Combined Continental Casualty Companies $ 11,321  $ 10,708  $ 1,253  $ 800  $ 1,062 
(1) Information derived from the statutory-basis financial statements to be filed with insurance regulators.
CNAF’s domestic insurance subsidiaries are subject to risk-based capital (RBC) requirements. RBC is a method developed by the NAIC to determine the minimum amount of statutory capital appropriate for an insurance company to support its overall business operations in consideration of its size and risk profile. The formula for determining the amount of RBC specifies various factors, weighted based on the perceived degree of risk, which are applied to certain financial balances and financial activity. The adequacy of a company's actual capital is evaluated by a comparison to the RBC results, as determined by the formula. Companies below minimum RBC requirements are classified within certain levels, each of which requires specified corrective action.
The statutory capital and surplus presented above for CCC was approximately 264% and 266% of company action level RBC as of December 31, 2021 and 2020. Company action level RBC is the level of RBC which triggers a heightened level of regulatory supervision. The statutory capital and surplus of the Company's foreign insurance subsidiaries, which is not significant to the overall statutory capital and surplus, also met or exceeded their respective regulatory and other capital requirements.
123

Note N. 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 Pension and postretirement benefits Cumulative foreign currency translation adjustment Total
Balance as of January 1, 2021 $ —  $ 1,745  $ (848) $ (94) $ 803 
Other comprehensive income (loss) before reclassifications (7) (625) 207  (19) (444)
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $1, $(21), $10, $— and $(10)
(5) 81  (37) —  39 
Other comprehensive income (loss) net of tax (expense) benefit of $1, $188, $(65), $— and $124
(2) (706) 244  (19) (483)
Balance as of December 31, 2021 $ (2) $ 1,039  $ (604) $ (113) $ 320 
(In millions) Net unrealized gains (losses) on investments with an allowance for credit losses Net unrealized gains (losses) on other investments Pension and postretirement benefits Cumulative foreign currency translation adjustment Total
Balance as of January 1, 2020 $ —  $ 1,025  $ (833) $ (141) $ 51 
Other comprehensive income (loss) before reclassifications (43) 763  (53) 47  714 
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $12, $(12), $10, $— and $10
(43) 43  (38) —  (38)
Other comprehensive income (loss) net of tax (expense) benefit of $—, $(189), $4, $— and $(185)
—  720  (15) 47  752 
Balance as of December 31, 2020 $ —  $ 1,745  $ (848) $ (94) $ 803 


Amounts reclassified from Accumulated other comprehensive income (loss) shown above are reported in Net income (loss) as follows:
Component of AOCI Consolidated Statements of Operations Line Item Affected by Reclassifications
Net unrealized gains (losses) on investments with an allowance for credit losses, Net unrealized gains (losses) on investments with OTTI 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
124

Note O. 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. Specialty provides management and professional liability and other coverages through property and casualty products and services using a network of brokers, independent agencies and managing general underwriters. Commercial works with a network of brokers and independent agents to market a broad range of property and casualty insurance products to all types of insureds targeting small business, construction, middle markets and other commercial customers. The International segment underwrites property and casualty coverages on a global basis through a branch operation in Canada, a European business consisting of insurance companies based in the U.K. and Luxembourg and Hardy, the Company's Lloyd's syndicate.
The Company's operations outside of Property & Casualty Operations are managed and reported in two segments: Life & Group and Corporate & Other. Life & Group primarily includes the results of the long term care business that is in run-off. Corporate & Other primarily includes certain corporate expenses, including interest on corporate debt, and the results of certain property and casualty business in run-off, including CNA Re, A&EP, a legacy portfolio of EWC policies and certain legacy mass tort reserves.
Effective January 1, 2021, and in connection with the ceding of certain legacy reserves under a retroactive reinsurance agreement executed in February 2021, management changed the segment presentation of a legacy portfolio of excess workers’ compensation policies relating to business written in 2007 and prior. This business, which was previously reported as part of the Commercial business segment, is now reported as part of the Corporate & Other business segment. Further information on this retroactive reinsurance agreement is provided in Note E. In addition, a determination was made to change the segment presentation of certain legacy mass tort reserves. Similar to the aforementioned excess workers’ compensation legacy business, these legacy mass tort reserves were previously reported in the Commercial business segment and are now reported as part of the Corporate & Other business segment. These changes were made to better reflect the manner in which the Company is organized for purposes of making operating decisions and assessing performance. Prior period information has been conformed to the new segment presentation.
The accounting policies of the segments are the same as those described in Note A to the Consolidated Financial Statements. 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.
Approximately 10%, 9% and 9% of the Company's direct written premiums were derived from outside the United States for the years ended December 31, 2021, 2020 and 2019.
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 and any cumulative effects of changes in accounting guidance. 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.
125

The Company's results of operations and selected balance sheet items by segment are presented in the following tables.
Year ended December 31, 2021
Specialty

Commercial
International Life &
Group
Corporate
& Other
   
(In millions) Eliminations Total
Net written premiums $ 3,225  $ 3,595  $ 1,101  $ 485  $ —  $ (1) $ 8,405 
Operating revenues  
Net earned premiums $ 3,076  $ 3,552  $ 1,057  $ 491  $ —  $ (1) $ 8,175 
Net investment income 497  624  57  966  15  —  2,159 
Non-insurance warranty revenue 1,430  —  —  —  —  —  1,430 
Other revenues 23  —  —  (6) 24 
Total operating revenues 5,004  4,199  1,114  1,457  21  (7) 11,788 
Claims, benefits and expenses            
Net incurred claims and benefits 1,787  2,540  652  1,239  109  —  6,327 
Policyholders’ dividends 19  —  —  —  —  22 
Amortization of deferred acquisition costs 643  594  206  —  —  —  1,443 
Non-insurance warranty expense 1,328  —  —  —  —  —  1,328 
Other insurance related expenses 296  511  144  103  (1) 1,062 
Other expenses 47  38  (2) 10  155  (6) 242 
Total claims, benefits and expenses 4,104  3,702  1,000  1,352  273  (7) 10,424 
Core income (loss) before income tax 900  497  114  105  (252) —  1,364 
Income tax (expense) benefit on core income (loss) (196) (103) (28) 21  48  —  (258)
Core income (loss)  $ 704  $ 394  $ 86  $ 126  $ (204) $ —  1,106 
Net investment gains (losses) 120 
Income tax (expense) benefit on net investment gains (losses) (24)
Net investment gains (losses), after tax 96 
Net income (loss) $ 1,202 
December 31, 2021
(In millions)            
Reinsurance receivables $ 1,200  $ 923  $ 381  $ 401  $ 2,579  $ —  $ 5,484 
Insurance receivables 1,136  1,488  340  —  2,974 
Deferred acquisition costs 363  278  96  —  —  —  737 
Goodwill 117  —  31  —  —  —  148 
Deferred non-insurance warranty acquisition expense 3,476  —  —  —  —  —  3,476 
Insurance reserves  
Claim and claim adjustment expenses 6,433  8,890  2,280  3,754  2,817  —  24,174 
Unearned premiums 3,001  2,066  585  109  —  —  5,761 
Future policy benefits —  —  —  13,236  —  —  13,236 
Deferred non-insurance warranty revenue 4,503  —  —  —  —  —  4,503 
126

Year ended December 31, 2020
Specialty

Commercial
International Life &
Group
Corporate
& Other
   
(In millions) Eliminations Total
Net written premiums $ 3,040  $ 3,565  $ 961  $ 494  $ —  $ (1) $ 8,059 
Operating revenues  
Net earned premiums $ 2,883  $ 3,323  $ 940  $ 504  $ —  $ (1) $ 7,649 
Net investment income 449  513  58  851  64  —  1,935 
Non-insurance warranty revenue 1,252  —  —  —  —  —  1,252 
Other revenues 25  —  —  (5) 26 
Total operating revenues 4,585  3,861  998  1,355  69  (6) 10,862 
Claims, benefits and expenses        
Net incurred claims and benefits 1,792  2,375  629  1,286  67  —  6,149 
Policyholders’ dividends 18  —  —  —  —  21 
Amortization of deferred acquisition costs 621  592  197  —  —  —  1,410 
Non-insurance warranty expense 1,159  —  —  —  —  —  1,159 
Other insurance related expenses 280  506  136  109  (2) (1) 1,028 
Other expenses 50  34  (7) 141  (5) 220 
Total claims, benefits and expenses 3,905  3,525  955  1,402  206  (6) 9,987 
Core income (loss) before income tax 680  336  43  (47) (137) —  875 
Income tax (expense) benefit on core income (loss) (145) (69) (5) 56  23  —  (140)
Core income (loss) $ 535  $ 267  $ 38  $ $ (114) $ —  735 
Net investment gains (losses) (54)
Income tax (expense) benefit on net investment gains (losses)
Net investment gains (losses), after tax (45)
Net income (loss) $ 690 
December 31, 2020
(In millions)
Reinsurance receivables $ 886  $ 848  $ 302  $ 390  $ 2,052  $ —  $ 4,478 
Insurance receivables 1,052  1,254  328  —  2,640 
Deferred acquisition costs 330  281  97  —  —  —  708 
Goodwill 117  —  31  —  —  —  148 
Deferred non-insurance warranty acquisition expense 3,068  —  —  —  —  —  3,068 
Insurance reserves  
Claim and claim adjustment expenses 5,748  8,250  2,091  3,743  2,874  —  22,706 
Unearned premiums 2,635  1,824  546  114  —  —  5,119 
Future policy benefits —  —  —  13,318  —  —  13,318 
Deferred non-insurance warranty revenue 4,023  —  —  —  —  —  4,023 
127

Year ended December 31, 2019
Specialty

Commercial
Life &
Group
Corporate
& Other
(In millions) International Eliminations Total
Net written premiums $ 2,848  $ 3,315  $ 971  $ 523  $ $ (2) $ 7,656 
Operating revenues  
Net earned premiums $ 2,773  $ 3,162  $ 974  $ 520  $ $ (2) $ 7,428 
Net investment income 556  605  63  820  74  —  2,118 
Non-insurance warranty revenue 1,161  —  —  —  —  —  1,161 
Other revenues 29  —  —  (5) 31 
Total operating revenues 4,491  3,796  1,037  1,340  81  (7) 10,738 
Claims, benefits and expenses          
Net incurred claims and benefits 1,595  2,086  624  1,416  62  —  5,783 
Policyholders’ dividends 18  —  —  —  —  23 
Amortization of deferred acquisition costs 610  537  236  —  —  —  1,383 
Non-insurance warranty expense 1,082  —  —  —  —  —  1,082 
Other insurance related expenses 292  505  130  115  (2) (2) 1,038 
Other expenses 48  32  144  (5) 235 
Total claims, benefits and expenses 3,632  3,178  998  1,539  204  (7) 9,544 
Core income (loss) before income tax 859  618  39  (199) (123) —  1,194 
Income tax (expense) benefit on core income (loss) (188) (138) (9) 90  30  —  (215)
Core income (loss) $ 671  $ 480  $ 30  $ (109) $ (93) $ —  979 
Net investment gains (losses) 29 
Income tax (expense) benefit on net investment gains (losses) (8)
Net investment gains (losses), after tax 21 
Net income (loss) $ 1,000 

128

The following table presents operating revenues by line of business for each reportable segment.
Years ended December 31
(In millions) 2021 2020 2019
Specialty
Management & Professional Liability $ 2,776  $ 2,577  $ 2,572 
Surety 604  596  596 
Warranty & Alternative Risks 1,624  1,412  1,323 
Specialty revenues 5,004  4,585  4,491 
Commercial
Middle Market 1,508  1,444  1,439 
Construction 1,322  1,120  1,043 
Small Business 558  482  504 
Other Commercial 811  815  810 
Commercial revenues 4,199  3,861  3,796 
International
Canada 344  291  277 
Europe 473  389  363 
Hardy 297  318  397 
International revenues 1,114  998  1,037 
Life & Group revenues 1,457  1,355  1,340 
Corporate & Other revenues 21  69  81 
Eliminations (7) (6) (7)
Total operating revenues 11,788  10,862  10,738 
Net investment gains (losses) 120  (54) 29 
Total revenues $ 11,908  $ 10,808  $ 10,767 

Note P. Related Party Transactions
The Company reimburses Loews for, or pays directly, fees and expenses of investment facilities and services provided to the Company. Additionally, the Company provides investment-related processing services to Loews and charges Loews for these services. The net amounts incurred by the Company for these fees, expenses and services were $47 million, $47 million and $44 million for the years ended December 31, 2021, 2020 and 2019. Net amounts due to Loews related to these services, included in Other liabilities and payable in the first quarter of the subsequent year, were $23 million and $22 million as of December 31, 2021 and 2020. In addition, the Company reimbursed Loews for general corporate services and related travel expenses of $1 million and less than $1 million for the years ended December 31, 2021 and 2020. The CNA Tax Group is included in the consolidated federal income tax return of Loews and its eligible subsidiaries. The related payable due to Loews, included in Other liabilities, was $33 million and $67 million as of December 31, 2021 and 2020. For a detailed description of the income tax agreement with Loews see Note D to the Consolidated Financial Statements. In 2021, the Company wrote an appeal bond for Loews at standard rates. In addition, the Company writes, at standard rates, a limited amount of insurance for Loews and its subsidiaries. The earned premiums for each of the years ended December 31, 2021, 2020 and 2019 were $2 million.
129

