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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

For the quarterly period ended March 31, 2022
OR

| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

For the transition period from _____ to _____
Commission File Number 1-5823

CNA FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

Delaware |  | 36-6169860
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

151 N. Franklin |  | 60606
Chicago, | Illinois |  | (Zip Code)
(Address of principal executive offices) |  |

(312) 822-5000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, Par value $2.50 |  | "CNA" |  | New York Stock Exchange
|  |  |  | Chicago Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | ☐ | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of April 28, 2022, 271,309,932 shares of common stock were outstanding.

Item Number |  | Page Number
| PART I |
1. | Condensed Consolidated Financial Statements: | 3
| Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (Unaudited) | 3
| Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 202 2 and 202 1 (Unaudited) | 4
| Condensed Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021 | 5
| Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 202 2 and 202 1 (Unaudited) | 6
| Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 202 2 and 202 1 (Unaudited) | 7
| Notes to Condensed Consolidated Financial Statements (Unaudited) | 8
2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 36
3. | Quantitative and Qualitative Disclosures About Market Risk | 54
4. | Controls and Procedures | 54
| PART II |
1. | Legal Proceedings | 55
2. | Unregistered Sales of Equity Securities and Use of Proceeds | 55
6. | Exhibits | 55

2

T a b l e o f C o n t e n t s
PART I
Item 1. Condensed Consolidated Financial Statements
CNA Financial Corporation
Condensed Consolidated Statements of Operations (Unaudited)

Three months ended March 31 |  |  |
(In millions, except per share data) | 2022 |  | 2021
Revenues |  |  |
Net earned premiums | $ | 2,059 |  |  | $ | 1,962 |
Net investment income | 448 |  |  | 504 |
Net investment (losses) gains | (11) |  |  | 57 |
Non-insurance warranty revenue | 382 |  |  | 338 |
Other revenues | 7 |  |  | 5 |
Total revenues | 2,885 |  |  | 2,866 |
Claims, Benefits and Expenses |  |  |
Insurance claims and policyholders’ benefits | 1,455 |  |  | 1,506 |
Amortization of deferred acquisition costs | 344 |  |  | 359 |
Non-insurance warranty expense | 354 |  |  | 311 |
Other operating expenses | 326 |  |  | 284 |
Interest | 28 |  |  | 28 |
Total claims, benefits and expenses | 2,507 |  |  | 2,488 |
Income before income tax | 378 |  |  | 378 |
Income tax expense | (65) |  |  | (66) |
Net income | $ | 313 |  |  | $ | 312 |
Basic earnings per share | $ | 1.15 |  |  | $ | 1.15 |
Diluted earnings per share | $ | 1.15 |  |  | $ | 1.14 |
Weighted Average Outstanding Common Stock and Common Stock Equivalents |  |  |
Basic | 271.8 |  | 271.9
Diluted | 272.9 |  | 272.9

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).
3

T a b l e o f C o n t e n t s
CNA Financial Corporation
Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Comprehensive Loss |  |  |
Net income | $ | 313 |  |  | $ | 312 |
Other Comprehensive Loss, net of tax |  |  |
Changes in: |  |  |
Net unrealized gains and losses on investments with an allowance for credit losses | (4) |  |  | — |
Net unrealized gains and losses on other investments | (1,611) |  |  | (627) |
Net unrealized gains and losses on investments | (1,615) |  |  | (627) |
Foreign currency translation adjustment | (14) |  |  | 2 |
Pension and postretirement benefits | 6 |  |  | 9 |
Other comprehensive loss, net of tax | (1,623) |  |  | (616) |
Total comprehensive loss | $ | (1,310) |  |  | $ | (304) |

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).
4

T a b l e o f C o n t e n t s
CNA Financial Corporation
Condensed Consolidated Balance Sheets

(In millions, except share data) | March 31, 2022 (Unaudited) |  | December 31, 2021
Assets |  |  |
Investments: |  |  |
Fixed maturity securities at fair value (amortized cost of $40,928 and $39,952, less allowance for credit loss of $17 and $18) | $ | 41,945 |  |  | $ | 44,380 |
Equity securities at fair value (cost of $965 and $964) | 981 |  |  | 1,035 |
Limited partnership investments | 1,840 |  |  | 1,859 |
Other invested assets | 97 |  |  | 91 |
Mortgage loans (less allowance for uncollectible receivables of $16 and $16) | 942 |  |  | 973 |
Short term investments | 1,301 |  |  | 1,990 |
Total investments | 47,106 |  |  | 50,328 |
Cash | 361 |  |  | 536 |
Reinsurance receivables (less allowance for uncollectible receivables of $22 and $21) | 5,505 |  |  | 5,463 |
Insurance receivables (less allowance for uncollectible receivables of $28 and $29) | 2,892 |  |  | 2,945 |
Accrued investment income | 398 |  |  | 377 |
Deferred acquisition costs | 766 |  |  | 737 |
Deferred income taxes | 547 |  |  | 142 |
Property and equipment at cost (less accumulated depreciation of $264 and $255) | 225 |  |  | 226 |
Goodwill | 147 |  |  | 148 |
Deferred non-insurance warranty acquisition expense | 3,504 |  |  | 3,476 |
Other assets | 2,341 |  |  | 2,261 |
Total assets | $ | 63,792 |  |  | $ | 66,639 |
Liabilities |  |  |
Insurance reserves: |  |  |
Claim and claim adjustment expenses | $ | 24,348 |  |  | $ | 24,174 |
Unearned premiums | 5,942 |  |  | 5,761 |
Future policy benefits | 11,938 |  |  | 13,236 |
Long term debt | 2,779 |  |  | 2,779 |
Deferred non-insurance warranty revenue | 4,528 |  |  | 4,503 |
Other liabilities (includes $85 and $56 due to Loews Corporation) | 3,440 |  |  | 3,377 |
Total liabilities | 52,975 |  |  | 53,830 |
Commitments and contingencies (Notes C and F) |  |  |
Stockholders' Equity |  |  |
Common stock ($2.50 par value; 500,000,000 shares authorized; 273,040,243 shares issued; 271,293,966 and 271,363,999 shares outstanding) | 683 |  |  | 683 |
Additional paid-in capital | 2,195 |  |  | 2,215 |
Retained earnings | 9,319 |  |  | 9,663 |
Accumulated other comprehensive (loss) income | (1,303) |  |  | 320 |
Treasury stock (1,746,277 and 1,676,244 shares), at cost | (77) |  |  | (72) |
Total stockholders’ equity | 10,817 |  |  | 12,809 |
Total liabilities and stockholders' equity | $ | 63,792 |  |  | $ | 66,639 |

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).
5

T a b l e o f C o n t e n t s
CNA Financial Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Cash Flows from Operating Activities |  |  |
Net income | $ | 313 |  |  | $ | 312 |
Adjustments to reconcile net income to net cash flows provided by operating activities: |  |  |
Deferred income tax expense | 17 |  |  | 30 |
Trading portfolio activity | — |  |  | (8) |
Net investment losses (gains) | 11 |  |  | (57) |
Equity method investees | 152 |  |  | 14 |
Net amortization of investments | (26) |  |  | (24) |
Depreciation and amortization | 13 |  |  | 14 |
Changes in: |  |  |
Receivables, net | (5) |  |  | (700) |
Accrued investment income | (22) |  |  | (19) |
Deferred acquisition costs | (31) |  |  | (32) |
Insurance reserves | 489 |  |  | 605 |
Other, net | (266) |  |  | (53) |
Net cash flows provided by operating activities | 645 |  |  | 82 |
Cash Flows from Investing Activities |  |  |
Dispositions: |  |  |
Fixed maturity securities - sales | 803 |  |  | 907 |
Fixed maturity securities - maturities, calls and redemptions | 916 |  |  | 1,084 |
Equity securities | 77 |  |  | 119 |
Limited partnerships | 80 |  |  | 49 |
Mortgage loans | 55 |  |  | 42 |
Purchases: |  |  |
Fixed maturity securities | (2,547) |  |  | (2,203) |
Equity securities | (75) |  |  | (81) |
Limited partnerships | (85) |  |  | (61) |
Mortgage loans | (25) |  |  | (16) |
Change in other investments | (3) |  |  | (2) |
Change in short term investments | 687 |  |  | 573 |
Purchases of property and equipment | (12) |  |  | (3) |
Net cash flows (used) provided by investing activities | (129) |  |  | 408 |
Cash Flows from Financing Activities |  |  |
Dividends paid to common stockholders | (657) |  |  | (310) |
Purchase of treasury stock | (21) |  |  | (3) |
Other, net | (10) |  |  | (8) |
Net cash flows used by financing activities | (688) |  |  | (321) |
Effect of foreign exchange rate changes on cash | (3) |  |  | — |
Net change in cash | (175) |  |  | 169 |
Cash, beginning of year | 536 |  |  | 419 |
Cash, end of period | $ | 361 |  |  | $ | 588 |

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).
6

T a b l e o f C o n t e n t s
CNA Financial Corporation
Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Common Stock |  |  |
Balance, beginning of year | $ | 683 |  |  | $ | 683 |
Balance, end of year | 683 |  |  | 683 |
Additional Paid-in Capital |  |  |
Balance, beginning of year | 2,215 |  |  | 2,211 |
Stock-based compensation | (20) |  |  | (17) |
Balance, end of year | 2,195 |  |  | 2,194 |
Retained Earnings |  |  |
Balance, beginning of year | 9,663 |  |  | 9,081 |
Dividends to common stockholders ($2.40 and $1.13 per share) | (657) |  |  | (309) |
Net income | 313 |  |  | 312 |
Balance, end of year | 9,319 |  |  | 9,084 |
Accumulated Other Comprehensive (Loss) Income |  |  |
Balance, beginning of year | 320 |  |  | 803 |
Other comprehensive loss | (1,623) |  |  | (616) |
Balance, end of year | (1,303) |  |  | 187 |
Treasury Stock |  |  |
Balance, beginning of year | (72) |  |  | (71) |
Stock-based compensation | 16 |  |  | 15 |
Purchase of treasury stock | (21) |  |  | (3) |
Balance, end of year | (77) |  |  | (59) |
Total stockholders' equity | $ | 10,817 |  |  | $ | 12,089 |

The accompanying Notes are an integral part of these Condensed Consolidated Financial Statements (Unaudited).
7

