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Basis of Presentation | 6 Months Ended
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Jun. 30, 2023
Accounting Policies [Abstract] |
Basis of Presentation | Basis of Presentation Loews Corporation is a holding company. Its consolidated operating subsidiaries are engaged in the following lines of business: commercial property and casualty insurance (CNA Financial Corporation (“CNA”), a 90% owned subsidiary); transportation and storage of natural gas and natural gas liquids (Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”), a wholly owned subsidiary) and the operation of a chain of hotels (Loews Hotels Holding Corporation (“Loews Hotels & Co”), a wholly owned subsidiary). Unless the context otherwise requires, as used herein, the term “Company” means Loews Corporation including its consolidated subsidiaries, the term “Parent Company” means Loews Corporation excluding its subsidiaries, the term “Net income (loss) attributable to Loews Corporation” means Net income (loss) attributable to Loews Corporation shareholders and the term “subsidiaries” means Loews Corporation’s consolidated subsidiaries. In the opinion of management, the accompanying unaudited Consolidated Condensed Financial Statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s financial position as of June 30, 2023 and December 31, 2022 and results of operations, comprehensive income (loss) and changes in shareholders’ equity for the three and six months ended June 30, 2023 and 2022 and cash flows for the six months ended June 30, 2023 and 2022, in each case in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Net income for the interim periods is not necessarily indicative of net income for the entire year. These Consolidated Condensed Financial Statements should be read in conjunction with the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The Company presents basic and diluted net income (loss) per share on the Consolidated Condensed Statements of Operations. Basic net income (loss) per share excludes dilution and is computed by dividing net income (loss) attributable to common stock by the weighted average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the three and six months ended June 30, 2023 and 2022 there were no shares attributable to employee stock-based compensation awards excluded from the diluted weighted average shares outstanding amounts because the effect would have been antidilutive. Accounting changes – In August of 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 are required to review, and update if there is a change, cash flow assumptions (including morbidity and persistency) used to measure the liability for future policyholder benefits (“LFPB”) at least annually. The LFPB must also be updated for actual experience at least annually. The LFPB is reflected as Insurance reserves: Future policy benefits on the Consolidated Condensed Balance Sheets. The discount rate assumption used to measure the LFPB must be updated quarterly using an upper-medium grade (low credit risk) fixed-income instrument yield, commonly interpreted as a single-A rate. The effect of changes in cash flow assumptions and actual variances from expected experience are recorded in results of operations within Insurance claims and policyholders’ benefits. The effect of changes in discount rate assumptions are recorded in Other comprehensive income (loss) (“OCI”). In contrast, under legacy accounting guidance, cash flow and discount rate assumptions were locked in unless a premium deficiency emerged. The discount rate assumption under legacy accounting guidance was determined using CNA’s internal investment portfolio yield, which was generally higher than a single-A yield. The new guidance eliminates the need to hold shadow reserves associated with long term care reserves. Under legacy accounting guidance, to the extent that unrealized gains on fixed maturity securities supporting long term care reserves would have resulted in a premium deficiency if realized, a related increase to Insurance reserves was recorded, net of tax, as a reduction of net unrealized gains (losses), through Other comprehensive income (loss) (shadow reserves). The unit of account is the level at which reserves are measured. Under the new guidance, the unit of account used to measure the LFPB is the cohort. Cohorts are comprised of insurance contracts issued no more than one year apart, and must be further disaggregated according to policy benefit and insurance risk characteristics. Under legacy accounting guidance, the LFPB was generally measured at the individual policy level. Under the new guidance, the net premium ratio (“NPR”) is capped at 100%. To the extent that NPR would otherwise exceed 100%, the LFPB is increased, and a loss is recognized immediately in the results of operations. The NPR cap is applied at the cohort level each quarter when NPR is updated. In contrast, under legacy accounting guidance, premium deficiency testing was performed annually at the product level. See Note 6 to the Consolidated Condensed Financial Statements for further explanation of the NPR and LFPB calculations. The Company adopted the new guidance effective January 1, 2023, using the modified retrospective method applied as of the transition date of January 1, 2021. CNA’s run-off long term care business is in scope of the new guidance. All prior periods presented in the financial statements have been adjusted to reflect application of the new guidance. The original locked in discount rate, utilized for purposes of calculating the NPR under the new guidance, was based on the discount rate assumption used to calculate the LFPB immediately prior to the transition date. While the requirements of the new guidance represent a material change from legacy accounting, the new guidance does not impact capital and surplus under statutory accounting practices, cash flows or the underlying economics of the business. In December of 2022, the FASB issued ASU 2022-05, “Financial Services-Insurance (Topic 944): Transition for Sold Contracts” (“ASU 2022-05”). This guidance permits companies to make an election to exclude from the scope of ASU 2018-12 any insurance contracts that have been de-recognized prior to the effective date of ASU 2018-12, assuming that the company has no significant continuing involvement with the de-recognized contracts. In the fourth quarter of 2022, CNA novated its block of legacy annuity business, which was fully-ceded prior to novation. The Company has elected the ASU 2022-05 transition relief, and has excluded the novated legacy annuity business from the scope of ASU 2018-12. Explanation of ASU 2018-12 Transition Impacts: The following table presents a roll-forward of the pre-transition LFPB balance as of January 1, 2021:
(In millions) |
Balance as of December 31, 2020, as reported | $ | 13,318 |
Reclassification of reserves for policyholders currently receiving benefits to Future policy benefits (a) | 2,844 |
De-recognition of shadow reserves | (3,293) |
Re-measurement using an upper-medium grade fixed income instrument yield discount rate | 6,255 |
Other adjustments | 8 |
Balance as of January 1, 2021, as adjusted | $ | 19,132 |
(a) | In conjunction with the adoption of ASU 2018-12, at January 1, 2023, the long term care reserves for policyholders currently receiving benefits were reclassified from Claim and claim adjustment expense to Future policy benefits. This change was applied retrospectively as of January 1, 2021.