Note Q. Non-Insurance Revenues from Contracts with Customers
Non-Insurance revenue is recognized when obligations under the terms of a contract with a customer are satisfied; generally this occurs over time as obligations are fulfilled. Revenue is measured as the amount of consideration the Company expects to receive in exchange for providing services.
Deferred Non-Insurance Warranty Revenue
The Company had deferred non-insurance warranty revenue balances of $4.5 billion and $4.0 billion reported in Deferred non-insurance warranty revenue as of December 31, 2021 and 2020. The increase in the deferred revenue balance for the year ended December 31, 2021 was primarily driven by deferrals outpacing revenue recognized in the period due to growth in the business. For the year ended December 31, 2021, the Company recognized $1.2 billion of revenues that were included in the deferred revenue balance as of January 1, 2021. For the year ended December 31, 2020, the Company recognized $1.1 billion of revenues that were included in the deferred revenue balance as of January 1, 2020. For the years ended December 31, 2021 and 2020, Non-insurance warranty revenue recognized from performance obligations related to prior periods due to a change in estimate was not material. The Company expects to recognize approximately $1.3 billion of the deferred revenue in 2022, $1.0 billion in 2023, $0.8 billion in 2024 and $1.3 billion thereafter.
Cost to Obtain and Fulfill Non-Insurance Warranty Contracts with Customers
For the years ended December 31, 2021 and 2020, capitalized commission costs were $3.5 billion and $3.1 billion and capitalized administrator service costs were $47 million and $37 million. For the years ended December 31, 2021 and 2020, the amount of amortization of capitalized costs was $1.1 billion and $0.9 billion and there were no impairment losses related to the costs capitalized. There were no adjustments to deferred costs recorded for the years ended December 31, 2021 and 2020.
130

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
CNA Financial Corporation
Chicago, Illinois
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of CNA Financial Corporation (an affiliate of Loews Corporation) and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), cash flows, and stockholders' equity, for each of the three years in the period ended December 31, 2021, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
Change in Accounting Principle
As discussed in Note A to the financial statements, the Company changed its method of accounting for measurement of credit losses on financial instruments in 2020.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
131

Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Claim and claim adjustment expense reserves - Property & Casualty - Refer to Notes A and E to the consolidated financial statements.
Critical Audit Matter Description
The estimation of property and casualty claim and claim adjustment expense reserves (“P&C claim and claim adjustment expense reserves”), including those claims that are incurred but not reported, requires significant judgment. Estimating P&C claim and claim adjustment expense reserves is subject to a high degree of variability as it involves complex estimates that are generally derived using a variety of actuarial estimation techniques and numerous assumptions and expectations about future events, many of which are highly uncertain. Modest changes in judgments and assumptions can materially impact the valuation of these liabilities, particularly for claims with longer-tailed exposures such as workers’ compensation, general liability and professional liability claims.
Given the significant judgments made by management in estimating P&C claim and claim adjustment expense reserves, auditing P&C claim and claim adjustment expense reserves required a high degree of auditor judgment and an increased extent of effort, including the involvement of our actuarial specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to P&C claim and claim adjustment expense reserves included the following, among others:
We tested the effectiveness of controls related to the determination of P&C claim and claim adjustment expense reserves, including those controls related to the estimation of and management’s review of P&C claim and claim adjustment expense reserves.
We tested the underlying data, including historical claims, that served as the basis for the actuarial analyses, to test that the inputs to the actuarial estimates were accurate and complete.
With the assistance of our actuarial specialists:
132

We developed a range of independent estimates of P&C claim and claim adjustment expense reserves and compared our estimates to the recorded reserves.
We compared our prior year estimates of expected incurred losses to actual experience during the most recent year to identify potential bias in the Company’s determination of P&C claim and claim adjustment expense reserves.
Future policy benefit reserves - Long Term Care - Refer to Notes A and E to the consolidated financial statements.
Critical Audit Matter Description
The estimation of long term care future policy benefit reserves (“LTC future policy benefit reserves”) requires significant judgment in the selection of key assumptions, including morbidity, persistency (inclusive of mortality), discount rate and future premium rate increases.
A gross premium valuation (“GPV”) is performed annually to assess the adequacy of the LTC future policy benefit reserves. The actuarial assumptions underlying the recorded LTC future policy benefit reserves are “locked-in” absent an indicated premium deficiency. If the GPV indicates the recorded LTC future policy benefit reserves are not adequate (i.e. a premium deficiency exists), the assumptions are “unlocked” and the LTC future policy benefit reserves are increased to eliminate the premium deficiency.
Estimating future experience for long term care policies is subject to significant estimation risk as the required projection period spans several decades. Morbidity and persistency experience can be volatile while discount rates and premium rate increases can be difficult to predict. Modest changes in each of these assumptions can materially impact the valuation of these liabilities.
Given the significant judgments made by management in estimating LTC future policy benefit reserves, auditing LTC future policy benefit reserves required a high degree of auditor judgment and an increased extent of effort, including the involvement of our actuarial specialists.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to LTC future policy benefit reserves included the following, among others:
We tested the effectiveness of controls related to the determination of LTC future policy benefit reserves, including those controls related to the estimation of and management’s review of LTC future policy benefit reserves.
We tested the underlying data, including demographic and historical claims data, that served as the basis for the actuarial analyses, to test that the inputs to the actuarial estimates were accurate and complete.
With the assistance of our actuarial specialists:
We independently recalculated a sample of LTC future policy benefit reserves and compared our estimates to the recorded reserves.
We evaluated the key assumptions applied in the GPV analysis, including comparing those assumptions to the Company’s historical experience, underlying portfolio yield and market data.
We assessed the Company’s projection of future cash flows to evaluate the adequacy of recorded reserves using "locked-in" assumptions.
/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
February 8, 2022
We have served as the Company's auditor since 1976.
133

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of CNA Financial Corporation (CNAF or the Company) is responsible for establishing and maintaining adequate internal control over financial reporting. CNAF's internal control system was designed to provide reasonable assurance to the Company's management, its Audit Committee and Board of Directors regarding the preparation and fair presentation of published financial statements.
There are inherent limitations to the effectiveness of any internal control or system of control, however well designed, including the possibility of human error and the possible circumvention or overriding of such controls or systems. Moreover, because of changing conditions the reliability of internal controls may vary over time. As a result even effective internal controls can provide no more than reasonable assurance with respect to the accuracy and completeness of financial statements and their process of preparation.
CNAF management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2021. In making this assessment, it has used the criteria set forth by the 2013 Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. Based on those criteria and our assessment we believe that, as of December 31, 2021, the Company's internal control over financial reporting was effective.
CNAF's independent registered public accountant, Deloitte & Touche LLP, has issued an audit report on the Company's internal control over financial reporting. This report appears on page 131.

CNA Financial Corporation
Chicago, Illinois
February 8, 2022
134

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
As of December 31, 2021, 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.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, and the implementing rules of the Securities and Exchange Commission, the Company included a report of management's assessment of the design and effectiveness of its internal controls as part of this Annual Report on Form 10-K for the year ended December 31, 2021. Management's report and the independent registered public accounting firm's attestation report are included in Part II, Item 8 under the captions entitled “Management's Report on Internal Control Over Financial Reporting” and “Report of Independent Registered Public Accounting Firm” and are incorporated herein by reference.
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 December 31, 2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information about our Executive Officers
NAME POSITION AND OFFICES HELD WITH REGISTRANT AGE FIRST BECAME EXECUTIVE OFFICER OF CNA PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
Dino E. Robusto Chief Executive Officer 63 2016 Chairman of the Board and Chief Executive Officer of CNA Financial Corporation since November 2016.
Larry A. Haefner (1)
Interim Chief Financial Officer 65 2008 Interim Chief Financial Officer of CNA Financial Corporation since September 2021.  Executive Vice President & Chief Actuary of the CNA Insurance Companies from April 2008 through August 2020.
Elizabeth A. Aguinaga Executive Vice President & Chief Human Resources Officer 44 2018 Executive Vice President and Chief Human Resources Officer of CNA Insurance Companies since February 2018. Senior Vice President, Chief Human Resources Officer of CNA Insurance Companies from September 2015 through February 2018.
Michael A. Costonis Executive Vice President & Global Head of Marketing, Strategy & Innovation 51 2018 Executive Vice President & Global Head of Marketing, Strategy & Innovation since August 2021. Executive Vice President & Chief Operations Officer of the CNA Insurance Companies from September 2018 to August 2021. Global Insurance Industry Practice Leader and Senior Managing Director at Accenture from 2014 through September 2018.
Nick Creatura President & Chief Executive Officer, Canada 58 2020
President and Chief Executive Officer, Canada of the CNA Insurance Companies since May 2017.
Daniel P. Franzetti Executive Vice President, Worldwide Claim 55 2020 Executive Vice President, Worldwide Claim of the CNA Insurance Companies since April 2020. Chief Operating Officer, QBE North America from January 2018 through April 2020. Chief Claims Officer, QBE North America from February 2016 through January 2018.
Gary Haase Executive Vice President & Chief Operations Officer 45 2021 Executive Vice President & Chief Operations Officer of the CNA Insurance Companies since October 2021. Group Chief Operating Officer, Catalina Holdings (Bermuda) Ltd from October 2018 through September 2021. Chief Operating Officer, Catalina Holdings (Bermuda) Ltd from 2014 through 2018.
Robert J. Hopper Executive Vice President & Chief Actuary 55 2020 Executive Vice President & Chief Actuary of the CNA Insurance Companies since August 2020. Executive Vice President, Actuary of the CNA Insurance Companies from February 2020 through August 2020. Senior Vice President and Actuary for Chubb Commercial Insurance from 2005 through February 2020.
Kevin J. Leidwinger(2)
President & Chief Operating Officer, Commercial 58 2015 President and Chief Operating Officer, Commercial of the CNA Insurance Companies since June 2015.
Jalil Rehman President & Chief Executive Officer, U.K. & Europe 57 2020
President and Chief Executive Officer, U.K. & Europe of the CNA Insurance Companies since September 2020. Senior Vice President and Chief Operating Officer, U.K. & Europe of the CNA Insurance Companies from October 2018 to September 2020. Executive Vice President & Chief Business Operations Officer of Chubb European Group PLC from January 2016 through July 2018.
136


NAME POSITION AND OFFICES HELD WITH REGISTRANT AGE FIRST BECAME EXECUTIVE OFFICER OF CNA PRINCIPAL OCCUPATION DURING PAST FIVE YEARS
Kevin G. Smith
President & Chief Operating Officer, Specialty 57 2017 President and Chief Operating Officer for Specialty of CNA Insurance Companies since May 2017. Executive Vice President, Chubb from May 2016 through May 2017.
Susan A. Stone Executive Vice President & General Counsel 60 2021 Executive Vice President and General Counsel of CNA Financial Corporation since June 2021. General Counsel, Marsh LLC from February 2017 through May 2021. Prior to February 2017, served in various capacities at Sidley Austin since 1989, including Executive Committee Member, Practice Group Head, Partner and Associate.
Douglas M. Worman Executive Vice President & Chief Underwriting Officer 54 2017 Executive Vice President and Chief Underwriting Officer of CNA Insurance Companies since March 2017.
(1) Larry A. Haefner will be succeeded in this role on February 14, 2022 by Scott Lindquist, 58, who previously served as Chief Financial Officer of Farmers Group, Inc. from February 2008 through April 2021 and Senior Adviser to the Chief Executive Officer of Farmers Group, Inc. from April 2021 through September 2021.
(2) Kevin J. Leidwinger announced his intention to retire effective April 30, 2022

Officers are elected annually and hold office until their successors are elected and qualified, and are subject to removal by the Board of Directors.
Additional information required in Part III, Item 10 has been omitted as we intend to include such information in our definitive proxy statement which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2021.