T a b l e o f C o n t e n t s
CNA Financial Corporation
Notes to Condensed Consolidated Financial Statements
Note A. General
Basis of Presentation
The Condensed Consolidated Financial Statements include the accounts of CNA Financial Corporation (CNAF) and its subsidiaries. Collectively, CNAF and its subsidiaries are referred to as CNA or the Company. Loews Corporation (Loews) owned approximately 89.6% of the outstanding common stock of CNAF as of March 31, 2022.
The accompanying Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Intercompany amounts have been eliminated. Certain financial information that is normally included in annual financial statements prepared in accordance with GAAP, including certain financial statement notes, is not required for interim reporting purposes and has been condensed or omitted. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in CNAF's Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2021, including the summary of significant accounting policies in Note A. The preparation of Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.
The interim financial data as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 is unaudited. However, in the opinion of management, the interim data includes all adjustments, including normal recurring adjustments, necessary for a fair statement of the Company's results for the interim periods. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year.
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. For the Company, this includes the Long term care and fully-ceded single premium immediate annuity business. Entities will be required to review, and update if there is a change, 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. Financial statements for prior periods presented shall be adjusted to reflect the effects of applying the new accounting guidance.
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 Company will use a published spot rate curve constructed from A+, A and A- rated U.S. dollar denominated corporate bonds matched to the duration of the corresponding insurance liabilities, to calculate discount rates. The Company will group its long-duration contracts into calendar year cohorts based on the contract issue date and product line. Long term care contracts will be grouped separately from the Company’s fully-ceded single premium immediate annuity contracts.
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 $2.2 billion - $2.5 billion decrease in Accumulated other comprehensive income as of the transition date of January 1, 2021. There is a minimal transition impact expected to retained earnings.
8

T a b l e o f C o n t e n t s
The requirement to review, and update if there is a change, cash flow assumptions at least annually is expected to change the pattern of earnings 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, 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.
9

T a b l e o f C o n t e n t s
Note B. Earnings (Loss) Per Share
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 three months ended March 31, 2022 and 2021, approximately 1.1 million and 1.0 million 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, less than 1 thousand and approximately 120 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.
The Company repurchased 445,000 and 66,000 shares of CNAF common stock at an aggregate cost of $21 million and $3 million during the three months ended March 31, 2022 and 2021.
10

T a b l e o f C o n t e n t s
Note C. Investments
The significant components of Net investment income are presented in the following table.

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Fixed maturity securities | $ | 429 |  |  | $ | 428 |
Equity securities | 2 |  |  | 29 |
Limited partnership investments | 18 |  |  | 43 |
Mortgage loans | 15 |  |  | 14 |
Trading portfolio | 1 |  |  | 5 |
Other | — |  |  | 2 |
Gross investment income | 465 |  |  | 521 |
Investment expense | (17) |  |  | (17) |
Net investment income | $ | 448 |  |  | $ | 504 |

During the three months ended March 31, 2022 and 2021, $(5) million and $13 million of Net i nvestment (loss) income was recognized due to the change in fair value of common stock still held as of March 31, 2022 and 2021.
Net investment gains (losses) are presented in the following table.

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Net investment gains (losses): |  |  |
Fixed maturity securities: |  |  |
Gross gains | $ | 26 |  |  | $ | 58 |
Gross losses | (28) |  |  | (20) |
Net investment gains (losses) on fixed maturity securities | (2) |  |  | 38 |
Equity securities | (38) |  |  | 2 |
Derivatives | 29 |  |  | 17 |
Net investment gains (losses) | $ | (11) |  |  | $ | 57 |

During the three months ended March 31, 2022 and 2021, $38 million of losses and $2 million of gains were recognized in Net investment gains (losses) due to the change in fair value of non-redeemable preferred stock still held as of March 31, 2022 and 2021.
11

T a b l e o f C o n t e n t s
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 $389 million, $369 million, and $389 million as of March 31, 2022, December 31, 2021 and March 31, 2021 and is excluded from the estimate of expected credit losses and the amortized cost basis in the tables included within this Note.

(In millions) | Corporate and other bonds |  | Asset-backed |  | Total
Allowance for credit losses: |  |  |  |  |
Balance as of January 1, 2022 | $ | 11 |  |  | $ | 7 |  |  | $ | 18 |
Additions to the allowance for credit losses: |  |  |  |  |
Securities for which credit losses were not previously recorded | — |  |  | — |  |  | — |
Available-for-sale securities accounted for as PCD assets | — |  |  | — |  |  | — |
Reductions to the allowance for credit losses: |  |  |  |  |
Securities sold during the period (realized) | — |  |  | — |  |  | — |
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis | — |  |  | — |  |  | — |
Write-offs charged against the allowance | — |  |  | — |  |  | — |
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 | 1 |  |  | (2) |  |  | (1) |
Balance as of March 31, 2022 | $ | 12 |  |  | $ | 5 |  |  | $ | 17 |

(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 | 2 |  |  | — |  |  | 2 |
Reductions to the allowance for credit losses: |  |  |  |  |
Securities sold during the period (realized) | 6 |  |  | — |  |  | 6 |
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis | — |  |  | — |  |  | — |
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 | (6) |  |  | (1) |  |  | (7) |
Balance as of March 31, 2021 | $ | 27 |  |  | $ | 16 |  |  | $ | 43 |

12

T a b l e o f C o n t e n t s
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.

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Fixed maturity securities available-for-sale: |  |  |
Corporate and other bonds | $ | 8 |  |  | $ | 7 |
Asset-backed | 2 |  |  | (1) |
Impairment (gains) losses recognized in earnings | $ | 10 |  |  | $ | 6 |

There were no losses recognized on mortgage loans during the three months ended March 31, 2022 or 2021.
13

T a b l e o f C o n t e n t s
The following tables present a summary of fixed maturity securities.

March 31, 2022 | Cost or Amortized Cost |  | Gross Unrealized Gains |  | Gross Unrealized Losses |  | Allowance for Credit Losses |  | Estimated Fair Value
(In millions) |  |  |  |
Fixed maturity securities available-for-sale: |  |  |  |  |  |  |  |  |
Corporate and other bonds | $ | 22,001 |  |  | $ | 1,277 |  |  | $ | 486 |  |  | $ | 12 |  |  | $ | 22,780 |
States, municipalities and political subdivisions | 10,516 |  |  | 862 |  |  | 319 |  |  | — |  |  | 11,059 |
Asset-backed: |  |  |  |  |  |  |  |  |
Residential mortgage-backed | 2,983 |  |  | 25 |  |  | 160 |  |  | — |  |  | 2,848 |
Commercial mortgage-backed | 2,008 |  |  | 13 |  |  | 81 |  |  | — |  |  | 1,940 |
Other asset-backed | 2,710 |  |  | 11 |  |  | 93 |  |  | 5 |  |  | 2,623 |
Total asset-backed | 7,701 |  |  | 49 |  |  | 334 |  |  | 5 |  |  | 7,411 |
U.S. Treasury and obligations of government-sponsored enterprises | 125 |  |  | — |  |  | 5 |  |  | — |  |  | 120 |
Foreign government | 559 |  |  | 3 |  |  | 13 |  |  | — |  |  | 549 |
Redeemable preferred stock | 20 |  |  | — |  |  | — |  |  | — |  |  | 20 |
Total fixed maturity securities available-for-sale | 40,922 |  |  | 2,191 |  |  | 1,157 |  |  | 17 |  |  | 41,939 |
Total fixed maturity securities trading | 6 |  |  | — |  |  | — |  |  | — |  |  | 6 |
Total fixed maturity securities | $ | 40,928 |  |  | $ | 2,191 |  |  | $ | 1,157 |  |  | $ | 17 |  |  | $ | 41,945 |

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 |  |  | 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 |
Redeemable preferred stock | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total fixed maturity securities available-for-sale | 39,945 |  |  | 4,558 |  |  | 112 |  |  | 18 |  |  | 44,373 |
Total fixed maturity securities trading | 7 |  |  | — |  |  | — |  |  | — |  |  | 7 |
Total fixed maturity securities | $ | 39,952 |  |  | $ | 4,558 |  |  | $ | 112 |  |  | $ | 18 |  |  | $ | 44,380 |

The net unrealized gains on investments included in the tables above are recorded as a component of Accumulated other comprehensive income (AOCI). When presented in AOCI, these amounts are net of tax and any required Shadow Adjustments. To the extent that unrealized gains on fixed income securities supporting certain products within the Life & Group segment would result in a premium deficiency, or would impact the reserve balance if realized, a related increase in Insurance reserves is recorded, net of tax, as a reduction of net unrealized gains through Other comprehensive income (loss) (Shadow Adjustments). As of March 31, 2022 and December 31, 2021, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $1,394 million and $2,477 million.
14

T a b l e o f C o n t e n t s
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
March 31, 2022 | Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses
(In millions) |  |  |  |  |
Fixed maturity securities available-for-sale: |  |  |  |  |  |  |  |  |  |  |
Corporate and other bonds | $ | 7,390 |  |  | $ | 441 |  |  | $ | 327 |  |  | $ | 45 |  |  | $ | 7,717 |  |  | $ | 486 |
States, municipalities and political subdivisions | 2,796 |  |  | 314 |  |  | 35 |  |  | 5 |  |  | 2,831 |  |  | 319 |
Asset-backed: |  |  |  |  |  |  |  |  |  |  |
Residential mortgage-backed | 2,315 |  |  | 160 |  |  | — |  |  | — |  |  | 2,315 |  |  | 160 |
Commercial mortgage-backed | 1,274 |  |  | 65 |  |  | 151 |  |  | 16 |  |  | 1,425 |  |  | 81 |
Other asset-backed | 1,717 |  |  | 90 |  |  | 67 |  |  | 3 |  |  | 1,784 |  |  | 93 |
Total asset-backed | 5,306 |  |  | 315 |  |  | 218 |  |  | 19 |  |  | 5,524 |  |  | 334 |
U.S. Treasury and obligations of government-sponsored enterprises | 94 |  |  | 5 |  |  | 5 |  |  | — |  |  | 99 |  |  | 5 |
Foreign government | 327 |  |  | 11 |  |  | 26 |  |  | 2 |  |  | 353 |  |  | 13 |
Total | $ | 15,913 |  |  | $ | 1,086 |  |  | $ | 611 |  |  | $ | 71 |  |  | $ | 16,524 |  |  | $ | 1,157 |

| 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 |  |  | $ | 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 | $ | 5,695 |  |  | $ | 92 |  |  | $ | 370 |  |  | $ | 20 |  |  | $ | 6,065 |  |  | $ | 112 |

15

T a b l e o f C o n t e n t s
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.

| March 31, 2022 |  | December 31, 2021
(In millions) | Estimated Fair Value |  | Gross Unrealized Losses |  | Estimated Fair Value |  | Gross Unrealized Losses
U.S. Government, Government agencies and Government-sponsored enterprises | $ | 2,095 |  |  | $ | 116 |  |  | $ | 898 |  |  | $ | 8 |
AAA | 993 |  |  | 105 |  |  | 368 |  |  | 6 |
AA | 2,809 |  |  | 269 |  |  | 875 |  |  | 17 |
A | 3,300 |  |  | 205 |  |  | 1,516 |  |  | 23 |
BBB | 6,073 |  |  | 392 |  |  | 1,812 |  |  | 42 |
Non-investment grade | 1,254 |  |  | 70 |  |  | 596 |  |  | 16 |
Total | $ | 16,524 |  |  | $ | 1,157 |  |  | $ | 6,065 |  |  | $ | 112 |

