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

FORM 10-Q

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

For the quarterly period ended June 30, 2021

OR

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

For the Transition Period From ____________ to _____________

Commission File Number 1-6541

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, NY 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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.01 per share
L
New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes 
 
No
   

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes 
 
No
   

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

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

 
Emerging growth company 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

Yes 
 
No 
   

As of July 30, 2021, there were 257,273,034 shares of the registrant’s common stock outstanding.




INDEX

Page
No.
   
 
   
 
   
3
 
   
4
 
   
5
 
   
6
 
   
8
 
   
9
   
36
   
55
   
55
   
55
   
55
   
55
   
58
   
59


2


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.

Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)

 
June 30,
2021
   
December 31,
2020
 
(Dollar amounts in millions, except per share data)
           
             
Assets:
           
             
Investments:
           
Fixed maturities, amortized cost of $39,826 and $38,963, less allowance for credit loss of $45 and $40
 
$
44,910
   
$
44,646
 
Equity securities, cost of $1,496 and $1,456
   
1,663
     
1,561
 
Limited partnership investments
   
1,898
     
1,798
 
Other invested assets, primarily mortgage loans, less allowance for credit loss of $26 and $26
   
1,101
     
1,165
 
Short term investments
   
4,802
     
4,674
 
Total investments
   
54,374
     
53,844
 
Cash
   
578
     
478
 
Receivables
   
9,162
     
7,833
 
Property, plant and equipment
   
9,847
     
10,451
 
Goodwill
   
350
     
785
 
Deferred non-insurance warranty acquisition expenses
   
3,305
     
3,068
 
Deferred acquisition costs of insurance subsidiaries
   
721
     
708
 
Other assets
   
3,271
     
3,069
 
Total assets
 
$
81,608
   
$
80,236
 
                 
Liabilities and Equity:
               
                 
Insurance reserves:
               
Claim and claim adjustment expense
 
$
23,480
   
$
22,706
 
Future policy benefits
   
13,285
     
13,318
 
Unearned premiums
   
5,592
     
5,119
 
Total insurance reserves
   
42,357
     
41,143
 
Payable to brokers
   
654
     
92
 
Short term debt
   
122
     
37
 
Long term debt
   
8,988
     
10,072
 
Deferred income taxes
   
1,083
     
1,065
 
Deferred non-insurance warranty revenue
   
4,309
     
4,023
 
Other liabilities
   
4,697
     
4,623
 
Total liabilities
   
62,210
     
61,055
 
                 
Commitments and contingent liabilities
               
                 
Preferred stock, $0.10 par value:
               
Authorized – 100,000,000 shares
   
     
 
Common stock, $0.01 par value:
   
     
 
Authorized – 1,800,000,000 shares
               
Issued – 269,514,991 and 269,360,973 shares
   
3
     
3
 
Additional paid-in capital
   
3,121
     
3,133
 
Retained earnings
   
15,132
     
14,150
 
Accumulated other comprehensive income
   
327
     
581
 
     
18,583
     
17,867
 
Less treasury stock, at cost (9,652,672 and 150,000 shares)
   
(500
)
   
(7
)
Total shareholders’ equity
   
18,083
     
17,860
 
Noncontrolling interests
   
1,315
     
1,321
 
Total equity
   
19,398
     
19,181
 
Total liabilities and equity
 
$
81,608
   
$
80,236
 

See accompanying Notes to Consolidated Condensed Financial Statements.

3


Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2021
   
2020
   
2021
   
2020
 
(In millions, except per share data)
                       
                         
Revenues:
                       
Insurance premiums
 
$
2,035
   
$
1,850
   
$
3,997
   
$
3,719
 
Net investment income
   
616
     
644
     
1,166
     
807
 
Investment gains (losses) (Note 2)
   
578
     
(1,142
)
   
635
     
(1,358
)
Non-insurance warranty revenue
   
359
     
308
     
697
     
609
 
Operating revenues and other
   
415
     
650
     
1,130
     
1,632
 
Total
   
4,003
     
2,310
     
7,625
     
5,409
 
                                 
Expenses:
                               
