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Investments | 9 Months Ended
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Sep. 30, 2022
Investments, Debt and Equity Securities [Abstract] |
Investments | Investments Net investment income is as follows:
| Three Months Ended | Nine Months Ended |  |
| September 30, | September 30, |  |
| 2022 |  | 2021 | 2022 |  | 2021 |  |
(In millions) |  |  |  |  |  |  |  |
Fixed maturity securities | $ | 454 |  |  | $ | 425 |  | $ | 1,324 |  |  | $ | 1,278 |  |  |
Limited partnership investments | (32) |  |  | 89 |  | (5) |  |  | 285 |  |  |
Equity securities (a) | 2 |  |  | 4 |  | (7) |  |  | 53 |  |  |
Income (loss) from trading portfolio (a) | (18) |  |  | (30) |  | (95) |  |  | 46 |  |  |
Other | 19 |  |  | 13 |  | 47 |  |  | 43 |  |  |
Total investment income | 425 |  |  | 501 |  | 1,264 |  |  | 1,705 |  |  |
Investment expenses | (21) |  |  | (18) |  | (62) |  |  | (56) |  |  |
Net investment income | $ | 404 |  |  | $ | 483 |  | $ | 1,202 |  |  | $ | 1,649 |  |  |
(a) Net investment income (loss) recognized due to the change in fair value of equity and trading portfolio securities held as of September 30, 2022 and 2021 | $ | (68) |  |  | $ | (55) |  | $ | (179) |  |  | $ | (9) |  |  |
Investment gains (losses) are as follows:
| Three Months Ended | Nine Months Ended |  |
| September 30, | September 30, |  |
| 2022 |  | 2021 | 2022 |  | 2021 |  |
(In millions) |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |
Gross gains | $ | 23 |  |  | $ | 50 |  | $ | 94 |  |  | $ | 159 |  |  |
Gross losses | (134) |  |  | (28) |  | (222) |  |  | (68) |  |  |
Investment gains (losses) on fixed maturity securities | (111) |  |  | 22 |  | (128) |  |  | 91 |  |  |
Equity securities (a) | (2) |  |  | (2) |  | (111) |  |  | 17 |  |  |
Derivative instruments | 24 |  |  | 2 |  | 79 |  |  | 7 |  |  |
Short term investments and other | (7) |  |  |  | (6) |  |  | (13) |  |  |
Altium Packaging (see Note 1) |  |  |  |  |  | 555 |  |  |
Investment gains (losses) | $ | (96) |  |  | $ | 22 |  | $ | (166) |  |  | $ | 657 |  |  |
(a) Investment gains (losses) recognized due to the change in fair value of non-redeemable preferred stock included within equity securities held as of September 30, 2022 and 2021 | $ | (2) |  |  | $ | (2) |  | $ | (109) |  |  | $ | 15 |  |  |
Investment gains (losses) for the three months ended September 30, 2022 in the table above include a $35 million net loss related to the expected novation of a coinsurance agreement on CNA’s legacy annuity business, which was transacted on a funds withheld basis and gave rise to an embedded derivative. The net loss of $35 million is comprised of a $59 million loss on the fixed maturity securities supporting the funds withheld liability to recognize unrealized losses which had been included in AOCI since the inception of the coinsurance agreement, partially offset by a $24 million gain on the associated embedded derivative. Taken together, this net loss is the final recognition of changes in the valuation of the funds held assets and offsets previously recognized investment gains on the associated embedded derivative. The components of available-for-sale impairment losses (gains) recognized in earnings by asset type are presented in the following table. The table includes losses (gains) on securities with an intention to sell and changes in the allowance for credit losses on securities since acquisition date:
| Three Months Ended | Nine Months Ended |  |
| September 30, | September 30, |  |
| 2022 |  | 2021 | 2022 |  | 2021 |  |
(In millions) |  |  |  |  |  |  |  |
Fixed maturity securities available-for-sale: |  |  |  |  |  |  |  |
Corporate and other bonds | $ | 24 |  |  |  | $ | 53 |  |  | $ | 5 |  |  |
Asset-backed | 1 |  |  | $ | 11 |  | 2 |  |  | 11 |  |  |