Based on current facts and circumstances, the Company believes the unrealized losses presented in the March 31, 2022 securities in a gross unrealized loss position tables above are not 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 to a lesser extent credit spreads. In reaching this determination, the Company considered the recent volatility in risk-free rates and spreads as well as the fact that its unrealized losses are concentrated in investment grade issuers. Additionally, the Company has no current intent to sell securities with unrealized losses, nor is it more likely than not that it will be required to sell prior to recovery of amortized cost; accordingly, the Company has determined that there are no additional impairment losses to be recorded as of March 31, 2022.
16

T a b l e o f C o n t e n t s
Contractual Maturity
The following table presents available-for-sale fixed maturity securities by contractual maturity.

| March 31, 2022 |  | December 31, 2021
(In millions) | Cost or Amortized Cost |  | Estimated Fair Value |  | Cost or Amortized Cost |  | Estimated Fair Value
Due in one year or less | $ | 1,533 |  |  | $ | 1,546 |  |  | $ | 1,603 |  |  | $ | 1,624 |
Due after one year through five years | 10,206 |  |  | 10,337 |  |  | 10,637 |  |  | 11,229 |
Due after five years through ten years | 14,040 |  |  | 14,032 |  |  | 13,294 |  |  | 14,338 |
Due after ten years | 15,143 |  |  | 16,024 |  |  | 14,411 |  |  | 17,182 |
Total | $ | 40,922 |  |  | $ | 41,939 |  |  | $ | 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.
Derivative Financial Instruments
The Company holds an embedded derivative on a funds withheld liability with a notional value of $268 million and $270 million and a fair value of $16 million and $(12) million as of March 31, 2022 and December 31, 2021. The embedded derivative on the funds withheld liability is accounted for separately and reported with the funds withheld liability in Other liabilities on the Condensed 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 March 31, 2022, the Company had commitments to purchase or fund approximately $1,280 million and sell approximately $65 million under the terms of these investments.
17

T a b l e o f C o n t e n t s
Mortgage Loans
The following table presents the amortized cost basis of mortgage loans for each credit quality indicator by year of origination. The primary credit quality indicators utilized are debt service coverage ratios (DSCR) and loan-to-value ratios (LTV).

March 31, 2022 | Mortgage Loans Amortized Cost Basis by Origination Year (1)
(In millions) | 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  | Prior |  | Total
DSCR ≥1.6x |  |  |  |  |  |  |  |  |  |  |  |  |
LTV less than 55% | $ | — |  |  | $ | 9 |  |  | $ | 94 |  |  | $ | 21 |  |  | $ | 54 |  |  | $ | 247 |  |  | $ | 425 |
LTV 55% to 65% | — |  |  | 5 |  | 19 |  | 8 |  | — |  |  | 24 |  |  | 56
LTV greater than 65% | 18 |  |  | 11 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 29
DSCR 1.2x - 1.6x |  |  |  |  |  |  |  |  |  |  |  |  |
LTV less than 55% | — |  |  | 13 |  |  | 14 |  |  | 95 |  |  | 10 |  |  | 56 |  |  | 188
LTV 55% to 65% | 21 |  |  | 36 |  |  | 24 |  |  | — |  |  | — |  |  | 8 |  |  | 89
LTV greater than 65% | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 0
DSCR ≤1.2 |  |  |  |  |  |  |  |  |  |  |  |  |
LTV less than 55% | — |  |  | — |  |  | — |  |  | 52 |  |  | — |  |  | 30 |  |  | 82
LTV 55% to 65% | — |  |  | — |  |  | — |  |  | 55 |  |  | — |  |  | — |  |  | 55
LTV greater than 65% | — |  |  | 21 |  |  | — |  |  | 6 |  |  | — |  |  | 7 |  |  | 34
Total | $ | 39 |  |  | $ | 95 |  |  | $ | 151 |  |  | $ | 237 |  |  | $ | 64 |  |  | $ | 372 |  |  | $ | 958 |

(1) The values in the table above reflect DSCR on a standardized amortization period and LTV based on the most recent appraised values trended forward using changes in a commercial real estate price index.
As of March 31, 2022, 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.
18

T a b l e o f C o n t e n t s
Note D. Fair Value
Fair value is the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following fair value hierarchy is used in selecting inputs, with the highest priority given to Level 1, as these are the most transparent or reliable.
Level 1 - Quoted prices for identical instruments in active markets.
Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are not observable.
Prices may fall within Level 1, 2 or 3 depending upon the methodology and inputs used to estimate fair value for each specific security. In general, the Company seeks to price securities using third-party pricing services. Securities not priced by pricing services are submitted to independent brokers for valuation and, if those are not available, internally developed pricing models are used to value assets using a methodology and inputs the Company believes market participants would use to value the assets. Prices obtained from third-party pricing services or brokers are not adjusted by the Company.
The Company performs control procedures over information obtained from pricing services and brokers to ensure prices received represent a reasonable estimate of fair value and to confirm representations regarding whether inputs are observable or unobservable. Procedures may include i) the review of pricing service methodologies or broker pricing qualifications, ii) back-testing, where past fair value estimates are compared to actual transactions executed in the market on similar dates, iii) exception reporting, where period-over-period changes in price are reviewed and challenged with the pricing service or broker based on exception criteria, and iv) deep dives, where the Company performs an independent analysis of the inputs and assumptions used to price individual securities.
19

T a b l e o f C o n t e n t s
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.

March 31, 2022 |  |  |  |  |  |  | Total Assets/Liabilities at Fair Value
(In millions) | Level 1 |  | Level 2 |  | Level 3 |
Assets |  |  |  |  |  |  |
Fixed maturity securities: |  |  |  |  |  |  |
Corporate bonds and other | $ | 129 |  |  | $ | 22,431 |  |  | $ | 915 |  |  | $ | 23,475 |
States, municipalities and political subdivisions | — |  |  | 11,008 |  |  | 51 |  |  | 11,059 |
Asset-backed | — |  |  | 6,807 |  |  | 604 |  |  | 7,411 |
Total fixed maturity securities | 129 |  |  | 40,246 |  |  | 1,570 |  |  | 41,945 |
Equity securities: |  |  |  |  |  |  |
Common stock | 191 |  |  | — |  |  | 29 |  |  | 220 |
Non-redeemable preferred stock | 63 |  |  | 683 |  |  | 15 |  |  | 761 |
Total equity securities | 254 |  |  | 683 |  |  | 44 |  |  | 981 |
Short term and other | 1,146 |  |  | 27 |  |  | — |  |  | 1,173 |
Total assets | $ | 1,529 |  |  | $ | 40,956 |  |  | $ | 1,614 |  |  | $ | 44,099 |
Liabilities |  |  |  |  |  |  |
Other liabilities | $ | — |  |  | $ | (16) |  |  | $ | — |  |  | $ | (16) |
Total liabilities | $ | — |  |  | $ | (16) |  |  | $ | — |  |  | $ | (16) |

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 |

20

T a b l e o f C o n t e n t s
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, 2022 | $ | 937 |  |  | $ | 56 |  |  | $ | 556 |  |  | $ | 29 |  |  | $ | 1,578 |
Total realized and unrealized investment gains (losses): |  |  |  |  |  |  |  |  |
Reported in Net investment gains (losses) | (1) |  |  | — |  |  | 2 |  |  | (1) |  |  | — |
Reported in Net investment income | — |  |  | — |  |  | 1 |  |  | 4 |  |  | 5 |
Reported in Other comprehensive income (loss) | (71) |  |  | (5) |  |  | (32) |  |  | — |  |  | (108) |
Total realized and unrealized investment gains (losses) | (72) |  |  | (5) |  |  | (29) |  |  | 3 |  |  | (103) |
Purchases | 67 |  |  | — |  |  | 140 |  |  | 12 |  |  | 219 |
Sales | (5) |  |  | — |  |  | — |  |  | — |  |  | (5) |
Settlements | (22) |  |  | — |  |  | (17) |  |  | — |  |  | (39) |
Transfers into Level 3 | 10 |  |  | — |  |  | 5 |  |  | — |  |  | 15 |
Transfers out of Level 3 | — |  |  | — |  |  | (51) |  |  | — |  |  | (51) |
Balance as of March 31, 2022 | $ | 915 |  |  | $ | 51 |  |  | $ | 604 |  |  | $ | 44 |  |  | $ | 1,614 |
Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2022 recognized in Net income (loss) in the period | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 3 |  |  | $ | 3 |
Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2022 recognized in Other comprehensive income (loss) in the period | (72) |  |  | (5) |  |  | (31) |  |  | — |  |  | (108) |

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) | (13) |  |  | — |  |  | — |  |  | 1 |  |  | (12) |
Reported in Net investment income | — |  |  | — |  |  | 2 |  |  | 1 |  |  | 3 |
Reported in Other comprehensive income (loss) | (40) |  |  | (2) |  |  | (9) |  |  | — |  |  | (51) |
Total realized and unrealized investment gains (losses) | (53) |  |  | (2) |  |  | (7) |  |  | 2 |  |  | (60) |
Purchases | 42 |  |  | — |  |  | 30 |  |  | — |  |  | 72 |
Sales | — |  |  | — |  |  | — |  |  | — |  |  | — |
Settlements | (2) |  |  | — |  |  | (17) |  |  | — |  |  | (19) |
Transfers into Level 3 | 10 |  |  | — |  |  | 9 |  |  | — |  |  | 19 |
Transfers out of Level 3 | — |  |  | — |  |  | (8) |  |  | — |  |  | (8) |
Balance as of March 31, 2021 | $ | 767 |  |  | $ | 44 |  |  | $ | 315 |  |  | $ | 29 |  |  | $ | 1,155 |
Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2021 recognized in Net income (loss) in the period | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2 |  |  | $ | 2 |
Unrealized gains (losses) on Level 3 assets and liabilities held as of March 31, 2021 recognized in Other comprehensive income (loss) in the period | (40) |  |  | (2) |  |  | (9) |  |  | — |  |  | (51) |

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.
21

T a b l e o f C o n t e n t s
Valuation Methodologies and Inputs
The following section describes the valuation methodologies and relevant inputs used to measure different financial instruments at fair value, including an indication of the level in the fair value hierarchy in which the instruments are generally classified.
Fixed Maturity Securities
Level 1 securities include highly liquid government securities and exchange traded bonds, valued using quoted market prices. Level 2 securities include most other fixed maturity securities as the significant inputs are observable in the marketplace. All classes of Level 2 fixed maturity securities are valued using a methodology based on information generated by market transactions involving identical or comparable assets, a discounted cash flow methodology, or a combination of both when necessary. Common inputs for all classes of fixed maturity securities include prices from recently executed transactions of similar securities, marketplace quotes, benchmark yields, spreads off benchmark yields, interest rates and U.S. Treasury or swap curves. Specifically for asset-backed securities, key inputs include prepayment and default projections based on past performance of the underlying collateral and current market data. Fixed maturity securities are primarily assigned to Level 3 in cases where broker/dealer quotes are significant inputs to the valuation and there is a lack of transparency as to whether these quotes are based on information that is observable in the marketplace. Level 3 securities also include private placement debt securities whose fair value is determined using internal models with some inputs that are not market observable.
Equity Securities
Level 1 equity securities include publicly traded securities valued using quoted market prices. Level 2 securities are primarily valued using pricing for similar securities, recently executed transactions and other pricing models utilizing market observable inputs. Level 3 securities are primarily priced using broker/dealer quotes and internal models with some inputs that are not market observable.
Short Term and Other Invested Assets
Securities that are actively traded or have quoted prices are classified as Level 1. These securities include money market funds and treasury bills. Level 2 primarily includes non-U.S. government securities, for which all inputs are market observable. Fixed maturity securities purchased within one year of maturity are classified consistent with fixed maturity securities discussed above. Short term investments as presented in the tables above differ from the amounts presented on the Condensed Consolidated Balance Sheets because certain short term investments, such as time deposits, are not measured at fair value.
As of March 31, 2022 and December 31, 2021, there were $79 million and $74 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.

