Loews Corporation — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited, compared with Q1 2023. Loews is a holding company with operations in insurance (CNA), natural gas and liquids transportation and storage (Boardwalk Pipelines), hotels (Loews Hotels & Co), and Corporate activities.
Financial performance
- Revenue: $4.231 billion, up 11.8% from $3.783 billion. Insurance premiums were $2.441 billion versus $2.248 billion; net investment income was $669 million versus $569 million.
- Profit: Net income was $485 million versus $404 million. Net income attributable to Loews was $457 million, or $2.05 per diluted share, versus $375 million, or $1.61 per share. The increase primarily reflected higher CNA and Boardwalk Pipelines earnings.
- Segment earnings attributable to Loews: CNA $310 million (up from $268 million); Boardwalk Pipelines $121 million (up from $86 million); Loews Hotels & Co $16 million (down from $24 million); Corporate $10 million (versus a $3 million loss).
- Cash flow: Consolidated operating cash flow was $198 million, down from $719 million. Investing used $1.026 billion, compared with $134 million in Q1 2023; financing provided $987 million, compared with $524 million used. Cash ended the quarter at $556 million, up from $399 million at year-end.
- Margins and operating measures: CNA Property & Casualty combined ratio was 94.6%, versus 93.9%; its underlying combined ratio was 91.0%, versus 90.8%. Boardwalk Pipelines EBITDA was $307 million, up from $256 million. Loews does not present a single consolidated operating margin.
- Balance sheet and debt: Total assets were $80.906 billion and total liabilities $63.908 billion at March 31. Short- and long-term debt totaled $10.103 billion, up from $9.003 billion at December 31, 2023. Loews’ parent-company cash and investments, net of receivables and payables, were $3.2 billion, versus $2.6 billion at year-end.
Material changes and management commentary
- CNA: Net investment income rose, supported by better limited partnership and common-stock returns and higher fixed-income reinvestment yields. Q1 catastrophe losses increased to $88 million from $52 million. Property & Casualty recorded $7 million of favorable prior-year reserve development, compared with $13 million unfavorable development a year earlier.
- Boardwalk Pipelines: Revenue increased to $517 million from $397 million, partly reflecting higher renewal rates, growth projects, and $75 million of revenue from the Bayou Ethane acquisition. Management said the acquisition also contributed to higher operating costs.
- Hotels: Revenue growth reflected the opening of the Loews Arlington Hotel and Convention Center, stronger city-center occupancy and food-and-beverage revenue, and consolidation of a previously equity-method property. Higher staffing, insurance and property-tax costs, and lower joint-venture occupancy, weighed on earnings.
- Investments: Fixed maturities had $3.096 billion of gross unrealized losses at quarter-end, primarily attributed by management to interest-rate changes. Loews stated it did not intend to sell the affected securities and did not expect to be required to sell before recovery of amortized cost.
Liquidity, outlook, risks and contingencies
- No specific consolidated earnings or revenue guidance was provided. Management expects Boardwalk’s existing resources to fund 2024 operations and capital spending and its $600 million December 2024 debt maturity. Loews Hotels intends to refinance $527 million of mortgage loans maturing within 12 months.
- CNA and Boardwalk issued $500 million and $600 million of senior notes, respectively, in February 2024. CNA intends to use proceeds toward retiring $550 million of notes due May 2024; Boardwalk intends to retire $600 million of notes due December 2024. Boardwalk reported its full $1.0 billion revolving-credit capacity available.
- Loews depends on subsidiary distributions and investment returns to meet parent-company obligations. Subsidiary distributions are subject to regulatory, earnings, liquidity and debt-covenant constraints. CNA paid Loews a special dividend as part of $656 million of subsidiary dividends received by the parent during the quarter.
- Insurance reserves involve significant estimation uncertainty, particularly long-tail claims and CNA’s run-off long-term-care business. Long-term-care future policy benefit reserves were $13.513 billion; adverse experience could require increases. Catastrophe losses and investment-market changes can cause earnings and equity volatility.
- A Delaware litigation involving Boardwalk Pipelines was remanded for further proceedings; a hearing on remanded issues took place in April 2024. Management said pending litigation, including this matter, was not expected to materially affect results or equity. CNA also has approximately $1.5 billion of potential structured-settlement guarantee payments, which it believes are unlikely to be required.
- Management reported no material changes to the risk factors in the 2023 Form 10-K and no material changes in market-risk components. Disclosure controls were assessed as effective at March 31, 2024.
Important facts for investors to verify
- Whether CNA’s higher investment income and favorable reserve development persist, and how catastrophe losses and the combined ratio develop.
- Whether Boardwalk realizes expected benefits from higher-rate renewals, growth projects and Bayou Ethane, while managing debt maturities and costs.
- Whether Loews Hotels can refinance the $527 million of near-term mortgage maturities on acceptable terms and improve hotel and joint-venture operating performance.
- The drivers of the decline in consolidated operating cash flow and the sustainability of parent-company liquidity and subsidiary dividend capacity.
- Developments in long-term-care and other insurance reserve estimates, unrealized investment losses, and the remanded Boardwalk litigation.