Insurance claims and policyholders’ benefits
   
1,546
     
1,642
     
3,052
     
3,067
 
Amortization of deferred acquisition costs
   
357
     
342
     
716
     
686
 
Non-insurance warranty expense
   
332
     
285
     
643
     
566
 
Operating expenses and other
   
656
     
992
     
1,570
     
3,018
 
Interest
   
100
     
123
     
225
     
267
 
Total
   
2,991
     
3,384
     
6,206
     
7,604
 
Income (loss) before income tax
   
1,012
     
(1,074
)
   
1,419
     
(2,195
)
Income tax (expense) benefit
   
(219
)
   
228
     
(333
)
   
305
 
Net income (loss)
   
793
     
(846
)
   
1,086
     
(1,890
)
Amounts attributable to noncontrolling interests
   
(39
)
   
11
     
(71
)
   
423
 
Net income (loss) attributable to Loews Corporation
 
$
754
   
$
(835
)
 
$
1,015
   
$
(1,467
)
                                 
Basic net income (loss) per share
 
$
2.87
   
$
(2.96
)
 
$
3.83
   
$
(5.16
)
                                 
Diluted net income (loss) per share
 
$
2.86
   
$
(2.96
)
 
$
3.82
   
$
(5.16
)
                                 
Weighted average shares outstanding:
                               
Shares of common stock
   
262.76
     
281.48
     
265.06
     
284.26
 
Dilutive potential shares of common stock
   
0.58
             
0.49
         
Total weighted average shares outstanding assuming dilution
   
263.34
     
281.48
     
265.55
     
284.26
 

See accompanying Notes to Consolidated Condensed Financial Statements.

4


Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2021
   
2020
   
2021
   
2020
 
(In millions)
                       
                         
Net income (loss)
 
$
793
   
$
(846
)
 
$
1,086
   
$
(1,890
)
                                 
Other comprehensive income (loss), after tax
                               
Changes in:
                               
Net unrealized gains (losses) on investments with an allowance for credit losses
           
2
             
(9
)
Net unrealized gains (losses) on other investments
   
300
     
1,191
     
(327
)
   
147
 
Total unrealized gains (losses) on investments
   
300
     
1,193
     
(327
)
   
138
 
Unrealized gains (losses) on cash flow hedges
   
8
             
12
     
(19
)
Pension and postretirement benefits
   
7
     
6
     
16
     
20
 
Foreign currency translation
   
11
     
29
     
14
     
(55
)
                                 
Other comprehensive income (loss)
   
326
     
1,228
     
(285
)
   
84
 
                                 
Comprehensive income (loss)
   
1,119
     
382
     
801
     
(1,806
)
                                 
Amounts attributable to noncontrolling interests
   
(72
)
   
(119
)
   
(40
)
   
412
 
                                 
Total comprehensive income (loss) attributable to Loews Corporation
 
$
1,047
   
$
263
   
$
761
   
$
(1,394
)

See accompanying Notes to Consolidated Condensed Financial Statements.

5


Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF EQUITY
(Unaudited)

       
Loews Corporation Shareholders
       
                           
Accumulated
   
Common
       
               
Additional
         
Other
   
Stock
       
         
Common
   
Paid-in
   
Retained
   
Comprehensive
   
Held in
   
Noncontrolling
 
   
Total
   
Stock
   
Capital
   
Earnings
   
Income (Loss)
   
Treasury
   
Interests
 
(In millions)
                                         
                                           
Balance, April 1, 2020
 
$
19,178
   
$
3
   
$
3,347
   
$
15,167
   
$
(1,093
)
 
$
(458
)
 
$
2,212
 
Net loss
   
(846
)
                   
(835
)
                   
(11
)
Other comprehensive income
   
1,228
                             
1,098
             
130
 
Dividends paid ($0.0625 per share)
   
(27
)
                   
(18
)
                   
(9
)
Deconsolidation of Diamond Offshore
   
(1,087
)
                                           
(1,087
)
Purchases of Loews Corporation treasury stock
   
(33
)
                                   
(33
)
       
Purchases of subsidiary stock from noncontrolling interests
   
(19
)
           