March 31, 2022 | Estimated Fair Value (In millions) |  | Valuation Technique(s) |  | Unobservable Input(s) |  | Range (Weighted Average)
Fixed maturity securities | $ | 1,198 |  |  | Discounted cash flow |  | Credit spread |  | 1% - 7% (3%)

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%)

For fixed maturity securities, an increase to the credit spread assumptions would result in a lower fair value measurement.
Financial Assets and Liabilities Not Measured at Fair Value
The carrying amount and estimated fair value of the Company's financial assets and liabilities which are not measured at fair value on the Condensed Consolidated Balance Sheets are presented in the following tables.

March 31, 2022 | Carrying Amount |  | Estimated Fair Value
(In millions) |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets |  |  |  |  |  |  |  |  |
Mortgage loans | $ | 942 |  |  | $ | — |  |  | $ | — |  |  | $ | 940 |  |  | $ | 940 |
Liabilities |  |  |  |  |  |  |  |  |
Long term debt | $ | 2,779 |  |  | $ | — |  |  | $ | 2,795 |  |  | $ | — |  |  | $ | 2,795 |

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 |

The carrying amounts reported on the Condensed Consolidated Balance Sheets for Cash, Short term investments not carried at fair value, Accrued investment income and certain Other assets and Other liabilities approximate fair value due to the short term nature of these items. These assets and liabilities are not listed in the tables above.
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Note E. Claim and Claim Adjustment Expense Reserves
Property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including incurred but not reported (IBNR) claims as of the reporting date. The Company's reserve projections are based primarily on detailed analysis of the facts in each case, the Company's experience with similar cases and various historical development patterns. Consideration is given to historical patterns such as claim reserving trends and settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions and economic conditions, 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.
Catastrophes are an inherent risk of the property and casualty insurance business and have contributed to material period-to-period fluctuations in our results of operations and/or equity. The Company reported catastrophe losses, net of reinsurance, of $19 million and $125 million for the three months ended March 31, 2022 and 2021. Catastrophe losses for the three months ended March 31, 2022 were primarily related to severe weather related events. Catastrophe losses for the three months ended March 31, 2021 were primarily driven by Winter Storms Uri and Viola.
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T a b l e o f C o n t e n t s
Liability for Unpaid Claim and Claim Adjustment Expenses
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.

For the three months ended March 31, 2022 |  |  |
(In millions) | 2022 |  | 2021
Reserves, beginning of year: |  |  |
Gross | $ | 24,174 |  |  | $ | 22,706 |
Ceded | 4,969 |  |  | 4,005 |
Net reserves, beginning of year | 19,205 |  |  | 18,701 |
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 | 1,448 |  |  | 1,474 |
Increase (decrease) in provision for insured events of prior years | (45) |  |  | (54) |
Amortization of discount | 47 |  |  | 50 |
Total net incurred (1) | 1,450 |  |  | 1,470 |
Net payments attributable to: |  |  |
Current year events | (70) |  |  | (85) |
Prior year events | (1,147) |  |  | (1,067) |
Total net payments | (1,217) |  |  | (1,152) |
Foreign currency translation adjustment and other | (92) |  |  | (32) |
Net reserves, end of period | 19,346 |  |  | 18,355 |
Ceded reserves, end of period | 5,002 |  |  | 4,701 |
Gross reserves, end of period | $ | 24,348 |  |  | $ | 23,056 |

(1) Total net incurred above does not agree to Insurance claims and policyholders' benefits as reflected on the Condensed Consolidated Statements of Operations due to amounts related to retroactive reinsurance deferred gain accounting, the loss on the Excess Workers' Compensation Loss Portfolio Transfer, uncollectible reinsurance and benefit expenses related to future policy benefits, which are not reflected in the table above.
Net Prior Year Development
Changes in estimates of claim and claim adjustment expense reserves, net of reinsurance, for prior years are defined as net prior year loss reserve development (development). These changes can be favorable or unfavorable. The following table presents development recorded for the Specialty, Commercial, International and Corporate & Other segments.

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Pretax (favorable) unfavorable development: |  |  |
Specialty | $ | (10) |  |  | $ | (15) |
Commercial | (2) |  |  | — |
International | — |  |  | — |
Corporate & Other | — |  |  | — |
Total pretax (favorable) unfavorable development | $ | (12) |  |  | $ | (15) |

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T a b l e o f C o n t e n t s
Specialty
The following table presents further detail of the development recorded for the Specialty segment.

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Pretax (favorable) unfavorable development: |  |  |
Medical Professional Liability | $ | 8 |  |  | $ | 8 |
Other Professional Liability and Management Liability | — |  |  | — |
Surety | (9) |  |  | (15) |
Warranty | (9) |  |  | (8) |
Other | — |  |  | — |
Total pretax (favorable) unfavorable development | $ | (10) |  |  | $ | (15) |

2021
Favorable development in surety was primarily due to lower than expected frequency and lack of systemic activity in recent accident years.
Commercial
The following table presents further detail of the development recorded for the Commercial segment.

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Pretax (favorable) unfavorable development: |  |  |
Commercial Auto | $ | — |  |  | $ | — |
General Liability | — |  |  | — |
Workers' Compensation | (2) |  |  | — |
Property and Other | — |  |  | — |
Total pretax (favorable) unfavorable development | $ | (2) |  |  | $ | — |

International
There was no development recorded in the International segment for the three months ended March 31, 2022 and 2021.
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T a b l e o f C o n t e n t s
Asbestos & Environmental Pollution (A&EP) Reserves
In 2010, Continental Casualty Company (CCC) together with several of the Company’s insurance subsidiaries completed a transaction with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc., under which substantially all of the Company’s legacy A&EP liabilities were ceded to NICO through a Loss Portfolio Transfer (LPT). At the effective date of the transaction, the Company ceded approximately $1.6 billion of net A&EP claim and allocated claim adjustment expense reserves to NICO under a retroactive reinsurance agreement with an aggregate limit of $4 billion. The $1.6 billion of claim and allocated claim adjustment expense reserves ceded to NICO was net of $1.2 billion of ceded claim and allocated claim adjustment expense reserves under existing third-party reinsurance contracts. The NICO LPT aggregate reinsurance limit also covers credit risk on the existing third-party reinsurance related to these liabilities. The Company paid NICO a reinsurance premium of $2 billion and transferred to NICO billed third-party reinsurance receivables related to A&EP claims with a net book value of $215 million, resulting in total consideration of $2.2 billion.
In years subsequent to the effective date of the LPT, the Company recognized adverse prior year development on its A&EP reserves resulting in additional amounts ceded under the LPT. As a result, the cumulative amounts ceded under the LPT have exceeded the $2.2 billion consideration paid, resulting in the NICO LPT moving into a gain position, requiring retroactive reinsurance accounting. Under retroactive reinsurance accounting, this gain is deferred and only recognized in earnings in proportion to actual paid recoveries under the LPT. Over the life of the contract, there is no economic impact as long as any additional losses incurred are within the limit of the LPT. In a period in which the Company recognizes a change in the estimate of A&EP reserves that increases or decreases the amounts ceded under the LPT, the proportion of actual paid recoveries to total ceded losses is affected and the change in the deferred gain is recognized in earnings as if the revised estimate of ceded losses was available at the effective date of the LPT. The effect of the deferred retroactive reinsurance benefit is recorded in Insurance claims and policyholders' benefits on the Condensed Consolidated Statements of Operations.
The impact of the LPT on the Condensed Consolidated Statements of Operations was the recognition of a retroactive reinsurance benefit of $12 million and $10 million for the three months ended March 31, 2022 and 2021. As of March 31, 2022 and December 31, 2021, the cumulative amounts ceded under the LPT were $3.4 billion. The unrecognized deferred retroactive reinsurance benefit was $417 million and $429 million as of March 31, 2022 and December 31, 2021 and is included within Other liabilities on the Condensed Consolidated Balance Sheets.
NICO established a collateral trust account as security for its obligations to the Company. The fair value of the collateral trust account was $3.1 billion as of March 31, 2022. In addition, Berkshire Hathaway Inc. guaranteed the payment obligations of NICO up to the aggregate reinsurance limit as well as certain of NICO’s performance obligations under the trust agreement. NICO is responsible for claims handling and billing and collection from third-party reinsurers related to the majority of the Company’s A&EP claims.
Credit Risk for Ceded Reserves
The majority of the Company’s outstanding voluntary reinsurance receivables are due from reinsurers with financial strength ratings of A- or higher. Receivables due from reinsurers with lower financial strength ratings are primarily due from captive reinsurers and are backed by collateral arrangements.
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T a b l e o f C o n t e n t s
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.
Guarantees
The Company has provided guarantees, if the primary obligor fails to perform, to holders of structured settlement annuities issued by a previously owned subsidiary. As of March 31, 2022, 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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T a b l e o f C o n t e n t s
Note G. Benefit Plans
The components of net periodic pension cost (benefit) are presented in the following table.

