Edgar Filing: LOEWS CORP

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013

[ ]

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 1-6541

LOEWS CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

13-2646102

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

667 Madison Avenue, New York, N.Y. 10065-8087

(Address of principal executive offices) (Zip Code)

(212) 521-2000

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

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 X No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

Yes X No Not Applicable

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer X Accelerated filer Non-accelerated filer Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No X


Class		Outstanding at July 19, 2013
Common stock, $0.01 par value		387,316,565 shares

INDEX


	Page No.

Part I. Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Condensed Balance Sheets June 30, 2013 and December 31, 2012		3
Consolidated Condensed Statements of Income Three and six months ended June 30, 2013 and 2012		4
Consolidated Condensed Statements of Comprehensive Income Three and six months ended June 30, 2013 and 2012		5
Consolidated Condensed Statements of Equity Six months ended June 30, 2013 and 2012		6
Consolidated Condensed Statements of Cash Flows Six months ended June 30, 2013 and 2012		7
Notes to Consolidated Condensed Financial Statements		8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		38
Item 3. Quantitative and Qualitative Disclosures about Market Risk		66
Item 4. Controls and Procedures		66
Part II. Other Information		67
Item 1. Legal Proceedings		67
Item 1A. Risk Factors		67
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		67
Item 6. Exhibits		68

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)


	June 30, 2013		December 31, 2012

(Dollar amounts in millions, except per share data)

Assets:

Investments:
Fixed maturities, amortized cost of $39,114 and $38,324	$	41,595	$	42,765
Equity securities, cost of $903 and $893		856		898
Limited partnership investments		3,317		3,090
Other invested assets, primarily mortgage loans		473		460
Short term investments		6,091		5,835

Total investments		52,332		53,048
Cash		166		228
Receivables		9,519		9,366
Property, plant and equipment		14,525		13,935
Goodwill		989		996
Other assets		1,618		1,538
Deferred acquisition costs of insurance subsidiaries		650		598
Separate account business		247		312

Total assets	$	80,046	$	80,021


Liabilities and Equity:

Insurance reserves:
Claim and claim adjustment expense	$	24,339	$	24,763
Future policy benefits		10,787		11,475
Unearned premiums		3,869		3,610
Policyholders’ funds		133		157

Total insurance reserves		39,128		40,005
Payable to brokers		520		205
Short term debt		33		19
Long term debt		10,039		9,191
Deferred income taxes		749		840
Other liabilities		4,688		4,773
Separate account business		247		312

Total liabilities		55,404		55,345

Preferred stock, $0.10 par value:
Authorized – 100,000,000 shares
Common stock, $0.01 par value:
Authorized – 1,800,000,000 shares
Issued – 392,282,321 and 392,054,766 shares		4		4
Additional paid-in capital		3,643		3,595
Retained earnings		15,654		15,192
Accumulated other comprehensive income		37		678

		19,338		19,469

Less treasury stock, at cost (4,276,200 and 249,600 shares)		(187)		(10)

Total shareholders’ equity		19,151		19,459
Noncontrolling interests		5,491		5,217

Total equity		24,642		24,676

Total liabilities and equity	$	80,046	$	80,021

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,

	2013		2012		2013		2012

(In millions, except per share data)

Revenues:
Insurance premiums	$	1,800	$	1,668	$	3,564	$	3,317
Net investment income		579		386		1,220		1,112
Investment gains (losses):
Other-than-temporary impairment losses		(16)		(12)		(34)		(27)
Portion of other-than-temporary impairment losses recognized in Other comprehensive income (loss)				(11)				(23)

Net impairment losses recognized in earnings		(16)		(23)		(34)		(50)
Other net investment gains		2		43		44		102

Total investment gains (losses)		(14)		20		10		52
Contract drilling revenues		745		726		1,445		1,481
Other		615		588		1,220		1,170

Total		3,725		3,388		7,459		7,132


Expenses:
Insurance claims and policyholders’ benefits		1,521		1,348		2,950		2,729
Amortization of deferred acquisition costs		335		309		663		604
Contract drilling expenses		369		405		744		802
Other operating expenses (Note 1)		807		1,001		1,789		1,820
Interest		112		111		220		222

Total		3,144		3,174		6,366		6,177

Income before income tax		581		214		1,093		955
Income tax expense		(169)		(16)		(283)		(238)

Net income		412		198		810		717
Amounts attributable to noncontrolling interests		(143)		(142)		(299)		(294)

Net income attributable to Loews Corporation	$	269	$	56	$	511	$	423


Basic net income per share	$	0.69	$	0.14	$	1.31	$	1.07


Diluted net income per share	$	0.69	$	0.14	$	1.31	$	1.06


Dividends per share	$	0.0625	$	0.0625	$	0.125	$	0.125


Weighted-average shares outstanding:
Shares of common stock		388.79		396.40		390.08		396.59
Dilutive potential shares of common stock		0.83		0.73		0.80		0.71

Total weighted-average shares outstanding assuming dilution		389.62		397.13		390.88		397.30

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,

	2013		2012		2013		2012

(In millions)

Net income	$	412	$	198	$	810	$	717


Other comprehensive income (loss), after tax
Changes in:
Net unrealized gains (losses) on investments with other-than-temporary impairments		(8)		(3)		6		37
Net other unrealized gains (losses) on investments		(585)		120		(647)		337

Total unrealized gains (losses) on available-for-sale investments		(593)		117		(641)		374
Unrealized gains (losses) on cash flow hedges		10		(2)		(11)		13
Pension liability		5		4		9		11
Foreign currency		(13)		(19)		(74)		2


Other comprehensive income (loss)		(591)		100		(717)		400


Comprehensive income (loss)		(179)		298		93		1,117

Amounts attributable to noncontrolling interests		(83)		(150)		(225)		(333)


Total comprehensive income (loss) attributable to Loews Corporation	$	(262)	$	148	$	(132)	$	784

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF EQUITY

(Unaudited)


			Loews Corporation Shareholders

	Total		Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Common Stock Held in Treasury		Noncontrolling Interests

(In millions)

Balance, January 1, 2012	$	23,203	$	4	$	3,494	$	14,890	$	384	$	-	$	4,431
Net income		717						423						294
Other comprehensive income		400								361				39
Dividends paid		(266)						(50)						(216)
Issuance of equity securities by subsidiary		222				36				1				185
Purchase of Loews treasury stock		(51)										(51)
Issuance of Loews common stock		5				5
Stock-based compensation		11				10								1
Other		-				(2)								2

Balance, June 30, 2012	$	24,241	$	4	$	3,543	$	15,263	$	746	$	(51)	$	4,736


Balance, January 1, 2013	$	24,676	$	4	$	3,595	$	15,192	$	678	$	(10)	$	5,217
Net income		810						511						299
Other comprehensive loss		(717)								(643)				(74)
Dividends paid		(292)						(49)						(243)
Issuance of equity securities by subsidiary		337				51				2				284
Purchase of Loews treasury stock		(177)										(177)
Issuance of Loews common stock		3				3
Stock-based compensation		7				(6)								13
Other		(5)												(5)

Balance, June 30, 2013	$	24,642	$	4	$	3,643	$	15,654	$	37	$	(187)	$	5,491

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)


Six Months Ended June 30	2013		2012

(In millions)

Operating Activities:

Net income	$	810	$	717
Adjustments to reconcile net income to net cash provided (used) by operating activities, net		613		673
Changes in operating assets and liabilities, net:
Receivables		(180)		257
Deferred acquisition costs		(43)		(17)
Insurance reserves		198		121
Other assets		(70)		(81)
Other liabilities		54		(87)
Trading securities		(879)		(477)

Net cash flow operating activities		503		1,106


Investing Activities:

Purchases of fixed maturities		(5,656)		(5,169)
Proceeds from sales of fixed maturities		3,143		3,303
Proceeds from maturities of fixed maturities		1,820		1,566
Purchases of equity securities		(33)		(27)
Proceeds from sales of equity securities		60		61
Purchases of limited partnership investments		(203)		(83)
Proceeds from sales of limited partnership investments		169		115
Purchases of property, plant and equipment		(1,150)		(869)
Dispositions		24		151
Change in short term investments		616		(116)
Other, net		(83)		(90)

Net cash flow investing activities		(1,293)		(1,158)


Financing Activities:

Dividends paid		(49)		(50)
Dividends paid to noncontrolling interests		(243)		(216)
Purchases of treasury shares		(180)		(51)
Issuance of common stock		3		5
Proceeds from sale of subsidiary stock		370		246
Principal payments on debt		(742)		(1,246)
Issuance of debt		1,598		1,375
Other, net		(23)		(4)

Net cash flow financing activities		734		59


Effect of foreign exchange rate on cash		(6)


Net change in cash		(62)		7
Cash, beginning of period		228		129

Cash, end of period	$	166	$	136

See accompanying Notes to Consolidated Condensed Financial Statements.

Loews Corporation and Subsidiaries

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

Loews Corporation is a holding company. Its subsidiaries are engaged in the following lines of business: commercial property and casualty insurance (CNA Financial Corporation (“CNA”), a 90% owned subsidiary); the operation of offshore oil and gas drilling rigs (Diamond Offshore Drilling, Inc. (“Diamond Offshore”), a 50.4% owned subsidiary); transportation and storage of natural gas and natural gas liquids and gathering and processing of natural gas (Boardwalk Pipeline Partners, LP (“Boardwalk Pipeline”), a 53% owned subsidiary); exploration, production and marketing of natural gas and oil (including condensate and natural gas liquids), (HighMount Exploration & Production LLC (“HighMount”), a wholly owned subsidiary); and the operation of a chain of hotels (Loews Hotels Holding Corporation (“Loews Hotels”), a wholly owned subsidiary). Unless the context otherwise requires, the terms “Company,” “Loews” and “Registrant” as used herein mean Loews Corporation excluding its subsidiaries and the term “Net income (loss) attributable to Loews Corporation” as used herein means Net income (loss) attributable to Loews Corporation shareholders.

In the opinion of management, the accompanying unaudited Consolidated Condensed Financial Statements reflect all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of June 30, 2013 and December 31, 2012 and the results of operations and comprehensive income for the three and six months ended June 30, 2013 and 2012 and changes in shareholders’ equity and cash flows for the six months ended June 30, 2013 and 2012.

Net income for the second quarter and first half of each of the years is not necessarily indicative of net income for that entire year.

Reference is made to the Notes to Consolidated Financial Statements in the 2012 Annual Report on Form 10-K which should be read in conjunction with these Consolidated Condensed Financial Statements.

The Company presents basic and diluted net income per share on the Consolidated Condensed Statements of Income. Basic net income per share excludes dilution and is computed by dividing net income attributable to common stock by the weighted average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Stock appreciation rights (“SARs”) of 1.4 million, 1.9 million, 1.7 million and 2.3 million shares were not included in the diluted weighted average shares amount for the three and six months ended June 30, 2013 and 2012 due to the exercise price being greater than the average stock price.

Bluegrass Project – In the second quarter of 2013, Boardwalk Pipeline executed an agreement with the Williams Companies, Inc. (“Williams”) to continue the development process for the Bluegrass Project, a project that would transport natural gas liquids from the Marcellus and Utica shale plays to the petrochemical and export complex in the U.S. Gulf Coast region, and related fractionation and storage facilities. In connection with the transaction, Boardwalk Pipeline and Boardwalk Pipelines Holding Corp. (“BPHC”), a wholly owned subsidiary of the Company, have entered into separate joint venture arrangements for purposes of funding the project. Boardwalk Pipeline and BPHC have contributed a total of $25 million to the project as of June 30, 2013. The approval of funding any additional capital for the project is dependent on, among other conditions, execution of customer contracts sufficient to support the project and the parties’ receipt of all necessary board and regulatory approvals.

Impairment of Natural Gas and Oil Properties – Results for the six months ended June 30, 2013, include a first quarter non-cash ceiling test impairment charge of $145 million ($92 million after tax) related to the carrying value of HighMount’s natural gas and oil properties. For the three and six months ended June 30, 2012, HighMount recorded non-cash ceiling test impairment charges of $222 million and $266 million ($142 million and $170 million after tax). The impairments were recorded within Other operating expenses and as credits to Accumulated depreciation, depletion and amortization. The 2013 write-down was primarily attributable to reduced average natural gas liquids (“NGL”) and oil prices used in the ceiling test calculations and negative reserve revisions. Had the effects of HighMount’s cash flow hedges not been considered in calculating the ceiling limitation, the impairments

would have been $195 million ($124 million after tax) for 2013, and $266 million and $335 million ($170 million and $214 million after tax) for the three and six months ended June 30, 2012. In periods which HighMount took ceiling test impairment charges, HighMount performed a goodwill impairment test. HighMount also performed its annual goodwill impairment test as of April 30, 2013 and 2012. No impairment charges were required as a result of either the annual or interim period testing.

2. Investments

Net investment income is as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,

	2013		2012		2013		2012

(In millions)

Fixed maturity securities	$	498	$	505	$	997	$	1,021
Short term investments		1		4		3		7
Limited partnership investments		84		(43)		230		100
Equity securities		3		2		6		6
Income (loss) from trading portfolio (a)		1		(74)		(2)		(4)
Other		6		7		12		11

Total investment income		593		401		1,246		1,141
Investment expenses		(14)		(15)		(26)		(29)

Net investment income	$	579	$	386	$	1,220	$	1,112

(a)	Includes net unrealized gains (losses) related to changes in fair value on trading securities still held of $(30), $(90), $(43) and $(60) for the three and six months ended June 30, 2013 and 2012.

Investment gains (losses) are as follows:


Fixed maturity securities	$	(5)	$	17	$	27	$	47
Equity securities		(2)				(15)		1
Derivative instruments		(5)		(1)		(3)		(2)
Short term investments and other		(2)		4		1		6

Investment gains (losses) (a)	$	(14)	$	20	$	10	$	52

(a)	Includes gross realized gains of $42, $51, $88 and $123 and gross realized losses of $49, $34, $76 and $75 on available-for-sale securities for the three and six months ended June 30, 2013 and 2012.

The components of other-than-temporary impairment (“OTTI”) losses recognized in earnings by asset type are as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,

	2013		2012		2013		2012

(In millions)

Fixed maturity securities available-for-sale:
Corporate and other bonds	$	5	$	6	$	8	$	16
Asset-backed:
Residential mortgage-backed		3		15		3		29
Other asset-backed		1				1

Total asset-backed		4		15		4		29
U.S. Treasury and obligations of government-sponsored enterprises								1

Total fixed maturities available-for-sale		9		21		12		46

Equity securities available-for-sale:
Common stock		2		2		2		4
Preferred stock		5				20

Total equity securities available-for-sale		7		2		22		4

Net OTTI losses recognized in earnings	$	16	$	23	$	34	$	50

The amortized cost and fair values of securities are as follows:

June 30, 2013

Cost or

Amortized

Cost

Gross

Unrealized

Gains

Gross

Unrealized

Losses

Estimated

Fair Value

Unrealized

OTTI Losses

(Gains)

(In millions)

Fixed maturity securities:

Corporate and other bonds

20,079

$ 1,826

147

$21,758

States, municipalities and political subdivisions

10,098

814

173

10,739

Asset-backed:

Residential mortgage-backed

5,031

153

5,096

(37)

Commercial mortgage-backed

1,941

2,009

(3)

Other asset-backed

933

947

Total asset-backed

7,905

264

117

8,052

(40)

U.S. Treasury and obligations of government-sponsored enterprises

167

176

Foreign government

528

544

Redeemable preferred stock

121

132

Fixed maturities available-for-sale

38,898

2,943

440

41,401

(40)

Fixed maturities, trading

216

194

Total fixed maturities

39,114

2,943

462

41,595

(40)

Equity securities:

Common stock

Preferred stock

138

142

Equity securities available-for-sale

185

199

Equity securities, trading

718

132

657

Total equity securities

903

132

856

Total

40,017

$ 3,028

594

$42,451

(40)


December 31, 2012	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Unrealized OTTI Losses (Gains)


Fixed maturity securities:
Corporate and other bonds	$	19,530	$	2,698	$	21	$	22,207
States, municipalities and political subdivisions		9,372		1,455		44		10,783
Asset-backed:
Residential mortgage-backed		5,745		246		71		5,920	$	(28)
Commercial mortgage-backed		1,692		147		17		1,822		(3)
Other asset-backed		929		23				952

Total asset-backed		8,366		416		88		8,694		(31)
U.S. Treasury and obligations of government-sponsored enterprises		172		11		1		182
Foreign government		588		25				613
Redeemable preferred stock		113		13		1		125

Fixed maturities available-for-sale		38,141		4,618		155		42,604		(31)
Fixed maturities, trading		183				22		161

Total fixed maturities		38,324		4,618		177		42,765		(31)

Equity securities:
Common stock		38		14				52
Preferred stock		190		7				197

Equity securities available-for-sale		228		21		-		249		-
Equity securities, trading		665		80		96		649

Total equity securities		893		101		96		898		-

Total	$	39,217	$	4,719	$	273	$	43,663	$	(31)

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 noncontrolling interests and any required Shadow Adjustments. At June 30, 2013 and December 31, 2012, the net unrealized gains on investments included in AOCI were net of Shadow Adjustments of $794 million and $1.4 billion. To the extent that unrealized gains on fixed income securities supporting certain products within CNA’s Life & Group Non-Core Segment would result in a premium deficiency if realized, a related decrease in Deferred acquisition costs, and/or increase in Insurance reserves is recorded, net of tax and noncontrolling interests, as a reduction of net unrealized gains (losses) through Other comprehensive income (Shadow Adjustments).

The available-for-sale securities in a gross unrealized loss position are as follows:


	Less than 12 Months				12 Months or Longer				Total

June 30, 2013	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	3,478	$	143	$	33	$	4	$	3,511	$	147
States, municipalities and political subdivisions		2,075		130		119		43		2,194		173
Asset-backed:
Residential mortgage-backed		1,462		33		321		55		1,783		88
Commercial mortgage-backed		593		23		79		4		672		27
Other asset-backed		235		2						235		2

Total asset-backed		2,290		58		400		59		2,690		117
Foreign government		65		1						65		1
Redeemable preferred stock		39		2						39		2

Total	$	7,947	$	334	$	552	$	106	$	8,499	$	440

December 31, 2012


Fixed maturity securities:
Corporate and other bonds	$	846	$	13	$	108	$	8	$	954	$	21
States, municipalities and political subdivisions		254		5		165		39		419		44
Asset-backed:
Residential mortgage-backed		583		5		452		66		1,035		71
Commercial mortgage-backed		85		2		141		15		226		17

Total asset-backed		668		7		593		81		1,261		88
U.S. Treasury and obligations of government-sponsored enterprises		23		1						23		1
Redeemable preferred stock		28		1						28		1

Total	$	1,819	$	27	$	866	$	128	$	2,685	$	155

The amount of pretax net realized gains (losses) on available-for-sale securities reclassified out of AOCI into earnings was $(7) million, $15 million, $12 million and $47 million for the three and six months ended June 30, 2013 and 2012.