Shadow reserves associated with the long term care business were de-recognized as of the transition date in Accumulated other comprehensive income (“AOCI”). The effect of re-measuring the LFPB at the single-A discount rate as of the transition date was similarly recorded in AOCI. There are no cohorts for which the NPR exceeded 100% at the transition date. CNA’s practice under legacy accounting guidance was to calculate and record premium deficiency reserves at the policy level. Accordingly, an allocation methodology was not required to assign historical premium deficiency reserves to cohorts upon transition to ASU 2018-12. The following table presents after tax adjustments to the opening balance of Shareholders’ equity and Noncontrolling interests resulting from adoption of ASU 2018-12:
| Accumulated other comprehensive income (loss) |  | Retained earnings |  | Noncontrolling interests
(In millions) |  |  |  |  |
Balance as of December 31, 2020, as reported | $ | 581 |  |  | $ | 14,150 |  |  | $ | 1,321 |
De-recognition of shadow reserves | 2,331 |  |  |  |  | 270 |
Re-measurement of LFPB using an upper-medium grade fixed income instrument yield discount rate | (4,428) |  |  |  |  | (513) |
Other adjustments |  |  | (5) |  |  | (1) |
Balance as of January 1, 2021, as adjusted | $ | (1,516) |  |  | $ | 14,145 |  |  | $ | 1,077 |
The effects of adoption of ASU 2018-12 on the Consolidated Condensed Statement of Operations were as follows:
Three Months Ended June 30, 2022 | As Reported |  | Effect of Adoption |  | As Adjusted
(In millions) |  |  |  |  |
Insurance claims and policyholders’ benefits (a) | $ | 1,583 |  |  | $ | 18 |  |  | $ | 1,601 |
Income before income tax | 253 |  |  | (18) |  |  | 235 |
Income tax expense | (51) |  |  | 3 |  |  | (48) |
Net income | 202 |  |  | (15) |  |  | 187 |
Amounts attributable to noncontrolling interests | (22) |  |  | 2 |  |  | (20) |
Net income attributable to Loews Corporation | 180 |  |  | (13) |  |  | 167 |
Basic net income per share | 0.73 |  |  | (0.05) |  |  | 0.68 |
Diluted net income per share | 0.73 |  |  | (0.05) |  |  | 0.68 |
(a) | The effect of adopting ASU 2018-12 on Insurance claims and policyholders’ benefits is inclusive of the re-measurement gain of $1 million, which is presented parenthetically on the Consolidated Condensed Statement of Operations.
Six Months Ended June 30, 2022 | As Reported |  | Effect of Adoption |  | As Adjusted
(In millions) |  |  |  |  |
Insurance claims and policyholders’ benefits (a) | $ | 3,038 |  |  | $ | 41 |  |  | $ | 3,079 |
Income before income tax | 715 |  |  | (41) |  |  | 674 |
Income tax expense | (143) |  |  | 8 |  |  | (135) |
Net income | 572 |  |  | (33) |  |  | 539 |
Amounts attributable to noncontrolling interests | (54) |  |  | 4 |  |  | (50) |
Net income attributable to Loews Corporation | 518 |  |  | (29) |  |  | 489 |
Basic net income per share | 2.10 |  |  | (0.12) |  |  | 1.98 |
Diluted net income per share | 2.09 |  |  | (0.11) |  |  | 1.98 |
(a) | The effect of adopting ASU 2018-12 on Insurance claims and policyholders’ benefits is inclusive of the re-measurement gain of $6 million, which is presented parenthetically on the Consolidated Condensed Statement of Operations.