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Net periodic pension cost (benefit) |  |  |
Interest cost on projected benefit obligation | $ | 17 |  |  | $ | 15 |
Expected return on plan assets | (38) |  |  | (38) |
Amortization of net actuarial (gain) loss | 7 |  |  | 12 |
Total net periodic pension cost (benefit) | $ | (14) |  |  | $ | (11) |

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

Three months ended March 31 |
(In millions) | 2022 |  | 2021
Non-Service Cost (Benefit): |  |  |
Insurance claims and policyholder's benefits | $ | (4) |  |  | $ | (3) |
Other operating expenses | (10) |  |  | (8) |
Total net periodic pension cost (benefit) | $ | (14) |  |  | $ | (11) |

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T a b l e o f C o n t e n t s
Note H. 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, 2022 | $ | (2) |  |  | $ | 1,039 |  |  | $ | (604) |  |  | $ | (113) |  |  | $ | 320 |
Other comprehensive income (loss) before reclassifications | (4) |  |  | (1,612) |  |  | — |  |  | (14) |  |  | (1,630) |
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $—, $1, $2, $— and $3 | — |  |  | (1) |  |  | (6) |  |  | — |  |  | (7) |
Other comprehensive income (loss) net of tax (expense) benefit of $1, $424, $(2), $— and $423 | (4) |  |  | (1,611) |  |  | 6 |  |  | (14) |  |  | (1,623) |
Balance as of March 31, 2022 | $ | (6) |  |  | $ | (572) |  |  | $ | (598) |  |  | $ | (127) |  |  | $ | (1,303) |

(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 | (3) |  |  | (593) |  |  | — |  |  | 2 |  |  | (594) |
Amounts reclassified from accumulated other comprehensive income (loss) net of tax (expense) benefit of $1, $(8), $2, $— and $(5) | (3) |  |  | 34 |  |  | (9) |  |  | — |  |  | 22 |
Other comprehensive income (loss) net of tax (expense) benefit of $—, $162, $(2), $— and $160 | — |  |  | (627) |  |  | 9 |  |  | 2 |  |  | (616) |
Balance as of March 31, 2021 | $ | — |  |  | $ | 1,118 |  |  | $ | (839) |  |  | $ | (92) |  |  | $ | 187 |

Amounts reclassified from Accumulated other comprehensive income (loss) shown above are reported in Net income (loss) as follows:

Component of AOCI |  | Condensed Consolidated Statements of Operations Line Item Affected by Reclassifications
Net unrealized gains (losses) on investments with an allowance for credit losses and Net unrealized gains (losses) on other investments |  | Net investment gains (losses)
Pension and postretirement benefits |  | Other operating expenses and Insurance claims and policyholders' benefits

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T a b l e o f C o n t e n t s
Note I. Business Segments
The Company's property and casualty commercial insurance operations are managed and reported in three business segments: Specialty, Commercial and International. These three segments are collectively referred to as Property & Casualty Operations. The Company's operations outside of Property & Casualty Operations are managed and reported in two segments: Life & Group and Corporate & Other.
The accounting policies of the segments are the same as those described in Note A to the Consolidated Financial Statements within CNAF's Annual Report on Form 10-K for the year ended December 31, 2021. The Company manages most of its assets on a legal entity basis, while segment operations are generally conducted across legal entities. As such, only Insurance and Reinsurance receivables, Insurance reserves, Deferred acquisition costs, Goodwill and Deferred non-insurance warranty acquisition expense and revenue are readily identifiable for individual segments. Distinct investment portfolios are not maintained for every individual segment; accordingly, allocation of assets to each segment is not performed. Therefore, a significant portion of Net investment income and Net investment gains or losses are allocated primarily based on each segment's net carried insurance reserves, as adjusted. All significant intersegment income and expense have been eliminated. Income taxes have been allocated on the basis of the taxable income of the segments.
In the following tables, certain financial measures are presented to provide information used by management to monitor the Company's operating performance. Management utilizes these financial measures to monitor the Company's insurance operations and investment portfolio.
The performance of the Company's insurance operations is monitored by management through core income (loss), which is derived from certain income statement amounts. The Company's investment portfolio is monitored by management through analysis of various factors including unrealized gains and losses on securities, portfolio duration and exposure to market and credit risk.
Core income (loss) is calculated by excluding from net income (loss) the after-tax effects of net investment gains or losses 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.
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T a b l e o f C o n t e n t s
The Company's results of operations and selected balance sheet items by segment are presented in the following tables.

Three months ended March 31, 2022 | Specialty |  | Commercial |  | International |  | Life & Group |  | Corporate & Other |  |  |  |
(In millions) |  |  |  |  |  | Eliminations |  | Total
Operating revenues |  |  |  |  |  |  |  |  |  |  |  |  |
Net earned premiums | $ | 772 |  |  | $ | 904 |  |  | $ | 264 |  |  | $ | 120 |  |  | $ | (1) |  |  | $ | — |  |  | $ | 2,059 |
Net investment income | 103 |  |  | 118 |  |  | 14 |  |  | 212 |  |  | 1 |  |  | — |  |  | 448 |
Non-insurance warranty revenue | 382 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 382 |
Other revenues | 1 |  |  | 8 |  |  | (1) |  |  | (1) |  |  | 2 |  |  | (2) |  |  | 7 |
Total operating revenues | 1,258 |  |  | 1,030 |  |  | 277 |  |  | 331 |  |  | 2 |  |  | (2) |  |  | 2,896 |
Claims, benefits and expenses |  |  |  |  |  |  |  |  |  |  |  |  |
Net incurred claims and benefits | 445 |  |  | 573 |  |  | 158 |  |  | 281 |  |  | (8) |  |  | — |  |  | 1,449 |
Policyholders’ dividends | 1 |  |  | 5 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6 |
Amortization of deferred acquisition costs | 157 |  |  | 148 |  |  | 39 |  |  | — |  |  | — |  |  | — |  |  | 344 |
Non-insurance warranty expense | 354 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 354 |
Other insurance related expenses | 81 |  |  | 130 |  |  | 47 |  |  | 31 |  |  | 2 |  |  | — |  |  | 291 |
Other expenses | 13 |  |  | 7 |  |  | 1 |  |  | 3 |  |  | 41 |  |  | (2) |  |  | 63 |
Total claims, benefits and expenses | 1,051 |  |  | 863 |  |  | 245 |  |  | 315 |  |  | 35 |  |  | (2) |  |  | 2,507 |
Core income (loss) before income tax | 207 |  |  | 167 |  |  | 32 |  |  | 16 |  |  | (33) |  |  | — |  |  | 389 |
Income tax (expense) benefit on core income (loss) | (44) |  |  | (35) |  |  | (6) |  |  | 7 |  |  | 5 |  |  | — |  |  | (73) |
Core income (loss) | $ | 163 |  |  | $ | 132 |  |  | $ | 26 |  |  | $ | 23 |  |  | $ | (28) |  |  | $ | — |  |  | 316 |
Net investment gains (losses) |  |  |  |  |  |  |  |  |  |  |  |  | (11) |
Income tax (expense) benefit on net investment gains (losses) |  |  |  |  |  |  |  |  |  |  |  |  | 8 |
Net investment gains (losses), after tax |  |  |  |  |  |  |  |  |  |  |  |  | (3) |
Net income (loss) |  |  |  |  |  |  |  |  |  |  |  |  | $ | 313 |

March 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
(In millions) |  |  |  |  |  |  |  |  |  |  |  |  |
Reinsurance receivables | $ | 1,291 |  |  | $ | 947 |  |  | $ | 360 |  |  | $ | 399 |  |  | $ | 2,530 |  |  | $ | — |  |  | $ | 5,527 |
Insurance receivables | 1,055 |  |  | 1,503 |  |  | 359 |  |  | 4 |  |  | (1) |  |  | — |  |  | 2,920 |
Deferred acquisition costs | 370 |  |  | 294 |  |  | 102 |  |  | — |  |  | — |  |  | — |  |  | 766 |
Goodwill | 117 |  |  | — |  |  | 30 |  |  | — |  |  | — |  |  | — |  |  | 147 |
Deferred non-insurance warranty acquisition expense | 3,504 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,504 |
Insurance reserves |  |  |  |  |  |  |  |  |  |  |  |  |
Claim and claim adjustment expenses | 6,623 |  |  | 8,934 |  |  | 2,316 |  |  | 3,712 |  |  | 2,763 |  |  | — |  |  | 24,348 |
Unearned premiums | 3,029 |  |  | 2,161 |  |  | 624 |  |  | 128 |  |  | — |  |  | — |  |  | 5,942 |
Future policy benefits | — |  |  | — |  |  | — |  |  | 11,938 |  |  | — |  |  | — |  |  | 11,938 |
Deferred non-insurance warranty revenue | 4,528 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4,528 |

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Three months ended March 31, 2021 | Specialty |  | Commercial |  | International |  | Life & Group |  | Corporate & Other |  |  |  |
(In millions) |  |  |  |  | Eliminations |  | Total
Operating revenues |  |  |  |  |  |  |  |  |  |  |  |  |
Net earned premiums | $ | 735 |  |  | $ | 855 |  |  | $ | 252 |  |  | $ | 120 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,962 |
Net investment income | 117 |  |  | 148 |  |  | 14 |  |  | 219 |  |  | 6 |  |  | — |  |  | 504 |
Non-insurance warranty revenue | 338 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 338 |
Other revenues | — |  |  | 5 |  |  | — |  |  | 1 |  |  | 1 |  |  | (2) |  |  | 5 |
Total operating revenues | 1,190 |  |  | 1,008 |  |  | 266 |  |  | 340 |  |  | 7 |  |  | (2) |  |  | 2,809 |
Claims, benefits and expenses |  |  |  |  |  |  |  |  |  |  |  |  |
Net incurred claims and benefits | 427 |  |  | 639 |  |  | 155 |  |  | 281 |  |  | (2) |  |  | — |  |  | 1,500 |
Policyholders’ dividends | 1 |  |  | 5 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6 |
Amortization of deferred acquisition costs | 154 |  |  | 153 |  |  | 52 |  |  | — |  |  | — |  |  | — |  |  | 359 |
Non-insurance warranty expense | 311 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 311 |
Other insurance related expenses | 70 |  |  | 115 |  |  | 35 |  |  | 25 |  |  | 10 |  |  | — |  |  | 255 |
Other expenses | 11 |  |  | 9 |  |  | (5) |  |  | 2 |  |  | 42 |  |  | (2) |  |  | 57 |
Total claims, benefits and expenses | 974 |  |  | 921 |  |  | 237 |  |  | 308 |  |  | 50 |  |  | (2) |  |  | 2,488 |
Core income (loss) before income tax | 216 |  |  | 87 |  |  | 29 |  |  | 32 |  |  | (43) |  |  | — |  |  | 321 |
Income tax (expense) benefit on core income (loss) | (46) |  |  | (18) |  |  | (5) |  |  | 4 |  |  | 7 |  |  | — |  |  | (58) |
Core income (loss) | $ | 170 |  |  | $ | 69 |  |  | $ | 24 |  |  | $ | 36 |  |  | $ | (36) |  |  | $ | — |  |  | 263 |
Net investment gains (losses) |  |  |  |  |  |  |  |  |  |  |  |  | 57 |
Income tax (expense) benefit on net investment gains (losses) |  |  |  |  |  |  |  |  |  |  |  |  | (8) |
Net investment gains (losses), after tax |  |  |  |  |  |  |  |  |  |  |  |  | 49 |
Net income (loss) |  |  |  |  |  |  |  |  |  |  |  |  | $ | 312 |

December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |
(In millions) |  |  |  |  |  |  |  |  |  |  |  |  |
Reinsurance receivables | $ | 1,200 |  |  | $ | 923 |  |  | $ | 381 |  |  | $ | 401 |  |  | $ | 2,579 |  |  | $ | — |  |  | $ | 5,484 |
Insurance receivables | 1,136 |  |  | 1,488 |  |  | 340 |  |  | 6 |  |  | 4 |  |  | — |  |  | 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 |

33

T a b l e o f C o n t e n t s
The following table presents operating revenues by line of business for each reportable segment.