Based on current facts and circumstances, the Company believes the unrealized losses presented in the table above are primarily attributable to broader economic conditions, changes in interest rates and credit spreads, market illiquidity and other market factors, but are not indicative of the ultimate collectibility of the current amortized cost of the securities. The investments with longer duration, primarily included within the states, municipalities and political subdivision asset category, were more significantly impacted by changes in market interest rates. The Company has no current intent to sell these securities, 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 OTTI losses to be recorded at June 30, 2013.

The following table summarizes the activity for the three and six months ended June 30, 2013 and 2012 related to the pretax credit loss component reflected in Retained earnings on fixed maturity securities still held at June 30, 2013 and 2012 for which a portion of an OTTI loss was recognized in Other comprehensive income.


	Three Months Ended				Six Months Ended
	June 30,				June 30,

	2013		2012		2013		2012

(In millions)

Beginning balance of credit losses on fixed maturity securities	$	92	$	100	$	95	$	92
Additional credit losses for securities for which an OTTI loss was previously recognized		1		10		1		21
Credit losses for securities for which an OTTI loss was not previously recognized				1				2
Reductions for securities sold during the period		(4)		(4)		(7)		(8)
Reductions for securities the Company intends to sell or more likely than not will be required to sell				(8)				(8)

Ending balance of credit losses on fixed maturity securities	$	89	$	99	$	89	$	99

Contractual Maturity

The following table summarizes available-for-sale fixed maturity securities by contractual maturity at June 30, 2013 and December 31, 2012. Actual maturities may differ from contractual maturities because certain securities may be called or prepaid with or without call or prepayment penalties. Securities not due at a single date are allocated based on weighted average life.


	June 30, 2013				December 31, 2012

	Cost or Amortized Cost		Estimated Fair Value		Cost or Amortized Cost		Estimated Fair Value

(In millions)

Due in one year or less	$	2,105	$	2,153	$	1,648	$	1,665
Due after one year through five years		11,450		12,078		13,603		14,442
Due after five years through ten years		10,613		10,981		8,726		9,555
Due after ten years		14,730		16,189		14,164		16,942

Total	$	38,898	$	41,401	$	38,141	$	42,604

Investment Commitments

As of June 30, 2013, the Company had committed approximately $372 million to future capital calls from various third-party limited partnership investments in exchange for an ownership interest in the related partnerships.

The Company invests in various privately placed debt securities, including bank loans, as part of its overall investment strategy and has committed to additional future purchases, sales and funding. As of June 30, 2013, the Company had commitments to purchase or fund additional amounts of $160 million and sell $150 million under the terms of such securities.

3. 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.

The type of financial instruments being measured and the methodologies and inputs used at June 30, 2013 were consistent with those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2012.

Prices may fall within Level 1, 2 or 3 depending upon the methodologies 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 methodologies 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 include (i) the review of pricing service or broker pricing methodologies, (ii) back-testing, where past fair value estimates are compared to actual transactions executed in the market on similar dates, (iii) exception reporting, where changes in price, period-over-period, are reviewed and challenged with the pricing service or broker based on exception criteria, (iv) detailed analysis, where the Company independently validates information regarding inputs and assumptions for individual securities and (v) pricing validation, where prices received are compared to prices independently estimated by the Company.

The fair values of CNA’s life settlement contracts are included in Other assets on the Consolidated Condensed Balance Sheets. Equity options purchased are included in Equity securities, and all other derivative assets are included in Receivables. Derivative liabilities are included in Payable to brokers. Assets and liabilities measured at fair value on a recurring basis are summarized in the tables below:

June 30, 2013

Level 1

Level 2

Level 3

Total

(In millions)

Fixed maturity securities:

Corporate and other bonds

21,526

202

21,758

States, municipalities and political subdivisions

10,599

140

10,739

Asset-backed:

Residential mortgage-backed

4,668

428

5,096

Commercial mortgage-backed

1,844

165

2,009

Other asset-backed

560

387

947

Total asset-backed

7,072

980

8,052

U.S. Treasury and obligations of government-sponsored enterprises

147

176

Foreign government

446

544

Redeemable preferred stock

132

Fixed maturities available-for-sale

324

39,730

1,347

41,401

Fixed maturities, trading

194

Total fixed maturities

371

39,790

1,434

41,595

Equity securities available-for-sale

134

199

Equity securities, trading

655

657

Total equity securities

789

856

Short term investments

5,617

423

6,040

Other invested assets

Receivables

Life settlement contracts

Separate account business

239

247

Payable to brokers

(135)

(16)

(3)

(154)



December 31, 2012	Level 1		Level 2		Level 3		Total

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	6	$	21,982	$	219	$	22,207
States, municipalities and political subdivisions				10,687		96		10,783
Asset-backed:
Residential mortgage-backed				5,507		413		5,920
Commercial mortgage-backed				1,693		129		1,822
Other asset-backed				584		368		952

Total asset-backed				7,784		910		8,694
U.S. Treasury and obligations of government-sponsored enterprises		158		24				182
Foreign government		140		473				613
Redeemable preferred stock		40		59		26		125

Fixed maturities available-for-sale		344		41,009		1,251		42,604
Fixed maturities, trading				72		89		161

Total fixed maturities	$	344	$	41,081	$	1,340	$	42,765


Equity securities available-for-sale	$	117	$	98	$	34	$	249
Equity securities, trading		642				7		649

Total equity securities	$	759	$	98	$	41	$	898


Short term investments	$	4,990	$	799	$	6	$	5,795
Other invested assets				58		1		59
Receivables				32		11		43
Life settlement contracts						100		100
Separate account business		4		306		2		312
Payable to brokers		(95)		(11)		(6)		(112)

The tables below present reconciliations for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2013 and 2012:


	Balance, April 1		Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)				Purchases		Sales		Settlements		Transfers into Level 3		Transfers out of Level 3		Balance, June 30		Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities Held at June 30
2013	Balance, April 1		Included in Net Income		Included in OCI		Purchases		Sales		Settlements		Transfers into Level 3		Transfers out of Level 3		Balance, June 30

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	283	$	1	$	(3)	$	13	$	(54)	$	(6)			$	(32)	$	202	$	(1)
States, municipalities and political subdivisions		129				4		37		(32)		(3)	$	5				140
Asset-backed:
Residential mortgage-backed		450		(1)		(1)		50		(10)		(21)		4		(43)		428		(2)
Commercial mortgage-backed		177				4		5				(2)		21		(40)		165
Other asset-backed		396				(3)		38		(33)		(11)						387		(1)

Total asset-backed		1,023		(1)		-		93		(43)		(34)		25		(83)		980		(3)
Redeemable preferred stock		26				(1)												25

Fixed maturities available-for-sale		1,461		-		-		143		(129)		(43)		30		(115)		1,347		(4)
Fixed maturities, trading		107								(20)								87

Total fixed maturities	$	1,568	$	-	$	-	$	143	$	(149)	$	(43)	$	30	$	(115)	$	1,434	$	(4)


Equity securities available-for-sale	$	19	$	(5)	$	(1)											$	13	$	(5)
Equity securities trading		3		(1)														2		(2)

Total equity securities	$	22	$	(6)	$	(1)	$	-	$	-	$	-	$	-	$	-	$	15	$	(7)


Short term investments	$	5							$	(5)							$	-
Life settlement contracts		95	$	4							$	(8)						91	$	(1)
Separate account business		2																2
Derivative financial instruments, net		2		2	$	2	$	1		(1)		(1)						5


	Balance, April 1		Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)				Purchases		Sales		Settlements		Transfers into Level 3		Transfers out of Level 3		Balance, June 30		Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities Held at June 30
2012	Balance, April 1		Included in Net Income		Included in OCI		Purchases		Sales		Settlements		Transfers into Level 3		Transfers out of Level 3		Balance, June 30

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	485	$	3	$	2	$	68	$	(26)	$	(13)	$	9	$	(40)	$	488
States, municipalities and political subdivisions		173				1						(85)						89
Asset-backed:
Residential mortgage-backed		447		1		(18)		22				(9)						443
Commercial mortgage-backed		105		2		4		87		(12)		(4)				(16)		166
Other asset-backed		384		2		(1)		182		(99)		(34)						434

Total asset-backed		936		5		(15)		291		(111)		(47)		-		(16)		1,043
Redeemable preferred stock		53								(26)								27

Fixed maturities available-for-sale		1,647		8		(12)		359		(163)		(145)		9		(56)		1,647
Fixed maturities, trading		101								(3)						(4)		94

Total fixed maturities	$	1,748	$	8	$	(12)	$	359	$	(166)	$	(145)	$	9	$	(60)	$	1,741	$	-


Equity securities available-for-sale	$	74			$	19	$	15	$	(15)							$	93	$	(1)
Equity securities trading		11	$	(2)														9		(2)

Total equity securities	$	85	$	(2)	$	19	$	15	$	(15)	$	-	$	-	$	-	$	102	$	(3)


Short term investments	$	-					$	4									$	4
Other invested assets		11																11
Life settlement contracts		115	$	20							$	(19)						116	$	3
Separate account business		4							$	(1)								3
Derivative financial instruments, net		(8)		1	$	21				(1)		(1)						12


	Balance, January 1		Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)				Purchases		Sales		Settlements		Transfers		Transfers		Balance, June 30		Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities
2013	Balance, January 1		Included in Net Income		Included in OCI		Purchases		Sales		Settlements		into Level 3		out of Level 3		Balance, June 30		Held at June 30

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	219	$	1	$	(1)	$	104	$	(71)	$	(26)	$	26	$	(50)	$	202	$	(2)
States, municipalities and political subdivisions		96		(3)		4		122		(79)		(5)		5				140
Asset-backed:
Residential mortgage-backed		413		2		(1)		111		(10)		(32)		4		(59)		428		(2)
Commercial mortgage-backed		129		1		9		78				(9)		21		(64)		165
Other asset-backed		368		3		(2)		174		(132)		(24)						387		(1)

Total asset-backed		910		6		6		363		(142)		(65)		25		(123)		980		(3)
Redeemable preferred stock		26				(1)												25

Fixed maturities available-for-sale		1,251		4		8		589		(292)		(96)		56		(173)		1,347	$	(5)
Fixed maturities, trading		89		1				19		(22)								87		1

Total fixed maturities	$	1,340	$	5	$	8	$	608	$	(314)	$	(96)	$	56	$	(173)	$	1,434	$	(4)


Equity securities available-for-sale	$	34	$	(20)											$	(1)	$	13	$	(20)
Equity securities trading		7		(5)														2		(5)

Total equity securities	$	41	$	(25)	$	-	$	-	$	-	$	-	$	-	$	(1)	$	15	$	(25)


Short term investments	$	6							$	(6)							$	-
Other invested assets		1								(1)								-
Life settlement contracts		100	$	11							$	(20)						91	$	1
Separate account business		2																2
Derivative financial instruments, net		5		5	$	(2)	$	1				(4)						5		1


	Balance, January 1		Net Realized Gains (Losses) and Net Change in Unrealized Gains (Losses)				Purchases		Sales		Settlements		Transfers into Level 3		Transfers out of Level 3		Balance, June 30		Unrealized Gains (Losses) Recognized in Net Income on Level 3 Assets and Liabilities Held at June 30
2012	Balance, January 1		Included in Net Income		Included in OCI		Purchases		Sales		Settlements		Transfers into Level 3		Transfers out of Level 3		Balance, June 30

(In millions)

Fixed maturity securities:
Corporate and other bonds	$	482	$	6	$	6	$	146	$	(112)	$	(32)	$	42	$	(50)	$	488
States, municipalities and political subdivisions		171				3						(85)						89
Asset-backed:
Residential mortgage-backed		452		2		(22)		60				(16)				(33)		443
Commercial mortgage-backed		59		2		8		129		(12)		(4)				(16)		166
Other asset-backed		343		6		3		358		(176)		(59)				(41)		434

Total asset-backed		854		10		(11)		547		(188)		(79)		-		(90)		1,043
Redeemable preferred stock		-						53		(26)								27

Fixed maturities available-for-sale		1,507		16		(2)		746		(326)		(196)		42		(140)		1,647
Fixed maturities, trading		101		(7)				1		(1)								94	$	(7)

Total fixed maturities	$	1,608	$	9	$	(2)	$	747	$	(327)	$	(196)	$	42	$	(140)	$	1,741	$	(7)


Equity securities available-for-sale	$	67			$	16	$	26	$	(16)							$	93	$	(3)
Equity securities trading		14	$	(5)														9		(4)

Total equity securities	$	81	$	(5)	$	16	$	26	$	(16)	$	-	$	-	$	-	$	102	$	(7)


Short term investments	$	27					$	16			$	(39)					$	4
Other invested assets		11																11
Life settlement contracts		117	$	23								(24)						116	$	3
Separate account business		23							$	(20)								3
Derivative financial instruments, net		(15)		(4)	$	34				(6)		3						12		1

Net realized and unrealized gains and losses are reported in Net income as follows:


Major Category of Assets and Liabilities		Consolidated Condensed Statements of Income Line Items


Fixed maturity securities available-for-sale		Investment gains (losses)
Fixed maturity securities, trading		Net investment income
Equity securities available-for-sale		Investment gains (losses)
Equity securities, trading		Net investment income
Other invested assets		Investment gains (losses) and Net investment income
Derivative financial instruments held in a trading portfolio		Net investment income
Derivative financial instruments, other		Investment gains (losses) and Other revenues
Life settlement contracts		Other revenues

Securities shown in the Level 3 tables may be transferred in or out of Level 3 based on the availability of observable market information used to determine the fair value of the security. The availability of observable market information varies based on market conditions and trading volume and may cause securities to move in and out of Level 3 from reporting period to reporting period. There were no transfers between Level 1 and Level 2 during the three or six months ended June 30, 2013 and 2012. The Company’s policy is to recognize transfers between levels at the beginning of quarterly reporting periods.

Significant Unobservable Inputs

The table below presents 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 table 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 unobservable inputs from these broker quotes is neither provided nor reasonably available to the Company.

June 30, 2013

Fair Value

Valuation
Technique(s)

Unobservable

Input(s)

Range

(Weighted

Average)

(In millions)

Assets

Fixed maturity securities

106

Discounted cash flow

Expected call date

1.6 - 3.5 years (3.1 years)

Credit spread

1.95% -7.95%(2.67%)

Market approach

Private offering price

$36.32 -$113.76($101.70)

Equity securities

Market approach

Private offering price

$33.73 - $4,017.00 per

share ($936.89 per share)

Life settlement contracts

Discounted cash flow

Discount rate risk premium

Mortality assumption

69% - 883%(209.2%)

December 31, 2012

Assets

Fixed maturity securities

121

Discounted cash flow

Expected call date

3.3 – 5.3 years (4.3 years)

Credit spread adjustment

0.02% – 0.48%(0.17%)

Market approach

Private offering price

$42.39 – $102.32($100.11)

Equity securities

Market approach

Private offering price

$4.54 –$3,842.00 per share

($571.17 per share)

Life settlement contracts

100

Discounted cash flow

Discount rate risk premium

Mortality assumption

69% – 883%(208.9%)

For fixed maturity securities, an increase to the expected call date assumption and credit spread adjustment or decrease in the private offering price would result in a lower fair value measurement. For equity securities, an increase in the private offering price would result in a higher fair value measurement. For life settlement contracts, an increase in the discount rate risk premium or decrease in the mortality assumption would result in a lower fair value measurement.

Financial Assets and Liabilities Not Measured at Fair Value

The methods and assumptions used to estimate the fair value for financial assets and liabilities not measured at fair value were consistent with those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2012.

The carrying amount, estimated fair value and the level of the fair value hierarchy of the Company’s financial instrument assets and liabilities which are not measured at fair value on the Consolidated Condensed Balance Sheets are listed in the tables below. The carrying amounts reported on the Consolidated Condensed Balance Sheets for cash and short term investments not carried at fair value and certain other assets and liabilities approximate fair value due to the short term nature of these items.


	Carrying		Estimated Fair Value

June 30, 2013	Amount		Level 1	Level 2		Level 3		Total

(In millions)

Financial Assets:
Other invested assets, primarily mortgage loans	$	437				$	449	$	449

Financial Liabilities:
Premium deposits and annuity contracts		75					76		76
Short term debt		33		$	13		20		33
Long term debt		10,039			10,444		334		10,778
December 31, 2012


Financial Assets:
Other invested assets, primarily mortgage loans	$	401				$	418	$	418

Financial Liabilities:
Premium deposits and annuity contracts		100					104		104
Short term debt		19		$	13		6		19
Long term debt		9,191			10,170		202		10,372

4. Derivative Financial Instruments

A summary of the aggregate contractual or notional amounts and gross estimated fair values related to derivative financial instruments follows. The contractual or notional amounts for derivatives are used to calculate the exchange of contractual payments under the agreements and may not be representative of the potential for gain or loss on these instruments.


	June 30, 2013						December 31, 2012

	Contractual/						Contractual/
	Notional		Estimated Fair Value				Notional		Estimated Fair Value

	Amount		Asset		(Liability)		Amount		Asset		(Liability)

(In millions)

With hedge designation:

Interest rate risk:
Interest rate swaps	$	300	$	1	$	(4)	$	300			$	(6)
Commodities:
Forwards – short		295		29		(3)		288	$	39		(3)
Foreign exchange:
Currency forwards – short		222		1		(10)		144		4

Without hedge designation:

Equity markets:
Options – purchased		1,010		37				255		19
– written		606				(33)		374				(11)
Equity swaps and warrants
– long		18		13				14		6

Interest rate risk:
Credit default swaps
– purchased protection		63				(2)		78				(2)
– sold protection		18						33				(2)

Foreign exchange:
Currency forwards – long		75						404				(2)
– short		273		6				128

Gross estimated fair values of derivative positions are currently presented in Equity securities, Receivables and Payable to brokers on the Consolidated Condensed Balance Sheets. There would be no significant difference in the balance included in such accounts if the estimated fair values were presented net for the periods ended June 30, 2013 and December 31, 2012.

For derivative financial instruments without hedge designation, changes in the fair value of derivatives not held in a trading portfolio are reported in Investment gains (losses) and changes in the fair value of derivatives held for trading purposes are reported in Net investment income on the Consolidated Condensed Statements of Income. Losses of $5 million and $1 million for the three months ended June 30, 2013 and 2012 and losses of $3 million and $2 million for the six months ended June 30, 2013 and 2012 were included in Investment gains (losses). Losses of $3 million and gains of $5 million for three months ended June 30, 2013 and 2012 and losses of $16 million and gains of $1 million for the six months ended June 30, 2013 and 2012 were included in Net investment income.

The Company’s derivative financial instruments with cash flow hedge designation hedge variable price risk associated with the purchase and sale of natural gas and other energy-related products, exposure to foreign currency losses on future foreign currency expenditures, as well as risks attributable to changes in interest rates on long term debt. Gains of $19 million and $15 million were recognized in OCI related to these cash flow hedges for the three

months ended June 30, 2013 and 2012. Gains of $1 million and $49 million were recognized in OCI related to these cash flow hedges for the six months ended June 30, 2013 and 2012. For the three months ended June 30, 2013 and 2012, the amount of gains reclassified from AOCI into income were $6 million and $18 million. For the six months ended June 30, 2013 and 2012, the amount of gains reclassified from AOCI into income were $19 million and $27 million. As of June 30, 2013, the estimated amount of net unrealized gains associated with these cash flow hedges that will be reclassified from AOCI into earnings during the next twelve months was $10 million. The net amounts recognized due to ineffectiveness were less than $1 million for the three and six months ended June 30, 2013 and 2012.