Impairment losses (gains) recognized in earnings | $ | 25 |  |  | $ | 11 |  | $ | 55 |  |  | $ | 16 |  |  |
There were $8 million of losses on mortgage loans recognized during the three and nine months ended September 30, 2022 primarily due to changes in expected credit losses. T here were no losses recognized on mortgage loans during the three and nine months ended September 30, 2021. The following tables present a summary of fixed maturity securities:
September 30, 2022 | Cost or Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Allowance for Credit Losses |  | Estimated Fair Value
(In millions) |  |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |  |
Corporate and other bonds | $ | 23,082 |  |  | $ | 231 |  |  | $ | 2,398 |  |  |  |  | $ | 20,915 |
States, municipalities and political subdivisions | 9,244 |  |  | 259 |  |  | 1,080 |  |  |  |  | 8,423 |
Asset-backed: |  |  |  |  |  |  |  |  |
Residential mortgage-backed | 3,153 |  |  | 6 |  |  | 470 |  |  |  |  | 2,689 |
Commercial mortgage-backed | 1,921 |  |  | 4 |  |  | 237 |  |  |  |  | 1,688 |
Other asset-backed | 3,264 |  |  | 2 |  |  | 349 |  |  | $ | 3 |  |  | 2,914 |
Total asset-backed | 8,338 |  |  | 12 |  |  | 1,056 |  |  | 3 |  |  | 7,291 |
U.S. Treasury and obligations of government sponsored enterprises | 107 |  |  | 3 |  |  | 1 |  |  |  |  | 109 |
Foreign government | 544 |  |  | 2 |  |  | 48 |  |  |  |  | 498 |
Redeemable preferred stock | 3 |  |  |  |  |  |  |  |  | 3 |
Fixed maturities available-for-sale | 41,318 |  |  | 507 |  |  | 4,583 |  |  | 3 |  |  | 37,239 |
Fixed maturities trading | 270 |  |  |  |  | 5 |  |  |  |  | 265 |
Total fixed maturity securities | $ | 41,588 |  |  | $ | 507 |  |  | $ | 4,588 |  |  | $ | 3 |  |  | $ | 37,504 |
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: |  |  |  |  |  |  |  |  |
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 |  |  | 8 |  |  |  |  | 2,956 |
Commercial mortgage-backed | 1,987 |  |  | 63 |  |  | 19 |  |  |  |  | 2,031 |
Other asset-backed | 2,561 |  |  | 54 |  |  | 10 |  |  | 7 |  |  | 2,598 |
Total asset-backed | 7,441 |  |  | 188 |  |  | 37 |  |  | 7 |  |  | 7,585 |
U.S. Treasury and obligations of government sponsored enterprises | 132 |  |  | 1 |  |  | 3 |  |  |  |  | 130 |
Foreign government | 570 |  |  | 15 |  |  | 2 |  |  |  |  | 583 |
Fixed maturities available-for-sale | 39,945 |  |  | 4,558 |  |  | 112 |  |  | 18 |  |  | 44,373 |
Fixed maturities trading | 7 |  |  |  |  |  |  |  |  | 7 |
Total fixed maturity securities | $ | 39,952 |  |  | $ | 4,558 |  |  | $ | 112 |  |  | $ | 18 |  |  | $ | 44,380 |
The net unrealized gains and losses on available-for-sale investments included in the tables above are recorded as a component of AOCI. When presented in AOCI, these amounts are net of tax and noncontrolling interests and any required Shadow Adjustments. To the extent there are unrealized gains on fixed income securities supporting the reserves of certain products within the Life & Group business that would result in a premium deficiency, or would impact the reserve balance if realized, a related increase in Insurance reserves is recorded as a reduction of net unrealized gains (losses), net of tax and noncontrolling interests, through Other comprehensive income (loss) (“Shadow Adjustments”). As of September 30, 2022 and December 31, 2021, the net unrealized gains and losses on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $41 million and $2.2 billion (after tax and noncontrolling interests). The available-for-sale securities in a gross unrealized loss position for which an allowance for credit losses has not been recorded are as follows:
| Less than 12 Months |  | 12 Months or Longer |  | Total
September 30, 2022 | Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses
(In millions) |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |
Corporate and other bonds | $ | 16,707 |  |  | $ | 2,117 |  |  | $ | 914 |  |  | $ | 281 |  |  | $ | 17,621 |  |  | $ | 2,398 |
States, municipalities and political subdivisions | 4,793 |  |  | 1,029 |  |  | 128 |  |  | 51 |  |  | 4,921 |  |  | 1,080 |
Asset-backed: |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed | 2,582 |  |  | 462 |  |  | 17 |  |  | 8 |  |  | 2,599 |  |  | 470 |
Commercial mortgage-backed | 1,372 |  |  | 194 |  |  | 233 |  |  | 43 |  |  | 1,605 |  |  | 237 |
Other asset-backed | 2,433 |  |  | 307 |  |  | 233 |  |  | 42 |  |  | 2,666 |  |  | 349 |
Total asset-backed | 6,387 |  |  | 963 |  |  | 483 |  |  | 93 |  |  | 6,870 |  |  | 1,056 |
U.S. Treasury and obligations of government-sponsored enterprises | 61 |  |  | 1 |  |  |  |  |  |  | 61 |  |  | 1 |
Foreign government | 446 |  |  | 42 |  |  | 25 |  |  | 6 |  |  | 471 |  |  | 48 |
Total fixed maturity securities | $ | 28,394 |  |  | $ | 4,152 |  |  | $ | 1,550 |  |  | $ | 431 |  |  | $ | 29,944 |  |  | $ | 4,583 |
December 31, 2021 |  |  |  |  |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |  |  |  |  |
Corporate and other bonds | $ | 2,389 |  |  | $ | 48 |  |  | $ | 136 |  |  | $ | 8 |  |  | $ | 2,525 |  |  | $ | 56 |
States, municipalities and political subdivisions | 730 |  |  | 14 |  |  |  |  |  |  | 730 |  |  | 14 |
Asset-backed: |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed | 1,043 |  |  | 8 |  |  |  |  |  |  | 1,043 |  |  | 8 |
Commercial mortgage-backed | 527 |  |  | 7 |  |  | 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 |  |  | 3 |  |  | 5 |  |  |  |  | 74 |  |  | 3 |
Foreign government | 97 |  |  | 2 |  |  |  |  |  |  | 97 |  |  | 2 |
Total fixed maturity securities | $ | 5,695 |  |  | $ | 92 |  |  | $ | 370 |  |  | $ | 20 |  |  | $ | 6,065 |  |  | $ | 112 |
The following table presents 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 ratings distribution.
| September 30, 2022 |  | December 31, 2021
| Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses
(In millions) |  |  |  |  |  |  |
U.S. Government, Government agencies and Government-sponsored enterprises | $ | 2,360 |  |  | $ | 360 |  |  | $ | 898 |  |  | $ | 8 |
AAA | 1,566 |  |  | 318 |  |  | 368 |  |  | 6 |
AA | 4,430 |  |  | 917 |  |  | 875 |  |  | 17 |
A | 6,548 |  |  | 838 |  |  | 1,516 |  |  | 23 |
BBB | 13,394 |  |  | 1,902 |  |  | 1,812 |  |  | 42 |
Non-investment grade | 1,646 |  |  | 248 |  |  | 596 |  |  | 16 |
Total | $ | 29,944 |  |  | $ | 4,583 |  |  | $ | 6,065 |  |  | $ | 112 |
Based on current facts and circumstances, the unrealized losses presented in the September 30, 2022 securities in the gross unrealized loss position table above are not believed to be indicative of the ultimate collectibility of the current amortized cost of the securities, but rather are primarily attributable to changes in risk-free interest rates and a general market widening of credit spreads. In reaching this determination, the recent volatility in risk-free rates and credit spreads, as well as the fact that the unrealized losses are concentrated in investment grade issuers, were considered. Additionally, there is no current intent to sell securities with unrealized losses, nor is it more likely than not that sale will be required prior to recovery of amortized cost; accordingly, it was determined that there are no additional impairment losses to be recorded at September 30, 2022. 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 receivables on available-for-sale fixed maturity securities totaled $401 million, $369 million and $387 million as of September 30, 2022, December 31, 2021 and September 30, 2021 and are excluded from the estimate of expected credit losses and the amortized cost basis in the tables within this Note.