The effects of adoption of ASU 2018-12 on the Consolidated Condensed Balance Sheet were as follows:
December 31, 2022 | As Reported |  | Effect of Adoption |  | As Adjusted
(In millions) |  |  |  |  |
Other assets | $ | 3,941 |  |  | $ | 73 |  |  | $ | 4,014 |
Total assets | 75,494 |  |  | 73 |  |  | 75,567 |
Claim and claim adjustment expenses (a) | 25,099 |  |  | (2,979) |  |  | 22,120 |
Future policy benefits (a) | 10,151 |  |  | 3,329 |  |  | 13,480 |
Total liabilities | 60,016 |  |  | 350 |  |  | 60,366 |
Retained earnings | 15,144 |  |  | (213) |  |  | 14,931 |
Accumulated other comprehensive income (loss) | (3,284) |  |  | (36) |  |  | (3,320) |
Noncontrolling interests | 880 |  |  | (28) |  |  | 852 |
Total equity | 15,478 |  |  | (277) |  |  | 15,201 |
(a) | In conjunction with the adoption of ASU 2018-12, at January 1, 2023, the long term care reserves for policyholders currently receiving benefits were reclassified from Claim and claim adjustment expense to Future policy benefits. This change was applied retrospectively as of January 1, 2021.
The effects of adoption of ASU 2018-12 on the Consolidated Condensed Statement of Comprehensive Income (Loss) were as follows:
Three Months Ended June 30, 2022 | As Reported |  | Effect of Adoption |  | As Adjusted
(In millions) |  |  |  |  |
Changes in: Net unrealized losses on other investments | $ | (1,346) |  |  | $ | (880) |  |  | $ | (2,226) |
Total unrealized losses on investments | (1,348) |  |  | (880) |  |  | (2,228) |
Impact of changes in discount rates used to measure long-duration contract liabilities |  |  | 1,507 |  |  | 1,507 |
Other comprehensive (loss) | (1,405) |  |  | 627 |  |  | (778) |
Comprehensive (loss) | (1,203) |  |  | 612 |  |  | (591) |
Amounts attributable to noncontrolling interests | 124 |  |  | (65) |  |  | 59 |
Total comprehensive (loss) attributable to Loews Corporation | (1,079) |  |  | 547 |  |  | (532) |
Six Months Ended June 30, 2022 | As Reported |  | Effect of Adoption |  | As Adjusted
(In millions) |  |  |  |  |
Changes in: Net unrealized losses on other investments | $ | (2,957) |  |  | $ | (1,912) |  |  | $ | (4,869) |
Total unrealized losses on investments | (2,963) |  |  | (1,912) |  |  | (4,875) |
Impact of changes in discount rates used to measure long-duration contract liabilities |  |  | 3,142 |  |  | 3,142 |
Other comprehensive (loss) | (3,010) |  |  | 1,230 |  |  | (1,780) |
Comprehensive (loss) | (2,438) |  |  | 1,197 |  |  | (1,241) |
Amounts attributable to noncontrolling interests | 260 |  |  | (124) |  |  | 136 |
Total comprehensive (loss) attributable to Loews Corporation | (2,178) |  |  | 1,073 |  |  | (1,105) |
The effects of adoption of ASU 2018-12 on the Consolidated Condensed Statements of Cash Flows were as follows:
Six Months Ended June 30, 2022 | As Reported |  | Effect of Adoption |  | As Adjusted
(In millions) |  |  |  |  |
Net income | $ | 572 |  |  | $ | (33) |  |  | $ | 539 |
Adjustments to reconcile net income to net cash provided by operating activities, net | 505 |  |  | (8) |  |  | 497 |
Changes in: Insurance reserves | 1,376 |  |  | 41 |  |  | 1,417 |
The effects of adoption of ASU 2018-12 on segment results of operations of CNA were as follows:
Three Months Ended June 30, 2022 | As Reported |  | Effect of Adoption |  | As Adjusted
(In millions) |  |  |  |  |
Insurance claims and policyholders’ benefits (a) | $ | 1,583 |  |  | $ | 18 |  |  | $ | 1,601 |
Income before income tax | 245 |  |  | (18) |  |  | 227 |
Income tax expense | (40) |  |  | 3 |  |  | (37) |
Net income | 205 |  |  | (15) |  |  | 190 |
Amounts attributable to noncontrolling interests | (22) |  |  | 2 |  |  | (20) |
Net income attributable to Loews Corporation | 183 |  |  | (13) |  |  | 170 |
(a) | The effect of adopting ASU 2018-12 on Insurance claims and policyholders’ benefits is inclusive of the re-measurement gain of $1 million, which is presented parenthetically on the Consolidated Condensed Statement of Operations.
Six Months Ended June 30, 2022 | As Reported |  | Effect of Adoption |  | As Adjusted
(In millions) |  |  |  |  |
Insurance claims and policyholders’ benefits (a) | $ | 3,038 |  |  | $ | 41 |  |  | $ | 3,079 |
Income before income tax | 623 |  |  | (41) |  |  | 582 |
Income tax expense | (105) |  |  | 8 |  |  | (97) |
Net income | 518 |  |  | (33) |  |  | 485 |
Amounts attributable to noncontrolling interests | (54) |  |  | 4 |  |  | (50) |
Net income attributable to Loews Corporation | 464 |  |  | (29) |  |  | 435 |
(a) | The effect of adopting ASU 2018-12 on Insurance claims and policyholders’ benefits is inclusive of the re-measurement gain of $6 million, which is presented parenthetically on the Consolidated Condensed Statement of Operations.

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- Definition The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//235/tableOfContent + Details
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