5. Claim and Claim Adjustment Expense Reserves

CNA’s property and casualty insurance claim and claim adjustment expense reserves represent the estimated amounts necessary to resolve all outstanding claims, including claims that are incurred but not reported (“IBNR”) as of the reporting date. CNA’s reserve projections are based primarily on detailed analysis of the facts in each case, CNA’s experience with similar cases and various historical development patterns. Consideration is given to such historical patterns as field reserving trends and claims settlement practices, loss payments, pending levels of unpaid claims and product mix, as well as court decisions, 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 all 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 CNA’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 CNA’s results of operations and/or equity. CNA reported catastrophe losses, net of reinsurance, of $65 million and $68 million for the three months ended June 30, 2013 and 2012 and $104 million and $96 million for the six months ended June 30, 2013 and 2012. Catastrophe losses in 2013 related primarily to U.S. storms.

Net Prior Year Development

The following tables and discussion include the net prior year development recorded for CNA Specialty, CNA Commercial and Other.


Three Months Ended June 30, 2013	CNA Specialty			CNA Commercial		Other		Total

(In millions)

Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(41	)	$	27	$	9	$	(5)
Pretax (favorable) unfavorable premium development		(5	)		(5)		2		(8)

Total pretax (favorable) unfavorable net prior year development	$	(46	)	$	22	$	11	$	(13)


Three Months Ended June 30, 2012	CNA Specialty		CNA Commercial		Other		Total

(In millions)

Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(35)	$	(13)	$	(4)	$	(52)
Pretax (favorable) unfavorable premium development		(5)		(19)		1		(23)

Total pretax (favorable) unfavorable net prior year development	$	(40)	$	(32)	$	(3)	$	(75)


Six Months Ended June 30, 2013


Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(56)	$	16	$	9	$	(31)
Pretax (favorable) unfavorable premium development		(13)		(15)		7		(21)

Total pretax (favorable) unfavorable net prior year development	$	(69)	$	1	$	16	$	(52)


Six Months Ended June 30, 2012


Pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(41)	$	(27)	$	(2)	$	(70)
Pretax (favorable) unfavorable premium development		(14)		(36)		2		(48)

Total pretax (favorable) unfavorable net prior year development	$	(55)	$	(63)	$	-	$	(118)

For the three and six months ended June 30, 2012, favorable premium development was recorded for CNA Commercial primarily due to premium adjustments on auditable policies arising from increased exposures.

CNA Specialty

The following table and discussion provide further detail of the net prior year claim and allocated claim adjustment expense reserve development (“development”) recorded for the CNA Specialty segment:


	Three Months Ended June 30,				Six Months Ended June 30,

	2013		2012		2013		2012

(In millions)

Medical professional liability	$	(17)	$	(9)	$	(20)	$	(15)
Other professional liability		(23)		(6)		(24)		(2)
Surety		1				2		1
Warranty								(1)
Other		(2)		(20)		(14)		(24)

Total pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	(41)	$	(35)	$	(56)	$	(41)

Three Month Comparison

2013

Favorable development for medical professional liability was primarily due to a decrease in incurred loss severity in accident years 2009 and prior.

Overall, favorable development for other professional liability was related to better than expected loss emergence in accident years 2007 through 2009. Unfavorable development was recorded in accident years 2010 through 2012 related to an increase in severity.

2012

Favorable development for medical professional liability was primarily due to a decrease in incurred loss severity in accident years 2008 through 2010.

Other includes standard property and casualty coverages provided to CNA Specialty customers. Favorable development for other coverages was primarily due to favorable loss emergence in property and workers’ compensation coverages in accident years 2005 and subsequent.

Six Month Comparison

2013

Overall, favorable development for medical professional liability reflects favorable experience in accident years 2009 and prior. Unfavorable development was recorded for accident years 2010 and 2011 due to higher than expected large loss activity.

Favorable development for other coverages was primarily due to better than expected loss emergence in property coverages in accident years 2010 and subsequent.

2012

Favorable development for medical professional liability was primarily due to a decrease in incurred loss severity in accident years 2008 through 2010 and reductions in the estimated frequency of large losses in accident years 2008 and prior.

Favorable development for other coverages was primarily due to favorable loss emergence in property and workers’ compensation coverages in accident years 2005 and subsequent.

CNA Commercial

The following table and discussion provide further detail of the development recorded for the CNA Commercial segment:


	Three Months Ended June 30,				Six Months Ended June 30,

	2013		2012		2013		2012

(In millions)

Commercial auto	$	2	$	2	$	(3)	$	2
General liability		15		(13)		(6)		(5)
Workers’ compensation		45		8		70		(11)
Property and other		(35)		(10)		(45)		(13)

Total pretax (favorable) unfavorable net prior year claim and allocated claim adjustment expense reserve development	$	27	$	(13)	$	16	$	(27)

Three Month Comparison

2013

Unfavorable development for general liability coverages was primarily related to increased incurred loss severity in accident years 2010 through 2012.

Unfavorable development for workers’ compensation was primarily in response to legislation enacted during 2013 related to the New York Fund for Reopened Cases. The law change necessitated an increase in reserves as re-opened workers’ compensation claims can no longer be turned over to the state for handling and payment after December 31, 2013.

Favorable development for property and other coverages was primarily related to favorable outcomes on litigated catastrophe claims in accident years 2005 and 2010 and favorable loss emergence on non-catastrophe losses in accident year 2012.

2012

Favorable development for general liability coverages was primarily related to favorable loss emergence in accident years 2005 and prior.

Favorable development for property and marine coverages was due to a favorable outcome on an individual claim in accident year 2005 and favorable loss emergence in non-catastrophe losses in accident year 2010.

Six Month Comparison

2013

Overall, favorable development for general liability coverages was primarily related to better than expected loss emergence in accident years 2002 and prior. Unfavorable development was recorded in accident years 2010 through 2012 primarily related to increased incurred loss severity.

Unfavorable development for workers’ compensation was recorded in response to legislation in New York as discussed above. Additional unfavorable development was primarily due to higher than expected large losses and increased severity in the state of California in accident year 2010.

2012

Overall, favorable development for workers’ compensation reflects favorable experience in accident years 2001 and prior. Unfavorable development was recorded in accident year 2010 related to increased medical severity and in accident year 2011 related to favorable premium development.

6. Debt

In May of 2013, the Company completed a public offering of $500 million aggregate principal amount of 2.6% senior notes due May 15, 2023 and $500 million aggregate principal amount of 4.1% senior notes due May 15, 2043. The Company received net proceeds of approximately $983 million, after deducting the underwriters’ discounts and commissions and offering expenses of $17 million, which will be amortized over the life of the notes. The proceeds for this offering are expected to be used for general corporate purposes.

7. Shareholders’ Equity

Accumulated other comprehensive income

The tables below present the changes in Accumulated other comprehensive income (“AOCI”) by component for the three and six months ended June 30, 2013:


	Unrealized Gains (Losses) On Investments		OTTI Gains (Losses)		Cash Flow Hedges						Pension Liability		Foreign Currency Translation		Total Accumulated Other Comprehensive Income (Loss)
					Cash Flow Hedges
					Interest Rate Swaps		Commodity Hedges		Foreign Currency Forwards



(In millions)

Balance, April 1, 2013	$	1,176	$	31	$	(9)	$	6	$	1	$	(727)	$	88	$	566

Other comprehensive income (loss) before reclassifications, after tax of $317, $4, $(1), $(8), $4, $0 and $0		(589)		(8)		2		18		(6)				(13)		(596)
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $(3), $0, $0, $2, $0, $(2) and $0		4						(3)		(1)		5				5
Issuance of equity securities by subsidiary												2				2

Other comprehensive income (loss)		(585)		(8)		2		15		(7)		7		(13)		(589)
Amounts attributable to noncontrolling interests		59						(3)		3		(1)		2		60

Balance, June 30, 2013	$	650	$	23	$	(7)	$	18	$	(3)	$	(721)	$	77	$	37


Balance, January 1, 2013	$	1,233	$	18	$	(9)	$	24	$	1	$	(732)	$	143	$	678

Other comprehensive income (loss) before reclassifications, after tax of $346, $(3), $(1), $(2), $4, $0 and $0		(638)		6		3		5		(6)				(74)		(704)
Reclassification of (gains) losses from accumulated other comprehensive income, after tax of $3, $0, $(1), $6, $1, $(5) and $0		(9)				(1)		(10)		(2)		9				(13)
Issuance of equity securities by subsidiary												2				2

Other comprehensive income (loss)		(647)		6		2		(5)		(8)		11		(74)		(715)
Amounts attributable to noncontrolling interests		64		(1)				(1)		4				8		74

Balance, June 30, 2013	$	650	$	23	$	(7)	$	18	$	(3)	$	(721)	$	77	$	37

Amounts reclassified from AOCI shown above are reported in Net income as follows:


Major Category of AOCI		Affected Line Item


Unrealized gains (losses) on investments		Investment gains (losses)
OTTI gains (losses)		Investment gains (losses)
Cash flow hedges
Interest rate swaps		Interest expense
Commodity hedges		Other revenues
Foreign currency forwards		Contract drilling expenses
Pension liability		Other operating expenses

Subsidiary Equity Transactions

In May of 2013, Boardwalk Pipeline sold 12.7 million common units in a public offering and received net proceeds of $377 million, including an $8 million contribution from the Company to maintain its 2% general partner interest. The Company’s percentage ownership interest in Boardwalk Pipeline declined as a result of this transaction, from 55% to 53%. The issuance price of the common units exceeded the Company’s carrying value, resulting in an increase to Additional paid-in capital of $51 million and an increase to AOCI of $2 million.

Treasury Stock

The Company purchased 4.0 million and 1.3 million shares of Loews common stock at aggregate costs of $177 million and $51 million during the six months ended June 30, 2013 and 2012.

8. Benefit Plans

Pension Plans - The Company has several non-contributory defined benefit plans for eligible employees. Benefits for certain plans are determined annually based on a specified percentage of annual earnings (based on the participant’s age or years of service) and a specified interest rate (which is established annually for all participants) applied to accrued balances. The benefits for another plan which cover salaried employees are based on formulas which include, among others, years of service and average pay. The Company’s funding policy is to make contributions in accordance with applicable governmental regulatory requirements.

Other Postretirement Benefit Plans - The Company has several postretirement benefit plans covering eligible employees and retirees. Participants generally become eligible after reaching age 55 with required years of service. Actual requirements for coverage vary by plan. Benefits for retirees who were covered by bargaining units vary by each unit and contract. Benefits for certain retirees are in the form of a Company health care account.

Benefits for retirees reaching age 65 are generally integrated with Medicare. Other retirees, based on plan provisions, must use Medicare as their primary coverage, with the Company reimbursing a portion of the unpaid amount; or are reimbursed for the Medicare Part B premium or have no Company coverage. The benefits provided by the Company are basically health and, for certain retirees, life insurance type benefits.

The Company funds certain of these benefit plans and accrues postretirement benefits during the active service of those employees who would become eligible for such benefits when they retire.

The components of net periodic benefit cost are as follows:


	Pension Benefits

	Three Months Ended				Six Months Ended
	June 30,				June 30,

	2013		2012		2013		2012

(In millions)

Service cost	$	6	$	6	$	12	$	12
Interest cost		33		37		67		75
Expected return on plan assets		(50)		(46)		(99)		(93)
Amortization of unrecognized net loss		14		12		28		23

Net periodic benefit cost	$	3	$	9	$	8	$	17


	Other Postretirement Benefits

	Three Months Ended				Six Months Ended
	June 30,				June 30,

	2013		2012		2013		2012

(In millions)

Interest cost	$	1	$	2	$	2	$	3
Expected return on plan assets		(1)		(1)		(2)		(2)
Amortization of unrecognized prior service benefit		(7)		(7)		(13)		(13)

Net periodic benefit cost	$	(7)	$	(6)	$	(13)	$	(12)

9. Business Segments

The Company’s reportable segments are primarily based on its individual operating subsidiaries. Each of the principal operating subsidiaries are headed by a chief executive officer who is responsible for the operation of its business and has the duties and authority commensurate with that position. Investment gains (losses) and the related income taxes, excluding those of CNA, are included in the Corporate and other segment.

CNA’s results are reported in four business segments: CNA Specialty, CNA Commercial, Life & Group Non-Core and Other. CNA Specialty provides a broad array of professional, financial and specialty property and casualty products and services, primarily through insurance brokers and managing general underwriters. CNA Commercial includes property and casualty coverages sold to small businesses and middle market entities and organizations primarily through an independent agency distribution system. CNA Commercial also includes commercial insurance and risk management products sold to large corporations primarily through insurance brokers. Life & Group Non-Core primarily includes the results of the life and group lines of business that are in run-off. Other includes the operations of Hardy Underwriting Bermuda Limited (“Hardy”) since its acquisition date of July 2, 2012, corporate expenses, including interest on corporate debt, and the results of certain property and casualty business primarily in run-off, including CNA Re and asbestos and environmental pollution. Hardy is a specialized Lloyd’s of London underwriter primarily of short-tail exposures in marine and aviation, non-marine property, specialty lines and property treaty reinsurance.

Diamond Offshore owns and operates offshore drilling rigs that are chartered on a contract basis for fixed terms by companies engaged in exploration and production of hydrocarbons. Offshore rigs are mobile units that can be relocated based on market demand. Diamond Offshore’s fleet consists of 45 drilling rigs, including five new-build rigs which are under construction and two rigs being constructed utilizing the hulls of Diamond Offshore’s existing mid-water floaters. On June 30, 2013, Diamond Offshore’s drilling rigs were located offshore 12 countries in addition to the United States.

Boardwalk Pipeline is engaged in the interstate transportation and storage of natural gas and natural gas liquids (“NGLs”) and gathering and processing of natural gas. This segment consists of interstate natural gas pipeline systems originating in the Gulf Coast region, Oklahoma and Arkansas, and extending north and east through the midwestern states of Tennessee, Kentucky, Illinois, Indiana and Ohio, natural gas storage facilities in four states and NGL pipelines and storage facilities in Louisiana, with approximately 14,410 miles of pipeline.

HighMount is engaged in the exploration, production and marketing of natural gas and oil (including condensate and NGLs), primarily located in the Permian Basin in West Texas as well as the Mississippian Lime in Oklahoma and the Texas Panhandle regions.

Loews Hotels operates a chain of 19 hotels, 17 of which are in the United States and two are in Canada.

The Corporate and other segment consists primarily of corporate investment income, corporate interest expense and other unallocated expenses.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1 of the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. In addition, CNA does not maintain a distinct investment portfolio for every insurance segment, and accordingly, allocation of assets to each segment is not performed. Therefore, a significant portion of net investment income and investment gains (losses) are allocated based on each segment’s carried insurance reserves, as adjusted.

The following tables set forth the Company’s consolidated revenues and income (loss) by business segment:


	Three Months Ended				Six Months Ended
	June 30,				June 30,

	2013		2012		2013		2012

(In millions)

Revenues (a):

CNA Financial:
CNA Specialty	$	954	$	896	$	1,910	$	1,841
CNA Commercial		1,104		984		2,205		2,072
Life & Group Non-Core		346		360		709		710
Other		89		6		172		24

Total CNA Financial		2,493		2,246		4,996		4,647
Diamond Offshore		760		793		1,492		1,589
Boardwalk Pipeline		304		277		633		591
HighMount		66		69		134		145
Loews Hotels		101		94		195		174
Corporate and other		1		(91)		9		(14)

Total	$	3,725	$	3,388	$	7,459	$	7,132


Income (loss) before income tax and noncontrolling interests (a):

CNA Financial:
CNA Specialty	$	220	$	166	$	435	$	375
CNA Commercial		161		99		359		326
Life & Group Non-Core		(78)		(14)		(87)		(51)
Other		(25)		(18)		(65)		(51)

Total CNA Financial		278		233		642		599
Diamond Offshore		257		246		462		498
Boardwalk Pipeline		67		66		166		158
HighMount		9		(217)		(130)		(251)
Loews Hotels		2		11		2		18
Corporate and other		(32)		(125)		(49)		(67)

Total	$	581	$	214	$	1,093	$	955


Net income (loss) (a):

CNA Financial:
CNA Specialty	$	129	$	100	$	257	$	225
CNA Commercial		94		59		209		190
Life & Group Non-Core		(33)		5		(25)		(5)
Other		(15)		(13)		(40)		(33)

Total CNA Financial		175		151		401		377
Diamond Offshore		87		94		169		181
Boardwalk Pipeline		22		25		55		60
HighMount		5		(139)		(83)		(161)
Loews Hotels		1		6		1		10
Corporate and other		(21)		(81)		(32)		(44)

Total	$	269	$	56	$	511	$	423

(a)	Investment gains (losses) included in Revenues, Income (loss) before income tax and noncontrolling interests and Net income (loss) are as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,

	2013		2012		2013		2012


Revenues and Income (loss) before income tax and noncontrolling interests:

CNA Financial:
CNA Specialty	$	(6)	$	8	$	(3)	$	16
CNA Commercial		(12)		13		(8)		24
Life & Group Non-Core				4		14		17
Other		4		(3)		7		(3)

Total CNA Financial		(14)		22		10		54
Corporate and other				(2)				(2)

Total	$	(14)	$	20	$	10	$	52


Net income (loss):

CNA Financial:
CNA Specialty	$	(3)	$	5	$	(1)	$	10
CNA Commercial		(6)		8		(4)		14
Life & Group Non-Core				3		8		10
Other		1		(3)		3		(2)

Total CNA Financial		(8)		13		6		32
Corporate and other				(1)				(1)

Total	$	(8)	$	12	$	6	$	31

10. Legal Proceedings

The Company and its subsidiaries are parties to litigation arising in the ordinary course of business. The outcome of this litigation will not, in the opinion of management, materially affect the Company’s results of operations or equity.

11. Commitments and Contingencies

Guarantees

In the course of selling business entities and assets to third parties, CNA has agreed to indemnify purchasers for losses arising out of breaches of representation and warranties with respect to the business entities or assets being sold, including, in certain cases, losses arising from undisclosed liabilities or certain named litigation. Such indemnification provisions generally survive for periods ranging from nine months following the applicable closing date to the expiration of the relevant statutes of limitation. As of June 30, 2013, the aggregate amount of quantifiable indemnification agreements in effect for sales of business entities, assets and third party loans was $724 million.

In addition, CNA has agreed to provide indemnification to third party purchasers for certain losses associated with sold business entities or assets that are not limited by a contractual monetary amount. As of June 30, 2013, CNA had outstanding unlimited indemnifications in connection with the sales of certain of its business entities or assets that included tax liabilities arising prior to a purchaser’s ownership of an entity or asset, defects in title at the time of sale, employee claims arising prior to closing and in some cases losses arising from certain litigation and undisclosed liabilities. These indemnification agreements survive until the applicable statutes of limitation expire, or until the agreed upon contract terms expire.