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ITEM 11. EXECUTIVE COMPENSATION
Information required in Part III, Item 11 has been omitted as we intend to include such information in our definitive proxy statement which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2021.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Equity Compensation Plan
The table below presents the securities authorized for issuance under equity compensation plans. Performance share units are included at the maximum potential payout percentage.
December 31, 2021 Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Plan Category (a) (b) (c)
Equity compensation plans approved by security holders 3,196,059  $ 42.01  5,570,594 
Equity compensation plans not approved by security holders —  —  — 
Total 3,196,059  $ 42.01  5,570,594 
Additional information required in Part III, Item 12 has been omitted as we intend to include such information in our definitive proxy statement which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2021.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required in Part III, Item 13 has been omitted as we intend to include such information in our definitive proxy statement which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2021.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information required in Part III, Item 14 about aggregate fees billed to us by our principal accountant, Deloitte & Touche LLP (PCAOB ID No. 34) has been omitted as we intend to include such information in our definitive proxy statement which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2021.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(1)    FINANCIAL STATEMENTS:
Page Number
55
56
57
58
59
60
131
134
(2)    FINANCIAL STATEMENT SCHEDULES:
Schedule I
143
Schedule II
143
Schedule III
147
Schedule IV
147
Schedule V
147
Schedule VI
148
(3)    EXHIBITS:
Description of Exhibit Exhibit Number
(3) Articles of incorporation and by-laws:
3.1 
3.1.1
Certificate of Amendment of Certificate of Incorporation, dated May 10, 1999 (Exhibit 3.1 to 1999 Form 10-K incorporated herein by reference) 3.1.2 P
3.2 
(4) Instruments defining the rights of security holders, including indentures:*
4.1 
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4.2 
(10) Material contracts:
10.1 
Federal Income Tax Allocation Agreement, dated February 29, 1980 between CNA Financial Corporation and Loews Corporation (Exhibit 10.2 to 1987 Form 10-K incorporated herein by reference) 10.2  P
10.3 
10.3.1
10.4
+
10.5
+
10.6
+
10.7
+
10.8
+
10.9
10.10
10.11
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Table of Contents
10.12
10.13
10.14
10.15
(21) Subsidiaries of the Registrant
21.1
(23) Consent of Experts and Counsel
23.1
(31) Rule 13a-14(a)/15d-14(a) Certifications
31.1
   
31.2
   
(32) Section 1350 Certifications
32.1
   
32.2
(101) XBRL - Interactive Data File
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
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(104) Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) 104.1 
* CNA Financial Corporation hereby agrees to furnish to the Commission upon request copies of instruments with respect to long term debt, pursuant to Item 601(b)(4) (iii) of Regulation S-K.
P - Per Item 102(d) of Regulation S-T [17CFR 232.102(d)], these exhibits do not need to be hyperlinked.
+ Management contract or compensatory plan or arrangement.
Except for Exhibits 10.6, 21.1, 23.1, 31.1, 31.2, 32.1, 32.2 and the XBRL documents as discussed in the note above, the exhibits above are not included in this report, but are on file with the SEC.
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SCHEDULE I. SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
Incorporated herein by reference to Note B to the Consolidated Financial Statements included under Item 8.
SCHEDULE II. CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY)
CNA Financial Corporation
Statements of Operations and Comprehensive Income
Years ended December 31
(In millions) 2021 2020 2019
Revenues
Net investment income $ —  $ $ 13 
Net investment losses —  (20) (21)
Total revenues —  (17) (8)
Expenses
Administrative and general
Interest 112  122  131 
Total expenses 113  123  132 
Loss from operations before income taxes and equity in net income of subsidiaries (113) (140) (140)
Income tax benefit 11  18  21 
Loss before equity in net income of subsidiaries (102) (122) (119)
Equity in net income of subsidiaries 1,304  812  1,119 
Net income 1,202  690  1,000 
Equity in other comprehensive (loss) income of subsidiaries (483) 752  929 
Total comprehensive income $ 719  $ 1,442  $ 1,929 
See accompanying Notes to Condensed Financial Information as well as the
Consolidated Financial Statements and accompanying Notes.
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CNA Financial Corporation
Balance Sheets
December 31
(In millions, except share data) 2021 2020
Assets
Investment in subsidiaries $ 14,937  $ 14,996 
Cash — 
Short term investments 685  522 
Amounts due from affiliates
Other assets — 
Total assets $ 15,626  $ 15,523 
Liabilities
Long term debt $ 2,779  $ 2,776 
Other liabilities 38  40 
Total liabilities 2,817  2,816 
Stockholders' Equity
Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 271,363,999 and 271,391,603 shares outstanding)
683  683 
Additional paid-in capital 2,215  2,211 
Retained earnings 9,663  9,081 
Accumulated other comprehensive income 320  803 
Treasury stock (1,676,244 and 1,648,640 shares), at cost
(72) (71)
Total stockholders' equity 12,809  12,707 
Total liabilities and stockholders' equity $ 15,626  $ 15,523 
See accompanying Notes to Condensed Financial Information as well as the
Consolidated Financial Statements and accompanying Notes.
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CNA Financial Corporation
Statements of Cash Flows
Years ended December 31
(In millions) 2021 2020 2019
Cash Flows from Operating Activities
Net income $ 1,202  $ 690  $ 1,000 
Adjustments to reconcile net income to net cash flows provided by operating activities:
Equity in net income of subsidiaries (1,304) (812) (1,119)
Dividends received from subsidiaries 880  975  1,065 
Net investment income —  20  21 
Other, net 33  26  13 
Net cash flows provided by operating activities 811  899  980 
Cash Flows from Investing Activities
Change in short term investments (163) 10 
Capital contributions to subsidiaries —  (1) (2)
Other, net —  —  — 
Net cash flows (used) provided by investing activities (163)
Cash Flows from Financing Activities
Dividends paid to common stockholders (621) (950) (929)
Proceeds from the issuance of debt —  495  496 
Repayment of debt —  (419) (520)
Purchase of treasury stock (18) (18) (23)
Other, net (8) (9) (12)
Net cash flows used by financing activities (647) (901) (988)
Net change in cash (1) — 
Cash, beginning of year — 
Cash, end of year $ $ —  $
See accompanying Notes to Condensed Financial Information as well as the
Consolidated Financial Statements and accompanying Notes.
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Notes to Condensed Financial Information
A. Summary of Significant Accounting Policies
Basis of Presentation
The condensed financial information of CNA Financial Corporation (CNAF or the Parent Company) should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 of this Form 10-K. CNAF’s subsidiaries are accounted for using the equity method of accounting. Equity in net income of these subsidiaries is presented on the Condensed Statements of Operations as Equity in net income of subsidiaries. Loews owned approximately 89.6% of the outstanding common stock of CNAF as of December 31, 2021.
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SCHEDULE III. SUPPLEMENTARY INSURANCE INFORMATION
Incorporated herein by reference to Note O to the Consolidated Financial Statements included under Item 8.
SCHEDULE IV. REINSURANCE
Incorporated herein by reference to Note G to the Consolidated Financial Statements included under Item 8.
SCHEDULE V. VALUATION AND QUALIFYING ACCOUNTS
(In millions) Balance at Beginning of Period Charged to Costs and Expenses Charged to Other Accounts Deductions Balance at End of Period
Year ended December 31, 2021
Allowance for uncollectible:
Mortgage loan receivables
$ 26  $ —  $ (10) $ —  $ 16 
Insurance and reinsurance receivables $ 54  $ $ —  $ (8) $ 50 
Allowance for credit losses:
Fixed maturity securities
$ 40  $ —  $ 30  $ (52) $ 18 
Year ended December 31, 2020
Allowance for uncollectible:
Mortgage loan receivables
$ $ —  $ 19  $ —  $ 26 
Insurance and reinsurance receivables $ 57  $ $ —  $ (7) $ 54 
Allowance for credit losses:
Fixed maturity securities
$ $ —  $ 92  $ (58) $ 40 
Year ended December 31, 2019
Allowance for uncollectible:
Insurance and reinsurance receivables $ 71  $ (6) $ —  $ (8) $ 57 
Effects of foreign currency translation, changes in the estimate of the allowance for uncollectible mortgage loan receivables, increases in the estimate of the allowance for credit losses on fixed maturity securities and allowances established with respect to assets purchased with credit deterioration are presented within the Charged to Other Accounts column in the table above. Write-offs of uncollectible amounts and reductions to the allowance for credit losses due to securities sold during the period or the reversal for securities that had an allowance recorded in a previous period are presented within the Deductions column in the table above.
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SCHEDULE VI. SUPPLEMENTAL INFORMATION CONCERNING PROPERTY AND CASUALTY INSURANCE OPERATIONS
As of and for the years ended December 31 Consolidated Property and Casualty Operations
(In millions) 2021 2020 2019
Balance Sheet Data
Deferred acquisition costs $ 737  $ 708 
Reserves for unpaid claim and claim adjustment expenses 24,174  22,706 
Discount deducted from claim and claim adjustment expense reserves above (based on interest rates ranging from 3.5% to 6.4%)
1,146  1,209 
Unearned premiums 5,761  5,119 
Statement of Operations Data
Net written premiums $ 8,405  $ 8,059  $ 7,656 
Net earned premiums 8,175  7,649  7,428 
Net investment income 2,111  1,896  2,063 
Incurred claim and claim adjustment expenses related to current year 5,970  5,793  5,356 
Incurred claim and claim adjustment expenses related to prior years (104) (119) (127)
Amortization of deferred acquisition costs 1,443  1,410  1,383 
Paid claim and claim adjustment expenses 4,844  5,164  5,576 
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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: February 8, 2022 By /s/ Dino E. Robusto
Dino E. Robusto
Chief Executive Officer
(Principal Executive Officer)
Dated: February 8, 2022 By /s/ Larry Haefner
Larry Haefner
Interim Chief Financial Officer
(Principal Financial Officer)
Dated: February 8, 2022 By /s/ Amy M. Smith
Amy M. Smith
Chief Accounting Officer
(Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Dated: February 8, 2022 By /s/ Dino E. Robusto
(Dino E. Robusto, Chief Executive Officer and Chairman of the Board of Directors)
Dated: February 8, 2022 By /s/ Michael A. Bless
(Michael A. Bless, Director)
Dated: February 8, 2022 By /s/ Jose O. Montemayor
(Jose O. Montemayor, Director)
Dated: February 8, 2022 By /s/ Don M. Randel
(Don M. Randel, Director)
Dated: February 8, 2022 By /s/ Andre Rice
(Andre Rice, Director)
Dated: February 8, 2022 By /s/ Kenneth I. Siegel
(Kenneth I. Siegel, Director)
Dated: February 8, 2022 By /s/ Andrew H. Tisch
(Andrew H. Tisch, Director)
Dated: February 8, 2022 By /s/ Benjamin J. Tisch
(Benjamin J. Tisch, Director)
Dated: February 8, 2022 By /s/ James S. Tisch
(James S. Tisch, Director)
Dated: February 8, 2022 By /s/ Jane Wang
(Jane Wang, Director)
149


CNA DEFERRED COMPENSATION AND SAVINGS PLAN
Restated as of January 1, 2022



CNA DEFERRED COMPENSATION AND SAVINGS PLAN

TABLE OF CONTENTS

ARTICLE I GENERAL PROVISIONS
1
1.1    Purpose
1
1.2    Effective Date.
1
1.3    Company and Employers.
1
1.4    Plan Year..
1
1.5    Definitions and Rules of Construction.
1
ARTICLE II ELIGIBILITY AND BENEFITS
4
2.1    Eligibility
4
2.2    Elective Deferrals.
4
2.3    Employer Contributions.
6
2.4    Earnings.
6
2.5    Vesting.
7
2.6    Time and Form of Payment.
7
2.7    Death Benefits.
10
2.8    Excess Benefit Plan Participants.
11
2.9    Former Participants in Surety Plans
11
ARTICLE III PAYMENT OF BENEFITS
13
3.1    Source of Payment.
13
3.2    Establishment of Trust.
13
3.3    Withdrawals for Financial Emergency..
13
3.4    Withholding and Payroll Taxes.
14
3.5    Payment on Behalf of Disabled or Incompetent Persons.
14
3.6    Missing Participants or Beneficiaries.
14
3.7    Other Permitted Distributions.
14
3.8    Recovery of Erroneous Distributions.
14
ARTICLE IV ADMINISTRATION
16
4.1    Administrator.
16
4.2    Administrator’s Powers.
16
4.3    Binding Effect of Rulings.
16
4.4    Claims Procedure.
17
4.5    Indemnity.
18
ARTICLE V AMENDMENT AND TERMINATION OF PLAN
19
5.1    Amendment.
19
5.2    Termination.
19
ARTICLE VI MISCELLANEOUS
20
6.1    Status of Plan.
20
6.2    Nonassignability..
20
6.3    No Contract of Employment.
20
6.4    Participant Litigation.
20
6.5    Participant and Beneficiary Duties.
20
6.6    Governing Law.
20
6.7    Validity.
20
6.8    Notices.
21
6.9    Successors.
21
-i-
75170576v.4


