Loews Corporation — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023; unaudited. Loews is a holding company with operations in insurance (CNA), natural gas transportation and storage (Boardwalk Pipelines), hotels (Loews Hotels & Co), and Corporate investments.
Financial results and key metrics
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $3.926B | $3.461B | $11.643B | $10.251B |
| Net income attributable to Loews | $253M | $(22)M | $988M | $467M |
| Diluted EPS | $1.12 | $(0.09) | $4.31 | $1.90 |
| Net cash from operating activities | — | $3.430B | $2.692B |
- Revenue growth reflected higher insurance premiums and investment income, alongside gains in operating revenue at Boardwalk and Hotels. Net investment income was $592M in Q3 and $1.752B for nine months, up from $404M and $1.202B, respectively.
- CNA’s property and casualty combined ratio was 94.3% in Q3 versus 95.8% a year earlier; its underlying combined ratio was 90.4% versus 91.1%. For nine months, the combined ratio was 94.0% versus 93.0%, while the underlying ratio was 90.8% versus 91.1%.
- At September 30, cash was $762M; short-term and long-term debt were $1.261B and $7.925B. Total assets were $76.469B and total equity was $15.158B. Parent Company cash and investments, net of receivables and payables, were $2.3B, down from $3.2B at year-end 2022.
- Consolidated operating cash flow increased to $3.430B. Investing activities used $2.253B and financing activities used $947M. Loews repurchased 11.9M shares for $711M in the first nine months.
Material changes and notable items
- Loews’ Q3 attributable result swung to $253M income from a $22M loss; nine-month income more than doubled. Management attributed the improvement chiefly to higher investment income, lower investment losses and stronger CNA underwriting results. Q3 also benefited from a much smaller long-term-care reserve review charge than in 2022.
- CNA’s nine-month catastrophe losses rose to $214M from $171M; Q3 losses were $94M versus $114M. Nine-month favorable prior-year reserve development in CNA P&C was $11M, down from $66M; other insurance operations recorded $55M of unfavorable development.
- Boardwalk acquired Bayou Ethane for $348M cash in September. Loews Hotels recorded a $46M pretax ($36M after-tax) gain after acquiring an additional interest in and consolidating a joint-venture property.
- A $47M pretax ($37M after-tax) pension settlement charge was recorded in Q3 following termination of a defined-benefit plan. CNA also expects an approximately $24M pretax office-consolidation charge in Q4 2023.
- Loews adopted long-duration insurance accounting standard ASU 2018-12 retrospectively. Comparatives were adjusted; the standard materially changed reported long-term-care measurements but management says it does not change statutory capital and surplus, cash flows or underlying economics.
Outlook, risks and contingencies
- The filing gives no consolidated earnings guidance. Boardwalk expects available capital resources and operating cash flows to fund 2023 operations and capital expenditures; CNA says it expects its current cash flows to cover near-term working capital and debt needs. CNA expects to continue offering long-term-care policy buyouts in the remainder of 2023 and future years.
- CNA’s run-off long-term-care reserves are sensitive to morbidity, persistency, future premium increases and expenses. Its Q3 2023 assumption review increased reserves by $8M pretax. The filing estimates that a hypothetical 2.5% morbidity increase could reduce pretax income by $275M; the actual effect would depend on affected policies and other factors.
- Fixed maturities had $4.888B of gross unrealized losses at September 30, primarily attributed by management to interest rates and credit spreads; management reported no intent or requirement to sell before recovery. These losses and rate movements remain relevant to portfolio value and equity.
- Loews Hotels had $464M of mortgage loans maturing within 12 months and intends to extend or refinance them; refinancing could require paydowns, restricted cash or guarantees. Subsidiary distributions to the parent are subject to regulatory, covenant and other constraints.
- A long-running Boardwalk Pipelines lawsuit was remanded for further proceedings after the Delaware Supreme Court reversed a prior approximately $690M award plus interest. Briefing on remanded issues was completed in September 2023. Management does not believe pending litigation will materially affect results or equity.
- Other exposures include catastrophe losses, evolving insurance claim estimates, commercial real estate credit exposure and investment commitments of approximately $1.6B to purchase or fund. Management reported no material change in risk factors or market-risk components from the 2022 Form 10-K.
Important facts for investors to verify
- How much of the earnings improvement is attributable to recurring underwriting and investment income versus reserve-review effects, investment valuation changes and the hotel joint-venture gain.
- Development in CNA long-term-care assumptions, reserve adequacy, policy buyouts and statutory margin, as well as the effect of updated experience on future results.
- Trends in P&C combined ratios, catastrophe claims and prior-year reserve development, particularly in cyber, professional liability, general liability and legacy mass-tort claims.
- Parent liquidity and future capital returns, taking account of subsidiary dividend limits, debt maturities, repurchases and planned investment or acquisition needs.
- Progress on refinancing the Hotels loans, Boardwalk’s Bayou Ethane integration and the remanded litigation proceedings.