Offshore Rig Purchase Obligations

Diamond Offshore has entered into four turnkey construction contracts with Hyundai Heavy Industries, Co. Ltd. (“Hyundai”) for the construction of four dynamically positioned, ultra-deepwater drillships, the first two of which are expected to be delivered in the third and fourth quarters of 2013. Diamond Offshore expects the aggregate cost of the construction of its drillships, including commissioning, capital spares and project management costs, to be approximately $2.6 billion, of which approximately $650 million in contractual installment payments have been paid. These amounts are included in Construction in process within Property, plant and equipment in the Consolidated Condensed Balance Sheets. Diamond Offshore expects to pay a total of approximately $790 million

for the two drillships which will be delivered in 2013 and the remaining contractual payments due to Hyundai will be paid when the remaining drillships are delivered in 2014.

Diamond Offshore also entered into agreements for the construction of two moored semisubmersible deepwater rigs with expected completion dates in the third quarter of 2013 and the second quarter of 2014. The rigs will be constructed utilizing the hulls of two of Diamond Offshore’s mid-water floaters and the aggregate cost of the two rigs, including commissioning, capital spares and project management costs, is estimated to be approximately $705 million, of which $164 million in contractual installment payments have been paid.

In February of 2013, Diamond Offshore entered into a vessel modification agreement for enhancements to a mid-water floater that will enable the rig to work in the North Sea. The contracted price with the shipyard is $29 million, of which $6 million has been paid. The total cost of the project is estimated to be approximately $120 million, including shipyard costs, owner-furnished equipment and labor, commissioning and capital spares, with an expected completion date in the first quarter of 2014.

In May of 2013, Diamond Offshore entered into a construction contract with Hyundai for the construction of a dynamically positioned, ultra-deepwater harsh environment semisubmersible drilling rig, expected to be delivered in the first quarter of 2016. The total cost of the rig including capital spares, commissioning and shipyard supervision is estimated to be approximately $755 million. The first installment payment of $189 million has been paid and is included in Construction in process within Property, plant and equipment in the Consolidated Condensed Balance Sheets.

Boardwalk Pipeline

Boardwalk Pipeline’s future capital commitments are comprised of binding commitments under purchase orders for materials ordered but not received and firm commitments under binding construction service agreements. The commitments as of June 30, 2013 were approximately $113 million, all of which are expected to be settled within the next twelve months.

Loews Hotels

Loews Hotels has commitments aggregating approximately $270 million for development and renovation of hotel properties.

12. Consolidating Financial Information

The following schedules present the Company’s consolidating balance sheet information at June 30, 2013 and December 31, 2012, and consolidating statements of income information for the six months ended June 30, 2013 and 2012. These schedules present the individual subsidiaries of the Company and their contribution to the Consolidated Condensed Financial Statements. Amounts presented will not necessarily be the same as those in the individual financial statements of the Company’s subsidiaries due to adjustments for purchase accounting, income taxes and noncontrolling interests. In addition, many of the Company’s subsidiaries use a classified balance sheet which also leads to differences in amounts reported for certain line items.

The Corporate and Other column primarily reflects the parent company’s investment in its subsidiaries, invested cash portfolio and corporate long term debt. The elimination adjustments are for intercompany assets and liabilities, interest and dividends, the parent company’s investment in capital stocks of subsidiaries, and various reclasses of debit or credit balances to the amounts in consolidation. Purchase accounting adjustments have been pushed down to the appropriate subsidiary.

Loews Corporation

Consolidating Balance Sheet Information

CNA

Diamond

Boardwalk

Loews

Corporate

June 30, 2013

Financial

Offshore

Pipeline

HighMount

Hotels

and Other

Eliminations

Total

(In millions)

Assets:

Investments

46,299

1,200

4,729

52,332

Cash

121

166

Receivables

8,686

496

265

(70)

9,519

Property, plant and equipment

301

5,244

7,239

1,097

599

14,525

Deferred income taxes

340

785

(1,125)

Goodwill

115

267

584

989

Investments in capital stocks of subsidiaries

16,862

(16,862)

Other assets

770

342

332

116

1,618

Deferred acquisition costs of insurance subsidiaries

650

Separate account business

247

Total assets

57,529

7,322

7,914

2,558

837

21,914

(18,028)

80,046

Liabilities and Equity:

Insurance reserves

39,128

Payable to brokers

315

188

520

Short term debt

Long term debt

2,558

1,490

3,258

720

335

1,678

10,039

Deferred income taxes

503

680

623

(1,096)

749

Other liabilities

3,362

610

381

109

258

(70)

4,688

Separate account business

247

Total liabilities

45,623

2,613

4,320

835

432

2,747

(1,166)

55,404

Total shareholders’ equity

10,718

2,386

1,616

1,723

403

19,167

(16,862)

19,151

Noncontrolling interests

1,188

2,323

1,978

5,491

Total equity

11,906

4,709

3,594

1,723

405

19,167

(16,862)

24,642

Total liabilities and equity

57,529

7,322

7,914

2,558

837

21,914

(18,028)

80,046

Loews Corporation

Consolidating Balance Sheet Information


	CNA		Diamond		Boardwalk				Loews		Corporate
December 31, 2012	Financial		Offshore		Pipeline		HighMount		Hotels		and Other		Eliminations		Total

(In millions)

Assets:

Investments	$	47,636	$	1,435	$	1	$	8	$	33	$	3,935			$	53,048
Cash		156		53		3		2		10		4				228
Receivables		8,516		503		89		69		25		183	$	(19)		9,366
Property, plant and equipment		297		4,870		7,252		1,136		333		47				13,935
Deferred income taxes		119						734						(853)		-
Goodwill		118		20		271		584		3						996
Investments in capital stocks of subsidiaries												16,936		(16,936)		-
Other assets		730		366		330		22		84		4		2		1,538
Deferred acquisition costs of insurance subsidiaries		598														598
Separate account business		312														312

Total assets	$	58,482	$	7,247	$	7,946	$	2,555	$	488	$	21,109	$	(17,806)	$	80,021


Liabilities and Equity:

Insurance reserves	$	40,005													$	40,005
Payable to brokers		61					$	10			$	134				205
Short term debt		13							$	6						19
Long term debt		2,557	$	1,489	$	3,539		710		203		693				9,191
Deferred income taxes				483		619				37		552	$	(851)		840
Other liabilities		3,260		675		432		120		42		263		(19)		4,773
Separate account business		312														312

Total liabilities		46,208		2,647		4,590		840		288		1,642		(870)		55,345

Total shareholders’ equity		11,058		2,331		1,624		1,715		200		19,467		(16,936)		19,459
Noncontrolling interests		1,216		2,269		1,732										5,217

Total equity		12,274		4,600		3,356		1,715		200		19,467		(16,936)		24,676

Total liabilities and equity	$	58,482	$	7,247	$	7,946	$	2,555	$	488	$	21,109	$	(17,806)	$	80,021

Loews Corporation

Consolidating Statement of Income Information

CNA

Diamond

Boardwalk

Loews

Corporate

Six Months Ended June 30, 2013

Financial

Offshore

Pipeline

HighMount

Hotels

and Other

Eliminations

Total

(In millions)

Revenues:

Insurance premiums

3,564

Net investment income

1,211

1,220

Intercompany interest and dividends

364

(364)

Investment gains

Contract drilling revenues

1,445

Other

211

633

134

195

1,220

Total

4,996

1,492

633

134

195

373

(364)

7,459

Expenses:

Insurance claims and policyholders’ benefits

2,950

Amortization of deferred acquisition costs

663

Contract drilling expenses

744

Other operating expenses

658

270

386

255

187

1,789

Interest

220

Total

4,354

1,030

467

264

193

6,366

Income (loss) before income tax

642

462

166

(130)

315

(364)

1,093

Income tax (expense) benefit

(196)

(114)

(36)

(1)

(283)

Net income (loss)

446

348

130

(83)

332

(364)

810

Amounts attributable to noncontrolling interests

(45)

(179)

(75)

(299)

Net income (loss) attributable to Loews Corporation

401

169

(83)

332

(364)

511

Loews Corporation

Consolidating Statement of Income Information


	CNA		Diamond		Boardwalk				Loews		Corporate
Six Months Ended June 30, 2012	Financial		Offshore		Pipeline		HighMount		Hotels		and Other		Eliminations		Total

(In millions)

Revenues:

Insurance premiums	$	3,317													$	3,317
Net investment income		1,118	$	3							$	(9)				1,112
Intercompany interest and dividends												341	$	(341)		-
Investment gains (losses)		54			$	(2)										52
Contract drilling revenues				1,481												1,481
Other		158		105		591	$	145	$	174				(3)		1,170

Total		4,647		1,589		589		145		174		332		(344)		7,132


Expenses:

Insurance claims and policyholders’ benefits		2,729														2,729
Amortization of deferred acquisition costs		604														604
Contract drilling expenses				802												802
Other operating expenses		630		261		350		390		152		40		(3)		1,820
Interest		85		28		83		6		4		20		(4)		222

Total		4,048		1,091		433		396		156		60		(7)		6,177

Income (loss) before income tax		599		498		156		(251)		18		272		(337)		955
Income tax (expense) benefit		(180)		(125)		(37)		90		(8)		22				(238)

Net income (loss)		419		373		119		(161)		10		294		(337)		717
Amounts attributable to noncontrolling interests		(42)		(192)		(60)										(294)

Net income (loss) attributable to Loews Corporation	$	377	$	181	$	59	$	(161)	$	10	$	294	$	(337)	$	423

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with our Consolidated Condensed Financial Statements included in Item 1 of this Report, Risk Factors included in Part II, Item 1A of this Report, and the Consolidated Financial Statements, Risk Factors, and MD&A included in our Annual Report on Form 10-K for the year ended December 31, 2012. This MD&A is comprised of the following sections:


		Page No.

Overview		38
Consolidated Financial Results		38
Parent Company Structure		39
Critical Accounting Estimates		39
Results of Operations by Business Segment		40
CNA Financial		40
Diamond Offshore		45
Boardwalk Pipeline		49
HighMount		52
Loews Hotels		55
Corporate and Other		56
Liquidity and Capital Resources		57
CNA Financial		57
Diamond Offshore		57
Boardwalk Pipeline		58
HighMount		58
Loews Hotels		59
Corporate and Other		59
Investments		60
Forward-Looking Statements		63

OVERVIEW

We are a holding company. Our subsidiaries are engaged in the following lines of business:

—

commercial property and casualty insurance (CNA Financial Corporation (“CNA”), a 90% owned subsidiary);

—

operation of offshore oil and gas drilling rigs (Diamond Offshore Drilling, Inc. (“Diamond Offshore”), a 50.4% owned subsidiary);

—

transportation and storage of natural gas and natural gas liquids and gathering and processing of natural gas (Boardwalk Pipeline Partners, LP (“Boardwalk Pipeline”), a 53% owned subsidiary);

—

exploration, production and marketing of natural gas and oil (including condensate and natural gas liquids) (HighMount Exploration & Production LLC (“HighMount”), a wholly owned subsidiary); and

—

operation of a chain of hotels (Loews Hotels Holding Corporation (“Loews Hotels”), a wholly owned subsidiary).

Unless the context otherwise requires, references in this Report to “Loews Corporation,” “the Company,” “Parent Company,” “we,” “our,” “us” or like terms refer to the business of Loews Corporation excluding its subsidiaries.

Consolidated Financial Results

Net income for the second quarter of 2013 amounted to $269 million, or $0.69 per share, compared to $56 million, or $0.14 per share, in the second quarter of 2012. Net income for the second quarter of 2012 includes an after tax non-cash impairment charge of $142 million at HighMount related to the carrying value of its natural gas and oil properties. Excluding this impairment charge, Loews adjusted net income for the second quarter of 2012 would have been $198 million.

The increase in net income is primarily due to higher earnings at CNA and improved investment income at the parent company. These increases were partially offset by lower earnings at Diamond Offshore.

CNA’s earnings increased primarily from higher net investment income due to increased limited partnership results and improved non-catastrophe current accident year underwriting results. These increases were partially offset by lower favorable net prior year development and reduced results from the Life & Group Non-Core segment as a result of unfavorable morbidity in the long term care business.

Diamond Offshore’s earnings decreased primarily as a result of a prior year gain of $23 million (after tax and noncontrolling interests) from the sale of five jack-up rigs partially offset by higher dayrates and utilization as well as lower contract drilling expense in 2013, primarily reflecting reduced mobilization costs.

Net income for the six months ended June 30, 2013 was $511 million, or $1.31 per share as compared to $423 million, or $1.06 per share in the prior year period. Net income for the six months ended June 30, 2013 and 2012 includes after tax non-cash ceiling test impairment charges of $92 million and $170 million at HighMount. Excluding these non-cash impairment charges, Loews adjusted net income for the six months ended June 30, 2013 and 2012 would have been $603 million and $593 million. The increase in net income is primarily due to the reasons discussed in the three month comparison above for CNA and the parent company. Diamond Offshore’s earnings decreased primarily as a result of a prior year gain of $32 million (after tax and noncontrolling interests) from the sale of six jack-up rigs and lower utilization in 2013 partially offset by higher dayrates.

Book value per share increased to $49.36 at June 30, 2013 from $49.31 at June 30, 2012 and decreased from $49.67 at December 31, 2012. Book value per share excluding Accumulated other comprehensive income (“AOCI”) increased to $49.26 at June 30, 2013 from $47.42 at June 30, 2012 and $47.94 at December 31, 2012.

Parent Company Structure

We are a holding company and derive substantially all of our cash flow from our subsidiaries. We rely upon our invested cash balances and distributions from our subsidiaries to generate the funds necessary to meet our obligations and to declare and pay any dividends to our shareholders. The ability of our subsidiaries to pay dividends is subject to, among other things, the availability of sufficient earnings and funds in such subsidiaries, applicable state laws, including in the case of the insurance subsidiaries of CNA, laws and rules governing the payment of dividends by regulated insurance companies and compliance with covenants in their respective loan agreements. Claims of creditors of our subsidiaries will generally have priority as to the assets of such subsidiaries over our claims and those of our creditors and shareholders.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the consolidated condensed financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the related notes. Actual results could differ from those estimates.

The consolidated condensed financial statements and accompanying notes have been prepared in accordance with GAAP, applied on a consistent basis. We continually evaluate the accounting policies and estimates used to prepare the consolidated condensed 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 we believe are reasonable under the known facts and circumstances.

We consider the accounting policies discussed below to be critical to an understanding of our consolidated condensed financial statements as their application places the most significant demands on our judgment.

—

Insurance Reserves

—

Reinsurance and Other Receivables

—

Litigation

—

Valuation of Investments and Impairment of Securities

—

Long Term Care Products

—

Payout Annuity Contracts

—

Pension and Postretirement Benefit Obligations

—

Valuation of HighMount’s Proved Reserves

—

Impairment of Long-Lived Assets

—

Goodwill

—

Income Taxes

Due to the inherent uncertainties involved with these types of judgments, actual results could differ significantly from estimates, which may have a material adverse impact on our results of operations or equity. See the Critical Accounting Estimates section and the Results of Operations by Business Segment – CNA Financial – Reserves – Estimates and Uncertainties section of our MD&A included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2012 for further information.

RESULTS OF OPERATIONS BY BUSINESS SEGMENT

Unless the context otherwise requires, references to net operating income (loss), net realized investment results and net income (loss) reflect amounts attributable to Loews Corporation shareholders.

CNA Financial

The following table summarizes the results of operations for CNA for the three and six months ended June 30, 2013 and 2012 as presented in Note 12 of the Notes to Consolidated Condensed Financial Statements included in Item 1 of this Report:


	Three Months Ended				Six Months Ended
	June 30,				June 30,

	2013		2012		2013		2012

(In millions)

Revenues:
Insurance premiums	$	1,800	$	1,668	$	3,564	$	3,317
Net investment income		578		470		1,211		1,118
Investment gains (losses)		(14)		22		10		54
Other		129		86		211		158

Total		2,493		2,246		4,996		4,647

Expenses:
Insurance claims and policyholders’ benefits		1,521		1,348		2,950		2,729
Amortization of deferred acquisition costs		335		309		663		604
Other operating expenses		318		313		658		630
Interest		41		43		83		85

Total		2,215		2,013		4,354		4,048

Income before income tax		278		233		642		599
Income tax expense		(83)		(65)		(196)		(180)
Amounts attributable to noncontrolling interests		(20)		(17)		(45)		(42)

Net income attributable to Loews Corporation	$	175	$	151	$	401	$	377

Three Months Ended June 30, 2013 Compared to 2012

Net income increased $24 million for the three months ended June 30, 2013 as compared with the same period in 2012. Insurance premiums increased $132 million and includes $76 million from Hardy, which was acquired in July of 2012. In addition, net income improved from the prior year due to higher net investment income, improved current accident year underwriting results and a settlement benefit of $27 million (after tax and noncontrolling interests) related to workers’ compensation residual market litigation. These favorable impacts were partially offset by decreased net realized investment gains and lower favorable net prior year development. See the Investments section of this MD&A for further discussion of net realized investment results and net investment income.

Six Months Ended June 30, 2013 Compared to 2012

Net income increased $24 million for the six months ended June 30, 2013 as compared with the same period in 2012. Insurance premiums increased $247 million and includes $140 million from Hardy, which was acquired in July of 2012. Net income improved from the prior year primarily due to the same reasons discussed above for the three month comparison.

CNA Property and Casualty Insurance Operations

CNA’s property and casualty insurance operations consist of professional, financial, specialty property and casualty products and services and commercial insurance and risk management products.