5
                             
(24
)
Stock-based compensation
   
13
             
13
                                 
Other
   
6
             
6
     
2
                     
(2
)
Balance, June 30, 2020
 
$
18,413
   
$
3
   
$
3,371
   
$
14,316
   
$
5
   
$
(491
)
 
$
1,209
 
                                                         
Balance, April 1, 2021
 
$
18,537
   
$
3
   
$
3,119
   
$
14,394
   
$
34
   
$
(280
)
 
$
1,267
 
Net income
   
793
                     
754
                     
39
 
Other comprehensive income
   
326
                             
293
             
33
 
Dividends paid ($0.0625 per share)
   
(27
)
                   
(16
)
                   
(11
)
Purchases of Loews Corporation treasury stock
   
(219
)
                                   
(219
)
       
Purchases of subsidiary stock from noncontrolling interests
   
(15
)
                                           
(15
)
Stock-based compensation
   
3
             
2
                             
1
 
Other
   
-
                                     
(1
)
   
1
 
Balance, June 30, 2021
 
$
19,398
   
$
3
   
$
3,121
   
$
15,132
   
$
327
   
$
(500
)
 
$
1,315
 

See accompanying Notes to Consolidated Condensed Financial Statements.

6

Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF EQUITY
(Unaudited)

       
Loews Corporation Shareholders
       
                           
Accumulated
   
Common
       
               
Additional
         
Other
   
Stock
       
         
Common
   
Paid-in
   
Retained
   
Comprehensive
   
Held in
   
Noncontrolling
 
   
Total
   
Stock
   
Capital
   
Earnings
   
Income (Loss)
   
Treasury
   
Interests
 
(In millions)
                                         
                                           
Balance, January 1, 2020, as reported
 
$
21,930
   
$
3
   
$
3,374
   
$
15,823
   
$
(68
)
 
$
(13
)
 
$
2,811
 
Cumulative effect adjustment from change in accounting standards
   
(5
)
                   
(5
)
                       
Balance, January 1, 2020, as adjusted
   
21,925
     
3
     
3,374
     
15,818
     
(68
)
   
(13
)
   
2,811
 
Net loss
   
(1,890
)
                   
(1,467
)
                   
(423
)
Other comprehensive income
   
84
                             
73
             
11
 
Dividends paid ($0.125 per share)
   
(114
)
                   
(36
)
                   
(78
)
Deconsolidation of Diamond Offshore
   
(1,087
)
                                           
(1,087
)
Purchases of Loews Corporation treasury stock
   
(478
)
                                   
(478
)
       
Purchases of subsidiary stock from noncontrolling interests
   
(37
)
           
5
                             
(42
)
Stock-based compensation
   
9
             
(9
)
                           
18
 
Other
   
1
             
1
     
1
                     
(1
)
Balance, June 30, 2020
 
$
18,413
   
$
3
   
$
3,371
   
$
14,316
   
$
5
   
$
(491
)
 
$
1,209
 
                                                         
Balance,  January 1, 2021
 
$
19,181
   
$
3
   
$
3,133
   
$
14,150
   
$
581
   
$
(7
)
 
$
1,321
 
Net income
   
1,086
                     
1,015
                     
71
 
Other comprehensive loss
   
(285
)
                           
(254
)
           
(31
)
Dividends paid ($0.125 per share)
   
(76
)
                   
(33
)
                   
(43
)
Purchases of Loews Corporation treasury stock
   
(493
)
                                   
(493
)
       
Purchases of subsidiary stock from noncontrolling interests
   
(18
)
                                           
(18
)
Stock-based compensation
   
7
             
(9
)
                           
16
 
Other
   
(4
)
           
(3
)
                           
(1
)
Balance, June 30, 2021
 
$
19,398
   
$
3
   
$
3,121
   
$
15,132
   
$
327
   
$
(500
)
 
$
1,315
 

See accompanying Notes to Consolidated Condensed Financial Statements.