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Specialty |  |  |
Management & Professional Liability | $ | 673 |  |  | $ | 667 |
Surety | 148 |  |  | 142 |
Warranty & Alternative Risks | 437 |  |  | 381 |
Specialty revenues | 1,258 |  |  | 1,190 |
Commercial |  |  |
Middle Market | 362 |  |  | 375 |
Construction | 324 |  |  | 309 |
Small Business | 138 |  |  | 126 |
Other Commercial | 206 |  |  | 198 |
Commercial revenues | 1,030 |  |  | 1,008 |
International |  |  |
Canada | 88 |  |  | 79 |
Europe | 120 |  |  | 111 |
Hardy | 69 |  |  | 76 |
International revenues | 277 |  |  | 266 |
Life & Group revenues | 331 |  |  | 340 |
Corporate & Other revenues | 2 |  |  | 7 |
Eliminations | (2) |  |  | (2) |
Total operating revenues | 2,896 |  |  | 2,809 |
Net investment gains (losses) | (11) |  |  | 57 |
Total revenues | $ | 2,885 |  |  | $ | 2,866 |

34

T a b l e o f C o n t e n t s
Note J. Non-Insurance Revenues from Contracts with Customers
The Company had deferred non-insurance warranty revenue balances of $4.5 billion reported in Deferred non-insurance warranty revenue as of March 31, 2022 and December 31, 2021. For the three months ended March 31, 2022 and 2021, the Company recognized $0.4 billion and $0.3 billion of revenues that were included in the deferred revenue balance as of January 1, 2022 and 2021. For the three months ended March 31, 2022 and 2021, 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 $1.0 billion of the deferred revenue in the remainder of 2022, $1.1 billion in 2023, $0.9 billion in 2024 and $1.5 billion thereafter.
35

T a b l e o f C o n t e n t s
Item 2. Management's Discussion and Analysis (MD&A) of Financial Condition and Results of Operations
OVERVIEW
The following discussion highlights significant factors affecting the Company. References to “we,” “our,” “us” or like terms refer to the business of CNA.
The following discussion should be read in conjunction with the Condensed Consolidated Financial Statements included under Part I, Item 1 of this Form 10-Q and Item 1A Risk Factors and Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2021.
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 in Note I to the Condensed Consolidated Financial Statements included under Part I, Item 1. For reconciliations of non-GAAP measures to the most comparable GAAP measures and other information, please refer herein and/or to CNA's most recent Annual Report on Form 10-K on file with the Securities and Exchange Commission.
In evaluating the results of our Specialty, Commercial and International segments, we utilize the loss ratio, the 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 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 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 Condensed Consolidated Financial Statements included under Part I, Item 1.
36

T a b l e o f C o n t e n t s
CRITICAL ACCOUNTING ESTIMATES
The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the amount of revenues and expenses reported during the period. Actual results may differ from those estimates.
Our Condensed Consolidated Financial Statements and accompanying notes have been prepared in accordance with GAAP applied on a consistent basis. We continually evaluate the accounting policies and estimates used to prepare the Condensed Consolidated Financial Statements. In general, our estimates are based on historical experience, evaluation of current trends, information from third-party professionals and various other assumptions that are believed to be reasonable under the known facts and circumstances.
The accounting estimates discussed below are considered by us to be critical to an understanding of our Condensed Consolidated Financial Statements as their application places the most significant demands on our judgment:
•Insurance Reserves
•Long Term Care Reserves
•Reinsurance and Insurance Receivables
•Valuation of Investments and Impairment of Securities
•Income Taxes
Due to the inherent uncertainties involved with these types of judgments, actual results could differ significantly from our estimates and may have a material adverse impact on our results of operations, financial condition, equity, business, and insurer financial strength and corporate debt ratings. See the Critical Accounting Estimates section of our Management's Discussion and Analysis of Financial Condition and Results of Operations included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 for further information.
37

T a b l e o f C o n t e n t s
CONSOLIDATED OPERATIONS
Results of Operations
The following table includes the consolidated results of our operations including our financial measure, core income (loss). For more detailed components of our business operations and a discussion of the core income (loss) financial measure, see the Segment Results section within this MD&A. For further discussion of Net investment income and Net investment gains or losses, see the Investments section of this MD&A.

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Operating Revenues |  |  |
Net earned premiums | $ | 2,059 |  |  | $ | 1,962 |
Net investment income | 448 |  |  | 504 |
Non-insurance warranty revenue | 382 |  |  | 338 |
Other revenues | 7 |  |  | 5 |
Total operating revenues | 2,896 |  |  | 2,809 |
Claims, Benefits and Expenses |  |  |
Net incurred claims and benefits | 1,449 |  |  | 1,500 |
Policyholders' dividends | 6 |  |  | 6 |
Amortization of deferred acquisition costs | 344 |  |  | 359 |
Non-insurance warranty expense | 354 |  |  | 311 |
Other insurance related expenses | 291 |  |  | 255 |
Other expenses | 63 |  |  | 57 |
Total claims, benefits and expenses | 2,507 |  |  | 2,488 |
Core income before income tax | 389 |  |  | 321 |
Income tax expense on core income | (73) |  |  | (58) |
Core income | 316 |  |  | 263 |
Net investment (losses) gains | (11) |  |  | 57 |
Income tax benefit (expense) on net investment (losses) gains | 8 |  |  | (8) |
Net investment (losses) gains, after tax | (3) |  |  | 49 |
Net income | $ | 313 |  |  | $ | 312 |

Core income increased $53 million for the three months ended March 31, 2022 as compared with the same period in 2021. Core income for our Property & Casualty Operations increased $58 million due to lower catastrophe losses and improved non-catastrophe current accident year underwriting results partially offset by lower net investment income driven by limited partnership and common stock returns. Core income for our Life & Group segment decreased $13 million while core loss for our Corporate & Other segment improved $8 million.
Catastrophe losses were $19 million and $125 million for the three months ended March 31, 2022 and 2021. Catastrophe losses for the three months ended March 31, 2022 were primarily related to severe weather related events. Catastrophe losses for the three months ended March 31, 2021 were primarily driven by Winter Storms Uri and Viola. Favorable net prior year loss reserve development of $12 million and $15 million was recorded in the three months ended March 31, 2022 and 2021 related to our Specialty and Commercial segments. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.
38

T a b l e o f C o n t e n t s
SEGMENT RESULTS
The following discusses the results of operations for our business segments. Our property and casualty commercial insurance operations are managed and reported in three business segments: Specialty, Commercial and International, which we refer to collectively as Property & Casualty Operations. Our operations outside of Property & Casualty Operations are managed and reported in two segments: Life & Group and Corporate & Other.
39

T a b l e o f C o n t e n t s
Specialty
The following table details the results of operations for Specialty.

Three months ended March 31 |  |  |
(In millions, except ratios, rate, renewal premium change and retention) | 2022 |  | 2021
Gross written premiums | $ | 1,846 |  |  | $ | 1,794 |
Gross written premiums excluding third-party captives | 885 |  |  | 816 |
Net written premiums | 771 |  |  | 742 |
Net earned premiums | 772 |  |  | 735 |
Net investment income | 103 |  |  | 117 |
Core income | 163 |  |  | 170 |
Other performance metrics: |  |  |
Loss ratio excluding catastrophes and development | 58.9 | % |  | 59.4 | %
Effect of catastrophe impacts | — |  |  | 0.7 |
Effect of development-related items | (1.3) |  |  | (2.1) |
Loss ratio | 57.6 |  |  | 58.0 |
Expense ratio | 30.9 |  |  | 30.6 |
Dividend ratio | 0.2 |  |  | 0.2 |
Combined ratio | 88.7 | % |  | 88.8 | %
Combined ratio excluding catastrophes and development | 90.0 | % |  | 90.2 | %
Rate | 9 | % |  | 11 | %
Renewal premium change | 10 |  |  | 12 |
Retention | 85 |  |  | 86 |
New business | $ | 145 |  |  | $ | 103 |

Gross written premiums, excluding third-party captives, for Specialty increased $69 million for the three months ended March 31, 2022 as compared with the same period in 2021 driven by higher new business and rate. Net written premiums for Specialty increased $29 million for the three months ended March 31, 2022 as compared with the same period in 2021. The increase in net earned premiums was consistent with the trend in net written premiums.
Core income decreased $7 million for the three months ended March 31, 2022 as compared with the same period in 2021 primarily due to lower net investment income driven by limited partnership and common stock returns partially offset by improved current accident year underwriting results.
The combined ratio of 88.7% improved 0.1 point for the three months ended March 31, 2022 as compared with the same period in 2021 due to a 0.4 point improvement in the loss ratio largely offset by a 0.3 point increase in the expense ratio. The improvement in the loss ratio was primarily driven by improved current accident year underwriting results partially offset by lower favorable net prior year loss reserve development. There were no catastrophe losses for the three months ended March 31, 2022, as compared with $5 million, or 0.7 points of the loss ratio, for the three months ended March 31, 2021. The increase in the expense ratio was driven by higher underwriting expenses partially offset by higher net earned premiums.
Favorable net prior year loss reserve development of $10 million and $15 million was recorded for the three months ended March 31, 2022 and 2021. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.
40

T a b l e o f C o n t e n t s
The following table summarizes the gross and net carried reserves for Specialty.

(In millions) | March 31, 2022 |  | December 31, 2021
Gross case reserves | $ | 1,570 |  |  | $ | 1,578 |
Gross IBNR reserves | 5,053 |  |  | 4,855 |
Total gross carried claim and claim adjustment expense reserves | $ | 6,623 |  |  | $ | 6,433 |
Net case reserves | $ | 1,348 |  |  | $ | 1,338 |
Net IBNR reserves | 4,035 |  |  | 3,927 |
Total net carried claim and claim adjustment expense reserves | $ | 5,383 |  |  | $ | 5,265 |

41

T a b l e o f C o n t e n t s
Commercial
The following table details the results of operations for Commercial.