In the evaluation of the results of the property and casualty businesses, CNA utilizes the loss ratio, the expense ratio, the dividend ratio and the combined ratio. These ratios are calculated using GAAP financial results. The loss ratio is the percentage of net incurred claim and claim adjustment expenses to net earned premiums. The 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 following tables summarize the results of CNA’s property and casualty operations for the three and six months ended June 30, 2013 and 2012:

CNA

Three Months Ended June 30, 2013

Specialty

Commercial

Hardy

Total

(In millions, except %)

Net written premiums

756

826

138

1,720

Net earned premiums

746

840

1,662

Net investment income

151

211

363

Net operating income (loss)

132

100

(2)

230

Net realized investment losses

(3)

(6)

(9)

Net income (loss)

129

(2)

221

Ratios:

Loss and loss adjustment expense

60.6%

76.5%

53.9%

68.4%

Expense

29.7

34.9

44.5

32.9

Dividend

0.1

0.3

0.2

Combined

90.4%

111.7%

98.4%

101.5%


	CNA		CNA
Three Months Ended June 30, 2012	Specialty		Commercial		Total


Net written premiums	$	718	$	889	$	1,607
Net earned premiums		719		809		1,528
Net investment income		112		151		263
Net operating income		95		51		146
Net realized investment gains		5		8		13
Net income		100		59		159

Ratios:
Loss and loss adjustment expense		62.2%		72.9%		67.9%
Expense		32.1		34.8		33.5
Dividend		0.1		0.4		0.3

Combined		94.4%		108.1%		101.7%

CNA

Six Months Ended June 30, 2013

Specialty

Commercial

Hardy

Total

(In millions, except %)

Net written premiums

1,559

1,744

193

3,496

Net earned premiums

1,469

1,677

140

3,286

Net investment income

321

461

784

Net operating income (loss)

258

213

(9)

462

Net realized investment gains (losses)

(1)

(4)

Net income (loss)

257

209

(8)

458

Ratios:

Loss and loss adjustment expense

62.4%

74.1%

51.5%

67.9%

Expense

30.1

35.0

50.1

33.4

Dividend

0.2

Combined

92.7%

109.3%

101.6%

101.5%


	CNA		CNA
Six Months Ended June 30, 2012	Specialty		Commercial		Total


Net written premiums	$	1,483	$	1,732	$	3,215
Net earned premiums		1,425		1,612		3,037
Net investment income		287		416		703
Net operating income		215		176		391
Net realized investment gains		10		14		24
Net income		225		190		415

Ratios:
Loss and loss adjustment expense		64.2%		71.8%		68.2%
Expense		31.7		35.0		33.4
Dividend		(0.1)		0.4		0.2

Combined		95.8%		107.2%		101.8%

Three Months Ended June 30, 2013 Compared to 2012

Net written premiums increased $113 million for the three months ended June 30, 2013 as compared with the same period in 2012. Net written premiums for 2013 included $138 million related to Hardy. Excluding Hardy, there was a decrease in net written premiums, primarily driven by underwriting actions taken in certain business classes in CNA Commercial, including a transfer of $44 million of in-force business, partially offset by rate increases. Net earned premiums increased $134 million for the three months ended June 30, 2013 as compared with the same period in 2013, including $76 million related to Hardy. Excluding Hardy, the increase in net earned premiums was primarily driven by the increase in net written premiums over recent quarters.

CNA Specialty’s average rate increased 7% for the three months ended June 30, 2013, as compared with an increase of 5% for the three months ended June 30, 2012 for the policies that renewed in each period. Retention of 84% and 86% was achieved in each period. CNA Commercial’s average rate increased 9% for the three months ended June 30, 2013, as compared with an increase of 7% for the three months ended June 30, 2012 for the policies that renewed in each period. Retention of 75% and 77% was achieved in each period.

Net operating income increased $84 million for the three months ended June 30, 2013 as compared with the same period in 2012. The increase in net operating income was primarily due to higher net investment income, improved underwriting results and a settlement benefit of $27 million (after tax and noncontrolling interests) in CNA Commercial. These favorable items were partially offset by unfavorable net prior year development in 2013 for CNA Commercial, which includes $21 million (after tax and noncontrolling interests) recorded for workers’ compensation in response to legislation related to the New York Fund for Reopened Cases. Catastrophe losses were $38 million (after tax and noncontrolling interests) for the three months ended June 30, 2013 as compared to catastrophe losses of $40 million (after tax and noncontrolling interests) for the same period in 2012.

Favorable net prior year development of $10 million and $72 million was recorded for the three months ended June 30, 2013 and 2012. Further information on net prior year development and the unfavorable development for workers’ compensation recorded in response to legislation in New York is included in Note 5 of the Notes to Consolidated Condensed Financial Statements included under Item 1.

CNA Specialty’s combined ratio improved 4.0 points for the three months ended June 30, 2013 as compared with the same period in 2012. The loss ratio improved 1.6 points, due primarily to an improved current accident year loss ratio. The expense ratio improved 2.4 points, primarily due to the impact of lower expenses and a higher net earned premium base.

CNA Commercial’s combined ratio increased 3.6 points for the three months ended June 30, 2013 as compared with the same period in 2012. The loss ratio increased 3.6 points, primarily due to unfavorable net prior year development, partially offset by an improved current accident year loss ratio.

Six Months Ended June 30, 2013 Compared to 2012

Net written premiums increased $281 million for the six months ended June 30, 2013 as compared with the same period in 2012. Net written premiums for 2013 included $193 million related to Hardy. Excluding Hardy, the increase in net written premiums was primarily driven by increased rate, partially offset by underwriting actions taken in certain business classes in CNA Commercial. Net earned premiums increased $249 million for the six months ended June 30, 2013 as compared with the same period in 2013, including $140 million related to Hardy. Excluding Hardy, the increase in net earned premiums was primarily driven by the increase in net written premiums over recent quarters.

CNA Specialty’s average rate increased 7% for the six months ended June 30, 2013, as compared with an increase of 4% for the six months ended June 30, 2012 for the policies that renewed in each period. Retention of 85% and 86% was achieved in each period. CNA Commercial’s average rate increased 9% for the six months ended June 30, 2013, as compared with an increase of 6% for the six months ended June 30, 2012, for the policies that renewed in each period. Retention of 76% and 77% was achieved in each period.

Net operating income increased $71 million for the six months ended June 30, 2013 as compared with the same period in 2012. The increase in net operating income was primarily due to the same reasons discussed above in the three month comparison. Catastrophe losses were $61 million (after tax and noncontrolling interests) for the six months ended June 30, 2013 as compared to catastrophe losses of $56 million (after tax and noncontrolling interests) for the same period in 2012.

Favorable net prior year development of $51 million and $118 million was recorded for the six months ended June 30, 2013 and 2012. Further information on net prior year development is included in Note 5 of the Notes to Consolidated Condensed Financial Statements included under Item 1.

CNA Specialty’s combined ratio improved 3.1 points for the six months ended June 30, 2013 as compared with the same period in 2012. The loss ratio improved 1.8 points, due to an improved current accident year loss ratio and higher favorable net prior year development. The expense ratio improved 1.6 points primarily due to the impact of lower expenses and a higher net earned premium base.

CNA Commercial’s combined ratio increased 2.1 points for the six months ended June 30, 2013 as compared with the same period in 2012. The loss ratio increased 2.3 points, primarily due to unfavorable net prior year development, partially offset by an improved current accident year loss ratio.

Life & Group Non-Core and Other Operations

Life & Group Non-Core primarily includes the results of the life and group lines of business that are in run-off. Other primarily includes certain CNA corporate expenses, including interest on corporate debt and the results of certain property and casualty business in run-off, including CNA Re and asbestos and environmental pollution (“A&EP”).

The following tables summarize the results of CNA’s Life & Group Non-Core and Other operations for the three and six months ended June 30, 2013 and 2012:


	Life & Group
Three Months Ended June 30, 2013	Non-Core		Other		Total

(In millions)

Net earned premiums	$	138			$	138
Net investment income		207	$	8		215
Net operating loss		(33)		(14)		(47)
Net realized investment gains				1		1
Net loss		(33)		(13)		(46)

Three Months Ended June 30, 2012


Net earned premiums	$	139			$	139
Net investment income		201	$	6		207
Net operating income (loss)		2		(10)		(8)
Net realized investment gains (losses)		3		(3)		-
Net income (loss)		5		(13)		(8)

Six Months Ended June 30, 2013


Net earned premiums	$	279			$	279
Net investment income		411	$	16		427
Net operating loss		(33)		(34)		(67)
Net realized investment gains		8		2		10
Net loss		(25)		(32)		(57)

Six Months Ended June 30, 2012


Net earned premiums	$	280			$	280
Net investment income		399	$	16		415
Net operating loss		(15)		(31)		(46)
Net realized investment gains (losses)		10		(2)		8
Net loss		(5)		(33)		(38)

Three Months Ended June 30, 2013 Compared to 2012

Net loss increased $38 million for the three months ended June 30, 2013 as compared with the same period in 2012. This increase was primarily due to unfavorable morbidity in CNA’s long term care business, driven by an increase in claim volume and a gain on a life settlement contract in 2012. In addition, there was a $6 million release of an allowance established for officer notes receivable for the three months ended June 30, 2013, as compared to a $13 million release of an allowance established for uncollectible reinsurance receivables for the same period in 2012.

Six Months Ended June 30, 2013 Compared to 2012

Net loss increased $19 million for the six months ended June 30, 2013 as compared with the same period in 2012. This increase was primarily due to unfavorable morbidity in CNA’s long term care business. First quarter 2013 results for CNA’s long term care business reflected favorable claims experience driven by mortality. Second quarter 2013 long term care results reflect unfavorable claims experience driven by morbidity. In addition, there was the impact of the release of the allowances in both periods, as discussed above.

Diamond Offshore

The ultra-deepwater and deepwater floater markets are generally firm. Expected industry wide ultra-deepwater utilization for 2013 is near capacity, inclusive of the expected 2013 newbuild deliveries, as only two newbuild deliveries for 2013 have not yet been contracted. However, despite the strength of these markets, Diamond Offshore’s ability to meet demand in the near term is limited due to its contracted backlog for the remainder of 2013 (100% and 97% for its ultra-deepwater and deepwater fleets).

Regionally, the offshore basins of West Africa, Brazil and the Gulf of Mexico continue to be an area of significant ultra-deepwater and deepwater activity where demand is firm, and in which dayrates are expected to remain steady throughout 2013. Discoveries in the pre-salt and post-salt formations offshore Brazil and pre-salt formation offshore West Africa, primarily Angola and Nigeria, have led to increased deepwater interest in these regions. On the Outer Continental Shelf of the Gulf of Mexico, drilling activity has surpassed pre-Macondo levels, and industry analysts predict that the market will continue to strengthen in 2013 and beyond, particularly in the ultra-deepwater market. Demand in the deeper waters of the U.S. Gulf of Mexico is tending more to newer deepwater and ultra-deepwater rigs due to a more rigorous regulatory environment, stronger focus on safety and prevention and more challenging formations.

As a result of the robust outlook for the ultra-deepwater and deepwater markets, there are a significant number of newbuild floaters on order by established drilling contractors, as well as new entrants into the industry, which is expected to lead to increased competition. Based on recent industry reports, the total number of newbuild floaters on order or announced was reported to be in excess of 100 rigs, including an estimated 28 rigs to be built on behalf of Petróleo Brasileiro S.A. (“Petrobras”), which is currently Diamond Offshore’s most significant customer. Excluding the Brazil-ordered rigs, over half of the newbuilds scheduled for delivery in 2014 through 2016 are not yet contracted for future work, including two of Diamond Offshore’s drillships and one of its semisubmersible rigs under construction. Industry reports also indicate that several of the ultra-deepwater rigs are being contracted for operations in the deepwater market, which could lead to increased competition between ultra-deepwater and deepwater rigs.

Market demand for mid-water floaters is generally stable. In both the U.K. and Norway sectors of the North Sea, the mid-water market is particularly strong. The mid-water market in other regions remains mixed but relatively stable. In the Mediterranean region, demand remains solid, although tempered by instability in Libya and Egypt. The Southeast Asia and Australia markets also remain steady with indications of possible strengthening.

Diamond Offshore has six actively-marketed jack-up rigs, four of which are currently operating in the Mexican waters of the Gulf of Mexico, where drilling activity remains stable and additional tendering activity is ongoing, and another jack-up rig is contracted under a two-year bareboat charter offshore Ecuador through August of 2014. Diamond Offshore’s other jack-up rig began working under contract in the GOM during the second quarter of 2013, where contracts are generally well-to-well or short term in duration.

Contract Drilling Backlog

The following table reflects Diamond Offshore’s contract drilling backlog as of July 24, 2013 and February 1, 2013 (the date reported in our Annual Report on Form 10-K for the year ended December 31, 2012). Contract drilling backlog is calculated by multiplying the contracted operating dayrate by the firm contract period and adding one half of any potential rig performance bonuses. Diamond Offshore’s calculation also assumes full utilization of its drilling equipment for the contract period (excluding scheduled shipyard and survey days); however, the amount of actual revenue earned and the actual periods during which revenues are earned will be different than the amounts and periods shown in the tables below due to various factors. Utilization rates, which generally approach 92% - 98% during contracted periods, can be adversely impacted by downtime due to various operating factors including, but not limited to, weather conditions and unscheduled repairs and maintenance. Contract drilling backlog excludes revenues for mobilization, demobilization, contract preparation and customer reimbursables. No revenue is generally earned during periods of downtime for regulatory surveys. Changes in Diamond Offshore’s contract drilling backlog between periods are a function of the performance of work on term contracts, as well as the extension or modification of existing term contracts and the execution of additional contracts.


	July 24,		February 1,
	2013		2013

(In millions)

Floaters:
Ultra-Deepwater (a)	$	4,967	$	4,422
Deepwater (b)		987		1,229
Mid-Water (c)		2,178		2,649

Total Floaters		8,132		8,300
Jack-ups		229		272

Total	$	8,361	$	8,572

(a)

As of July 24, 2013, for ultra-deepwater floaters includes (i) $1.1 billion attributable to contracted operations offshore Brazil for the years 2013 to 2015, (ii) $1.8 billion attributable to future work for two drillships under construction for the years 2013 to 2019 and (iii) $641 million attributable to future work for the ultra-deepwater semisubmersible rig under construction for the years 2016 to 2019.

(b)

As of July 24, 2013, for deepwater floaters includes (i) $431 million attributable to contracted operations offshore Brazil for the years 2013 to 2016, including $49 million attributable to future work for OGX Petróleo e Gás Ltda (“OGX”) and (ii) $179 million for the years 2013 to 2014 attributable to future work for the Ocean Onyx which is under construction.

(c)	As of July 24, 2013, for mid-water floaters includes $663 million attributable to contracted operations offshore Brazil for the years 2013 to 2015, including $47 million attributable to future work for OGX.

Currently, $9 million of the $23 million owed to Diamond Offshore at June 30, 2013 by OGX was past due.

The following table reflects the amount of Diamond Offshore’s contract drilling backlog by year as of July 24, 2013:

Year Ended December 31

Total

2013 (a)

2014

2015

2016 - 2019

(In millions)

Floaters:

Ultra-Deepwater (b)

4,967

501

1,167

1,332

1,967

Deepwater (c)

987

252

483

190

Mid-Water (d)

2,178

638

958

388

194

Total Floaters

8,132

1,391

2,608

1,910

2,223

Jack-ups

229

Total

8,361

1,477

2,681

1,958

2,245

(a)	Represents a six month period beginning July 1, 2013.

(b)

As of July 24, 2013, for ultra-deepwater floaters includes (i) $263 million, $473 million and $324 million for the years 2013 to 2015 attributable to contracted operations offshore Brazil, (ii) $256 million and $361 million for the years 2014 and 2015, and $1.2 billion in the aggregate for the years 2016 to 2019 attributable to future work for two drillships under construction and (iii) $641 million in the aggregate for the years 2016 to 2019 attributable to future work for the ultra-deepwater semisubmersible rig under construction.

(c)

As of July 24, 2013, for deepwater floaters includes $89 million, $146 million, $134 million and $62 million for the years 2013 to 2016, attributable to contracted operations offshore Brazil, including $34 million and $15 million for the years 2013 and 2014 attributable to future work for OGX and (ii) $15 million and $164 million for the years 2013 and 2014 attributable to future work for the Ocean Onyx which is under construction.

(d)	As of July 24, 2013, for mid-water floaters includes $243 million, $342 million and $79 million for the years 2013 to 2015 attributable to contracted operations offshore Brazil, including $47 million for the year 2013 attributable to future work for OGX.

The following table reflects the percentage of rig days committed by year as of July 24, 2013. The percentage of rig days committed is calculated as the ratio of total days committed under contracts, as well as scheduled shipyard, survey and mobilization days for all rigs in Diamond Offshore’s fleet, to total available days (number of rigs multiplied by the number of days in a particular year). Total available days have been calculated based on the expected final commissioning dates for rigs under construction.

Year Ended December 31

2013 (a) (b)

2014 (b)

2015 (b)

2016–2019 (b)

Floaters:

Ultra-Deepwater

100%

94%

70%

21%

Deepwater

97%

48%

19%

Mid-Water

79%

51%

17%

Total Floaters

88%

63%

35%

Jack-ups

74%

40%

20%

(a)	Represents a six month period beginning July 1, 2013.

(b)	As of July 24, 2013, includes approximately 827, 1,125, 34 and 196 currently known, scheduled shipyard, days for rig commissioning, contract preparation, surveys, and extended maintenance projects, as well as rig mobilization days for 2013, 2014, 2015 and 2016.

Dayrate and Utilization Statistics

Three Months Ended

Six Months Ended

June 30,

2013

2012

2013

2012

Revenue earning days (a)

Floaters:

Ultra-Deepwater

672

649

1,198

1,269

Deepwater

451

377

873

777

Mid-Water

1,058

1,142

2,099

2,266

Jack-ups (b)

469

419

918

941

Utilization (c)

Floaters:

Ultra-Deepwater

92%

89%

83%

87%

Deepwater

99%

83%

97%

85%

Mid-Water

65%

66%

64%

66%

Jack-ups (d)

74%

49%

72%

46%

Average daily revenue (e)

Floaters:

Ultra-Deepwater

341,800

354,000

350,000

359,000

Deepwater

408,600

371,600

399,200

365,000

Mid-Water

271,300

262,200

266,500

264,200

Jack-ups

88,400

94,100

86,800

90,000

(a)	A revenue earning day is defined as a 24-hour period during which a rig earns a dayrate after commencement of operations and excludes mobilization, demobilization and contract preparation days.

(b)	Revenue earning days for the six months ended June 30, 2012 included approximately 87 days earned by Diamond Offshore’s jack-up rigs during the period prior to being sold in 2012.

(c)	Utilization is calculated as the ratio of total revenue earnings days divided by the total calendar days in the period for all rigs in Diamond Offshore’s fleet (including cold stacked rigs).

(d)	Utilization for Diamond Offshore’s jack-up rigs would have been 66% and 67% for the three and six months ended June 30, 2012, excluding revenue earning days and total calendar days associated with rigs that were sold in 2012.

(e)	Average daily revenue is defined as contract drilling revenue (excluding revenue for mobilization, demobilization and contract preparation) per revenue earning day.

Results of Operations

The following table summarizes the results of operations for Diamond Offshore for the three and six months ended June 30, 2013 and 2012, as presented in Note 12 of the Notes to Consolidated Condensed Financial Statements included in Item 1 of this Report:


	Three Months Ended				Six Months Ended
	June 30,				June 30,

	2013		2012		2013		2012

(In millions)

Revenues:
Contract drilling revenues	$	745	$	726	$	1,445	$	1,481
Net investment income				1		1		3
Other		15		66		46		105

Total		760		793		1,492		1,589

Expenses:
Contract drilling expenses		369		405		744		802
Other operating expenses		126		129		270		261
Interest		8		13		16		28

Total		503		547		1,030		1,091

Income before income tax		257		246		462		498
Income tax expense		(78)		(52)		(114)		(125)
Amounts attributable to noncontrolling interests		(92)		(100)		(179)		(192)

Net income attributable to Loews Corporation	$	87	$	94	$	169	$	181

Three Months Ended June 30, 2013 Compared to 2012

Contract drilling revenue increased $19 million in the three months ended June 30, 2013 as compared with 2012, while contract drilling expense decreased $36 million during the same period. Contract drilling revenue increased primarily as a result of an increase in both revenue earning days and average daily revenue earned by Diamond Offshore’s deepwater fleet, partially offset by a decrease in revenue earning days for its mid-water fleet. Contract drilling expense for the entire rig fleet decreased for the three months ended June 30, 2013 reflecting lower costs associated with repairs, maintenance and mobilization of rigs, partially offset by higher labor costs.