7


Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Ended June 30
 
2021
   
2020
 
(In millions)
           
             
Operating Activities:
           
             
Net income (loss)
 
$
1,086
   
$
(1,890
)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities, net
   
(187
)
   
2,430
 
Changes in operating assets and liabilities, net:
               
Receivables
   
(1,087
)
   
(574
)
Deferred acquisition costs
   
(12
)
   
(41
)
Insurance reserves
   
1,373
     
1,181
 
Other assets
   
(720
)
   
(280
)
Other liabilities
   
598
     
(46
)
Trading securities
   
(508
)
   
(340
)
Net cash flow provided by operating activities
   
543
     
440
 
                 
Investing Activities:
               
                 
Purchases of fixed maturities
   
(4,615
)
   
(5,356
)
Proceeds from sales of fixed maturities
   
1,846
     
3,773
 
Proceeds from maturities of fixed maturities
   
2,104
     
1,622
 
Purchases of equity securities
   
(181
)
   
(312
)
Proceeds from sales of equity securities
   
193
     
230
 
Purchases of limited partnership investments
   
(169
)
   
(90
)
Proceeds from sales of limited partnership investments
   
185
     
259
 
Purchases of property, plant and equipment
   
(183
)
   
(440
)
Dispositions
   
52
     
11
 
Sale of interest in Altium Packaging
   
417
         
Deconsolidation of Diamond Offshore
           
(483
)
Change in short term investments
   
405
     
526
 
Other, net
   
39
     
(65
)
Net cash flow provided (used) by investing activities
   
93
     
(325
)
                 
Financing Activities:
               
                 
Dividends paid
   
(33
)
   
(36
)
Dividends paid to noncontrolling interests
   
(43
)
   
(78
)
Purchases of Loews Corporation treasury stock
   
(484
)
   
(491
)
Purchases of subsidiary stock from noncontrolling interests
   
(18
)
   
(37
)
Principal payments on debt
   
(1,146
)
   
(465
)
Issuance of debt
   
1,199
     
1,342
 
Other, net
   
(12
)
   
(13
)
Net cash flow (used) provided by financing activities
   
(537
)
   
222
 
                 
Effect of foreign exchange rate on cash
   
1
     
(5
)
                 
Net change in cash
   
100
     
332
 
Cash, beginning of period
   
478
     
336
 
Cash, end of period
 
$
578
   
$
668
 

See accompanying Notes to Consolidated Condensed Financial Statements.

8


Loews Corporation and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation


Loews Corporation is a holding company. Its consolidated subsidiaries are engaged in the following lines of business: commercial property and casualty insurance (CNA Financial Corporation (“CNA”), an 89.6% owned subsidiary); transportation and storage of natural gas and natural gas liquids (Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”), a wholly owned subsidiary); and the operation of a chain of hotels (Loews Hotels Holding Corporation (“Loews Hotels & Co”), a wholly owned subsidiary). Unless the context otherwise requires, the term “Company” as used herein means Loews Corporation including its consolidated subsidiaries, the term “Net income (loss) attributable to Loews Corporation” as used herein means Net income (loss) attributable to Loews Corporation shareholders and the term “subsidiaries” means Loews Corporation’s consolidated subsidiaries.


On April 1, 2021, Loews Corporation sold 47% of its interest in Altium Packaging, previously a 99% owned subsidiary. See Note 2 for further discussion.


In the opinion of management, the accompanying unaudited Consolidated Condensed Financial Statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s financial position as of June 30, 2021 and December 31, 2020, results of operations, comprehensive income (loss) and changes in shareholders’ equity for the three and six months ended June 30, 2021 and 2020 and cash flows for the six months ended June 30, 2021 and 2020. Net income (loss) for the second quarter and first half of each of the years is not necessarily indicative of net income (loss) for that entire year. These Consolidated Condensed Financial Statements should be read in conjunction with the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.


The Company presents basic and diluted net income (loss) per share on the Consolidated Condensed Statements of Operations. Basic net income (loss) per share excludes dilution and is computed by dividing net income (loss) attributable to common stock by the weighted average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the three and six months ended June 30, 2021 there were no shares attributable to employee stock-based compensation awards excluded from the diluted weighted average shares outstanding amounts because the effect would have been antidilutive.