APPENDIX A FULL VESTING OF PARTICIPANTS AFFECTED BY CERTAIN EVENTS
23
APPENDIX B EXCESS BENEFIT PLAN
24
-ii-
75170576v.4


CNA DEFERRED COMPENSATION AND SAVINGS PLAN
ARTICLE I
GENERAL PROVISIONS
1.1 Purpose. The purpose of this CNA Deferred Compensation and Savings Plan (the “Plan”) is to enable selected Employees and former Employees of CNA Financial Corporation (the “Company”) or its subsidiaries (the “Employers”) to elect to defer additional compensation, and receive additional matching and other Company contributions, to compensate them for the limitations imposed upon their benefits under the CNA 401(k) Plan in order to comply with the requirements of the Internal Revenue Code (the “Code”), and also to permit the Employers to provide additional amounts of deferred compensation for other key Employees and former Employees. The Plan was originally adopted jointly by the Company and Continental Casualty Company, one of the Employers, effective as of January 1, 1987, under the name CNA Employees’ Supplemental Savings Plan, and has been amended from time to time. The Plan was most recently restated as of January 1, 2019, pursuant to which restatement the Company was granted the authority to adopt further amendments to the Plan. The Plan is hereby further amended to incorporate certain amendments made since the last restatement, and to make other changes.
1.2 Effective Date. The Plan was originally effective as of January 1, 1987, and was most recently restated as of January 1, 2019. This amendment and restatement of the Plan shall be effective as of January 1, 2022, except as otherwise provided herein. Except as otherwise explicitly provided below, the rights of a Participant whose employment terminated, or who otherwise became entitled to receive benefits, under the Plan prior to January 1, 2022, shall be determined under the terms of the Plan as in effect at such time.
1.3 Company and Employers. The Plan is adopted for the benefit of selected Employees and former Employees of the Company and the Employers. As of the effective date of this restatement, Continental Casualty Company is the only Employer participating in the Plan. The Administrator may permit any other company that is an affiliate or subsidiary of the Company to participate in the Plan in such manner as the Administrator may determine. Each Employer is liable for the payment of benefits to a Participant that is or was an Employee of such Employer. The Company is the sponsor of the Plan for purposes of ERISA and the issuer of all interests in the Plan for securities laws purposes.
1.4 Plan Year. The Plan Year of the Plan shall coincide with the calendar year, except as the Administrator shall otherwise determine.
1.5 Definitions and Rules of Construction.. As used in this Plan, certain capitalized terms shall have the meanings set forth below. Capitalized terms not defined herein shall have the meaning set forth in the CNA 401(k) Plan, if applicable. Nouns and pronouns which are of one gender shall be construed to include all genders, and the singular shall include the plural and vice-versa, except as the context otherwise clearly requires. Article and Section headings are for ease of reference only and shall have no substantive meaning.
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(a)“Account” means the separate bookkeeping account maintained on the books of a Participant’s Employer to reflect the amount owed to him pursuant to this Plan. Each Account shall be divided into the following subaccounts:
(i)The Pre-2005 Account shall consist of all Elective Deferrals made on or before December 31, 2004, and all Company Contributions vested on December 31, 2004, and any earnings thereon.
(ii)The Post-2004 Account shall consist of all Elective Deferrals and Company Contributions that are credited to the Participant’s Account on or prior to December 31, 2021, and any earnings thereon.
(iii)The Company Contribution Account shall consist of all Company Contributions credited to the Participant’s Account after December 31, 2021, and any earnings thereon.
(iv)The Separation Account shall consist of all Elective Deferrals credited to the Participant’s Account after December 31, 2021, that the Participant does not elect to have credited to an In-Service Withdrawal Account, and any earnings thereon.
(v)If elected by the Participant, either one or two In-Service Withdrawal Accounts, each of which shall consist of all Elective Deferrals credited to the Participant’s Account after December 31, 2021, that the Participant elects to have credited to such In-Service Withdrawal Account, and any earnings thereon.
The Administrator may establish additional subaccounts within a Participant’s Account, or may combine two or more subaccounts; provided that such action does not have the effect of changing the time or form of payment of amounts credited to such subaccounts. The term “Account”, when not otherwise specified, shall refer collectively to all of the subaccounts comprising a Participant’s Account.
(b)“Administrator” means the Company or such other person as the Company shall designate pursuant to Section 4.1.
(c)“Base Compensation” means Compensation as defined in Section 2.1(k) of the CNA 401(k) Plan for purposes of determining a Participant’s Before-Tax, After-Tax and Matching Contributions, but without regard to any limits on includable compensation imposed by the Tax Limits.
(d) “Beneficiary” means the person or persons designated to receive the Participant’s Account in the event of his or her death pursuant to Section 2.7.
(e)“Board” means the Board of Directors of the Company.
(f)“Bonus Compensation” means a Participant’s bonus under the Company’s Annual Incentive Bonus Plan, or such other incentive plan as may be designated by the Administrator.
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(g) “Code” means the Internal Revenue Code of 1986, and any treasury regulations, rulings or other authoritative administrative pronouncements interpreting the Code. If any provision of the Code specifically referred to herein is amended or replaced, the reference shall be deemed to be to the provision as so amended, or to the new provision, if such reference is consistent with the purposes of the Plan.
(h)“Company” means CNA Financial Corporation, and any successor thereto that assumes the obligations of the Company under this Plan.
(i)“Company Contributions” means amounts credited to an Active Participant’s Account pursuant to Section 2.3, including Matching Contributions as described in Section 2.3(a) and Basic Contributions as described in Section 2.3(b).
(j) “Controlled Group” means the Company and all other entities that are part of a controlled group of corporations, or group of trades or businesses under common control, that includes the Company as defined in §414(b) or (c) of the Code; including, for avoidance of doubt, Loews Corporation and its respective 80% owned subsidiaries.
(k)“Deferral Agreement” means an agreement between an Active Participant and his or her Employer specifying that a portion of his or her Base Compensation and/or Bonus Compensation shall be withheld as Elective Deferrals and credited to his or her Account in the Plan pursuant to Section 2.2, or providing that additional amounts will be credited to his or her Account pursuant to Section 2.3, or both, and any amendment thereto. Effective January 1, 2022, each Deferral Agreement shall also specify whether such Elective Deferrals shall be credited to the Participant’s Separation Account or to an In-Service Withdrawal Account. To the extent determined by the Administrator, a Deferral Agreement may take the form of an election made by the Participant either in writing or through electronic communications. The term “Deferral Agreement” may also refer to any provision of an employment, consulting, severance, or other agreement for the performance of services that makes specific reference to this Plan and provides for deferred compensation. Any reference herein to a “deferral election” shall mean entering into or modifying a Deferral Agreement.
(l)“Elective Deferrals” means the portion of an Active Participant’s Base Compensation or Bonus Compensation that the Active Participant elects, in accordance with a Deferral Agreement, to have credited to his or her Account.
(m)“Employee” means any person employed by any Employer and classified as an Employee by such Employer. Except as otherwise provided in Section 2.1(c), the term “Employee” shall not include a person who is retained to provide services for an Employer as an independent contractor, or who provides services for an Employer pursuant to an agreement or understanding, written or unwritten, with a third party that such person shall be treated as an employee of the third party, but who is subsequently determined to be an employee at common law, for purposes of any federal or state tax or employment law, or for any other purpose.
(n)“Employer” means any subsidiary of the Company that adopts the Plan and is the employer or former employer of a Participant.
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(o)“ERISA” means the Employee Retirement Income Security Act of 1974, and any Labor Department regulations, rulings or other authoritative administrative pronouncements interpreting ERISA. If any provision of ERISA specifically referred to herein is amended or replaced, the reference shall be deemed to be to the provision as so amended, or to the new provision, if such reference is consistent with the purposes of the Plan.
(p)“Excess Benefit Plan” means the separable portion of the Plan contained in Appendix B.
(q)“Participant” means an Employee or former Employee designated to participate in the Plan pursuant to Section 2.1, while he or she has the right to any benefits under the Plan. Participants are divided in Active Participants and Inactive Participants, as described in Section 2.1, and the term “Participant”, when not modified, shall refer to both Active and Inactive Participants, unless clearly inconsistent with the context.
(r)“Plan” means this CNA Deferred Compensation and Savings Plan, as amended from time to time.
(s)“Tax Limits” means the limitations imposed on a Participant’s benefits under the Plan to satisfy the requirements of §401(a)(17), §402(g), or §415 of the Code.
(t)“Total Compensation” means Total Compensation as defined in the 401(k) Plan (and as formerly referred to as “Retirement Plan Compensation”) for purposes of determining a Participant’s Basic Contributions, but without regard to any limits on includible compensation imposed by the Tax Limits.
(u)“401(k) Plan” means the CNA 401(k) Plan, as amended from time to time, and, if appropriate, any new plan adopted by the Company to replace the 401(k) Plan. In the case of a Participant who participates in a plan maintained by his or her Employer other than the CNA 401(k) Plan, which plan is qualified under §401(a) of the Code and includes a cash or deferred feature qualified under §401(k) of the Code, the term “401(k) Plan” with respect to such Participant shall mean such other plan.