Revenue generated by ultra-deepwater floaters decreased $2 million during the three months ended June 30, 2013 as compared with 2012, primarily due to decreased average daily revenue of $8 million and decreased mobilization revenue of $2 million, partially offset by increased utilization of $8 million.

Revenue generated by deepwater floaters increased $42 million during the three months ended June 30, 2013 as compared with 2012, primarily due to increased utilization of $27 million and higher average daily revenue of $17 million, partially offset by lower mobilization revenue of $2 million. Utilization increased in the three months ended June 30, 2013 primarily due to the absence of downtime associated with a survey in the 2012 period. Average daily revenue increased in the three months ended June 30, 2013 primarily due to the Ocean Valiant and Ocean Victory both working at significantly higher dayrates than those earned during the three months ended June 30, 2012.

Revenue generated by mid-water floaters decreased $22 million during the three months ended June 30, 2013 as compared with 2012, primarily due to decreased utilization of $22 million and decreased mobilization revenue of $9 million, partially offset by increased average daily revenue of $10 million. Revenue earning days decreased in the three months ended June 30, 2013 as compared with 2012, primarily due to an increase in planned downtime for shipyard projects.

Revenue earned by jack-up rigs remained stable for the three months ended June 30, 2013 as compared with 2012.

Net income decreased $7 million for the three months ended June 30, 2013 as compared with the 2012 period reflecting higher income taxes, partially offset by the increase in revenue and decrease in contract drilling expense as discussed above as well as a decrease in interest expense. Net income for the three months ended June 30, 2012 also included a $23 million gain (after tax and noncontrolling interests) on the sale of five jack-up rigs.

Diamond Offshore’s effective tax rate increased for the three months ended June 30, 2013 as compared with 2012. The higher effective tax rate is partially due to the mix of Diamond Offshore’s domestic and international pre-tax

earnings and losses and as a result of the sale of two jack-up rigs at a zero tax rate during the 2012 period. Additionally, the three months ended June 30, 2013 included $12 million of tax expense associated with settling the 2004 and 2006 tax years in Mexico under an amnesty program, which was partially offset by the reversal of $3 million of tax expense associated with the expiration of the statute of limitations in Mexico for the 2007 tax year.

Six Months Ended June 30, 2013 Compared to 2012

Contract drilling revenue decreased $36 million in the six months ended June 30, 2013 as compared with the 2012 period, while contract drilling expense decreased $58 million during the same period. Contract drilling revenue for the first six months of 2013 was negatively impacted by a decrease in revenue earned by Diamond Offshore’s ultra-deepwater, mid-water and jack-up fleets, partially offset by favorable revenue variances for its deepwater floaters. The decrease in contract drilling expense for the first six months of 2013 reflects lower mobilization and maintenance and repair costs, partially offset by additional labor costs associated with crews for the newbuild drillships.

Revenue generated by ultra-deepwater floaters decreased $55 million during the first six months of 2013 as compared with 2012, primarily due to decreased utilization of $25 million, decreased amortized mobilization fees of $19 million and decreased average daily revenue of $11 million. Utilization decreased in the first six months of 2013 primarily due to unplanned downtime for repairs. Amortized mobilization fees decreased in the first six months of 2013 as compared with 2012 primarily due to the recognition of mobilization revenue in the 2012 period associated with the Ocean Monarch’s mobilization to Vietnam and the Ocean Rover’s demobilization from Indonesia to Malaysia.

Revenue generated by deepwater floaters increased $60 million during the first six months of 2013 as compared with 2012, primarily due to higher average daily revenue of $30 million and increased utilization of $35 million, partially offset by lower amortized mobilization fees of $5 million. Average daily revenue increased in the first six months of 2013 primarily due to the Ocean Valiant and Ocean Victory both working at significantly higher dayrates than those rigs earned during the 2012 period. Revenue earning days increased during the first six months of 2013 primarily due to fewer planned non-operating days for surveys and shipyard projects.

Revenue generated by mid-water floaters decreased $35 million during the first six months of 2013 as compared with 2012, primarily due to decreased utilization of $44 million, partially offset by higher average daily revenue of $5 million and an increase in mobilization and contract preparation fees of $4 million. Revenue earning days decreased in the first six months of 2013 as compared with 2012, primarily due to an increase in planned downtime for shipyard projects and incremental downtime for cold stacked rigs, partially offset by fewer mobilization days during which revenue was deferred and a reduction in unplanned downtime for repairs.

Revenue earned by jack-up rigs decreased $6 million for the first six months of 2013 as compared with 2012, primarily due to the sale of six jack-up rigs in 2012. These rigs earned aggregate revenue of $5 million during the six months ended June 30, 2012.

Net income decreased $12 million for the six months ended June 30, 2013 as compared with the 2012 period reflecting the decline in revenue as discussed above, partially offset by the decrease in contract drilling expense as discussed above, lower interest expense and lower income taxes. The decrease in interest expense is primarily due to an increase in interest capitalized on eligible construction projects during 2013, partially offset by an increase in interest expense primarily related to uncertain tax positions in the Mexico tax jurisdiction. Net income for the six months ended June 30, 2012 also included a $32 million gain (after tax and noncontrolling interests) on the sale of six jack-up rigs.

Diamond Offshore’s effective tax rate remained stable for the six months ended June 30, 2013 as compared with 2012. The tax rate for the six months ended June 30, 2013 benefited from a $28 million reduction in tax expense during the six months ended June 30, 2013 as a result of the American Taxpayer Relief Act of 2012 which was signed into law on January 2, 2013. The Act extends through 2013 several expired temporary business provisions, commonly referred to as “extenders” which were retroactively extended to the beginning of 2012. This benefit was partially offset by the settlement of prior tax years in Mexico, as discussed above. The effective tax rate for the six months ended June 30, 2012 was favorably impacted by the sale of two jack-up rigs at a zero tax rate during the second quarter of 2012.

Boardwalk Pipeline

Boardwalk Pipeline derives revenues primarily from the transportation and storage of natural gas and natural gas liquids (“NGLs”) and gathering and processing of natural gas for third parties. Transportation services consist of firm natural gas transportation, where the customer pays a capacity reservation charge to reserve pipeline capacity at certain receipt and delivery points along pipeline systems, plus a commodity and fuel charge on the volume of

natural gas actually transported, and interruptible natural gas transportation, where the customer pays to transport gas only when capacity is available and used. Boardwalk Pipeline also offers firm natural gas storage services where the customer reserves and pays for a specific amount of storage capacity, including injection and withdrawal rights, and interruptible storage and parking and lending (“PAL”) services where the customer receives and pays for capacity only when it is available and used. Some PAL agreements are paid for at inception of the service and revenues for these agreements are recognized as service is provided over the term of the agreement. Boardwalk Pipeline’s NGL contracts are generally fee-based and are dependent on actual volumes transported or stored, although in some cases minimum volume requirements apply. Boardwalk Pipeline is not in the business of buying and selling natural gas and NGLs other than for system management purposes, but changes in the level of natural gas and NGL prices may impact the volumes of gas transported and stored on its pipeline systems. Boardwalk Pipeline’s operating costs and expenses typically do not vary significantly based upon the amount of products transported, with the exception of fuel consumed at its compressor stations.

Key drivers that influence the rates and terms of Boardwalk Pipeline’s transportation contracts are the current and anticipated basis spreads - generally meaning the difference in the price of natural gas at receipt and delivery points on its natural gas pipeline systems - which influence how much customers are willing to pay to transport gas between those points. Basis differentials can be affected by, among other things, the availability and supply of natural gas, competition from other pipelines, including pipelines under development, available transportation and storage capacity, storage inventories, regulatory developments, weather and general market demand in markets served by Boardwalk Pipeline’s pipeline systems. As new sources of natural gas have been identified and developed, including the Marcellus and the Utica Shales which are closer to the traditional high value markets served by interstate pipelines like Boardwalk Pipeline, and pipeline infrastructure has been developed to move the new sources of gas to market areas, changes in pricing dynamics between supply basins, pooling points and market areas have occurred. As a result of the new sources of supply and related pipeline infrastructure, basis spreads on Boardwalk Pipeline’s pipeline systems have narrowed significantly over the past several years, reducing the transportation rates Boardwalk Pipeline can typically negotiate with its customers on contracts due for renewal for its firm transportation services.

As of June 30, 2013, a substantial portion of Boardwalk Pipeline’s transportation capacity was contracted for under firm transportation agreements having a weighted-average remaining life of approximately 5.7 years. Each year a portion of Boardwalk Pipeline’s firm transportation agreements expire and must be renewed or replaced. Due to the factors noted above, in recent years the rates Boardwalk Pipeline has been able to obtain under firm and interruptible transportation agreements have declined and the amount of capacity that Boardwalk Pipeline has been able to contract for under long term firm transportation agreements have also declined. The amount of Boardwalk Pipeline’s transportation capacity under agreements which expire in 2013 is greater than in recent years. In light of the market conditions discussed above, transportation contracts Boardwalk Pipeline has renewed or entered into in 2013 have been at lower rates, and any remaining available capacity will be marketed and sold on a short term firm or interruptible basis, which Boardwalk Pipeline expects to be at lower rates. These circumstances have negatively affected, and are expected to continue to negatively affect, Boardwalk Pipeline’s transportation revenues and distributable cash flows in 2013.

The market for storage and PAL services is also impacted by the factors discussed above, as well as by natural gas price differentials between time periods, such as winter to summer (time period price spreads). Based on current forward pricing curves, time period price spreads for 2013 are not as favorable as they were in 2012. However, forward pricing curves change frequently as a result of a variety of market factors, including weather, levels of storage gas and available capacity, among others and as such may not be a reliable predictor of actual future events. Accordingly, Boardwalk Pipeline cannot predict its future revenues from interruptible storage and PAL services due to the uncertainty and volatility in market conditions discussed above. While PAL revenues for the six months ended June 30, 2013 were higher as compared to the same period for 2012, the majority of the revenues recognized in 2013 were a result of PAL transactions entered into in the latter half of 2012 when time period price spreads were more favorable.

In the second quarter of 2013, Boardwalk Pipeline executed an agreement with the Williams Companies, Inc. (“Williams”) to continue the development process for the Bluegrass Project, a project that would transport natural gas liquids from the Marcellus and Utica shale plays to the petrochemical and export complex in the U.S. Gulf Coast region, and related fractionation and storage facilities.

In connection with the transaction: (i) Boardwalk Pipeline entered into separate joint venture arrangements with Boardwalk Pipelines Holding Corp. (“BPHC”), a wholly owned subsidiary of ours, by forming Boardwalk Bluegrass Pipeline, LLC (“Boardwalk Bluegrass”) and Boardwalk Moss Lake, LLC (“Boardwalk Moss Lake”); and (ii) Boardwalk Bluegrass and Boardwalk Moss Lake, together with affiliates of Williams, formed Bluegrass Pipeline Company, LLC (“Bluegrass Pipeline”) and Moss Lake Fractionation, LLC (“Moss Lake”) to continue to pursue and,

if approved, develop, own and construct the pipeline and the fractionation facility. Boardwalk Bluegrass and Boardwalk Moss Lake will own 50% of the equity interests in Bluegrass Pipeline and Moss Lake, with affiliates of Williams owning the other 50%.

Through the agreement, Boardwalk Pipeline and Williams are engaged in comprehensive project development activities, including developing customer support for the pipeline. As of June 30, 2013 Boardwalk Pipeline and BPHC have contributed a total of $25 million to the project and our aggregate share of the 2013 pre-construction development costs are estimated to be approximately $110 million (inclusive of amounts funded to date). Sanctioning and completion of this project is subject to, among other conditions, execution of customer contracts sufficient to support the project and the parties’ receipt of all necessary board and regulatory approvals. In addition, each of the parties has the right, under certain circumstances, to withdraw from the project or from portions of the project, in which case the project may be terminated, only portions of the project may be completed or the parties respective ownership interests may change. No assurances can be given that this project will be completed, in whole or in part, however, if all conditions are satisfied, the project could be placed into service in late 2015.

Results of Operations

The following table summarizes the results of operations for Boardwalk Pipeline for the three and six months ended June 30, 2013 and 2012 as presented in Note 12 of the Notes to Consolidated Condensed Financial Statements included under Item 1 of this Report:


	Three Months Ended June 30,						Six Months Ended June 30,

	2013			2012			2013			2012

(In millions)

Revenues:
Other revenue, primarily operating	$	304		$	277		$	633		$	591
Investment losses					(2	)					(2)

Total		304			275			633			589

Expenses:
Operating		196			169			386			350
Interest		41			42			81			83

Total		237			211			467			433

Income before income tax		67			64			166			156
Income tax expense		(14	)		(15	)		(36	)		(37)
Amounts attributable to noncontrolling interests		(31	)		(25	)		(75	)		(60)

Net income attributable to Loews Corporation	$	22		$	24		$	55		$	59

Three Months Ended June 30, 2013 Compared to 2012

Total revenues increased $29 million for the three months ended June 30, 2013, compared to the same period in 2012. This increase is primarily due to $24 million of revenues earned from Louisiana Midstream, acquired in October of 2012, a $17 million gain from the sale of storage base gas and an increase in fuel revenues of $6 million primarily due to higher natural gas prices. The sale of storage base gas was a result of a strategy to monetize base gas and provide capacity for additional storage and parks of customer gas under PAL services. The increase in revenues was partially offset by lower transportation revenues, excluding fuel, of $16 million resulting primarily from lower firm and interruptible revenues due to the market and contract renewal conditions discussed above and mild weather.

Operating expenses increased $27 million for the three months ended June 30, 2013, compared to the same period in 2012. This increase is primarily due to $16 million of expenses incurred by Louisiana Midstream and increased fuel costs of $8 million due to higher natural gas prices.

Net income decreased $2 million for the three months ended June 30, 2013, compared with the 2012 period reflecting higher revenues offset by increased operating expenses as discussed above and amounts attributable to noncontrolling interests. The amount of income attributable to noncontrolling interests increased as a result of equity offerings in 2012 and 2013 by Boardwalk Pipeline, decreasing the ownership percentage from 61% for the three months ended June 30, 2012 to 54% for the three months ended June 30, 2013.

Six Months Ended June 30, 2013 Compared to 2012

Total revenues increased $44 million for the six months ended June 30, 2013, compared to the same period in 2012. This increase is primarily due to $43 million of revenues earned from Louisiana Midstream, acquired in October of 2012, a $17 million gain from the sale of storage base gas discussed above and an increase in fuel revenues of $13 million primarily due to higher natural gas prices. The increase in revenues was partially offset by lower transportation revenues, excluding fuel, of $30 million resulting primarily from lower firm and interruptible revenues due to the market and contract renewal conditions discussed above.

Operating expenses increased $36 million for the six months ended June 30, 2013, compared to the same period in 2012. This increase is primarily due to $29 million of expenses incurred by Louisiana Midstream and increased fuel costs of $11 million due to higher natural gas prices, partially offset by $7 million of asset impairment charges in 2012.

Net income decreased $4 million for the six months ended June 30, 2013, compared with the 2012 period reflecting higher revenues offset by increased operating expenses as discussed above and amounts attributable to noncontrolling interests. The amount of income attributable to noncontrolling interests increased as a result of equity offerings in 2012 and 2013 by Boardwalk Pipeline, decreasing the ownership percentage from 61% for the six months ended June 30, 2012 to 55% for the six months ended June 30, 2013.

HighMount

We use the following terms throughout this discussion of HighMount’s results of operations, with “equivalent” volumes computed with oil and natural gas liquid (“NGL”) quantities converted to Mcf, on an energy equivalent ratio of one barrel to six Mcf:


Bbl	-	Barrel (of oil or NGLs)
Bcf	-	Billion cubic feet (of natural gas)
Bcfe	-	Billion cubic feet of natural gas equivalent
Mbbl	-	Thousand barrels (of oil or NGLs)
Mcf	-	Thousand cubic feet (of natural gas)
Mcfe	-	Thousand cubic feet of natural gas equivalent
MMBtu	-	Million British thermal units

HighMount’s revenues and profitability depend substantially on natural gas and oil prices and HighMount’s ability to increase its natural gas and oil production. Natural gas and NGL prices remain at low levels due to an increase in the supply of natural gas and NGL resulting from new sources of supply recoverable from shale formations, primarily the result of technological advancements in horizontal drilling and hydraulic fracturing. As a result, HighMount continues to focus its capital investments primarily on potential oil producing properties, which led to a reduction in natural gas and NGL production and an increase in oil production. Revenues from the sale of oil, including the impact of hedges, amounted to 22% of HighMount’s total revenues for the six months ended June 30, 2013 as compared to 11% of its total revenue for the six months ended June 30, 2012. The price HighMount realizes for its production is also affected by HighMount’s hedging activities, as well as locational differences in market prices.

During the six months ended June 30, 2013, HighMount recorded a ceiling test impairment charge, primarily due to reduced average oil and NGL prices used in the ceiling test calculation and negative reserve revisions. No impairment charge was required during the second quarter of 2013. Reserve revisions in the first quarter were due to the continued deferral of well repair activity in the Sonora field given low natural gas and NGL prices and due to the Oklahoma Mississippian lime evaluation where HighMount is testing different horizontal target zones and hydraulic fracture designs resulting in some variability in well performance. In periods which HighMount took ceiling test impairment charges, HighMount performed a goodwill impairment test. HighMount also performed its annual goodwill impairment test as of April 30, 2013. No impairment charges were required.

Low natural gas and NGL prices, which are not anticipated to improve in the near term, and high drilling and completion costs of horizontal wells targeting oil reserves, as well as lower than anticipated production from recently completed wells, have adversely impacted HighMount’s results of operations and cash flows. The continuation of these factors could result in ceiling test and goodwill impairment charges in future periods, which may be material.

HighMount’s operating expenses consist primarily of production expenses, production and ad valorem taxes, as well as depreciation, depletion and amortization (“DD&A”) expenses. Production expenses represent costs incurred to operate and maintain wells, related equipment and facilities and transportation costs. Production and ad valorem taxes increase or decrease primarily when prices of natural gas and oil increase or decrease, but they are also affected by changes in production and state incentive programs, as well as appreciated property values. HighMount calculates depletion using the units-of-production method, which depletes the capitalized costs and future development costs associated with evaluated properties based on the ratio of production volumes for the current period to total remaining reserve volumes for the evaluated properties. HighMount’s depletion expense is affected by its capital spending program and projected future development costs, as well as reserve changes resulting from drilling programs, well performance and revisions due to changing commodity prices.