Recently issued ASUs – In August of 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-12, “Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts.” The updated accounting guidance requires changes to the measurement and disclosure of long-duration contracts. The guidance requires entities to update annually cash flow assumptions, including morbidity and persistency, and update quarterly discount rate assumptions using an upper-medium grade fixed-income instrument yield. The effect of changes in cash flow assumptions will be recorded in Net income and the effect of changes in discount rate assumptions will be recorded in Other comprehensive income (“OCI”). This guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. The guidance may be applied using either a modified retrospective transition method or a full retrospective transition method. The guidance requires restatement of prior periods presented. The Company plans to adopt on the effective date, using the modified retrospective transition method and is currently evaluating the effect the updated guidance will have on its consolidated financial statements, including the increased disclosure requirements. The annual updating of cash flow assumptions is expected to increase income statement volatility. While the requirements of the new guidance represent a material change from existing accounting guidance, the underlying economics of the business and related cash flows will be unchanged.

2.  Significant Transactions

Altium Packaging


On April 1, 2021, Loews Corporation sold 47% of its interest in Altium Packaging to GIC, Singapore’s sovereign wealth fund for $420 million in cash consideration. Loews Corporation will share certain participating rights with GIC related to capital allocation and other decisions by Altium Packaging. Therefore, in accordance with Accounting Standards Codification (“ASC”) 810, “Consolidation,” Altium Packaging was deconsolidated from Loews Corporation’s consolidated financial statements effective as of April 1, 2021. Effective April 1, 2021, Loews Corporation’s investment in Altium Packaging is accounted for under the equity method of accounting, with the investment reported in Other assets on the Consolidated Condensed Balance Sheets and equity income (loss) reported in Operating expenses and other on the Consolidated Condensed Statements of Operations.

9

The transaction resulted in a gain of $555 million ($438 million after tax) for the three and six months ended June 30, 2021, which is recorded in Investment gains (losses) on the Consolidated Condensed Statement of Operations. Loews Corporation’s retained investment in Altium Packaging was recorded at an estimated fair value of $473 million. The difference between the fair value of Loews Corporation’s investment in Altium Packaging and Loews Corporation’s 53% share of the carrying value of Altium Packaging’s net assets was attributed to definite lived intangible assets and goodwill. The amortization of the amounts attributed to definite lived intangible assets will be recognized as a component of equity income (loss) reported in Operating expenses and other on the Consolidated Condensed Statements of Operations. The assets and liabilities deconsolidated from the Consolidated Condensed Balance Sheets were property, plant and equipment of $490 million, goodwill of $436 million, intangible assets of $488 million, other assets of approximately $370 million, long term debt of $1.1 billion and other liabilities of approximately $380 million.

Diamond Offshore


As a result of the April 26, 2020 (“the Filing Date”) bankruptcy filing of Diamond Offshore Drilling, Inc. (“Diamond Offshore”) and certain of its subsidiaries and applicable accounting principles generally accepted in the United States of America (“GAAP”), Diamond Offshore was deconsolidated from Loews Corporation’s consolidated financial statements in the second quarter of 2020. Through the Filing Date, Diamond Offshore’s results were included in Loews Corporation’s consolidated financial statements and Loews Corporation recognized in its earnings its proportionate share of Diamond Offshore’s losses through such date. The deconsolidation resulted in the recognition of a loss of $1.2 billion ($957 million after tax) during the three and six months ended June 30, 2020, which is reported within Investment gains (losses) on the Consolidated Condensed Statements of Operations. During the first quarter of 2020, Diamond Offshore recorded an aggregate asset impairment charge of $774 million ($408 million after tax and noncontrolling interests), which is reported within Operating expenses and other on the Consolidated Condensed Statements of Operations. For additional information regarding the deconsolidation of Diamond Offshore and the Diamond Offshore asset impairments, see Notes 2 and 6 of the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

3. Investments


Net investment income is as follows:

 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2021
   
2020
   
2021
   
2020
 
(In millions)
                       
                         
Fixed maturity securities
 
$
425
   
$
430
   
$
853
   
$
868
 
Limited partnership investments
   
149
     
57
     
196
     
(45
)
Short term investments
           
2
             
9
 
Equity securities
   
20
     
50
     
49
     
6
 
Income (loss) from trading portfolio (a)
   
26
     
107
     
76
     
(22
)
Other
   
14
     
16
     
30
     
30
 
Total investment income
   
634
     
662
     
1,204
     
846
 
Investment expenses
   
(18
)
   
(18
)
   
(38
)
   
(39
)
Net investment income
 
$
616
   
$
644
   
$
1,166
   
$
807
 

(a)
Net unrealized gains (losses) related to changes in fair value on securities still held were $28 and $80 for the three months ended June 30, 2021 and 2020 and $58 and $7 for the six months ended June 30, 2021 and 2020.

