Loews Corporation — FY2020 Form 10-K
Reporting period: Year ended December 31, 2020. Loews is a diversified holding company with major operations in insurance (CNA), natural-gas transportation and storage (Boardwalk Pipelines), hotels, and plastic packaging (Altium Packaging). CNA supplied 86.0% of consolidated revenue. Diamond Offshore was deconsolidated after filing for Chapter 11 on April 26, 2020.
Financial results and position
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $12.583 billion | $14.931 billion |
| Income (loss) before tax | $(1.464) billion | $1.119 billion |
| Net income (loss) attributable to Loews | $(931) million | $932 million |
| Diluted earnings (loss) per share | $(3.32) | $3.07 |
| Cash flow from operating activities | $1.745 billion | $1.741 billion |
| Total assets | $80.236 billion | $82.243 billion |
| Debt | $10.109 billion | $11.533 billion |
| Shareholders’ equity | $17.860 billion | $19.119 billion |
Revenue fell 15.7%. The reported loss was dominated by a $1.2 billion pretax ($957 million after-tax) loss on the write-down of Loews’s Diamond Offshore interest following deconsolidation, in addition to $774 million of pretax rig impairment charges recognized before deconsolidation. Consolidated cash flow from investing activities was $(1.414) billion and financing activities were $(198) million. Cash at year-end was $478 million.
Parent-company cash and investments, net of receivables and payables, were $3.5 billion, versus $3.3 billion at year-end 2019. Loews received $947 million in subsidiary dividends, including a $485 million special dividend from CNA; it spent $923 million on Loews share repurchases and paid $70 million in shareholder dividends. The annual common dividend remained $0.25 per share.
Segments and material changes
- CNA: Loews-attributable net income was $618 million, down from $894 million. Net catastrophe losses rose to $550 million from $179 million, including $195 million related to COVID-19. CNA’s property-and-casualty combined ratio increased to 100.9% from 96.7%; excluding catastrophes and prior-year development, it was 93.1% versus 94.8%. Net written premiums increased to $7.566 billion from $7.134 billion, while investment income declined.
- Boardwalk Pipelines: Loews-attributable net income was $206 million, compared with $209 million. Revenue was $1.302 billion. Approximately 90% of revenue came from capacity reservation fees under firm contracts. Debt principal was $3.5 billion at year-end.
- Loews Hotels: Loews-attributable net loss was $212 million, versus a $31 million loss. Operating revenue declined to $167 million from $578 million as pandemic-related closures and lower occupancy and room rates sharply reduced business. It recorded $36 million in asset impairments and $73 million in equity losses from joint ventures.
- Corporate, including Altium Packaging: The segment recorded a $1.067 billion loss, compared with $35 million of income, primarily reflecting the Diamond Offshore write-down. Altium revenue increased to $1.022 billion from $932 million, reflecting acquisitions, higher volumes and resin prices.
Outlook, risks and unusual items
- Management said the pandemic materially affected 2020 results; its duration and full financial effects remained uncertain. Loews Hotels expected material adverse effects to continue into 2021, with recovery dependent on travel demand, restrictions and other factors.
- Boardwalk expected approximately $340 million of 2021 capital expenditures, including $150 million for maintenance and $190 million for growth. It anticipated existing resources and operating cash flows would be adequate for 2021. Separately, it expected about $380 million of spending on growth projects under construction through 2024.
- Boardwalk reported $9.45 billion of projected operating revenue under firm agreements at year-end 2020. Contract renewals at lower rates or shorter terms, customer credit, pipeline-safety regulation, climate policy and substantial debt remain risks.
- Loews Hotels was not in default on its loans at the report date, but was negotiating covenant waivers, payment deferrals and extensions with lenders; discussions could require debt paydowns or guarantees. It received $151 million of parent funding in 2020 and expected to need further funding in 2021.
- CNA’s reserves remain sensitive to long-tail claims, COVID-19 claims and litigation, long-term-care assumptions, catastrophe exposure and investment conditions. Its 2020 long-term-care review produced a $74 million premium-deficiency charge. A workers’ compensation reinsurance transaction closed in February 2021 and was expected to generate an approximately $11 million after-tax and noncontrolling-interest loss in Q1 2021.
- Other notable items include a $14 million reduction in CNA earned premiums for anticipated refunds after policy-rating calculation errors, and a pending Boardwalk-related class action scheduled for trial in February 2021. Management did not expect pending litigation, including that matter, to materially affect results or equity.
The filing gives no consolidated earnings or revenue guidance. The independent auditor issued an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective.
Most important facts for investors to verify
- Whether CNA’s COVID-19 and other long-tail claims, catastrophe losses and reserve assumptions develop materially differently from estimates.
- The pace of hotel occupancy and revenue recovery, cash requirements, lender concessions and any resulting impairment or debt pressure.
- Boardwalk’s renewal rates, customer credit exposure, leverage and the cost and timing of pipeline-safety and growth projects.
- Whether Loews’s parent-company liquidity and subsidiary dividends remain sufficient to support obligations, capital allocation and shareholder repurchases.
- The financial and operational consequences of Diamond Offshore’s bankruptcy and deconsolidation, and Altium Packaging’s post-year-end refinancing and dividend.