Production and Sales Statistics

Presented below are production and sales statistics related to HighMount’s operations for the three and six months ended June 30, 2013 and 2012:


	Three Months Ended June 30,				Six Months Ended June 30,

	2013		2012		2013		2012


Gas production (Bcf)		8.2		10.1		16.8		20.4
Gas sales (Bcf)		7.6		9.5		15.6		19.2
NGL production/sales (Mbbls)		501.2		582.3		1,004.6		1,215.1
Oil production/sales (Mbbls)		150.8		101.1		309.1		182.1
Equivalent production (Bcfe)		12.1		14.2		24.7		28.8
Equivalent sales (Bcfe)		11.5		13.5		23.5		27.5

Average realized prices without hedging results:
Gas (per Mcf)	$	4.05	$	2.11	$	3.60	$	2.34
NGL (per Bbl)		29.44		36.21		30.24		41.07
Oil (per Bbl)		91.96		83.31		89.49		89.10
Equivalent (per Mcfe)		5.16		3.65		4.86		4.03

Average realized prices with hedging results:
Gas (per Mcf)	$	4.31	$	3.89	$	4.20	$	4.06
NGL (per Bbl)		34.69		38.38		36.01		39.12
Oil (per Bbl)		95.41		89.01		92.95		91.67
Equivalent (per Mcfe)		5.61		5.03		5.55		5.15

Average cost per Mcfe:
Production expenses	$	1.68	$	1.30	$	1.57	$	1.29
Production and ad valorem taxes		0.32		0.24		0.31		0.27
General and administrative expenses		0.73		0.82		0.80		0.77
Depletion expense		1.14		1.46		1.27		1.51

Results of Operations

The following table summarizes the results of operations for HighMount for the three and six months ended June 30, 2013 and 2012, as presented in Note 12 of the Notes to Consolidated Condensed Financial Statements included in Item 1 of this Report:


	Three Months Ended June 30,				Six Months Ended June 30,

	2013		2012		2013		2012

(In millions)

Revenues:
Other revenue, primarily operating	$	66	$	69	$	134	$	145

Total		66		69		134		145

Expenses:
Other operating expenses
Impairment of natural gas and oil properties				222		145		266
Operating		53		61		110		124
Interest		4		3		9		6

Total		57		286		264		396

Income (loss) before income tax		9		(217)		(130)		(251)
Income tax (expense) benefit		(4)		78		47		90

Income (loss) attributable to Loews Corporation	$	5	$	(139)	$	(83)	$	(161)

HighMount’s results for the six months ended June 30, 2013, include a first quarter non-cash ceiling test impairment charge of $145 million ($92 million after tax) related to the carrying value of its natural gas and oil properties. For the three and six months ended June 30, 2012, HighMount recorded non-cash ceiling test impairment charges of $222 million and $266 million ($142 million and $170 million after tax). The 2013 write-down was attributable to reduced average NGL and oil prices used in the ceiling test calculations and negative reserve revisions. Had the effects of HighMount’s cash flow hedges not been considered in calculating the ceiling limitation, the impairments would have been $195 million ($124 million after tax) for 2013, and $266 million and $335 million ($170 million and $214 million after tax) for the three and six months ended June 30, 2012.

Three Months Ended June 30, 2013 Compared to 2012

HighMount’s operating revenues decreased $3 million for the three months ended June 30, 2013 as compared with the 2012 period primarily due to reduced sales volumes. HighMount sold 11.5 Bcfe in the three months ended June 30, 2013 compared to 13.5 Bcfe in the 2012 period. The decrease in sales volume was primarily due to the continued reduction in capital spending on natural gas drilling since 2008.

HighMount had hedges in place as of June 30, 2013 that cover approximately 67.0% and 36.7% of total estimated 2013 and 2014 natural gas equivalent production at a weighted average price of $6.49 and $5.68 per Mcfe.

Operating expenses were $53 million for the three months ended June 30, 2013 as compared to $61 million for the same period in 2012. Production expenses and production and ad valorem taxes were $26 million for the three months ended June 30, 2013, compared to $24 million for the 2012 period. DD&A expenses were $19 million for the three months ended June 30, 2013, compared to $26 million for the 2012 period. The decrease in DD&A expenses was due to reduced production volumes and lower depletion rates, primarily due to the impairment of natural gas and oil properties recorded in 2013 and 2012.

Six Months Ended June 30, 2013 Compared to 2012

HighMount’s operating revenues decreased $11 million for the six months ended June 30, 2013 as compared with the 2012 period primarily due to reduced natural gas and NGL sales volumes and reduced NGL sales prices. HighMount sold 23.5 Bcfe in 2013 compared to 27.5 Bcfe in the 2012 period. The decrease in sales volume was primarily due to the continued reduction in capital spending on natural gas drilling since 2008.

Operating expenses decreased by $14 million for the six months ended June 30, 2013 as compared with the 2012 period. Production expenses and production and ad valorem taxes were $50 million for the six months ended June 30, 2013, compared to $49 million for the 2012 period. DD&A expenses were $41 million in 2013, compared to $53

million in 2012. The decrease in DD&A expenses was due to reduced production volumes and lower depletion rates, primarily due to the impairment of natural gas and oil properties recorded in 2013 and 2012.

Loews Hotels

The following table summarizes the results of operations for Loews Hotels for the three and six months ended June 30, 2013 and 2012 as presented in Note 12 of the Notes to Consolidated Condensed Financial Statements included in Item 1 of this Report:


	Three Months Ended June 30,					Six Months Ended June 30,

	2013		2012			2013			2012

(In millions)

Revenues:
Other revenue, primarily operating	$	101	$	94		$	195		$	174

Total		101		94			195			174

Expenses:
Other operating expenses
Operating		92		81			184			155
Depreciation		10		7			18			14
Equity income from joint ventures		(6)		(7	)		(15	)		(17)
Interest		3		2			6			4

Total		99		83			193			156

Income before income tax		2		11			2			18
Income tax expense		(1)		(5	)		(1	)		(8)

Net income attributable to Loews Corporation	$	1	$	6		$	1		$	10


EBITDA	$	15	$	20		$	26		$	36

Earnings before interest, tax, depreciation and amortization (“EBITDA”) is an indicator of operating performance used by Loews Hotels to measure its ability to service debt, fund capital expenditures and expand its business. EBITDA is a non-GAAP financial measure that is not meant to replace net income as defined by GAAP. The following table reconciles EBITDA to Net income attributable to Loews Corporation for the three and six months ended June 30, 2013 and 2012:


	Three Months Ended June 30,					Six Months Ended June 30,

	2013		2012			2013			2012

(In millions)

EBITDA	$	15	$	20		$	26		$	36
Depreciation		(10)		(7	)		(18	)		(14)
Interest		(3)		(2	)		(6	)		(4)
Income tax expense		(1)		(5	)		(1	)		(8)

Net income attributable to Loews Corporation	$	1	$	6		$	1		$	10

Revenues and operating expenses for the three and six months ended June 30, 2013 include $12 million and $25 million of cost reimbursements from joint venture and managed properties, relating mainly to payroll incurred on behalf of the owners of hotel properties managed by us.

Revenues excluding reimbursables decreased $5 million and $4 million for the three and six months ended June 30, 2013 as compared to the 2012 periods, primarily due to the 2013 closure of the Loews Regency Hotel for renovation, partially offset by the addition of the Loews Madison Hotel and the Loews Boston Back Bay Hotel to the portfolio of owned properties during 2013.

Revenue per available room (“RevPAR”) is an industry measure of the combined effect of occupancy rates and average room rates on room revenues. Other hotel operating revenues primarily include guest charges for food and beverages. RevPAR, occupancy rates and average room rates as discussed below are for owned hotels only. RevPAR decreased $14.68 and $8.46 to $167.41 and $160.44 for the three and six months ended June 30, 2013 as compared to the 2012 periods, reflecting a decrease in occupancy and average room rates. Occupancy rates

decreased to 77.8% and 71.9% in the three and six months ended June 30, 2013, from 80.6% and 74.3% in the 2012 periods. Average room rates decreased by $10.71 and $4.10, or 4.7%, and 1.8%, in the three and six months ended June 30, 2013, as compared to the 2012 periods. Excluding the Loews Regency Hotel currently under renovation in 2013, RevPAR increased $5.94 and $7.32 for the three and six months ended June 30, 2013 as compared to the 2012 periods, reflecting an increase in average room rates.

Operating expenses excluding reimbursables, as discussed above, decreased $1 million for the three months ended June 30, 2013 and increased $4 million for the six months ended June 30, 2013 as compared to the 2012 periods. For the three months ended June 30, 2013 the decrease in expenses was primarily due to the closure of the Loews Regency Hotel, partially offset by the increase in expenses from the Loews Madison Hotel and the Loews Boston Back Bay Hotel. Operating expenses increased for the six months ended June 30, 2013 primarily due to expenses, including acquisition and transition related costs, from the Loews Madison Hotel and the Loews Boston Back Bay Hotel. The increase in expenses was partially offset by lower expenses due to the closure of the Loews Regency Hotel.

Net income decreased $5 million and $9 million for the three and six months ended June 30, 2013 as compared to the 2012 periods, primarily due to the changes discussed above.

Corporate and Other

Corporate and Other operations consist primarily of investment income at the Parent Company, corporate interest expenses and other corporate administrative costs. Investment income includes earnings on cash and short term investments held at the Parent Company level to meet current and future liquidity needs, as well as results of limited partnership investments and the trading portfolio managed to take advantage of potential market opportunities.

The following table summarizes the results of operations for Corporate and Other for the three and six months ended June 30, 2013 and 2012 as presented in Note 12 of the Notes to Consolidated Condensed Financial Statements included in Item 1 of this Report:


	Three Months Ended June 30,						Six Months Ended June 30,

	2013			2012			2013			2012

(In millions)

Revenues:
Net investment income (loss)	$	1		$	(85	)	$	8		$	(9)
Other					(2	)		1

Total		1			(87	)		9			(9)

Expenses:
Operating		18			28			33			40
Interest		15			10			25			20

Total		33			38			58			60

Loss before income tax		(32	)		(125	)		(49	)		(69)
Income tax benefit		11			43			17			22

Net loss attributable to Loews Corporation	$	(21	)	$	(82	)	$	(32	)	$	(47)

Revenues increased by $88 million and $18 million for the three and six months ended June 30, 2013, as compared to the 2012 periods. Investment income for the three and six months ended June 30, 2013 increased primarily due to improved performance of limited partnership investments and the absence of trading portfolio losses recorded in 2012.

Operating expenses decreased $10 million and $7 million for the three and six months ended June 30, 2013, as compared to the 2012 periods. These decreases were primarily due to lower corporate overhead expenses. In addition, interest expense increased $5 million for the three and six months ended June 30, 2013, primarily due to a May of 2013 public offering of $500 million aggregate principal amount of 2.6% senior notes due May 15, 2023 and $500 million aggregate principal amount of 4.1% senior notes due May 15, 2043.

There was a net loss of $21 million and $32 million for the three and six months ended June 30, 2013 as compared to a net loss of $82 million and $47 million in the 2012 periods. These changes were primarily due to the change in revenues and expenses discussed above.

LIQUIDITY AND CAPITAL RESOURCES

CNA Financial

CNA’s primary operating cash flow sources are premiums and investment income from its insurance subsidiaries. CNA’s primary operating cash flow uses are payments for claims, policy benefits and operating expenses including interest expense on corporate debt. Additionally, cash may be paid or received for income taxes.

For the six months ended June 30, 2013, net cash provided by operating activities was $569 million as compared with $618 million for the same period in 2012. Cash provided by operating activities in 2012 was favorably affected by a $75 million tax refund.

Cash flows from investing activities include the purchase and disposition of available-for-sale financial instruments. Additionally, cash flows from investing activities may include the purchase and sale of businesses, land, buildings, equipment and other assets not generally held for resale.

For the six months ended June 30, 2013, net cash used by investing activities was $471 million as compared with $510 million for the same period in 2012. The cash flow from investing activities is affected by various factors such as the anticipated payment of claims, financing activity, asset/liability management and individual security buy and sell decisions made in the normal course of portfolio management.

Cash flows from financing activities may include proceeds from the issuance of debt and equity securities, outflows for shareholder dividends or repayment of debt and outlays to reacquire equity instruments.

For the six months ended June 30, 2013, net cash used by financing activities was $127 million as compared with $83 million for the same period in 2012. Net cash used by financing activities in both periods was primarily related to the payment of dividends by CNA to common shareholders.

CNA believes that its present cash flows from operations, investing activities and financing activities are sufficient to fund its current and expected working capital and debt obligation needs and CNA does not expect this to change in the near term. There are currently no amounts outstanding under CNA’s $250 million senior unsecured revolving credit facility.

Ratings are an important factor in establishing the competitive position of insurance companies. CNA’s insurance company subsidiaries are rated by major rating agencies and these ratings reflect the rating agency’s opinion of the insurance company’s financial strength, operating performance, strategic position and ability to meet its obligations to policyholders. In June 2013, Standard & Poor’s (“S&P”) upgraded CNA’s property and casualty insurance financial strength ratings to A with a stable outlook and upgraded the credit rating on the senior debt of CNA to BBB. Further information on CNA’s ratings is included in the Liquidity and Capital Resources section of our MD&A included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2012.

Diamond Offshore

Cash and investments totaled $1.2 billion at June 30, 2013, compared to $1.5 billion at December 31, 2012. During the first six months of 2013, Diamond Offshore paid cash dividends totaling $246 million, consisting of aggregate regular cash dividends of $35 million and aggregate special cash dividends of $211 million. On July 24, 2013, Diamond Offshore declared a regular quarterly dividend of $0.125 per share and a special dividend of $0.75 per share.

Cash provided by operating activities for the six months ended June 30, 2013 decreased $93 million compared to the 2012 period, primarily due to a decrease in cash receipts from contract drilling services of $58 million, higher cash payments related to contract drilling expenses of $20 million and higher cash net income taxes paid of $15 million.

Diamond Offshore is currently obligated under various agreements in connection with the construction of three semisubmersible rigs and four new ultra-deepwater drillships. Diamond Offshore estimates that the aggregate cost for the construction of the these semisubmersible rigs and drillships, including commissioning, capital spares and project management, to be approximately $1.5 billion and $2.6 billion. During the first six months of 2013, Diamond Offshore spent $464 million towards the construction of these four new drillships and three semisubmersible rigs. In addition, Diamond Offshore spent approximately $79 million during the period related to its ongoing capital maintenance programs.

For 2013, Diamond Offshore has budgeted approximately $1.9 billion for capital expenditures of which approximately $1.5 billion will be spent towards the construction of its new drillships and semisubmersible rigs, and approximately $74 million will be spent on the North Sea enhancement project for the Ocean Patriot. The remainder will be spent on Diamond Offshore’s ongoing rig equipment enhancement/replacement program. Diamond Offshore expects to finance its 2013 capital expenditures through the use of existing cash balances and cash flows from operations and may also make use of its credit facility.

In addition, Diamond Offshore may, from time to time, issue debt or equity securities, or a combination thereof, to finance capital expenditures, the acquisition of assets and businesses or for general corporate purposes. Diamond Offshore’s ability to access the capital markets by issuing debt or equity securities will be dependent on its results of operations, current financial condition, current market conditions and other factors beyond its control.

A substantial portion of Diamond Offshore’s cash flows has been and is expected to continue to be invested in the enhancement of its drilling fleet. Diamond Offshore determines the amount of cash required to meet its capital commitments by evaluating its rig construction obligations, the need to upgrade rigs to meet specific customer requirements and its ongoing rig equipment enhancement and replacement programs. As a result of Diamond Offshore’s intention to indefinitely reinvest the earnings of its wholly owned subsidiary, Diamond Offshore International Limited (“DOIL”), to finance its foreign activities, Diamond Offshore does not expect such earnings to be available for distribution to its stockholders or to finance its domestic activities. However, Diamond Offshore believes that the operating cash flows generated by and cash reserves of DOIL, and the operating cash flows available to and cash reserves of Diamond Offshore Drilling, Inc. will be sufficient to meet both its working capital requirements and its capital commitments over the next twelve months. Diamond Offshore will, however, continue to make periodic assessments based on industry conditions and will adjust capital spending programs if required.

Boardwalk Pipeline

At June 30, 2013 and December 31, 2012, cash and investments amounted to $10 million and $4 million. Funds from operations for the six months ended June 30, 2013 amounted to $285 million, compared to $281 million for the 2012 period. For the six months ended June 30, 2013 and 2012, Boardwalk Pipeline’s capital expenditures were $142 million and $91 million.

In May of 2013, Boardwalk Pipeline sold 12.7 million common units in a public offering and received net proceeds of $377 million, including an $8 million contribution from us to maintain our 2% general partner interest.

As of June 30, 2013, Boardwalk Pipeline had $20 million of loans outstanding under its revolving credit facility with a weighted-average interest rate of 1.3% and had no letters of credit issued. As of June 30, 2013, Boardwalk Pipeline was in compliance with all covenant requirements under the credit facility and had an available borrowing capacity of $980 million.

Boardwalk Pipeline’s ability to access the capital markets for debt and equity financing under reasonable terms depends on its financial condition, credit ratings and market conditions. Boardwalk Pipeline anticipates that its existing capital resources, including the revolving credit facility and future cash flows generated from operations will be adequate to fund its operations, including maintenance capital expenditures. Boardwalk Pipeline may seek to access the capital markets to fund some or all of its growth capital expenditures, acquisitions or for general corporate purposes including to refinance all or a portion of its indebtedness, a significant amount of which matures in the next five years.

Boardwalk Pipeline expects total capital expenditures to be approximately $360 million in 2013, including approximately $100 million for maintenance capital. The 2013 growth capital expenditures primarily relate to the Eagle Ford and Choctaw Brine Supply Expansion Projects discussed in the Annual Report on Form 10-K for the year ended December 31, 2012.

HighMount

At June 30, 2013 and December 31, 2012, cash and investments amounted to $24 million and $10 million. Net cash flows provided by operating activities were $58 million and $76 million for the six months ended June 30, 2013 and 2012. Key drivers of net operating cash flows are commodity prices, production volumes and operating costs.

Cash used in investing activities for the six months ended June 30, 2013, was $149 million, compared to $153 million for the 2012 period. The primary driver of cash used in investing activities was capital spent developing

HighMount’s natural gas and oil reserves. HighMount expects to spend approximately $130 million in the second half of 2013, developing its natural gas and oil reserves with a focus on oil drilling opportunities. Funds for capital expenditures and working capital requirements are expected to be provided from operating activities and capital contributions from us.

At June 30, 2013, HighMount had $600 million of term loans outstanding and $120 million was outstanding under HighMount’s $250 million revolving credit facility. HighMount’s credit agreement contains financial covenants typical for these types of agreements, including a maximum debt to capitalization ratio and a minimum ratio of net present value of its projected future cash flows from its proved natural gas and oil reserves to total debt. The calculation of net present value, performed at least annually, is based on commodity prices determined by the lenders and HighMount’s proved reserves. A decrease in commodity prices and HighMount’s estimate of proved reserves will impact negatively HighMount’s borrowing capacity under its credit agreement. Due to the current limited capacity of HighMount’s credit agreement, we made $96 million of capital contributions to HighMount in the six months ended June 30, 2013, which were used for capital expenditures. The credit agreement also contains customary restrictions or limitations on HighMount’s ability to engage in certain transactions, including transactions with affiliates. At June 30, 2013, HighMount was in compliance with all of its covenants under the credit agreement.

Loews Hotels

Loews Hotels added two properties to its portfolio in 2013, the Loews Madison Hotel and the Loews Boston Back Bay Hotel. These acquisitions were funded with existing cash balances, debt and capital contributions by us.