10


Investment gains (losses) are as follows:

 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2021
   
2020
   
2021
   
2020
 
(In millions)
                       
                         
Fixed maturity securities
 
$
31
   
$
17
   
$
69
   
$
(58
)
Equity securities
   
17
     
63
     
19
     
(70
)
Derivative instruments
   
(12
)
   
(10
)
   
5
     
(5
)
Short term investments and other
   
2
     
(1
)
   
2
     
(14
)
Sale of 47% interest in Altium Packaging (see Note 2)
   
555
             
555
         
Deconsolidation of Diamond Offshore
   
(15
)
   
(1,211
)
   
(15
)
   
(1,211
)
Investment gains (losses) (a)
 
$
578
   
$
(1,142
)
 
$
635
   
$
(1,358
)

(a)
Gross investment gains on available-for-sale securities were $51 and $102 for the three months ended June 30, 2021 and 2020 and $109 and $131 for the six months ended June 30, 2021 and 2020. Gross investment losses on available-for-sale securities were $20 and $85 for the three months ended June 30, 2021 and 2020 and $40 and $189 for the six months ended June 30, 2021 and 2020. During the three and six months ended June 30, 2021, $15 of investment gains were recognized due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2021. During the three and six months ended June 30, 2020, $63 of investment gains and $70 of investment losses were recognized due to the change in fair value of non-redeemable preferred stock still held as of June 30, 2020.


The following tables present the activity related to the allowance on available-for-sale securities with credit impairments and purchased credit-deteriorated (“PCD”) assets. Accrued interest receivables on available-for-sale fixed maturity securities totaled $374 million, $371 million and $373 million as of June 30, 2021, December 31, 2020 and June 30, 2020 and are excluded from the estimate of expected credit losses and the amortized cost basis in the tables within this Note.

Three months ended June 30, 2021
 
Corporate and
Other Bonds
   
Asset-
backed
   
Total
 
(In millions)
                 
                   
Allowance for credit losses:
                 
Balance as of April 1, 2021
 
$
27
   
$
16
   
$
43
 
Additions to the allowance for credit losses:
                       
Securities for which credit losses were not previously recorded
                       
Available-for-sale securities accounted for as PCD assets
           
4
     
4
 
                         
Reductions to the allowance for credit losses:
                       
Securities sold during the period (realized)
                       
                         
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period
   
(3
)
   
1
     
(2
)
Total allowance for credit losses
 
$
24
   
$
21
   
$
45
 

Three months ended June 30, 2020
                 
                   
Allowance for credit losses:
                 
Balance as of April 1, 2020
 
$
49
   
$
-
   
$
49
 
Additions to the allowance for credit losses:
                       
Securities for which credit losses were not previously recorded
   
10
     
12
     
22
 
Available-for-sale securities accounted for as PCD assets
   
1
             
1
 
                         
Reductions to the allowance for credit losses:
                       
Securities sold during the period (realized)
   
1
             
1
 
                         
Additional increases or (decreases) to the allowance for credit losses on securities that had an allowance recorded in a previous period
   
(20
)
           
(20
)
Total allowance for credit losses
 
$
39
   
$
12
   
$
51
 
11


Six months ended June 30, 2021
 
Corporate and
Other Bonds
   
Asset-
backed
   
Total
 
(In millions)
                 
                   
Allowance for credit losses:
                 
Balance as of January 1, 2021
 
$
23
   
$
17
   
$
40
 
Additions to the allowance for credit losses:
                       
Securities for which credit losses were not previously recorded
   
14
             
14
 
Available-for-sale securities accounted for as PCD assets
   
2
     
4
     
6
 
                         
Reductions to the allowance for credit losses:
                       
Securities sold during the period (realized)
   
6
             
6
 
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis
                       
                         
Additional increases or (decrease) to the allowance for credit losses on securities that had an allowance recorded in a previous period
   