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ARTICLE II
ELIGIBILITY AND BENEFITS
2.1 Eligibility
(a)Only selected management and highly compensated Employees and former Employees who are designated as provided herein shall be eligible to participate in the Plan. The Employees and former Employees who are so designated to participate in the Plan shall be referred to herein as “Active Participants” for so long as they have the right to have additional amounts credited to their Accounts pursuant to Section 2.2 or 2.3. A person who is no longer an Active Participant, but who still has an undistributed Account in the Plan, shall be referred to as an “Inactive Participant.”
(b) Unless otherwise determined by the Administrator, only the following Employees are eligible to participate in the Plan:
(i)An Employee who is classified by the Company at Job Level 440 or above shall be eligible to have Elective Deferrals made pursuant to Section 2.2, and to receive Matching Contributions pursuant to Section 2.3(a). In the event that the Company revises its method of classifying Employees, the Administrator may revise all references to Job Level 440 to conform to the new method of classification.
(ii)An Employee shall be eligible to participate, solely for purposes of being credited with Basic Contributions, in any Plan Year in which his or her Total Compensation exceeds the limitation of Code §401(a)(17), or in which the total contributions to his or her 401(k) Plan account are restricted by Code §415 and in which he or she is not eligible to participate in the Excess Plan.
Notwithstanding the foregoing, the Administrator may, in its sole discretion, determine at any time that any Employee or group of Employees described in this paragraph (b) shall no longer be eligible to participate.
(c)Any Employer, with the consent of the Administrator, may enter into a Deferral Agreement with a person not described in paragraphs (a) or (b), who may be either an Employee or a former Employee, and such person shall thereby become an Active Participant. To the extent necessary or appropriate, any reference in this Plan to “employment” shall be modified and interpreted in the case of a former Employee or independent consultant in a manner consistent with the intent of the Plan.
(d)Any Employee who becomes a Participant, but who becomes ineligible to enter into a Deferral Agreement for any subsequent Plan Year by reason of a change in job classification, shall remain a Participant, and shall be credited with Employer Contributions pursuant to Section 2.3, for so long as he or she remains an Employee, unless otherwise determined by the Administrator.
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2.2 Elective Deferrals.
(a)Each Active Participant may, for any Plan Year, elect in his or her Deferral Agreement to accept a reduction in his or her Base Compensation from his or her Employer equal to a whole percentage not to exceed 50% of his or her Compensation, and may also elect (whether or not he or she elects to a defer a portion of his or her Base Compensation) to accept a reduction in his or her Bonus Compensation from his or her Employer earned during such Plan Year equal to a whole percentage not to exceed 100% of his or her Bonus Compensation (50% in the case of an Active Participant described in Section 2.2(b)(ii)(B)).
(b)All deferral elections shall be made in accordance with procedures established by the Administrator during the periods described below, and shall be irrevocable after the end of the period during which the election may be made. Except as otherwise provided in procedures established by the Administrator, a deferral election with respect to Base Compensation for one Plan Year shall apply to Base Compensation earned in all future Plan Years unless changed by the Participant during the applicable election period; provided that new affirmative deferral elections shall be required for the 2022 Plan Year:
(i)Except as otherwise provided below, all deferral elections shall be made not later than the last day of the Plan Year immediately preceding the Plan Year to which the deferral election shall apply. For this purpose, an election to defer Bonus Compensation shall apply to the Plan Year in which the Bonus Compensation begins to be earned, rather than the Plan Year in which the Bonus Compensation would otherwise be paid.
(ii)An Employee who is hired with a Job Level of 440, or who is promoted to a Job Level of 440, during a Plan Year, and who has not previously been considered eligible to participate in the Plan for purposes of Code §409A, shall become eligible to participate for purposes of making a deferral election for Base Compensation, as follows:
(A)    If the Employee is hired or promoted on or after June 1 but prior to December 1 of the Plan Year, he or she shall be eligible to participate as of January 1, and may make a deferral election that will take effect on January 1 of the following Plan Year.
(B)    If the Employee is hired or promoted on or after December 1 of the Plan Year, but prior to June 1 of the following Plan Year, he or she shall be eligible to participate as of July 1 of the following Plan Year, and may make a deferral election that will take effect on July 1 of the following Plan Year (and shall apply only to Base Compensation earned on or after such July 1). Notwithstanding the general effective date of this amendment and restatement of the Plan, the provisions of this Section 2.2(b)(ii)(B) shall apply to an Employee who is hired or promoted during December of 2021.
(C)    The Administrator may alter the time at which newly hired or promoted Employees shall become eligible and may make deferral elections, provided any such alteration is consistent with Code §409A and that no Employee shall become eligible to participate prior to the time set forth above unless such eligibility has been communicated to the Employee in writing.
(iii)The Administrator may permit Participants to elect to defer Bonus Compensation that constitutes qualified performance-based compensation as defined in Code §409A not later than the date that is six months prior to the end of the applicable performance period, provided that such election satisfies the requirements of Code §409A.
(iv)For the avoidance of doubt, effective January 1, 2022, an Active Participant may enter into Deferral Agreements for any Plan Year regardless of whether the Active Participant has made a deferral election under the 401(k) Plan, and all Deferral Agreements shall be administered and applied independently of the Active Participant’s deferral election under the 401(k) Plan, if any.
(c)Any Employer, with the consent of the Administrator, may enter into a Deferral Agreement with an Active Participant (including but not limited to a person described in Section 2.1(b)) which provides for
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Compensation to be withheld and credited to the Active Participant’s Deferral Account on a basis different from that described in paragraph (a). Such a Deferral Agreement may provide for the deferral of forms or amounts of compensation different from those defined as Base Compensation in Section 1.5(c), including payments to a former Employee or independent contractor, in which event such compensation shall be considered Compensation for all purposes of this Plan.
(d)Amounts deferred pursuant to paragraph (a) shall be credited to the Active Participant’s Deferral Account as of the date on which the deferred Compensation would otherwise have been paid. No election, and no provision of any Deferral Agreement, shall permit a Participant to defer Compensation already earned when the election is made. Effective January 1, 2005, all deferral elections, including those under a Deferral Agreement, must be made not later than December 31 of the immediately preceding year (except as otherwise provided in paragraph (b)(ii) or (b)(iii)) and may thereafter be revoked or modified only as permitted in regulations issued pursuant to Code §409A.
2.3 Company Contributions.
(a)The Account of an Active Participant who has elected to defer a portion of his or her Base Compensation for a Plan Year, and who has also elected to make elective deferrals under the 401(k) Plan in the same Plan Year, shall be credited for each payroll period commencing with the payroll period in which the Active Participant’s elective deferrals pursuant to the 401(k) Plan are discontinued by reason of the Tax Limits with an amount equal to the lesser of (i) amount of Base Compensation deferred by the Active Participant for such payroll period under Section 2.2 or (ii) six percent (6%) of the Active Participant’s Base Compensation for such payroll period. For the payroll period in which the Active Participant’s elective deferrals pursuant to the 401(k) Plan are first reduced, but not completely discontinued, by reason of the Tax Limits, the amount of Matching Contributions described in the preceding sentence shall be reduced by the amount of Matching Contributions credited to the Active Participant’s account in the 401(k) Plan. No Matching Contributions shall be made with respect to Elective Deferrals of Bonus Compensation. Matching Contributions shall be credited to an Active Participant’s Account as of the date as of which the deferred portion of his or her Base Compensation are credited.
(b)In addition to the amounts set forth above, for each Plan Year in which an Active Participant’s Total Compensation, or contributions to the 401(k) Plan, or both, exceeds the Tax Limits, the Employer of such Active Participant shall credit to the Active Participant’s Company Contribution Account an amount equal to the excess of five percent (5%) of such Active Participant’s Total Compensation over the maximum amount of Basic Contributions that can be credited to such Active Participant’s account in the 401(k) Plan. Such amounts shall be credited to the Active Participant’s Account as follows:
(i)    As of each payroll date for which the Active Participant’s Total Compensation exceeds the limitation of Code §401(a)(17), an amount equal to five percent (5%) of the portion of his or her Total Compensation that exceeds such limitation shall be credited to his or her Account.
(ii)    If the total amount of contributions to the Active Participant’s 401(k) Plan Account for the Plan Year is restricted by Code §415, an additional amount shall be credited to the Active Participant’s Account, if necessary, as of the first day of the following Plan Year on a true-up basis, provided that the total amount credited to the Active Participant’s Account for any Plan Year pursuant shall not exceed the excess of five percent (5%) of such Active Participant’s Total Compensation over the maximum amount of Basic Contributions that can be credited to such Active Participant’s account in the 401(k) Plan.
(c)Any Employer, with the consent of the Administrator, may enter into an employment agreement, or adopt employment policies, with or applicable to an Active Participant (including but not limited to a person described in Section 2.1(b)) which provides for amounts to be credited to the Active Participant’s Matching or Employer Account on a basis different from that described in paragraph (a) or (b). Such an agreement or policy shall specify the basis upon which the amount to be so credited shall be determined, and may also specify a vesting schedule different than that specified in Section 2.5.
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2.4 Earnings.
(a)Except as otherwise provided in paragraph (b), earnings shall be credited to each Participant’s Account at the rate of return on the Invesco Stable Value Fund established under the 401(k) Plan. In the event that the Invesco Stable Value Fund is no longer offered as an investment alternative under the 401(k) Plan, the Administrator shall designate a reasonably equivalent investment option under the 401(k) Plan to be used to measure the rate at which earnings shall be credited.
(b)Commencing January 1, 2022, the Administrator shall designate selected mutual funds or other investment media (“funds”), and each Participant shall have the right to have earnings (including realized and unrealized gains and losses) on each of his or her Accounts computed as if it had been invested in such funds in such proportions as the Participant shall elect. The funds may be the same as the Investment Funds designated under the 401(k) Plan, or may exclude some or all of such Investment Funds or include other funds as the Administrator may determine. The portion of each Participant’s Account that is deemed to be invested in each fund shall be a whole percentage, and elections may be changed at such intervals and in such manner as the Administrator may determine. The Administrator shall have the authority to select and discontinue funds at any time, and otherwise to establish rules and procedures with respect to the calculation and crediting of earnings, including changing the intervals at which fund elections may be made or at which earnings are posted, and establishing a minimum or maximum percentage that may be deemed invested in any fund. If a Participant fails to make an investment election with respect to one of his or her Accounts, such Account shall be invested in the Invesco Stable Value Fund or such other fund as may be selected by the Administrator.
(c)Anything else contained herein to the contrary, in no event shall any Participant be allowed to elect a rate of return on his or her Account retroactively, and in all cases earnings shall be computed in such a manner that they shall not be considered additional deferred compensation for purposes of FICA withholding under §3121(v) of the Code.
2.5 Vesting. All Elective Deferrals and the earnings attributable thereto shall be fully vested and nonforfeitable at all times. All Company Contributions and the earnings attributable thereto shall be vested at the same times and to the same extent as the Participant’s analogous account in the 401(k) Plan (except as otherwise provided in a Deferral Agreement with respect to amounts credited pursuant to Section 2.3(c)); provided, however, that an event that results in the 401(k) Plan accounts of a group of Participants being vested without regard to their years of service, including but not limited to the sale of a business unit or a determination that a partial termination of the 401(k) Plan has occurred, shall apply to this Plan if and only if such event is listed in Appendix A to this Plan. To the extent a Participant’s Account is not vested at the time of his or her termination of employment for any reason, the non-vested portion shall be forfeited, and neither the Company nor any Employer shall have any further obligation to him whatsoever with respect to the forfeited portion.
2.6 Time and Form of Payment.
(a)    All Elective Deferrals and Company Contributions credited to a Participant’s Account on or after January 1, 2022, shall be paid as follows:
(i)    All Elective Deferrals shall be credited to the Separation Account, except as otherwise provided in Section 2.6(a)(ii). The entire balance in a Participant’s Separation Account shall be paid to the Participant in a single lump sum paid in January of the year following the year in which the Participant incurs a Separation from Service, or, if so elected by the Participant, in not more than ten (10) annual installments, in each January commencing with January of the year following the year in which the Participant incurs a Separation from Service. An election to have the balance in the Participant’s Separation Account paid in installments (and the number of installments) must be made not later than the last day for entering into the first Deferral Agreement that provides for any portion of deferrals to be credited to the Separation Account, and shall also apply to all amounts credited to the Separation Account in subsequent Plan Years.
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(ii)    A Participant may elect to have any portion of the amount deferred in a Plan Year credited to an In-Service Withdrawal Account, the terms of which specify that the entire balance in such In-Service Withdrawal Account shall be distributed either in a lump sum in May of a year specified by the Active Participant at the time of establishing the In-Service Withdrawal Account, which year shall be not earlier than the fifth year after the first Plan Year for which amounts are credited to such In-Service Withdrawal Account (the “Payment Month”), or, if so elected by the Participant, in not more than five (5) annual installments in each May commencing with the Payment Month. The designation of the Payment Month, and an election to have the balance in the In-Service Withdrawal Account paid in installments (and the number of installments) must be made not later than the last day for entering into a Deferral Agreement that provides for any portion of deferrals to be credited to the In-Service Withdrawal Account, and shall also apply to all amounts credited to the same In-Service Withdrawal Account in subsequent Plan Years. Not more than two (2) In-Service Withdrawal Accounts may be in existence for a Participant at any one time. Notwithstanding the foregoing, (A) if a Participant incurs a Separation from Service prior to the first day of the Payment Month, the entire balance in the In-Service Withdrawal Account shall be distributed in a lump sum in January of the year following the year in which the Separation from Service occurs, and (B) if the balance in an In-Service Withdrawal Account does not exceed $50,000 as of the first day of the Payment Month, the entire balance in the In-Service Withdrawal Account shall be distributed in a lump sum during the Payment Month.
(iii)    All Company Contributions shall be credited to the Company Contribution Account. The entire vested balance in a Participant’s Company Contribution Account shall be paid to the Participant in a single lump sum paid in January of the year following the year in which the Participant incurs a Separation from Service, or, if so elected by the Participant, in not more than ten (10) annual installments, in each January commencing with January of the year following the year in which the Participant incurs a Separation from Service. An election to have the balance in the Participant’s Company Contribution Account paid in installments (and the number of installments) must be made not later than the earlier of (A) the last day prior to the January 1 or July 1 as of which the Participant is first eligible to make an election to defer Base Compensation paid after 2021, whether or not the Participant makes such an election, or (B) the thirtieth (30th) day after the first payroll date on which the Participant is credited with Basic Contributions pursuant to Section 2.3(b)(i), provided that if such Participant accrued any benefit under any nonqualified deferred compensation plan maintained by the Company or any Controlled Group Member in any prior year, such election will not apply to the Basic Contributions earned prior to the date such election is made.
(b)    The time and method of payment of the Participant’s Pre-2005 and Post-2004 Account shall be paid in accordance with the terms of the Plan as in effect prior to January 1, 2022, except as otherwise provided in Section 2.6(c).
(c)    All elections of the time and form of payment of any portion of a Participant’s Account shall be irrevocable, and cannot be changed in any way, after the last day for making such election as specified in the applicable provision of the Plan. Notwithstanding the foregoing, a Participant may make changes to the form of payment of the Separation Account, Company Contribution Account, In-Service Withdrawal Account, or the Post-2004 Account, subject to the provisions set forth below. Such a change may include changing from a lump sum to payment in annual installments or vice versa, changing the number of annual installments to a number that does not exceed the maximum number permitted by the applicable provision, or, in the case of an In-Service Withdrawal Account, changing the year in which payment will be made or commenced.
(i)    A change to the form of payment of the Separation Account or Company Contribution Account shall be made before the Participant incurs a Separation from Service, provided that such change shall not take effect for twelve (12) months after the change is made,
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and the Account would otherwise become payable within twelve (12) months after the change is made, the change shall be null and void and payment shall be made as if the change had never been made. If a valid change is made to either of such Accounts, payment of such account (or the first installment thereof) shall be made in January of the sixth Plan Year following the Plan Year in which the Participant incurs a Separation from Service.
(ii)    A change to the form of payment of the Post-2004 Account shall be made at least twelve (12) months before the Participant incurs a Separation from Service, and if the Participant incurs a Separation from Service within twelve (12) months after the change is made, the change shall be null and void and payment shall be made as if the change had never been made. If a valid change is made to the Post-2004 Account, payment of such portion (or the first installment thereof) shall be made in January of the sixth Plan Year following the Plan Year in which the Participant incurs a Separation from Service. Notwithstanding the foregoing, if the Participant had previously elected to have the balance in his or her Post-2004 Account paid in the January following a Separation from Service, either in a lump sum or installments commencing with such January, a change to the form of payment shall be made in accordance with Section 2.6(c)(i).
(iii)    A change to the form of payment of an In-Service Withdrawal Account shall be made not later than April 30 of the Plan Year before the Plan Year designated for payment of the In-Service Withdrawal Account. If a valid change is made to an In-Service Withdrawal Account, payment of such Account (or the first installment thereof) shall be made in May of a Plan Year designated by the Participant that is at least five years after the Plan Year originally designated for payment of the In-Service Withdrawal Account, subject to the last sentence of Section 2.6(a)(ii).
(iv)    Not more than one change can be made to the form of payment from the Separation Account, Company Contribution Account, or Post-2004 Account. The Administrator may limit the number of changes that may be made to an In-Service Withdrawal Account.
(v)    In no event shall any change be made to the time or form of payment of the Pre-2005 Account.
(d)    All Accounts shall continue to be credited with earnings as provided in Section 2.4 until they are distributed in full. Whenever the Participant has elected payment of an Account in the form of annual installments, the amount of each installment shall be equal to the balance in the applicable Account immediately prior to payment, divided by the number of installments remaining to be paid (including such installment). Notwithstanding the foregoing, if a Participant has elected to have his or her Company Contribution Account paid in installments, but a portion of the Company Contribution Account must be paid in a lump sum because it was accrued prior to the effective date of the election, the amount of the first installment shall be calculated by adding the amount required to be paid in a lump sum to the balance to be paid in installments, dividing such amount by the number of installments remaining to be paid, and reducing the first installment (but not below zero) by the amount of the lump sum.
(e)    The following provisions shall apply to all times and forms of payment of benefits, anything else in this Plan, or a Deferral Agreement, to the contrary notwithstanding:
(i)    No part of a Participant’s Account other than the Pre-2005 Account that becomes payable by reason of a Separation from Service shall be payable to a Participant who is a specified employee, as defined in Code §409A, on the date he or she incurs a Separation from Service, until the earlier of the first day of the seventh month following the month in which the Separation from Service occurs, or the date of the Participant’s death. If the benefit is payable in installments, the required deferral of the first such installment shall not affect the time of payment of subsequent installments. The identification of Participants as specified employees shall be made as of December 31 of each year by
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Loews Corporation based upon the employees of the controlled group of which Loews Corporation is the common parent, and a Participant identified as a specified employee as of any December 31 shall be subject to the provisions of this paragraph (c)(ii) if the Participant incurs a separation from service during the twelve month period commencing on the following April 1.
(ii)     In no event shall the distribution of any Post-2004 Account, Separation Account, In-Service Withdrawal Account, or Company Contribution Account be accelerated to a time earlier than which it would otherwise have been paid, whether by amendment of the Plan, exercise of the Employee Benefits Committee’s discretion, or otherwise, except as permitted by regulations issued pursuant to Code §409A.
(iii)    The Administrator may establish additional rules and procedures for making and changing elections, which may further restrict the ability of Participants to make and change elections. In the event that the Administrator, in its sole discretion, determines that any time or form of distribution provided for in the Plan, or the existence of a right to elect a different time or form of distribution, would cause the Plan to fail to meet the requirements of Code §409A, or otherwise cause Participants to be subject to any adverse federal income tax consequences, the Administrator shall adopt procedures modifying or removing the form of distribution or election right, which shall be deemed an amendment to the Plan.
(iv)    Any Deferral Agreement that provides for a different form or time of payment shall specify the time and manner of payment, without Employer or Participant discretion, at the time the Deferral Agreement is entered into, and shall otherwise comply with the requirements of this paragraph (b); provided that, in addition to a severance from service, a Deferral Agreement may provide for benefits to be paid at a specified time or pursuant to a fixed schedule set forth in the Deferral Agreement, or upon the occurrence of a change in ownership or control of the Participant’s Employer, or in a substantial portion of its assets, as defined in Code §409A, and provided further that a Deferral Agreement may permit a Participant to elect to further defer the distribution of his or her Account if such election is consistent with the requirements of Section 2.6(c) and Code §409A.
2.7 Death Benefits.
(a)If a Participant dies while still employed, his or her Account shall be fully vested and shall be paid to his or her Beneficiary in a single lump sum. If a Participant dies after his or her employment has been terminated but before his or her Account has been paid in full, the remaining balance in his or her Account shall be paid to his or her Beneficiary in a single lump sum, regardless of whether the Participant has elected payment in installments. All payments to Beneficiaries shall be within 90 days following the Participant’s death.
(b)A Participant’s Beneficiary shall be the person or persons designated by the Participant in his or her Deferral Agreement. A Participant may change his or her Beneficiary from time to time without the consent of the Beneficiary. Subject to rules, procedures, and limitations established by the Administrator, a Beneficiary may be an entity (including a trust or nonprofit organization), and the Participant may designate multiple or contingent Beneficiaries and specify the manner in which his or her Account will be divided among them. All designations of Beneficiaries, and revocations or changes in designations, shall be made in accordance with rules, procedures and limitations prescribed by the Administrator. No designation of a Beneficiary, and no revocation or change in a designation, shall be effective until actually received by the Administrator in writing, and the Administrator’s determination of a Participant’s Beneficiary, if made in good faith, shall be final and conclusive on all parties.
(c)The determination of the Participant’s Beneficiary shall be made at the time of his or her death. If there is no designated Beneficiary living at the time of the Participant’s death, his or her Beneficiary shall be the person designated as his or her beneficiary under the 401(k) Plan, or any
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similar retirement plan which permits the Participant to designate a beneficiary, as determined by the Administrator in its sole discretion (regardless of whether such designation is invalid solely by reason of §401(a)(11) of the Code or Section 205 of ERISA by reason of the failure of the Participant’s spouse to consent) or, if no beneficiary is designated under the 401(k) Plan or any such other plan, his or her estate. If the Participant has designated more than one Beneficiary and not specified the manner in which his or her Account shall be divided, it shall be divided among all living Beneficiaries at the time of his or her death, per stirpes.
2.8 Excess Benefit Plan Participants. If an Employee who has been a Participant in the Excess Benefit Plan becomes eligible pursuant to Section 2.1, such Employee shall become a Participant, and his or her Account under the Excess Benefit Plan shall be transferred to and become a part of his or her Account under the Plan. Any amounts credited with respect to Plan Years prior to 2022 shall be credited to the Participant’s Post-2004 Account, and any election made by the Participant under Section B4 of the Excess Benefit Plan with respect to such amounts shall be treated as having been made under Section 2.6 and shall apply to the Participant’s Post-2004 Account. Any amounts credited with respect to Plan Years beginning with 2022, shall be credited to the Participant’s Company Contribution Account, and any election made by the Participant under Section B4 of the Excess Benefit Plan with respect to such amounts shall be treated as having been made under Section 2.6 and shall apply to the Participant’s Company Contribution Account.
2.9 Former Participants in Surety Plans.
(a)    Effective as of December 25, 2011, the employees of Western Surety Company, a subsidiary of CNA Surety Corporation, became employees of Continental Casualty Company. CNA Surety Corporation sponsored two nonqualified deferred compensation plans for the benefit of employees of Western Surety Company: the CNA Surety Corporation Deferred Corporation Plan (the “2000 Surety Plan”), which provided for the deferral of compensation earned prior to 2005, and the CNA Surety Corporation 2005 Deferred Corporation Plan (the “2005 Surety Plan”, and, collectively with the 2000 Surety Plan, the “Surety Plans”), which provides for the deferral of compensation earned beginning in 2005. Effective January 3, 2012, each of the Surety Plans was merged with and into the Plan in accordance with the provisions of this Section 2.9.
(b)    Effective January 3, 2012, each person who has an account in either of the Surety Plan (a “Surety Participant”) became a Participant. Each Surety Participant’s account in the applicable Surety Plan, valued as of such date, became an Account in the Plan, and the Plan hereby assumes the obligation to pay such Account, subject to the terms of the Plan. If a Surety Participant had an account in the 2005 Surety Plan, such account became his or her Account in this Plan, any future contributions shall be credited to such Account, and the entire balance in such Account shall be considered a Post-2004 Account for all purposes of the Plan. If a Surety Participant has an account in the 2000 Surety Plan, whether or not he or she also has an account in the 2005 Surety Plan, such account shall be treated as a separate Account or subaccount which is a Pre-2005 Account for all purposes of the Plan, and no further contributions shall be allocated to such Account.
(c)    Contributions to the Plan on behalf of Surety Participants were determined as follows:
(i)    Elective Contributions, Matching Contributions, and Basic Contributions for the final Western Surety Company payroll period ending prior to December 25, 2011, were calculated in accordance with the terms of the 2005 Surety Plan, credited initially to the Surety Participant’s account in the 2005 Surety Plan, and were transferred to the Plan on January 3, 2012, as described in Section 2.9(b) above.
(ii)    Performance Contributions for 2011 were calculated in accordance with the terms of the 2005 Surety Plan (based upon the 2011 performance of CNA Surety Corporation), and credited to each eligible Surety Participants’ Post-2004 Account in this Plan.
(iii)    Surety Participants shall be considered Active Participants, and eligible to enter into a Deferral Agreement for 2012 and subsequent years, if and only if they otherwise satisfy the requirements of Section 2.1.