Three months ended September 30, 2022 | Corporate and Other Bonds |  | Asset-backed |  | Total
(In millions) |  |  |  |  |
Allowance for credit losses: |  |  |  |  |
Balance as of July 1, 2022 | $ | — |  |  | $ | 5 |  |  | $ | 5 |
Additions to the allowance for credit losses: |  |  |  |  |
Available-for-sale securities accounted for as PCD assets |  |  |  |  | — |
Reductions to the allowance for credit losses: |  |  |  |  |
Write-offs charged against the allowance |  |  |  |  | — |
Additional decreases to the allowance for credit losses on securities that had an allowance recorded in a previous period |  |  | (2) |  |  | (2) |
Total allowance for credit losses | $ | — |  |  | $ | 3 |  |  | $ | 3 |
Three months ended September 30, 2021 | Corporate and Other Bonds |  | Asset-backed |  | Total
(In millions) |  |  |  |  |
Allowance for credit losses: |  |  |  |  |
Balance as of July 1, 2021 | $ | 24 |  |  | $ | 21 |  |  | $ | 45 |
Additions to the allowance for credit losses: |  |  |  |  |
Available-for-sale securities accounted for as PCD assets | 2 |  |  |  |  | 2 |
Reductions to the allowance for credit losses: |  |  |  |  |
Write-offs charged against the allowance | 16 |  |  |  |  | 16 |
Total allowance for credit losses | $ | 10 |  |  | $ | 21 |  |  | $ | 31 |
Nine months ended September 30, 2022 |  |  |  |  |
Allowance for credit losses: |  |  |  |  |
Balance as of January 1, 2022 | $ | 11 |  |  | $ | 7 |  |  | $ | 18 |
Additions to the allowance for credit losses: |  |  |  |  |
Available-for-sale securities accounted for as PCD assets |  |  | 3 |  |  | 3 |
Reductions to the allowance for credit losses: |  |  |  |  |
Write-offs charged against the allowance | 12 |  |  |  |  | 12 |
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period | 1 |  |  | (7) |  |  | (6) |
Total allowance for credit losses | $ | — |  |  | $ | 3 |  |  | $ | 3 |
Nine months ended September 30, 2021 |  |  |  |  |
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 | 4 |  |  | 4 |  |  | 8 |
Reductions to the allowance for credit losses: |  |  |  |  |
Securities sold during the period (realized) | 6 |  |  |  |  | 6 |
Write-offs charged against the allowance | 16 |  |  |  |  | 16 |
Additional decreases to the allowance for credit losses on securities that had an allowance recorded in a previous period | (9) |  |  |  |  | (9) |
Total allowance for credit losses | $ | 10 |  |  | $ | 21 |  |  | $ | 31 |
Contractual Maturity The following table presents available-for-sale fixed maturity securities by contractual maturity.
| September 30, 2022 |  | December 31, 2021
| Cost or Amortized Cost |  | Estimated Fair Value |  | Cost or Amortized Cost |  | Estimated Fair Value
(In millions) |  |  |  |  |  |  |
Due in one year or less | $ | 952 |  |  | $ | 948 |  |  | $ | 1,603 |  |  | $ | 1,624 |
Due after one year through five years | 9,487 |  |  | 9,000 |  |  | 10,637 |  |  | 11,229 |
Due after five years through ten years | 14,323 |  |  | 12,765 |  |  | 13,294 |  |  | 14,338 |
Due after ten years | 16,556 |  |  | 14,526 |  |  | 14,411 |  |  | 17,182 |
Total | $ | 41,318 |  |  | $ | 37,239 |  |  | $ | 39,945 |  |  | $ | 44,373 |
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. Mortgage Loans The following table presents the amortized cost basis of mortgage loans for each credit quality indicator by year of origination. The primary credit quality indicators utilized are debt service coverage ratios (“DSCR”) and loan-to-value (“LTV”) ratios.
