We are downgrading
Loews Corporation
(
L
) to Underperform from Neutral on the back of weak fourth quarter
results. Operating earnings in the fourth quarter lagged the Zacks
Consensus Estimate owing to lower investment income from the
limited partnership, increase in insurance reserves for its payout
annuity business, lower earnings at Diamond Offshore and weak
equity investments.
Loews' subsidiary -
Diamond Offshore
(
DO
) - again posted lower earnings in the fourth quarter due to a
higher number of planned downtime days for scheduled maintenance,
survey, mobilization and upgrades. For 2012, Diamond Offshore
estimates a year-over-year decline in contract drilling revenues
due to downtime for rig mobilizations, regulatory surveys and
shipyard projects.
Also,
CNA Financial Corporation
's (
CNA
) exposure to catastrophe loss cost it $208 million, a substantial
deterioration from $113 million in the year-ago quarter.
HighMount, the exploration and production business wing,
generated weaker revenues and net income on lower sales volumes.
The downside resulted from less drilling activity and low natural
gas prices.
However, CNA's property and casualty operation continues to
deliver solid performance on the back of new business, continued
rate improvement and higher retention. Besides, 2011 marked the
fifth consecutive year of favorable prior-year property and
casualty loss development. Also, CNA's merger with CNA Surety,
completed in June 2011, will help it to expand its Specialty
franchise.
Loews maintains a strong balance sheet with minimal debt. It has
aggressively bought back shares in the past. Loews spent $718
million in 2011 to buy back 18.2 million shares, with 0.8 million
shares repurchased in the fourth quarter.
The quantitative Zacks #4 Rank (short-tem Sell rating) for the
company indicates downward pressure on the shares over the near
term.
Headquartered in New York, Loews Corporation is a diversified
holding company. The company's principal subsidiaries are CNA
Financial Corporation, Diamond Offshore Drilling Inc., Boardwalk
Pipeline Partners LP, Loews Hotels Holding Corporation and
HighMount Exploration & Production LLC.
CNA FINL CORP (
CNA
): Free Stock Analysis Report
DIAMOND OFFSHOR (
DO
): Free Stock Analysis Report
LOEWS CORP (
L
): Free Stock Analysis Report
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