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(iv)    Surety Participants who became employees of Continental Casualty Company shall be eligible to be credited with employer contributions pursuant to Section 2.3 if they are Active Participants in this Plan, or pursuant to the Excess Benefit Plan set forth in Appendix B if they are not Active Participants.
(d)    All Accounts transferred from the Surety Plans shall be credited with earnings in accordance with Section 2.4 beginning on January 3, 2012, and Surety Participants shall have no right to elect investment funds after such date through 2021. Beginning January 1, 2022, Surety Participants shall have the same right to elect investment funds as all other Participants.
(e)    The entire Post-2004 Account of a Surety Participant, including any amount transferred from the 2005 Surety Plan and all subsequent contributions, shall be distributed in a single lump sum as soon as reasonably practical after the date that is six months after the Surety Participant incurs a separation from service as defined in Code §409A, in accordance with Article VI of the 2005 Surety Plan.
(f)    The Pre-2005 Account of a Surety Plan that was transferred from the 2000 Surety Plan shall be distributed in accordance with the Surety Participant’s election made under the terms of the 2000 Plan, in accordance with Article VI of the 2000 Surety Plan.
(g)    The right of a Surety Participant to withdraw a portion of his or her Account by reason of unforeseeable financial emergency pursuant to Section 5.6 of the 2000 Surety Plan or 6.5 of the 2005 Surety Plan shall be governed exclusively by Section 3.3 of the Plan. A Surety Participant whose balance in the 2000 Surety Plan is transferred to a Pre-2005 Account in this Plan shall retain the right to an early distribution pursuant to Section 5.5 of the 2000 Surety Plan, but only with respect to such Pre-2005 Account.
(h)    The Administrator may treat any Beneficiary of a Surety Participant designated pursuant to one of the Surety Plans as the Participant’s Beneficiary under this Plan, subject to each Participant’s right to designate a new Beneficiary in accordance with the Plan.
(i)    Surety Participants shall be fully vested in their Accounts, including both amounts transferred to the Plan from the Surety Plans, and all subsequent contributions, subject to the provisions of Sections 4.9 of the 2000 Surety Plan and 5.8 of the 2005 Surety Plan relating to forfeiture for misconduct.
(j)    Except as otherwise provided herein, Surety Participants shall be considered Participants, and the portion of their Accounts representing amounts transferred from the Surety Plans shall be treated in the same manner as other Accounts, for all purposes of the Plan. Any former employee of Western Surety who was not a Surety Participant, and becomes an employee of Continental Casualty Company on December 25, 2011 or thereafter, shall be treated in the same manner as any newly hired employee for purposes of the Plan, but shall be given credit for Vesting Service earned as an employee of Western Surety Company.
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ARTICLE III
PAYMENT OF BENEFITS
3.1 Source of Payment. All payment of benefits under the Plan shall be made directly from the general funds of the Participant’s Employer. Each Employer shall establish separate bookkeeping accounts to reflect its liability under the Plan and may, but shall not be obligated to, invest in insurance or annuity contracts or other assets to assure a source of funds for the payment of benefits, but any such bookkeeping account, insurance or annuity contracts, or other investment shall constitute assets solely of such Employer, and Participants shall have no right, title or interest therein prior to payment of their benefits hereunder. The right of any Participant or other person to receive benefit payments under the provisions of this Plan shall be no greater than the right of any unsecured general creditor of the Participant’s Employer. This Plan shall not create nor be construed to create a trust or fiduciary relationship in favor of any person whatsoever.
3.2 Establishment of Trust. The Company may, but shall in no event be required to, establish one or more trusts and contribute, or cause Employers to contribute, amounts to such trusts to be used for the payment of benefits under this Plan. Any such trust shall be of the type commonly referred to as a “rabbi trust”, and the Company or Employer shall be treated as the owner of the assets of such trust for tax purposes in accordance with §671-§678 of the Code. The assets of any such trust shall remain subject to the claims of creditors of the Company or the Employer contributing such assets, and no Participant or any other person shall have any beneficial interest in or other claim to the assets of any such trust beyond that of a general creditor as provided in Section 3.1. Any payments made to or on behalf of a Participant or Beneficiary from any such trust shall fully discharge the liability of the Company or Employer to such Participant or Beneficiary under the Plan to the extent of the amount so paid. The Administrator shall have the right to select, remove, and replace the trustee thereof at any time in its sole discretion, and shall enter into one or more agreements governing such trust containing such terms as it determines, and may modify, amend or revoke any such agreements, all in its sole discretion. Without limiting the generality of the foregoing, the Administrator is hereby authorized and directed to enter into an agreement with one or more trustees designated by it establishing such a trust to accept the transfer of assets from the trust established by an agreement dated August 1, 2000, between CNA Surety Corporation and First National Bank in Sioux Falls to fund the 2000 Surety Plan (as defined in Section 2.9), and from the trust established by an agreement dated March 28, 2005, between the same parties to fund the 2005 Surety Plan (as defined in Section 2.9), and to commingle such assets into a single trust fund to be used to pay any benefits accrued under the Plan, including but not limited to accounts transferred from the Surety Plans, and to pay expenses of such trust and the Plan.
3.3 Withdrawals for Financial Emergency. A Participant may withdraw part or all of the vested portion of his or her Account if the amount withdrawn is reasonably necessary to satisfy an unforeseeable financial emergency. Any such withdrawals shall be subject to such rules, procedures and limitations as the Administrator may, in its sole discretion, determine, including rules specifying the Accounts to which such withdrawal will be charged. For purposes of this Section 3.3, an unforeseeable financial emergency means a severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant, one of his or her dependents (as defined in §152(a) of the Code), or the person designated as the Participant’s primary Beneficiary, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. A financial hardship that is foreseeable or within the Participant’s control, such as the need or desire to purchase a residence or to send a child to college, shall not be considered an unforeseeable financial emergency. The determination of whether a Participant’s need for funds constitutes an unforeseeable financial emergency shall be made in accordance with the requirements of §409A of the Code. The amount withdrawn may not exceed the amount necessary to satisfy the financial hardship (taking into account any tax payable on the withdrawal), determined after taking into account other sources of funds available to the Participant, including but not limited to reimbursement or compensation by insurance or otherwise, and the liquidation of other assets to the extent that such liquidation would not itself cause severe financial hardship. If a Participant has a financial hardship, the Participant’s Deferral Agreement, if any, shall be revoked for the Plan Year (and no subsequent Deferral Agreement may be made for the same Plan Year), and the additional income resulting from such revocation shall be taken into
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account in determining the amount of distribution reasonably necessary to relieve the financial hardship. A Participant shall not be required to take any hardship withdrawal or loan to which he or she is entitled under the 401(k) Plan or any other tax qualified retirement plan as a condition of receiving a distribution pursuant to this Section 3.3.
3.4 Withholding and Payroll Taxes. The Administrator shall withhold, or shall direct the person making any payment to withhold, from payments made hereunder any taxes required to be withheld from a Participant’s wages for the federal or any state or local government. To the extent that benefits hereunder are subject to tax under the Federal Insurance Contributions Act or any other law prior to the time that they become payable, the Administrator may either withhold, or direct the Participant’s Employer to withhold, the amount of such taxes from any other compensation or other amounts payable to the Participant, or may deduct the amount of such tax from the Participant’s Account in accordance with Section 3.7(c). The Administrator’s determination of the amount to be so withheld or deducted shall be final and binding on all parties.
3.5 Payment on Behalf of Disabled or Incompetent Persons. If a Plan benefit is payable to a minor or a person declared incompetent or to a person whom the Administrator, in its sole discretion, determines to be incapable of handling the disposition of property, the Administrator may direct payment of such Plan benefit to the guardian, legal representative or person having the care and custody of such minor or incompetent person, or to any other person, including any family member, whom the Administrator determines in its sole discretion to be best suited to receive and apply the payment for the benefit of such person. The Administrator may require proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution of the Plan benefit. Such distribution shall completely discharge the Company and the Participant’s Employer from all liability with respect to such benefit.
3.6 Missing Participants or Beneficiaries. If the Administrator is unable to locate any Participant, Beneficiary or other person entitled to benefits under this Plan, the Administrator may, in its sole discretion, either cause all or a portion of such payment to be forfeited and to reduce its obligations under this Plan, or may pay all or a portion of such benefit to members of the missing person’s family or such other person as it may determine in its sole discretion to be fair and equitable. Any payment made pursuant to this Section 3.6 shall fully discharge the obligation of the Company and all Employers under this Plan with respect to the amount so paid.
3.7 Other Permitted Distributions. Notwithstanding the foregoing provisions of this Article III, the Administrator in its sole discretion may provide for all or a portion of the balance in a Participant’s Account to be distributed to the Participant, provided that no Participant may be allowed to elect to receive such a distribution:
(a)If the total balance in a Participant’s Account does not exceed the limit in effect under §402(g) of the Code, the Administrator may direct that the entire balance be distributed to the Participant in full satisfaction of his or her interest in the Plan, provided that the Participant’s entire balance in all other account balance deferred compensation plans maintained by any member of the Controlled Group is also distributed to the Participant (and is taken into account in determining whether the total balance exceeds the limit in effect under §402(g)).
(b)If any portion of a Participant’s Account is determined to be includible in the Participant’s taxable income by reason of the operation of §409A of the Code, the amount includible in income shall be distributed to the Participant as soon as practical.
(c)The Administrator may direct that the Participant’s portion of the FICA tax imposed on amounts deferred under the Plan pursuant to §3121 of the Code be charged to the Participant’s Account, provided that the total amount charged to the Account shall not exceed the FICA tax plus income tax withholding on the amount applied to payment of the FICA tax.
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3.8 Recovery of Erroneous Distributions. If the Administrator determines that the amount paid to any Participant or Beneficiary exceeded the amount that should have been paid pursuant to the terms of the Plan, the Participant or Beneficiary shall repay the amount of the excess to the Plan upon demand, and the Administrator may, on behalf of the Plan, pursue offset the amount of such excess against any other amount owed by an Employer to the Participant or Beneficiary to the maximum extent permitted by law, or pursue any other remedy available at law or equity for the recovery of such excess. Each Participant or Beneficiary who receives an excess distribution shall hold such distribution in trust for the benefit of the Plan.
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ARTICLE IV
ADMINISTRATION
4.1 Administrator. This Plan shall be administered by Continental Casualty Company, which shall be the “administrator” for purposes of Section 3(16)(A) of the Employee Retirement Income Security Act of 1974. The Company may designate one or more persons who may be officers or Employees of any Employer, to exercise any of its authority or carry out any of its duties under the Plan, but such person shall not be considered the “administrator” unless specifically so designated in a resolution of the Board. In the absence of any other designation, the senior officer of Continental Casualty Company responsible for human resources, or persons acting under his or her supervision, shall be so designated. In addition, Continental Casualty Company has established an Employee Benefits Committee to oversee the operation of various retirement plans, and the Employee Benefits Committee shall have the authority on behalf of the Administrator to adopt rules, regulations and procedures, to hear all appeals from denied claims under Section 4.4, and to consider all other issues related to the administration of the Plan referred to it by senior officer of Continental Casualty Company responsible for human resources and his or her delegates.
4.2 Administrator’s Powers. The Administrator shall have such powers as may be necessary to discharge its duties hereunder, including, but not by way of limitation, the following powers, rights and duties:
(a)Interpretation of Plan. The Administrator shall have the power, right and duty to construe and interpret the Plan provisions and to determine all questions arising under the Plan including questions of Plan participation, eligibility for Plan benefits and the rights of Employees, Participants, Beneficiaries and other persons to benefits under the Plan and to determine the amount, manner and time of payment of any benefits hereunder.
(b)Plan Procedures. The Administrator shall have the power, right and duty to adopt procedures, rules, regulations and forms to be followed by Employees, Participants, Beneficiaries and other persons or to be otherwise utilized in the efficient administration of the Plan and as are consistent with the Plan.
(c)Benefit Determinations. The Administrator shall have the power, right and duty to make determinations as to the rights of Employees, Participants, Beneficiaries and other persons to benefits under the Plan and to afford any Participant or Beneficiary dissatisfied with such determination with rights pursuant to a claims procedure adopted by the Administrator in accordance with Section 4.4.
(d)Enforcement of the Plan. The Administrator shall have the power, right and duty to enforce the Plan in accordance with the terms of the Plan and to enforce its procedures, rules or regulations.
(e)Maintenance of Plan Records. The Administrator shall be responsible for preparing and maintaining records necessary to determine the rights and benefits of Employees, Participants and Beneficiaries or other persons under the Plan.
(f)Allocation of Duties. The Administrator shall be empowered to allocate fiduciary responsibilities and the right to employ agents (who may also be Employees of the Company) and to delegate to them any of the administrative duties imposed upon the Administrator.
(g)Correction of Errors. To correct any errors made in the computation of benefits under the Plan, and, if a trust has been established, to recover any contributions made to such trust by mistake of fact or law.
4.3 Binding Effect of Rulings. Any ruling, regulation, procedure or decision of the Administrator, including any interpretation of the Plan, which is made in good faith shall be conclusive and binding upon all persons affected by it. There shall be no appeal from any ruling by Administrator, except as provided in Section 4.4 below. When making a determination or a calculation, the Administrator shall be entitled to rely on information supplied by investment managers, insurance institutions, accountants and other professionals including legal counsel for the Administrator. Any rule or procedure established by the Administrator may alter any provision of this Plan that is ministerial or procedural in nature without the necessity for a formal amendment of the Plan.
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4.4 Claims Procedure.
(a)Any Participant or Beneficiary, or any other person asserting the right to receive a benefit under this Plan by virtue of his or her relationship to a Participant or Beneficiary (the “Claimant”), who believes that he or she has the right to a benefit that has not been paid, must file a written claim for such benefit in accordance with the procedures established by the Administrator. All such claims shall be filed not more than one year after the Claimant knows, or with the exercise of reasonable diligence would have known, of the basis for such claim. The preceding sentence shall not be construed to require a Participant or Beneficiary to file a formal claim for the payment of undisputed benefits in the normal course, but any claim that relates to the amount of any benefit shall in any event be filed not more than one year after payment of such benefit commences. The Administrator may retain third party administrators and recordkeepers for the purpose of processing routine matters relating to the payment of benefits, but correspondence between a Participant, Beneficiary or other person and such third parties shall not be considered claims for purposes of this Section, and a person shall not be considered a Claimant until he or she has filed a written claim for benefits with the Administrator.
(b)All claims for benefits shall be processed by the Administrator, and the Administrator shall furnish the Claimant within 90 days after receipt of such claim a written notice that specifies the reason for the denial, refers to the pertinent provisions of the Plan on which the denial is based, describes any additional material or information necessary for properly completing the claim and explains why such material or information is necessary, and explains the claim review procedures of this Section 4.4, and the Claimant’s right to bring an action under Section 502 of ERISA, subject to the restrictions of paragraph (e) if the request for review is unsuccessful. The 90 day period may be extended by up to an additional 90 days if the Administrator so notifies the Claimant prior to the end of the initial 90 day period, which notice shall include an explanation of the reason for the extension and an estimate of when the processing of the claim will be complete. If the Administrator determines that additional information is necessary to process the claim, the Claimant shall be given a period not less than 45 days to furnish the information, and the time for responding to the claim shall be tolled during the period of time beginning on the date on which the Claimant is notified of the need for the additional information and the day on which the information is furnished (or if earlier the end of the period for furnishing the information).
(c)If the claim is denied in whole or in part, or if the decision on the claim is otherwise adverse, the Claimant may, within 60 days after receipt of such notice, request a review of the decision in writing. If the claimant requests a review, the Employee Benefits Committee (or such other fiduciary as the Administrator may appoint for such purpose) shall review such decision. The Employee Benefits Committee’s decision on review shall be in writing and furnished not more than five days after the meeting at which the review is completed, and shall include specific reasons for the decision, written in a manner calculated to be understood by the Claimant, shall include specific references to the pertinent provisions of the Plan on which the decision is based, and shall advise the Claimant of his or her right to bring an action under Section 502 of ERISA, subject to the limitations of paragraph (e).
(d)The Employee Benefits Committee shall complete its review of the claim not later than its first meeting that is held at least 30 days after the request for review is received. If special circumstances require, the decision may be made by the Employee Benefits Committee not later than its third meeting held after the request for review is received, in which event the Claimant shall be notified of the reason for the delay not later than five days after the meeting at which the review would otherwise have been completed, which notice shall explain the reason for the delay and include an estimate of the time at which the review will be complete. Notwithstanding the foregoing, if at any time the Employee Benefits Committee (or any other fiduciary designated to review appeals) is not scheduled to meet at least quarterly, the decision on review shall be delivered to the Claimant not more than 60 days after the request for review is received, which
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may be extended to not more than 120 days if special circumstances require and the notice of extension described above is furnished by the end of the initial 60 day period.
(e)No action at law or in equity shall be brought to recover benefits under this Plan until the claim and appeal rights herein provided have been exercised and the Plan benefits requested in such claim and appeal have been denied in whole or in part. After exhaustion of the Plan’s claim procedures, any further legal action taken against the Plan or its fiduciaries by a claimant must be filed in a court of law no later than 120 days after the final adverse benefit determination of the Employee Benefits Committee (or other final appeals fiduciary) is communicated to the claimant or his or her legal representative, notwithstanding any other statute of limitations. In the event a claimant wishes to bring a legal action against the Plan or one of its fiduciaries, such legal action must be filed in the United States District Court for the Northern District of Illinois (Eastern Division) and shall be governed by the procedural and substantive laws of the State of Illinois, to the extent such laws are not preempted by ERISA, notwithstanding any conflict of laws principles.
(f)The provisions of this Section are intended to comply with ERISA Section 503 and the Department of Labor regulations issued pursuant thereto, and shall be so construed and applied. Consistent with such regulations, each Claimant shall have the right to have an authorized representative act on his or her behalf, to submit arguments and information in support of his or her claim, and to receive, upon written request and without charge, copies of all documents, records, or other information that either (i) were relied upon in determining his or her benefit under the Plan, (ii) were submitted, considered, or generated in the course of making the benefit determination, even if not relied upon, or (iii) demonstrate compliance with the administrative processes and safeguards of the claim and review procedure.
4.5 Indemnity. To the extent permitted by applicable law and to the extent that they are not indemnified or saved harmless under any liability insurance contracts, any present or former officers, Employees or directors of the Company, and each of them shall be indemnified and saved harmless by the Company from and against any and all liabilities or allegations of liability to which they may be subjected by reason of any act done or omitted to be done in good faith in the administration of the Plan, including all expenses reasonably incurred in their defense in the event that the Company fails to provide such defense after having been requested in writing to do so.
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ARTICLE V
AMENDMENT AND TERMINATION OF PLAN
5.1 Amendment. The Company may amend the Plan at any time by action of the Board, or any person to whom the Board may delegate such authority, except that no amendment shall decrease the vested Account balance of any Participant as of the effective date of the amendment. The Board has delegated the authority to amend the Plan, with certain exceptions, to the Executive Vice President and Chief Human Resources Officer of Continental Casualty Company, and any amendment executed by such officer shall be binding on all parties. In addition, the Administrator is authorized pursuant to Section 4.3 to adopt rules and procedures that have the effect of amendment technical, administrative or ministerial provisions of the Plan. By their execution of this amendment and restatement of the Plan, each Employer ratifies and accepts all prior amendments to the Plan, and agrees that in the future the Plan may be amended by action of the Company without consent of the other Employers.
5.2 Termination. The Company may at any time terminate the Plan by action of the Board. Upon termination, no further allocations shall be made to Accounts, but Accounts shall continue to be credited with earnings and shall be paid in accordance with the provisions of the Plan; provided, however, that upon termination, the Company may, but shall not be obligated to, amend the Plan to provide that the Accounts of some or all Participants shall be fully vested and paid to such Participants in a lump sum, which shall fully discharge all obligations owed to such Participants under the Plan; provided that such amendment shall apply to the Post-2004 Accounts only if all such Accounts are fully vested and distributed and the amendment otherwise complies with the requirements of §409A of the Code. Any Employer may at any time withdraw from the Plan by written notice to the Administrator, in which event the Plan shall be considered terminated with respect to the Participants employed by such Employer (or who were so employed at the time of their termination of employment), and the provisions of this Section 5.2 shall apply to such Participants only.
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ARTICLE VI
MISCELLANEOUS
6.1 Status of Plan. This Plan is intended to be an unfunded plan maintained primarily to provide retirement benefits for a select group of management Employees or highly compensated Employees within the meaning of Section 201(1), Section 301(a)(3), and §401(a)(1) of ERISA and Department of Labor Regulations 29 C.F.R. Section 2520.104-23, and shall be so construed.
6.2 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be nonassignable and nontransferable. No part of the amounts payable shall, prior to actual payment, be subject to garnishment, seizure or sequestration for the payment of any debts owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency. Nothing contained herein shall be construed as a waiver of the Company’s or any Employer’s right of setoff.
6.3 No Contract of Employment. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between the Company or any Employer and the Participant, and neither the Participant nor the Participant’s Beneficiary shall have any rights against the Company or any Employer except as may otherwise be specifically provided herein. Moreover, nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Company or any Employer or to interfere with the right of the Company and each Employer to discipline or discharge him at any time.
6.4 Participant Litigation. In any action or proceeding regarding the Plan, Participants, Employees or former Employees of the Company or an Employer, their Beneficiaries or any other persons having or claiming to have an interest in this Plan shall not be necessary parties and shall not be entitled to any notice or process. Any final judgment which is not appealed or appealable and may be entered in any such action or proceeding shall be binding and conclusive on the parties hereto and all persons having or claiming to have any interest in this Plan. To the extent permitted by law, if a legal action is begun against the Company, an Employer, the Administrator, the trustee of any trust established hereunder, or any person acting on the behalf or under the direction of any of the foregoing persons, by or on behalf of any person and such action results adversely to such person or if a legal action arises because of conflicting claims to a Participant’s or other person’s benefits, the costs to any such person of defending the action will be charged to the amounts, if any, which were involved in the action or were payable to the Participant or other person concerned. To the extent permitted by applicable law, acceptance of participation in this Plan shall constitute a release of the Company, each Employer, the Administrator and such trustee and their respective agents from any and all liability and obligation not involving willful misconduct or gross neglect.
6.5 Participant and Beneficiary Duties. Persons entitled to benefits under the Plan shall file with the Administrator from time to time such person’s post office address and each change of post office address. Each such person entitled to benefits under the Plan also shall furnish the Administrator with all appropriate documents, evidence, data or information which the committee considers necessary or desirable in administering the Plan.
6.6 Governing Law. The provisions of this Plan shall be construed and interpreted according to the laws of the State of Illinois to the extent not pre-empted by the laws of the United States. The Plan is intended to comply with all requirements of §409A, and to the maximum extent permitted by law shall be construed in a manner that is consistent with such intent, provided that in no event shall the Company, any Employer, the Administrator, or any of their respective employees, agents or representatives have any liability to any person for any additional tax imposed upon such person pursuant to §409A of the Code or any comparable federal, state or local income tax law.
6.7 Validity. In case any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein.
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6.8 Notices. Any notice or filing required or permitted to be given to the Administrator or the Company under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail to the Company at its principal executive offices, or to Company’s statutory agent. Notices shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice required or permitted to be given to a Participant shall be sufficient if in writing and hand delivered or sent by first class mail to the Participant at the last address listed on the records of the Company or such Participant’s Employer.
6.9 Successors. The provisions of this Plan shall bind and inure to the benefit of each Employer and its respective successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of an Employer, and successors of any such corporation or other business entity.
[SIGNATURE ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the Company has caused this amendment and restatement of the Plan to be executed on December 20, 2021
CNA FINANCIAL CORPOROATION
By   /s/ Elizabeth Aguinaga  
  Elizabeth Aguinaga  
  Executive Vice President & Chief Human Resources Officer  
Continental Casualty Company
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APPENDIX A
FULL VESTING OF PARTICIPANTS AFFECTED BY CERTAIN EVENTS
A.1    Sales of Business Units
In accordance with Section 2.5, Participants whose employment is terminated in connection with the following sales or other dispositions of business units shall be fully vested in their Account balance regardless of their years of service. Except as otherwise provided below, the Participants who qualify for full vesting with respect to any transaction shall be those, and only those, who qualify as an “Affected Member” with respect to such transaction in accordance with Appendix F of the 401(k) Plan.
Transaction Closing Date Exceptions/Special Rules
Sale of Life Reinsurance Business Unit to MARC 12/31/00 None
Sale of CNA Credit Collection Agency, Inc., to Coface 12/31/02 None
Sale of the unbundled risk management business of RSKCo Services, Inc to Cunningham Lindsey US 6/2/03 None
Sale of Smith System to McFadden Brothers 4/29/03 None
Sale of CNA Group Operations to Hartford Financial Services Group 12/31/03 None
Sale of individual life insurance business to Swiss Re Life & Health America App. 3/31/04 None