| Mortgage Loans Amortized Cost Basis by Origination Year (a)
As of September 30, 2022 | 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  | Prior |  | Total
(In millions) |  |  |  |  |  |  |  |  |  |  |  |  |
DSCR ≥1.6x |  |  |  |  |  |  |  |  |  |  |  |  |
LTV less than 55% | $ | 9 |  |  | $ | 13 |  |  | $ | 112 |  |  | $ | 29 |  |  | $ | 54 |  |  | $ | 275 |  |  | $ | 492 |
LTV 55% to 65% |  |  |  |  |  |  |  |  |  |  |  |  | — |
LTV greater than 65% | 18 |  |  | 11 |  |  |  |  |  |  |  |  |  |  | 29 |
DSCR 1.2x - 1.6x |  |  |  |  |  |  |  |  |  |  |  |  |
LTV less than 55% | 5 |  |  | 49 |  |  | 18 |  |  | 56 |  |  | 10 |  |  | 42 |  |  | 180 |
LTV 55% to 65% | 87 |  |  |  |  | 20 |  |  |  |  |  |  | 8 |  |  | 115 |
LTV greater than 65% |  |  |  |  |  |  |  |  |  |  |  |  | — |
DSCR ≤1.2x |  |  |  |  |  |  |  |  |  |  |  |  |
LTV less than 55% |  |  |  |  |  |  | 57 |  |  |  |  |  |  | 57 |
LTV 55% to 65% |  |  | 21 |  |  |  |  | 44 |  |  |  |  |  |  | 65 |
LTV greater than 65% | 10 |  |  |  |  |  |  | 22 |  |  |  |  | 7 |  |  | 39 |
Total | $ | 129 |  |  | $ | 94 |  |  | $ | 150 |  |  | $ | 208 |  |  | $ | 64 |  |  | $ | 332 |  |  | $ | 977 |
(a) | The values in the table above reflect DSCR on a standardized amortization period and LTV ratios based on the most recent appraised values trended forward using changes in a commercial real estate price index.
Derivative Financial Instruments A summary of the aggregate contractual or notional amounts and gross estimated fair values related to derivative financial instruments follows. The contractual or notional amounts for derivatives are used to calculate the exchange of contractual payments under related agreements and may not be representative of the potential for gain or loss on these instruments. Gross estimated fair values of derivative positions are currently presented in Equity securities, Receivables and Payable to brokers on the Consolidated Condensed Balance Sheets.
| September 30, 2022 |  | December 31, 2021
| Contractual/Notional Amount |  | Estimated Fair Value |  | Contractual/Notional Amount |  | Estimated Fair Value
|  | Asset |  | (Liability) |  |  | Asset |  | (Liability)
(In millions) |  |  |  |  |  |  |  |  |  |  |
Without hedge designation: |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps | $ | 240 |  |  | $ | 19 |  |  |  |  | $ | 100 |  |  |  |  |
Embedded derivative on funds withheld liability | 220 |  |  | 1 |  |  |  |  | 270 |  |  |  |  | $ | (12) |
Other | 127 |  |  | 7 |  |  |  |  |  |  |  |  |
Investment Commitments As part of the overall investment strategy, investments are made 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 September 30, 2022, commitments to purchase or fund were approximately $1.6 billion and to sell were approximately $100 million under the terms of these investments.

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- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2209399 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2324412 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -URI https://asc.fasb.org/topic&trid=2196928 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 940 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2176304 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher SEC -Name Regulation S-K (SK) -Number 229 -Section 1403 -Paragraph (b) + Details
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