Loews Corporation (L)

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Loews (L)

Q1 2011 Earnings Call

May 02, 2011 11:00 am ET


Darren Daugherty -

James Tisch - Chief Executive Officer, President, Member of Office of the President, Director, Member of Executive Committee, Member of Finance Committee, Chairman of Diamond Offshore and Director of CNA

Peter Keegan - Chief Financial Officer and Senior Vice President


Michael Millman - Millman Research Associates

Robert Glasspiegel - Langen McAlenney

David Adelman - Morgan Stanley



Good morning. My name is Melissa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Loews First Quarter 2011 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Darren Daugherty, Director of Investor Relations. Please go ahead.

Darren Daugherty

Thank you, Melissa. Good morning, everyone. Welcome to Loews Corporation's First Quarter 2010 (sic) [2011] Earnings Conference Call. A copy of the earnings release may be found on our website, loews.com. On the call this morning are Jim Tisch, Chief Executive Officer of Loews; and Peter Keegan, Chief Financial Officer of Loews. Following our prepared remarks this morning, we will have a question and answer session.

Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those projections made in any forward-looking statements. Forward-looking statements reflect circumstances at the time they are made, and the company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company’s statutory forward-looking statements disclaimer, which is included in the company’s 10-K and 10-Q filings with the SEC. During the call today, we might also discuss certain non-GAAP financial measures. Please refer to our security filings for reconciliation to the most comparable GAAP measures. I will now turn the call over to Loews' Chief Executive Officer, Jim Tisch.

James Tisch

Thank you, Darren. Good morning, and thank you for joining us on our call today. For the first quarter of 2011, Loews reported net income of $382 million, a decline from net income of $420 million in last year's first quarter. The decline in Loews' earnings resulted primarily from lower average day rates at Diamond Offshore and a decline in earnings at CNA. We started off 2011 with a relatively quiet first quarter, but rest assured, all of our subsidiaries are working hard towards achieving their long term strategic goals.

While CNA reported solid results, net income for the quarter declined modestly versus the same period in 2010. CNA's core property and casualty operations performed well, posting higher operating income for the quarter. An increase in catastrophe losses was more than offset by higher investment income and improved underwriting results before catastrophes. CNA continues to improve the financial performance of its core property and casualty operations, while seeking to grow in its focus areas. The work that has been done over the past 2 years is gaining traction is evidenced by net written premium growth of 13% in CNA's Specialty segment in the first quarter, while rate was essentially flat.

In its Commercial segment, CNA gained 2 points of rate as it continued to push for improved pricing and risk selection. CNA has now achieved rate increases for 6 consecutive quarters in its Commercial segment even as it works to exit lower tier, less profitable business. By now, you have probably seen the announcement of CNA's definitive merger agreement with CNA Surety. This transaction offers compelling benefits for both companies. It will allow the minority shareholders of CNA Surety to monetize their investment at a substantial premium to their historical stock price, and for CNA, it's an opportunity to expand further its Specialty franchise. CNA expects the transaction to be completed by the end of June.

In summary, we are very pleased with CNA's results. We believe that the improvements underway over the past several quarters are taking hold and that CNA is well positioned to continue making progress on improving its financial and operational results.

Moving on to Diamond Offshore. Diamond's income for the quarter decreased as compared to 2010, primarily due to lower revenues from the decline in average day rates and lower utilization rates for jack ups. However, oil prices have improved since the beginning of 2011 and water markets around the world appear to be stable to improving. In the ultra-deepwater markets, there is an upward trend in day rates with indications of strong interest from the major and national oil companies. The deepwater market shows signs of a positive trend, with market strength developing, while the mid-water market is relatively flat. Diamond's exposure to the mid-water sport [ph] market is somewhat mitigated by the fact that roughly half of its mid-water fleet is working in Brazil under long-term contracts. So even though earnings at Diamond have come down from deepwater, results nonetheless represent a pretty good quarter.

Turning now to Boardwalk Pipeline partners. Today it was announced that Stan Horton has been named President of Boardwalk GP, LLC effective today, and later this month, he will assume the additional role of Chief Executive Officer. Stan's background includes 10 years as President and COO of Cheniere Energy and a gaggle of leadership positions at several intrastate pipeline companies. Most recently, he was the President of CrossCountry Energy and Panhandle Energy. He has also served as CEO of Enron Transportation Services Company. We are very pleased to have a leader of Stan's caliber and experience taking over at Boardwalk.

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