Three months ended March 31 |  |  |
(In millions, except ratios, rate, renewal premium change and retention) | 2022 |  | 2021
Gross written premiums | $ | 1,208 |  |  | $ | 1,113 |
Gross written premiums excluding third-party captives | 1,206 |  |  | 1,111 |
Net written premiums | 1,001 |  |  | 960 |
Net earned premiums | 904 |  |  | 855 |
Net investment income | 118 |  |  | 148 |
Core income | 132 |  |  | 69 |
Other performance metrics: |  |  |
Loss ratio excluding catastrophes and development | 61.5 | % |  | 60.8 | %
Effect of catastrophe impacts | 1.8 |  |  | 13.4 |
Effect of development-related items | — |  |  | 0.5 |
Loss ratio | 63.3 |  |  | 74.7 |
Expense ratio | 30.7 |  |  | 31.4 |
Dividend ratio | 0.5 |  |  | 0.6 |
Combined ratio | 94.5 | % |  | 106.7 | %
Combined ratio excluding catastrophes and development | 92.7 | % |  | 92.8 | %
Rate | 5 | % |  | 10 | %
Renewal premium change | 8 |  |  | 11 |
Retention | 85 |  |  | 83 |
New business | $ | 228 |  |  | $ | 211 |

Gross written premiums for Commercial increased $95 million for the three months ended March 31, 2022 as compared with the same period in 2021 driven by rate and retention. Net written premiums for Commercial increased $41 million for the three months ended March 31, 2022 as compared with the same period in 2021. The increase in net earned premiums was consistent with the trend in net written premiums.
Core income increased $63 million for the three months ended March 31, 2022 as compared with the same period in 2021, primarily due to lower catastrophe losses partially offset by lower net investment income driven by limited partnership and common stock returns.
The combined ratio of 94.5% improved 12.2 points for the three months ended March 31, 2022 as compared with the same period in 2021 primarily due to a 11.4 point improvement in the loss ratio and a 0.7 point improvement in the expense ratio. The improvement in the loss ratio was primarily due to lower catastrophe losses. Catastrophe losses were $16 million, or 1.8 points of the loss ratio, for the three months ended March 31, 2022, as compared with $115 million, or 13.4 points of the loss ratio, for the three months ended March 31, 2021. The combined ratio excluding catastrophes and development improved 0.1 point for the three months ended March 31, 2022 as compared with the same period in 2021. The improvement in the expense ratio of 0.7 points was driven by higher net earned premiums and lower acquisition costs partially offset by an increase in underwriting expenses. The loss ratio excluding catastrophes and development increased 0.7 points due to a shift in mix of business associated with the property quota share treaty we purchased during the second quarter of 2021. Our property coverages, which have a lower underlying loss ratio than most other commercial coverages, now represent a smaller proportion of net earned premiums. On a mix adjusted basis, there was no change in the underlying loss ratio.
Favorable net prior year loss reserve development of $2 million was recorded for the three months ended March 31, 2022 as compared with no net prior year loss reserve development for the three months ended March 31, 2021. Further information on net prior year loss reserve development is in Note E to the Condensed Consolidated Financial Statements included under Part I, Item 1.
42

T a b l e o f C o n t e n t s
The following table summarizes the gross and net carried reserves for Commercial.

(In millions) | March 31, 2022 |  | December 31, 2021
Gross case reserves | $ | 3,102 |  |  | $ | 3,184 |
Gross IBNR reserves | 5,832 |  |  | 5,706 |
Total gross carried claim and claim adjustment expense reserves | $ | 8,934 |  |  | $ | 8,890 |
Net case reserves | $ | 2,796 |  |  | $ | 2,850 |
Net IBNR reserves | 5,315 |  |  | 5,215 |
Total net carried claim and claim adjustment expense reserves | $ | 8,111 |  |  | $ | 8,065 |

43

T a b l e o f C o n t e n t s
International
The following table details the results of operations for International.

Three months ended March 31 |  |  |
(In millions, except ratios, rate, renewal premium change and retention) | 2022 |  | 2021
Gross written premiums | $ | 363 |  |  | $ | 343 |
Net written premiums | 251 |  |  | 235 |
Net earned premiums | 264 |  |  | 252 |
Net investment income | 14 |  |  | 14 |
Core income | 26 |  |  | 24 |
Other performance metrics: |  |  |
Loss ratio excluding catastrophes and development | 58.6 | % |  | 59.6 | %
Effect of catastrophe impacts | 1.2 |  |  | 2.0 |
Effect of development-related items | — |  |  | (0.1) |
Loss ratio | 59.8 |  |  | 61.5 |
Expense ratio | 32.6 |  |  | 34.4 |
Combined ratio | 92.4 | % |  | 95.9 | %
Combined ratio excluding catastrophes and development | 91.2 | % |  | 94.0 | %
Rate | 9 | % |  | 14 | %
Renewal premium change | 10 |  |  | 12 |
Retention | 73 |  |  | 75 |
New business | $ | 78 |  |  | $ | 80 |

Gross written premiums for International increased $20 million for the three months ended March 31, 2022 as compared with the same period in 2021. Excluding the effect of foreign currency exchange rates, gross written premiums increased $30 million driven by rate. Net written premiums for International increased $16 million for the three months ended March 31, 2022 as compared with the same period in 2021. Excluding the effect of foreign currency exchange rates, net written premiums increased $26 million for the three months ended March 31, 2022 as compared with the same period in 2021. The increase in net earned premiums was consistent with the trend in net written premiums.
Core income increased $2 million for the three months ended March 31, 2022 as compared with the same period in 2021 driven by improved current accident year underwriting results.
The combined ratio of 92.4% improved 3.5 points for the three months ended March 31, 2022 as compared with the same period in 2021 due to a 1.8 point improvement in the expense ratio and a 1.7 point improvement in the loss ratio. The improvement in the expense ratio was driven by lower acquisition costs and higher net earned premiums. The improvement in the loss ratio was driven by improved current accident year underwriting results. Catastrophe losses were $3 million, or 1.2 points of the loss ratio, for 2022, as compared with $5 million, or 2.0 points of the loss ratio, for the three months ended March 31, 2021.
There was no net prior year loss reserve development for the three months ended March 31, 2022 or 2021.
44

T a b l e o f C o n t e n t s
The following table summarizes the gross and net carried reserves for International.

(In millions) | March 31, 2022 |  | December 31, 2021
Gross case reserves | $ | 829 |  |  | $ | 859 |
Gross IBNR reserves | 1,487 |  |  | 1,421 |
Total gross carried claim and claim adjustment expense reserves | $ | 2,316 |  |  | $ | 2,280 |
Net case reserves | $ | 718 |  |  | $ | 744 |
Net IBNR reserves | 1,251 |  |  | 1,196 |
Total net carried claim and claim adjustment expense reserves | $ | 1,969 |  |  | $ | 1,940 |

45

T a b l e o f C o n t e n t s
Life & Group
The following table summarizes the results of operations for Life & Group.

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Net earned premiums | $ | 120 |  |  | $ | 120 |
Net investment income | 212 |  |  | 219 |
Core income before income tax | 16 |  |  | 32 |
Income tax benefit on core income | 7 |  |  | 4 |
Core income | 23 |  |  | 36 |

Core income decreased $13 million for the three months ended March 31, 2022 as compared with the same period in 2021 primarily due to lower net investment income and higher expenses.
Corporate & Other
The following table summarizes the results of operations for the Corporate & Other segment, including intersegment eliminations.

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Net investment income | $ | 1 |  |  | $ | 6 |
Interest expense | 28 |  |  | 28 |
Core loss | (28) |  |  | (36) |

Core loss improved $8 million for the three months ended March 31, 2022 as compared with the same period in 2021. The prior period included the recognition of a $12 million after-tax loss resulting from the legacy Excess Workers' Compensation (EWC) Loss Portfolio Transfer (LPT).
The following table summarizes the gross and net carried reserves for Corporate & Other.

(In millions) | March 31, 2022 |  | December 31, 2021
Gross case reserves | $ | 1,580 |  |  | $ | 1,551 |
Gross IBNR reserves | 1,183 |  |  | 1,266 |
Total gross carried claim and claim adjustment expense reserves | $ | 2,763 |  |  | $ | 2,817 |
Net case reserves | $ | 139 |  |  | $ | 146 |
Net IBNR reserves | 144 |  |  | 148 |
Total net carried claim and claim adjustment expense reserves | $ | 283 |  |  | $ | 294 |

46

T a b l e o f C o n t e n t s
INVESTMENTS
Net Investment Income
The significant components of Net investment income are presented in the following table. Fixed income securities, as presented, include both fixed maturity securities and non-redeemable preferred stock.

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Fixed income securities: |  |  |
Taxable fixed income securities | $ | 368 |  |  | $ | 359 |
Tax-exempt fixed income securities | 73 |  |  | 80 |
Total fixed income securities | 441 |  |  | 439 |
Limited partnership and common stock investments | 8 |  |  | 61 |
Other, net of investment expense | (1) |  |  | 4 |
Net investment income | $ | 448 |  |  | $ | 504 |
Effective income yield for the fixed income securities portfolio | 4.3 | % |  | 4.4 | %
Limited partnership and common stock return | 0.4 | % |  | 3.4 | %

Net investment income decreased $56 million for the three months ended March 31, 2022 as compared with the same period in 2021 driven by lower limited partnership and common stock returns.
Net Investment Gains (Losses)
The components of Net investment gains (losses) are presented in the following table.