Cash and investments totaled $94 million at June 30, 2013, as compared to $43 million at December 31, 2012. Committed and planned capital expenditures for renovations, capital improvements and development of new properties are estimated to be approximately $145 million for the remainder of 2013. Funds for future capital expenditures, including acquisitions of new properties, renovations and working capital requirements are expected to be provided from operations, newly incurred debt, existing cash balances and advances or capital contributions from us.

Corporate and Other

Parent Company cash and investments, net of receivables and payables, at June 30, 2013 totaled $4.6 billion, as compared to $3.9 billion at December 31, 2012. In May of 2013, we received net proceeds of approximately $983 million, after deducting the underwriters’ discounts, commissions and offering expenses, in connection with a public offering of $500 million aggregate principal amount of 2.6% senior notes due May 15, 2023 and $500 million aggregate principal amount of 4.1% senior notes due May 15, 2043. The proceeds for this offering are expected to be used for general corporate purposes. In addition, during the six months ended June 30, 2013, we received $364 million in interest and dividends from our subsidiaries. These inflows were partially offset by the payment of $177 million to fund treasury stock purchases, the payment of $49 million of cash dividends to our shareholders and capital contributions of $320 million to our subsidiaries.

As of June 30, 2013, there were 388,006,121 shares of Loews common stock outstanding. Depending on market and other conditions, we may purchase shares of our subsidiaries’ outstanding common stock in the open market or otherwise. During the six months ended June 30, 2013, we purchased 4.0 million shares of Loews common stock at an aggregate cost of $177 million.

We have an effective Registration Statement on Form S-3 registering the future sale of an unlimited amount of our debt and equity securities. From time to time, we consider issuance of Parent Company indebtedness under this registration statement.

We continue to pursue conservative financial strategies while seeking opportunities for responsible growth. These include the expansion of existing businesses, full or partial acquisitions and dispositions, and opportunities for efficiencies and economies of scale.

INVESTMENTS

Investment activities of non-insurance subsidiaries primarily include investments in fixed income securities, including short term investments. The Parent Company portfolio also includes equity securities, including short sales and derivative instruments, and investments in limited partnerships. These types of investments generally present greater volatility, less liquidity and greater risk than fixed income investments and are included within Results of Operations – Corporate and Other.

We enter into short sales and invest in certain derivative instruments that are used for asset and liability management activities, income enhancements to our portfolio management strategy and to benefit from anticipated future movements in the underlying markets. If such movements do not occur as anticipated, then significant losses may occur. Monitoring procedures include senior management review of daily detailed reports of existing positions and valuation fluctuations to ensure that open positions are consistent with our portfolio strategy.

Credit exposure associated with non-performance by the counterparties to derivative instruments is generally limited to the uncollateralized change in fair value of the derivative instruments recognized in the Consolidated Condensed Balance Sheets. We mitigate the risk of non-performance by monitoring the creditworthiness of counterparties and diversifying derivatives to multiple counterparties. We occasionally require collateral from our derivative investment counterparties depending on the amount of the exposure and the credit rating of the counterparty.

Insurance

CNA maintains a large portfolio of fixed maturity and equity securities, including large amounts of corporate and government issued debt securities, residential and commercial mortgage-backed securities, and other asset-backed securities and investments in limited partnerships which pursue a variety of long and short investment strategies across a broad array of asset classes. CNA’s investment portfolio supports its obligation to pay future insurance claims and provides investment returns which are an important part of CNA’s overall profitability.

Net Investment Income

The significant components of CNA’s net investment income are presented in the following table:


	Three Months Ended June 30,						Six Months Ended June 30,

	2013			2012			2013			2012

(In millions)

Fixed maturity securities	$	498		$	505		$	997		$	1,021
Short term investments		1			2			2			3
Limited partnership investments		79			(35	)		210			95
Equity securities		3			2			6			6
Trading portfolio		5			4			10			11
Other		6			7			12			11

Gross investment income		592			485			1,237			1,147
Investment expense		(14	)		(15	)		(26	)		(29)

Net investment income	$	578		$	470		$	1,211		$	1,118

Net investment income for the three months ended June 30, 2013 increased $108 million as compared with the same period in 2012. The increase was primarily driven by limited partnership investment results. The decrease in fixed maturity securities income was due to the effect of investing at lower interest rates, partially offset by a higher invested asset base.

Net investment income for the six months ended June 30, 2013 increased $93 million as compared with the same period in 2012 due to the same reasons discussed above in the three month comparison.

The fixed maturity investment portfolio provided a pretax effective income yield of 5.2% and 5.4% for the six months ended June 30, 2013 and 2012. Tax-exempt municipal bonds generated $71 million and $140 million of net investment income for the three and six months ended June 30, 2013 compared with $69 million and $135 million of net investment income for the same periods in 2012.

Net Realized Investment Gains (Losses)

The components of CNA’s net realized investment results are presented in the following table:


	Three Months Ended June 30,				Six Months Ended June 30,

	2013		2012		2013			2012

(In millions)

Realized investment gains (losses):
Fixed maturity securities:
Corporate and other bonds	$	15	$	20	$	46		$	43
States, municipalities and political subdivisions				12		(2	)		27
Asset-backed		(21)		(17)		(18	)		(29)
U.S. Treasury and obligations of government-sponsored enterprises				1					2
Foreign government		1		1		1			4

Total fixed maturity securities		(5)		17		27			47
Equity securities		(2)				(15	)		1
Derivative securities		(5)		1		(3	)
Short term investments and other		(2)		4		1			6

Total realized investment gains (losses)		(14)		22		10			54
Income tax (expense) benefit		5		(8)		(3	)		(19)
Amounts attributable to noncontrolling interests		1		(2)		(1	)		(4)

Net realized investment gains (losses) attributable to Loews Corporation	$	(8)	$	12	$	6		$	31

Net realized investment results decreased $20 million and $25 million for the three and six months ended June 30, 2013, as compared with the 2012 period. The decrease was primarily driven by lower realized gains on sales of securities partially offset by lower OTTI losses recognized in earnings. Further information on CNA’s realized gains and losses, including CNA’s OTTI losses, is set forth in Note 2 of the Notes to Consolidated Condensed Financial Statements included under Item 1.

Portfolio Quality

CNA’s fixed maturity portfolio consists primarily of high quality bonds, 91.0% and 91.6% of which were rated as investment grade (rated BBB- or higher) at June 30, 2013 and December 31, 2012. The classification between investment grade and non-investment grade is based on a ratings methodology that takes into account ratings from S&P and Moody’s Investors Service, Inc. (“Moody’s”) in that order of preference. If a security is not rated by these rating agencies, CNA formulates an internal rating. At June 30, 2013 and December 31, 2012, approximately 98% of the fixed maturity portfolio was rated by S&P or Moody’s, or was issued or guaranteed by the U.S. Government, Government agencies or Government-sponsored enterprises.

The following table summarizes the ratings of CNA’s fixed maturity portfolio at fair value:


	June 30, 2013				December 31, 2012

(In millions of dollars)

U.S. Government, Government agencies and Government-sponsored enterprises	$	3,670	8.9	%	$	4,540	10.6%
AAA		3,048	7.4			3,224	7.6
AA and A		19,482	47.0			19,305	45.3
BBB		11,460	27.7			11,997	28.1
Non-investment grade		3,771	9.0			3,567	8.4

Total	$	41,431	100.0	%	$	42,633	100.0%

Non-investment grade fixed maturity securities, as presented in the table below, include high-yield securities rated below BBB- by bond rating agencies and other unrated securities that, according to CNA’s analysis, are below investment grade. Non-investment grade securities generally involve a greater degree of risk than investment grade securities. The amortized cost of CNA’s non-investment grade fixed maturity bond portfolio was $3.6 billion and

$3.4 billion at June 30, 2013 and December 31, 2012. The following table summarizes the ratings of this portfolio at fair value:


	June 30, 2013				December 31, 2012

(In millions of dollars)

BB	$	1,622	43.0	%	$	1,529	42.9%
B		1,191	31.6			1,075	30.1
CCC-C		679	18.0			724	20.3
D		279	7.4			239	6.7

Total	$	3,771	100.0	%	$	3,567	100.0%

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

June 30, 2013

Estimated
Fair value

Gross
Unrealized
Losses

(In millions of dollars)

U.S. Government, Government agencies and Government-sponsored enterprises

1,216

14.3

14.8%

AAA

640

7.5

4.8

1,555

18.3

133

30.2

1,605

18.9

13.9

BBB

2,346

27.6

126

28.6

Non-investment grade

1,137

13.4

7.7

Total

8,499

100.0

440

100.0%

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

June 30, 2013

Estimated
Fair value

Gross
Unrealized
Losses

(In millions of dollars)

Due in one year or less

246

2.9

0.9%

Due after one year through five years

1,448

17.0

8.0

Due after five years through ten years

3,939

46.3

182

41.4

Due after ten years

2,866

33.8

219

49.7

Total

8,499

100.0

440

100.0%

Duration

A primary objective in the management of the investment portfolio is to optimize return relative to corresponding liabilities and respective liquidity needs. CNA’s views on the current interest rate environment, tax regulations, asset class valuations, specific security issuer and broader industry segment conditions, and the domestic and global economic conditions, are some of the factors that enter into an investment decision. CNA also continually monitors exposure to issuers of securities held and broader industry sector exposures and may from time to time adjust such exposures based on its 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, CNA segregates investments for asset/liability management purposes. The segregated investments support the liabilities in Life & Group Non-Core including annuities, structured settlements and long term care products.

The effective durations of fixed maturity securities, short term investments and interest rate derivatives are presented in the table below. Short term investments are net of accounts payable and receivable amounts for securities purchased and sold, but not yet settled.

June 30, 2013

December 31, 2012

Fair Value

Effective
Duration
(Years)

Fair Value

Effective
Duration

(Years)

(In millions of dollars)

Investments supporting Life & Group Non-Core

14,986

11.2

15,590

11.3

Other interest sensitive investments

27,790

4.3

28,855

3.9

Total

42,776

6.7

44,445

6.5

The investment portfolio is periodically analyzed for changes in duration and related price change risk. Additionally, CNA periodically reviews 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 in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2012.

Short Term Investments

The carrying value of the components of CNA’s short term investment portfolio is presented in the following table:


	June 30, 2013		December 31, 2012

(In millions)

Short term investments:
Commercial paper	$	374	$	751
U.S. Treasury securities		836		617
Money market funds		164		301
Other		157		163

Total short term investments	$	1,531	$	1,832

FORWARD-LOOKING STATEMENTS

Investors are cautioned that certain statements contained in this Report as well as some statements in periodic press releases and some oral statements made by our officials and our subsidiaries during presentations about us, are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, events, performance or achievements, and may contain the words “expect,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “will be,” “will continue,” “will likely result,” and similar expressions. In addition, any statement concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible actions taken by us or our subsidiaries, which may be provided by management are also forward-looking statements as defined by the Act.

Forward-looking statements are based on current expectations and projections about future events and are inherently subject to a variety of risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from those anticipated or projected. These risks and uncertainties include, among others:

Risks and uncertainties primarily affecting us and our insurance subsidiaries

—

the risks and uncertainties associated with CNA’s loss reserves, as outlined under “Results of Operations by Business Segment – CNA Financial – Reserves – Estimates and Uncertainties” in our Annual Report on Form 10-K for the year ended December 31, 2012, 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 transaction in which, subject to certain limitations, CNA ceded its legacy A&EP liabilities will not fully perform their obligations to CNA, the uncertainty in estimating loss reserves for A&EP liabilities and the possible continued exposure of CNA to liabilities for A&EP claims that are not covered under the terms of the transaction;

—

the performance of reinsurance companies under reinsurance contracts with CNA;

—

the impact of competitive products, policies and pricing and the competitive environment in which CNA operates, including changes in CNA’s book of business;

—

product and policy availability and demand and market responses, including the level of ability to obtain rate increases and decline or non-renew underpriced accounts, to achieve premium targets and profitability and to realize growth and retention estimates;

—

general economic and business conditions, including recessionary conditions that may decrease the size and number of CNA’s insurance customers and create additional losses to CNA’s lines of business, especially those that provide management and professional liability insurance, as well as surety bonds, to businesses engaged in real estate, financial services and professional services, 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 continuing uncertainty and instability in these markets, as well as the overall economy, and their impact on the returns, types, liquidity and valuation of CNA’s investments;

—

conditions in the capital and credit markets that may limit CNA’s ability to raise significant amounts of capital on favorable terms, as well as restrictions on the ability or willingness of the Company to provide additional capital support to CNA;

—

the possibility of changes in CNA’s 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 limitations, impositions and restrictions upon CNA, including 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 as well as the new federal financial regulatory reform of the insurance industry established by the Dodd-Frank Wall Street Reform and Consumer Protection Act;

—

increased operating costs and underwriting losses arising from the Patient Protection and Affordable Care Act and the related amendments in the Health Care and Education Reconciliation Act, as well as health care reform proposals at the state level;

—

regulatory limitations and restrictions, including limitations upon CNA’s ability to receive dividends from its insurance subsidiaries imposed by regulatory authorities, including regulatory capital adequacy standards;

—

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 weather patterns, greenhouse gases, sea, land and air temperatures, sea levels, rain 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 and the effect of the absence or insufficiency of applicable terrorism legislation on coverages;

—

the unpredictability of the nature, targets, severity or frequency of potential terrorist events, as well as the uncertainty as to CNA’s ability to contain its terrorism exposure effectively; and

—

the occurrence of epidemics.

Risks and uncertainties primarily affecting us and our energy subsidiaries

—

the impact of changes in worldwide demand for oil and natural gas and oil and gas price fluctuations on E&P activity, including possible write-downs of the carrying value of natural gas and NGL properties and impairments of goodwill and reduced demand for offshore drilling services;

—

the effects of the Macondo well blowout;

—

timing and cost of completion of rig upgrades, construction projects and other capital projects, including delivery dates and drilling contracts;

—

changes in foreign and domestic oil and gas exploration, development and production activity;

—

risks of international operations, compliance with foreign laws and taxation policies and expropriation or nationalization of equipment and assets;

—

government policies regarding exploration and development of oil and gas reserves;

—

market conditions in the offshore oil and gas drilling industry, including utilization levels and dayrates;

—

timing and duration of required regulatory inspections for offshore oil and gas drilling rigs;

—

the risk of physical damage to rigs and equipment caused by named windstorms in the U.S. Gulf of Mexico;

—

the availability, cost limits and adequacy of insurance and indemnification;

—

the impact of new pipelines or new gas supply sources on competition and basis spreads on Boardwalk Pipeline’s pipeline systems, which may impact its ability to maintain or replace expiring gas transportation and storage contracts and to sell short term capacity on its pipelines;

—

the costs of maintaining and ensuring the integrity and reliability of Boardwalk Pipeline’s pipeline systems;

—

the impact of current and future environmental laws and regulations and exposure to environmental liabilities including matters related to global climate change;

—

regulatory issues affecting natural gas transmission, including ratemaking and other proceedings particularly affecting Boardwalk Pipeline’s gas transmission subsidiaries;

—

the timing, cost, scope and financial performance of Boardwalk Pipeline’s recent, current and future acquisitions and growth projects, including the expansion into new product lines and geographical areas; and

—

the development of additional natural gas reserves and changes in reserve estimates.

Risks and uncertainties affecting us and our subsidiaries generally

—

general economic and business conditions;

—

risks of war, military operations, other armed hostilities, terrorist acts or embargoes;

—

potential changes in accounting policies by the Financial Accounting Standards Board, the Securities and Exchange Commission or regulatory agencies for any of our subsidiaries’ industries which may cause us or

our subsidiaries to revise their financial accounting and/or disclosures in the future, and which may change the way analysts measure our and our subsidiaries’ business or financial performance;

—

the impact of regulatory initiatives and compliance with governmental regulations, judicial rulings and jury verdicts;

—

the results of financing efforts; by us and our subsidiaries, including any additional investments by us in our subsidiaries;

—

the ability of customers and suppliers to meet their obligations to us and our subsidiaries;

—

the consummation of contemplated transactions and agreements;

—

the successful integration, transition and management of acquired businesses;

—

the outcome of pending or future litigation, including any tobacco-related suits to which we are or may become a party;

—

possible casualty losses;

—

the availability of indemnification by Lorillard and its subsidiaries for any tobacco-related liabilities that we may incur as a result of tobacco-related lawsuits or otherwise, as provided in the Separation Agreement; and

—

potential future asset impairments.

Developments in any of these or other areas of risk and uncertainty, which are more fully described elsewhere in this Report and our other filings with the SEC, could cause our results to differ materially from results that have been or may be anticipated or projected. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements. Forward-looking statements speak only as of the date of this Report and we expressly disclaim any obligation or undertaking to update these statements to reflect any change in our expectations or beliefs or any change in events, conditions or circumstances on which any forward-looking statement is based.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

There were no material changes in our market risk components for the six months ended June 30, 2013. See the Quantitative and Qualitative Disclosures about Market Risk included in Item 7A of our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2012 for further information. Additional information related to portfolio duration and market conditions is discussed in the Investments section of 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.

The Company’s principal executive officer (“CEO”) and principal financial officer (“CFO”) undertook an evaluation of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report. The CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2013.

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the foregoing evaluation that occurred during the quarter ended June 30, 2013 that have materially affected or that are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Our Annual Report on Form 10-K for the year ended December 31, 2012 includes a detailed discussion of certain material risk factors facing our company. No updates or additions have been made to such risk factors as of June 30, 2013.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Items 2 (a) and (b) are inapplicable.


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 of shares (or approximate dollar value) of shares that may yet be purchased under the plans or programs (in millions)


April 1, 2013- April 30, 2013		1,180,400	$43.70	N/A	N/A

May 1, 2013 - May 31, 2013		N/A	N/A	N/A	N/A

June 1, 2013 - June 30, 2013		751,300	$44.63	N/A	N/A

Item 6. Exhibits.


Description of Exhibit		Exhibit Number


Certification by the Chief Executive Officer of the Company pursuant to Rule 13a-14(a) and Rule 15d-14(a)		31.1*

Certification by the Chief Financial Officer of the Company pursuant to Rule 13a-14(a) and Rule 15d-14(a)		31.2*

Certification by the Chief Executive Officer of the Company pursuant to 18 U.S.C. Section 1350 (as adopted by Section 906 of the Sarbanes-Oxley Act of 2002)		32.1*

Certification by the Chief Financial Officer of the Company 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		101.INS *

XBRL Taxonomy Extension Schema		101.SCH *

XBRL Taxonomy Extension Calculation Linkbase		101.CAL *

XBRL Taxonomy Extension Definition Linkbase		101.DEF *

XBRL Taxonomy Label Linkbase		101.LAB *

XBRL Taxonomy Extension Presentation Linkbase		101.PRE *

*Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.


	LOEWS CORPORATION
	(Registrant)

Dated: July 30, 2013	By:	/s/ Peter W. Keegan
		PETER W. KEEGAN
		Senior Vice President and
		Chief Financial Officer
		(Duly authorized officer
		and principal financial
		officer)