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APPENDIX B
EXCESS BENEFIT PLAN
B1.Purpose and Interpretation. The purpose of this Appendix B is to establish a separable portion of the Plan, referred to herein as the “Excess Benefit Plan”, solely for the purpose of providing benefits for Employees whose benefits under the 401(k) Plan are restricted by Code §415. Except as otherwise specifically provided in this Appendix B, all provisions of the Plan shall apply to Participants in the Excess Benefit Plan to the same extent and in the same manner such provisions apply to Participants in the Plan. All capitalized terms used in this Appendix B shall have the same meaning as such terms as defined in the Plan. It is the Company’s intent that the benefits accrued for Participants solely under this Appendix B shall constitute a separable part of the Plan that constitutes an “excess benefit plan” as defined in §3(36) of ERISA.
B2.Eligibility. The Employees who are eligible to participate in the Excess Benefit Plan shall be those Employees whose benefits under the 401(k) Plan are restricted solely by Code §415, and who are not, and never have been, eligible to participate in the Plan pursuant to Section 2.1 thereof. An Employee shall become a Participant in the Excess Benefit Plan on the last day of the first Plan Year in which an amount that would otherwise have been credited to his or her account in the 401(k) Plan cannot be credited solely by reason of Code §415, and shall remain a Participant in the Excess Benefit Plan until either his or her Account is fully distributed, or he or she transfers to the Plan pursuant to Section B4 below.
B3.Benefits Credited to Account. The amount credited to the Account of a Participant in the Excess Benefit Plan in each Plan Year shall be equal to the amount of Basic Contributions that would have been credited to his or her Company Contribution Account in the Plan pursuant to Section 2.3(c) for such Plan Year if he or she were eligible to participate in the Plan for such Plan Year, but taking into account only the Tax Limit imposed by Code §415. A Participant’s Account in the Excess Benefit Plan shall be treated as an Account in the Plan for all purposes of the Plan. Such amount shall be credited to the Participant’s Account as of January 1 of the following Plan Year on a true-up basis.
B4.Payment Election. When an Employee first becomes eligible to participate in the Excess Benefit Plan, the Administrator may permit the Employee to make an election as to the form of payment of his or her benefit in accordance with Section 2.6(b)(iii), which election shall thereafter be treated as an election made under Section 2.6(b)(iii). Such election may be made at any time prior to January 30 of the Plan Year following the first Plan Year in which the Employee is eligible to participate, and may thereafter be changed once in the manner provided in Section 2.6(c), provided that if the Employee has accrued any benefit under any nonqualified deferred compensation plan maintained by the Company or any Controlled Group Member in any prior year, such election will not apply to the Basic Contributions earned prior to the date such election is made.
B5.Earnings. Effective January 1, 2022, a Participant in the Excess Benefit Plan may designate the investment funds in which his or her Account will be deemed invested in the manner described in Section 2.4 of the Plan.
B6.Transfer to Plan. If an Employee who has been a Participant in the Excess Benefit Plan in any Plan Year subsequently becomes eligible to participate in the Plan pursuant to Section 2.1, his or her Account under the Excess Benefit Plan shall be transferred to the Plan, and he or she shall thereafter be considered a Participant in the Plan and shall be ineligible to again participate in the Excess Benefit Plan for so long as he or she remains an Employee, even if he or she subsequently becomes ineligible to participate in the Plan.
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EXHIBIT 21.1
CNA FINANCIAL CORPORATION
Subsidiaries of the Registrant
As of December 31, 2021
Name of Subsidiary Organized Under Laws of
American Casualty Company of Reading, Pennsylvania Pennsylvania
CNA Insurance Company (Europe) S.A. Luxembourg
CNA Insurance Company Limited United Kingdom
Columbia Casualty Company Illinois
Continental Casualty Company Illinois
Continental Reinsurance Corporation International, Ltd Bermuda
Hardy Bermuda Limited Bermuda
Hardy Underwriting Labuan Limited Malaysia
Hardy Underwriting Limited United Kingdom
National Fire Insurance Company of Hartford Illinois
North Rock Insurance Company Limited Bermuda
Surety Bonding Company of America South Dakota
The Continental Corporation New York
The Continental Insurance Company of New Jersey New Jersey
The Continental Insurance Company Pennsylvania
Transportation Insurance Company Illinois
Universal Surety of America South Dakota
Valley Forge Insurance Company Pennsylvania
Western Surety Company South Dakota
The names of certain subsidiaries which, if considered in the aggregate as a single subsidiary, would not constitute a “significant subsidiary” as defined in Regulation S-X, have been omitted.



EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement No. 333-231090 on Form S-3 and Registration Statement Nos. 333-211150 and 333-238290 on Form S-8 of our report dated February 8, 2022, relating to the consolidated financial statements of CNA Financial Corporation and subsidiaries (the “Company”) and the effectiveness of the Company's internal control over financial reporting appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2021.

/s/ DELOITTE & TOUCHE LLP
Chicago, Illinois
February 8, 2022


EXHIBIT 31.1
SARBANES-OXLEY ACT SECTION 302
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Dino E. Robusto, certify that:
1.I have reviewed this Annual Report on Form 10-K of CNA Financial Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: February 8, 2022 By   /s/ Dino E. Robusto   
    Dino E. Robusto  
    Chief Executive Officer   



EXHIBIT 31.2
SARBANES-OXLEY ACT SECTION 302
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Larry Haefner, certify that:
1.I have reviewed this Annual Report on Form 10-K of CNA Financial Corporation;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an Annual Report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 8, 2022 By   /s/ Larry Haefner  
    Larry Haefner  
    Interim Chief Financial Officer   


EXHIBIT 32.1
Written Statement of the Chief Executive Officer
of CNA Financial Corporation
Pursuant to 18 U.S.C. § 1350
(As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)
The undersigned, the Chief Executive Officer of CNA Financial Corporation (the Company), hereby certifies that, to his knowledge:
the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed on the date hereof with the Securities and Exchange Commission (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: February 8, 2022 By   /s/ Dino E. Robusto  
    Dino E. Robusto  
    Chief Executive Officer   
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.


EXHIBIT 32.2
Written Statement of the Chief Financial Officer
of CNA Financial Corporation
Pursuant to 18 U.S.C. § 1350
(As adopted by Section 906 of the Sarbanes-Oxley Act of 2002)
The undersigned, the Chief Financial Officer of CNA Financial Corporation (the Company), hereby certifies that, to his knowledge:
the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed on the date hereof with the Securities and Exchange Commission (the Report) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: February 8, 2022 By   /s/ Larry Haefner  
    Larry Haefner  
    Interim Chief Financial Officer   
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.