Loews Corporation — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. Loews is a holding company with consolidated businesses in property and casualty insurance (CNA, 90% owned), natural gas transportation and storage (Boardwalk Pipelines), and hotels (Loews Hotels & Co). It also owns 52.6% of unconsolidated Altium Packaging.
Financial performance
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Consolidated revenue | $14.044 billion | $14.657 billion |
| Net income attributable to Loews | $1.012 billion | $1.578 billion |
| Diluted earnings per share | $4.16 | $6.07 |
| Net cash from operating activities | $3.314 billion | $2.623 billion |
| Cash and investments | $47.300 billion | $54.559 billion |
| Total debt, carrying value | $9.019 billion | $9.079 billion |
Revenue declined about 4%; net income declined about 36%. The 2021 comparison included a $555 million pretax ($438 million after-tax) gain on the sale of a 47% interest in Altium Packaging. Excluding that gain, 2021 net income was about $1.14 billion, making the year-over-year decrease approximately $128 million. The 2022 result reflected weaker investment performance, partly offset by improved CNA underwriting, stronger hotel operations and higher Boardwalk Pipelines revenue.
Consolidated investment losses were $199 million in 2022, compared with gains of $660 million in 2021. Net investment income fell to $1.802 billion from $2.259 billion, largely due to unfavorable limited partnership and common-stock results. Cash from operations increased; investing activities used $2.347 billion and financing activities used $1.037 billion. Year-end cash was $532 million. Parent Company cash and investments, net of receivables and payables, were $3.2 billion.
Total equity fell to $15.478 billion from $19.175 billion, principally reflecting a $3.858 billion after-tax comprehensive loss, driven by unrealized investment losses. The filing reports no single consolidated operating margin; CNA’s property-and-casualty combined ratio was 93.2%, improved from 96.2% in 2021.
Segments and material changes
- CNA: Loews-attributable net income was $802 million, down from $1.077 billion. P&C premiums rose, underwriting improved and catastrophe losses declined to $247 million from $397 million. Investment losses and lower limited-partnership income weighed on results. P&C combined ratio improved to 93.2%; favorable prior-year reserve development was $96 million for P&C operations.
- Boardwalk Pipelines: Loews-attributable net income rose to $247 million from $235 million; revenue increased to $1.446 billion from $1.349 billion. Growth projects, higher re-contracting rates and utilization-based revenue contributed. About 87% of 2022 revenue came from firm-contract capacity fees.
- Loews Hotels & Co: Net income was $117 million versus a $14 million loss. Rebounding travel lifted occupancy and room rates; operating revenue increased to $596 million from $337 million. The Coral Gables hotel opened in 2022.
- Corporate: Net loss was $154 million versus income of $280 million, largely reflecting the prior-year Altium sale gain and weaker investment results. Altium has been equity-accounted since its 2021 deconsolidation.
Liquidity, debt and capital allocation
Consolidated debt was $9.019 billion, including $854 million classified as short-term. Boardwalk Pipelines had $3.3 billion of principal long-term debt, no revolver borrowings and $1.0 billion of available revolving capacity. The Parent Company received $978 million in subsidiary dividends in 2022, including a $486 million special CNA dividend, and spent $729 million on Loews share repurchases. It paid $61 million in shareholder dividends. CNA operating cash flow was $2.5 billion. Subsidiary distributions are subject to regulatory, covenant and other restrictions; Loews has no parent-company guarantees of subsidiary obligations.
Outlook, risks and unusual items
- Boardwalk expected approximately $405 million of total capital expenditures in 2023, including $210 million for growth, and approximately $460 million for maintenance, regulatory compliance and emissions-related work. It also expected about $410 million of growth-project spending through 2025. These plans are subject to project execution, permitting and cost risks.
- Loews Hotels’ development commitments include an estimated additional $160 million in contributions to two joint ventures expected to open in 2025. A $110 million variable-rate hotel mortgage matures within twelve months; management intended to refinance it. The filing gives no consolidated earnings or revenue guidance.
- CNA’s long-term-care reserves remain sensitive to morbidity, persistency, discount rates and approved premium increases. CNA reported a $125 million pretax reserve margin in its 2022 annual valuation. New long-duration insurance accounting effective January 1, 2023 was expected to reduce AOCI by about $2.1 billion after tax and noncontrolling interests at the transition date; management said the change would not affect statutory capital, cash flows or underlying economics.
- Management expected approximately $50 million of 2023 expense from planned termination of a non-contributory defined benefit plan. CNA anticipated a $12 million pension cost in 2023, versus a $55 million benefit in 2022.
- Principal risks include insurance reserve adequacy, long-term-care assumptions, catastrophes and reinsurance collectibility; market and investment volatility; pipeline regulation, safety, climate-related requirements, financing and customer concentration; hotel cyclicality, labor and development costs; and cybersecurity. CNA’s March 2021 ransomware incident involved copying personal information, and the company said available cyber insurance may not cover all losses.
- A Delaware court’s approximately $690 million damages award plus interest in litigation concerning the 2018 Boardwalk unit purchase was reversed by the Delaware Supreme Court in December 2022 and remanded for further proceedings. Management did not expect pending litigation, including this matter, to materially affect results or equity.
Key facts for investors to verify
- Whether CNA’s investment performance and underwriting gains can offset reserve uncertainty, catastrophe exposure and market volatility.
- Whether cash generation and regulated subsidiary dividend capacity can support parent liquidity, repurchases and planned investments.
- Boardwalk’s leverage, contract renewals, project costs and ability to manage new safety and emissions requirements.
- Hotel recovery, refinancing needs, development funding and geographic concentration in Florida.
- The effect of CNA’s 2023 accounting transition and the planned pension-plan termination on reported equity and earnings.
The financial statements received an unqualified audit opinion, and management and the auditor reported effective internal control over financial reporting as of December 31, 2022.