(9
)
           
(9
)
Total allowance for credit losses
 
$
24
   
$
21
   
$
45
 

Six months ended June 30, 2020
                 
                   
Allowance for credit losses:
                 
Balance as of January 1, 2020
 
$
-
   
$
-
   
$
-
 
Additions to the allowance for credit losses:
                       
Impact of adopting ASC 326
   
6
             
6
 
Securities for which credit losses were not previously recorded
   
58
     
12
     
70
 
Available-for-sale securities accounted for as PCD assets
   
2
             
2
 
                         
Reductions to the allowance for credit losses:
                       
Securities sold during the period (realized)
   
6
             
6
 
Intent to sell or more likely than not will be required to sell the security before recovery of its amortized cost basis
   
1
             
1
 
                         
Additional increases or (decrease) to the allowance for credit losses on securities that had an allowance recorded in a previous period
   
(20
)
           
(20
)
Total allowance for credit losses
 
$
39
   
$
12
   
$
51
 


The components of available-for-sale impairment losses recognized in earnings by asset type are presented in the following table. The table includes losses on securities with an intention to sell and changes in the allowance for credit losses on securities since acquisition date:

 
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
   
2021
   
2020
   
2021
   
2020
 
(In millions)
                       
                         
Fixed maturity securities available-for-sale:
                       
Corporate and other bonds
 
$
(2
)
 
$
(1
)
 
$
5
   
$
90
 
Asset-backed
   
1
     
12
             
13
 
Impairment losses (gains) recognized in earnings
 
$
(1
)
 
$
11
   
$
5
   
$
103
 


There were $13 million of losses on mortgage loans recognized during the six months ended June 30, 2020 due to changes in expected credit losses. There were no losses recognized on mortgage loans during the three and six months ended June 30, 2021 or during the three months ended June 30, 2020.

12


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

June 30, 2021
 
Cost or
Amortized
Cost
   
Gross
Unrealized
Gains
   
Gross
Unrealized
Losses
   
Allowance
for Credit
Losses
   
Estimated
Fair Value
 
(In millions)
                             
                               
Fixed maturity securities:
                             
Corporate and other bonds
 
$
21,291
   
$
3,153
   
$
35
   
$
24
   
$
24,385
 
States, municipalities and political subdivisions
   
10,125
     
1,743
     
2
             
11,866
 
Asset-backed:
                                       
Residential mortgage-backed
   
3,337
     
99
     
10
             
3,426
 
Commercial mortgage-backed
   
2,068
     
98
     
14
     
17
     
2,135
 
Other asset-backed
   
2,338
     
84
     
3
     
4
     
2,415
 
Total asset-backed
   
7,743
     
281
     
27
     
21
     
7,976
 
U.S. Treasury and obligations of government-sponsored enterprises
   
142
             
5
             
137
 
Foreign government
   
515
     
22
     
1
             
536
 
Fixed maturities available-for-sale
   
39,816
     
5,199
     
70
     
45
     
44,900
 
Fixed maturities trading
   
10
                             
10
 
Total fixed maturity securities
 
$
39,826
   
$
5,199
   
$
70
   
$
45
   
$
44,910
 

December 31, 2020
                             
                               
Fixed maturity securities:
                             
Corporate and other bonds
 
$
20,792
   
$
3,578
   
$
22
   
$
23
   
$
24,325
 
States, municipalities and political subdivisions
   
9,729
     
1,863
                     
11,592
 
Asset-backed:
                                       