Three months ended March 31 |  |  |
(In millions) | 2022 |  | 2021
Fixed maturity securities: |  |  |
Corporate and other bonds | $ | 3 |  |  | $ | 36 |
States, municipalities and political subdivisions | 3 |  |  | (1) |
Asset-backed | (8) |  |  | 3 |
Total fixed maturity securities | (2) |  |  | 38 |
Non-redeemable preferred stock | (38) |  |  | 2 |
Short term and other | 29 |  |  | 17 |
Net investment (losses) gains | (11) |  |  | 57 |
Income tax benefit (expense) on net investment (losses) gains | 8 |  |  | (8) |
Net investment (losses) gains, after tax | $ | (3) |  |  | $ | 49 |

Net investment results decreased $68 million for the three months ended March 31, 2022 as compared with the same period in 2021 driven by the unfavorable change in fair value of non-redeemable preferred stock and lower net investment gains on disposals of fixed maturity securities.
Further information on our investment gains and losses is set forth in Note C to the Condensed Consolidated Financial Statements included under Part I, Item 1.
47

T a b l e o f C o n t e n t s
Portfolio Quality
The following table presents the estimated fair value and net unrealized gains (losses) of our fixed maturity securities by rating distribution.

| March 31, 2022 |  | December 31, 2021
(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 | $ | 2,497 |  |  | $ | (107) |  |  | $ | 2,600 |  |  | $ | 42 |
AAA | 3,513 |  |  | 97 |  |  | 3,784 |  |  | 360 |
AA | 7,243 |  |  | 160 |  |  | 7,665 |  |  | 823 |
A | 9,062 |  |  | 366 |  |  | 9,511 |  |  | 1,087 |
BBB | 17,497 |  |  | 552 |  |  | 18,458 |  |  | 2,043 |
Non-investment grade | 2,133 |  |  | (34) |  |  | 2,362 |  |  | 91 |
Total | $ | 41,945 |  |  | $ | 1,034 |  |  | $ | 44,380 |  |  | $ | 4,446 |

As of March 31, 2022 and December 31, 2021, 1% of our fixed maturity portfolio was rated internally. AAA rated securities included $1.5 billion and $1.7 billion of pre-refunded municipal bonds as of March 31, 2022 and December 31, 2021.
The following table presents available-for-sale fixed maturity securities in a gross unrealized loss position by ratings distribution.

| March 31, 2022
(In millions) | Estimated Fair Value |  | Gross Unrealized Losses
U.S. Government, Government agencies and Government-sponsored enterprises | $ | 2,095 |  |  | $ | 116 |
AAA | 993 |  |  | 105 |
AA | 2,809 |  |  | 269 |
A | 3,300 |  |  | 205 |
BBB | 6,073 |  |  | 392 |
Non-investment grade | 1,254 |  |  | 70 |
Total | $ | 16,524 |  |  | $ | 1,157 |

The following table presents the maturity profile for these available-for-sale fixed maturity securities. Securities not due to mature on a single date are allocated based on weighted average life.

| March 31, 2022
(In millions) | Estimated Fair Value |  | Gross Unrealized Losses
Due in one year or less | 238 |  |  | 4 |
Due after one year through five years | 3,081 |  |  | 97 |
Due after five years through ten years | 7,754 |  |  | 465 |
Due after ten years | 5,451 |  |  | 591 |
Total | $ | 16,524 |  |  | $ | 1,157 |

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Duration
A primary objective in the management of the investment portfolio is to optimize return relative to the corresponding liabilities and respective liquidity needs. Our views on the current interest rate environment, tax regulations, asset class valuations, specific security issuer and broader industry segment conditions as well as domestic and global economic conditions, are some of the factors that enter into an investment decision. We also continually monitor exposure to issuers of securities held and broader industry sector exposures and may from time to time adjust such exposures based on our views of a specific issuer or industry sector.
A further consideration in the management of the investment portfolio is the characteristics of the corresponding liabilities and the ability to align the duration of the portfolio to those liabilities and to meet future liquidity needs, minimize interest rate risk and maintain a level of income sufficient to support the underlying insurance liabilities. For portfolios where future liability cash flows are determinable and typically long term in nature, we segregate investments for asset/liability management purposes. The segregated investments support the long term care and structured settlement liabilities in the Life & Group segment.
The effective durations of fixed income securities and short term investments are presented in the following table. Amounts presented are net of payable and receivable amounts for securities purchased and sold, but not yet settled.

| March 31, 2022 |  | December 31, 2021
(In millions) | Estimated Fair Value |  | Effective Duration (In years) |  | Estimated Fair Value |  | Effective Duration (In years)
Investments supporting Life & Group | $ | 16,868 |  |  | 8.9 |  |  | $ | 18,458 |  |  | 9.2 |
Other investments | 27,045 |  |  | 5.0 |  |  | 28,915 |  |  | 4.9 |
Total | $ | 43,913 |  |  | 6.5 |  |  | $ | 47,373 |  |  | 6.6 |

The investment portfolio is periodically analyzed for changes in duration and related price risk. Certain securities have duration characteristics that are variable based on market interest rates, credit spreads and other factors that may drive variability in the amount and timing of cash flows. Additionally, we periodically review the sensitivity of the portfolio to the level of foreign exchange rates and other factors that contribute to market price changes. A summary of these risks and specific analysis on changes is included in the Quantitative and Qualitative Disclosures About Market Risk included under Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2021.
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LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
Our primary operating cash flow sources are premiums and investment income. Our primary operating cash flow uses are payments for claims, policy benefits and operating expenses, including interest expense on corporate debt. Additionally, cash may be paid or received for income taxes.
For the three months ended March 31, 2022, net cash provided by operating activities was $645 million as compared with $82 million for the same period in 2021. The increase in cash provided by operating activities was driven by the prior year payment of the EWC LPT premium.
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 $129 million for the three months ended March 31, 2022, as compared with net cash provided of $408 million for the same period in 2021. 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.
For the three months ended March 31, 2022, net cash used by financing activities was $688 million as compared with $321 million for the same period in 2021. In the first quarter of 2022, we paid dividends of $657 million and repurchased 445,000 shares of common stock at an aggregate cost of $21 million. In the first quarter of 2021, we paid dividends of $310 million and repurchased 66,000 shares of our common stock at an aggregate cost of $3 million.
Common Stock Dividends
Cash dividends of $2.40 per share on our common stock, including a special cash dividend of $2.00 per share, were declared and paid during the three months ended March 31, 2022. On April 29, 2022, our Board of Directors declared a quarterly cash dividend of $0.40 per share, payable June 2, 2022 to stockholders of record on May 16, 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.
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Liquidity
We believe that our present cash flows from operating, investing and financing activities are sufficient to fund our current and expected working capital and debt obligation needs and we do not expect this to change in the near term. There are currently no amounts outstanding under our $250 million senior unsecured revolving credit facility and no borrowings outstanding through our membership in the Federal Home Loan Bank of Chicago (FHLBC).
Dividends from Continental Casualty Company (CCC) are subject to the insurance holding company laws of the State of Illinois, the domiciliary state of CCC. Under these laws, ordinary dividends, or dividends that do not require prior approval by the Illinois Department of Insurance (the Department), are determined based on the greater of the prior year's statutory net income or 10% of statutory surplus as of the end of the prior year, as well as timing and amount of dividends paid in the preceding twelve months. Additionally, ordinary dividends may only be paid from earned surplus, which is calculated by removing unrealized gains from unassigned surplus. As of March 31, 2022, CCC was in a positive earned surplus position. CCC paid dividends of $535 million and $330 million during the three months ended March 31, 2022 and 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.
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.
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ACCOUNTING STANDARDS UPDATE
In August 2018, the FASB issued ASU 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The updated accounting guidance requires changes to the measurement and disclosure of long-duration contracts. For the Company, this includes the Long term care and fully-ceded single premium immediate annuity business.
The most significant impact will be the effect of updating the discount rate assumption quarterly to reflect an upper-medium grade fixed-income instrument yield, rather than CNA’s expected investment portfolio yield. This 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 $2.2 billion - $2.5 billion decrease in Accumulated other comprehensive income as of the transition date of January 1, 2021. To illustrate the sensitivity of this adjustment, had the Company used interest rates in effect as of March 31, 2022 in its calculation, the transition impact would have been a $1.0 billion - $1.3 billion decrease in Accumulated other comprehensive income.
For a discussion of Accounting Standards Updates, see Note A to the Condensed Consolidated Financial Statements included under Part I, Item 1.
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 as well as those risks contained in the Risk Factors section of our 2021 Annual Report on Form 10-K:
Company-Specific Factors
•the risks and uncertainties associated with our insurance reserves, as outlined in the Critical Accounting Estimates and the Reserves - Estimates and Uncertainties sections of our 2021 Annual Report on Form 10-K, including the sufficiency of the reserves and the possibility for future increases, which would be reflected in the results of operations in the period that the need for such adjustment is determined;
•the risk that the other parties to the transactions in which, subject to certain limitations, we ceded our legacy A&EP and 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 or regulatory 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;
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•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 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.
Regulatory and Legal Factors
•regulatory and legal initiatives and compliance with governmental regulations and other legal requirements, including with respect to cyber security protocols, 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 Quarterly Report on Form 10-Q and we do not undertake any obligation to update or revise any forward-looking statement to reflect events or circumstances after the date of the statement, even if our expectations or any related events or circumstances change.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes in our market risk components for the three months ended March 31, 2022. See the Quantitative and Qualitative Disclosures About Market Risk included in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2021 for further information. Additional information related to portfolio duration is discussed in the Investments section of our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part I, Item 2.
Item 4. Controls and Procedures
The Company maintains a system of disclosure controls and procedures which are designed to ensure that information required to be disclosed by the Company in reports that it files or submits to the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including this report, is recorded, processed, summarized and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the Exchange Act is accumulated and communicated to the Company's management on a timely basis to allow decisions regarding required disclosure.
As of March 31, 2022, 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 Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on this evaluation, the CEO and CFO have concluded that the Company's disclosure controls and procedures are effective March 31, 2022.
There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15 (f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II. Other Information
Item 1. Legal Proceedings
Information on our legal proceedings is set forth in Note F to the Condensed Consolidated Financial Statements included under Part I, Item 1.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Items 2 (a) and (b) are not applicable
(c) The table below details the repurchases of our common stock made during the three months ended March 31, 2022.

Period |  | (a) Total number of shares purchased |  | (b) Average price paid per share |  |  | (c) Total number of shares purchased as part of publicly announced plans or programs |  | (d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (in millions)
February 1, 2022 - February 28, 2022 |  | 50,679 |  |  | $ | 45.85 |  |  |  |  |  | N/A |  | N/A
March 1, 2022 - March 31, 2022 |  | 394,321 |  |  | $ | 46.57 |  |  |  |  | N/A |  | N/A
Total |  | 445,000 |  |  |  |  |  | N/A |  | N/A

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Item 6. Exhibits
See Exhibit Index.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

|  | CNA Financial Corporation
Dated: May 2, 2022 | By | /s/ Scott R. Lindquist
|  | Scott R. Lindquist Executive Vice President and Chief Financial Officer (Duly authorized officer and principal financial officer)

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EXHIBIT INDEX

Description of Exhibit | Exhibit Number
General Release and Separation Agreement, dated March 14, 2022, between CNA Financial Corporation and Kevin Smith | 10.1
General Release and Separation Agreement, dated April 4, 2022, between CNA Financial Corporation and Kevin Leidwinger | 10.2
Certification of Chief Executive Officer | 31.1
Certification of Chief Financial Officer | 31.2
Written Statement of the Chief Executive Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002) | 32.1
Written Statement of the Chief Financial Officer of CNA Financial Corporation Pursuant to 18 U.S.C. Section 1350 (As adopted by Section 906 of the Sarbanes-Oxley Act of 2002) | 32.2
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | 101.INS
Inline XBRL Taxonomy Extension Schema | 101.SCH
Inline XBRL Taxonomy Extension Calculation Linkbase | 101.CAL
Inline XBRL Taxonomy Extension Definition Linkbase | 101.DEF
Inline XBRL Taxonomy Label Linkbase | 101.LAB
Inline XBRL Taxonomy Extension Presentation Linkbase | 101.PRE
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | 104.1

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