Residential mortgage-backed
   
3,442
     
146
     
1
             
3,587
 
Commercial mortgage-backed
   
1,933
     
93
     
42
     
17
     
1,967
 
Other asset-backed
   
2,179
     
81
     
9
             
2,251
 
Total asset-backed
   
7,554
     
320
     
52
     
17
     
7,805
 
U.S. Treasury and obligations of government-sponsored enterprises
   
339
     
2
     
3
             
338
 
Foreign government
   
512
     
32
                     
544
 
Fixed maturities available-for-sale
   
38,926
     
5,795
     
77
     
40
     
44,604
 
Fixed maturities trading
   
37
     
5
                     
42
 
Total fixed maturity securities
 
$
38,963
   
$
5,800
   
$
77
   
$
40
   
$
44,646
 



The net unrealized gains on available-for-sale investments included in the tables above are recorded as a component of Accumulated other comprehensive income (loss) (“AOCI”). When presented in AOCI, these amounts are net of tax and noncontrolling interests and any required Shadow Adjustments. To the extent that unrealized gains on fixed income securities supporting long term care products and structured settlements not funded by annuities would result in a premium deficiency if those gains were realized, a related increase in Insurance reserves is recorded, net of tax and noncontrolling interests, as a reduction of net unrealized gains through Other comprehensive income (loss) (“Shadow Adjustments”). As of June 30, 2021 and December 31, 2020, the net unrealized gains on investments included in AOCI were correspondingly reduced by Shadow Adjustments of $2.4 billion and $2.5 billion (after tax and noncontrolling interests).

13


The available-for-sale securities in a gross unrealized loss position for which an allowance for credit losses has not been recorded are as follows:

 
Less than
12 Months
   
12 Months
or Longer
   
Total
 
June 30, 2021
 
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
 
$
1,190
   
$
33
   
$
61
   
$
2
   
$
1,251
   
$
35
 
States, municipalities and political subdivisions
   
128
     
2
                     
128
     
2
 
Asset-backed:
                                               
Residential mortgage-backed
   
932
     
10
     
10
             
942
     
10
 
Commercial mortgage-backed
   
153
     
2
     
206
     
12
     
359
     
14
 
Other asset-backed
   
255
     
2
     
74
     
1
     
329
     
3
 
Total asset-backed
   
1,340
     
14
     
290
     
13
     
1,630
     
27
 
U.S. Treasury and obligations of government-sponsored enterprises
   
80
     
5
                     
80
     
5
 
Foreign government
   
48
     
1
                     
48
     
1
 
Total fixed maturity securities
 
$
2,786
   
$
55
   
$
351
   
$
15
   
$
3,137
   
$
70
 
                                                 
December 31, 2020
                                               
                                                 
Fixed maturity securities:
                                               
Corporate and other bonds
 
$
609
   
$
21
   
$
12
   
$
1
   
$
621
   
$
22
 
States, municipalities and political subdivisions
   
33
                             
33
         
Asset-backed:
                                               
Residential mortgage-backed
   
71
     
1
     
11
             
82
     
1
 
Commercial mortgage-backed
   
533
     
40
     
28
     
2
     
561
     
42
 
Other asset-backed
   
344
     
9
     
13
             
357
     
9
 
Total asset-backed
   
948
     
50
     
52
     
2
     
1,000
     
52
 
U.S. Treasury and obligations of government-sponsored enterprises
   
63
     
3
                     
63
     
3
 
Foreign government
   
13
                             
13
         
Total fixed maturity securities
 
$
1,666
   
$
74
   
$
64
   
$
3
   
$
1,730
   
$
77
 


Based on current facts and circumstances, the Company believes the unrealized losses presented in the June 30, 2021 securities in a gross unrealized loss position table above are not indicative of the ultimate collectability of the current amortized cost of the securities, but rather are attributable to changes in interest rates, credit spreads and other factors. There is no current intent to sell securities with unrealized losses, nor is it more likely than not that sale will be required prior to recovery of amortized cost; accordingly, it was determined that there are no additional impairment losses to be recorded at June 30, 2021.

Contractual Maturity


The following table presents available-for-sale fixed maturity securities by contractual maturity.

 
June 30, 2021
   
December 31, 2020
 
   
Cost or
Amortized
Cost
   
Estimated
Fair
Value
   
Cost or
Amortized
Cost
   
Estimated
Fair
Value
 
(In millions)
                       
                         
Due in one year or less
 
$
1,685
   
$
1,702
   
$
1,456
   
$
1,458
 
Due after one year through five years
   
10,723
     
11,479
     
12,304
     
13,098
 
Due after five years through ten years
   
13,775
     
15,012
     
12,319
     
13,878
 
Due after ten years
   
13,633
     
16,707
     
12,847
     
16,170
 
Total
 
$
39,816
   
$
44,900