Loews Q1 2010 Earnings Call Transcript

Loews Q1 2010 Earnings Call Transcript
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Loews (L)

Q1 2010 Earnings Call

May 03, 2010 11:00 am ET

Executives

Lawrence Dickerson - President, Chief Executive Officer, Director and Member of Executive Committee

Darren Daugherty -

Peter Keegan - Chief Financial Officer and Senior Vice President

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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

Analysts

Steven McSorely

Robert Glasspiegel - Langen McAlenney

David Adelman - Morgan Stanley

Stephen Velgot - Susquehanna Financial Group, LLLP

Michael Millman - Millman Research Associates

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Loews First Quarter 2010 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Mr. Darren Daugherty, Director of Investor Relations. Sir, you may begin your conference.

Darren Daugherty

Thank you, Paula. Good morning, everyone. Welcome to Loews Corporation's First Quarter 2010 Earnings Conference Call. A copy of the earnings release may be found on our website, www.loews.com. On the call this morning are Jim Tisch, the Chief Executive Officer of Loews; and Peter Keegan, the Chief Financial Officer of Loews. Before we begin, I'd like to make a few brief disclosures concerning forward-looking statements.

This conference call will include the use of 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. We urge you to read the full disclaimer, which is included in the company's 10-K and 10-Q filings with the SEC. I'd also like to remind you that during this call today, we may discuss certain non-GAAP financial measures. Please refer to our security filings for reconciliation to the most comparable GAAP measures.

After we have discussed our results, we will have a question-and-answer session. And now, I'll 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 the call today. Loews started the year with very solid first quarter reporting earnings of $0.99 per share compared to a loss of $1.49 per share in the first quarter of '09. CNA saw substantial improvement in its net operating income, primarily from higher investment income from limited partnership investments. The Specialty segment for CNA is performing well in a very competitive environment. CNA continues to exercise underlining discipline in both its Specialty and Commercial segments. In the Commercial segment, CNA maintains its focus on improving profitability with more selective underwriting and improved pricing. The competitive P&C insurance market and weak economy have put pressure on the top line but CNA's progress towards an adequately priced, more profitable commercial book of business is evidenced in its improving rate trend. Results in CNA's core property and casualty operation included higher catastrophe losses and decreased favorable net prior year development versus the first quarter of '09.

Diamond Offshore posted strong results for the first quarter. While day rates have decreased from their all-time high, current rates remain attractive and profitable. During the quarter, Diamond signed a number of contacts, bringing a revenue backlog to approximately $9.1 billion or 78.5 rig years of work. Diamond's recently declared special quarterly dividend along with its regular quarterly dividend was reduced from the previous level of $2 per share to $1.50 per share. This new level of dividend represents over $100 million of cash to be received by Loews this quarter.

The tragic events on the Deepwater Horizon and the ensuing oil spills are of great concern to all of us. Larry Dickerson, the CEO of Diamond Offshore, is on the call this morning. And after Pete Keegan and I have finished our prepared remarks, Larry will give us an update on the situation.

So turning back to our results, Boardwalk had a strong first quarter, benefiting from increased pipeline capacity and throughput on its major pipeline expansion projects. The growth of natural gas supply continues to create new opportunities, such as the previously announced Haynesville and Clarence Compression Projects which will boost capacity on Boardwalk's East Texas pipeline system to accommodate demand from the Haynesville Shale production area. During the quarter, Boardwalk placed into service three new compressor stations on the Gulf Crossing pipeline and the Fayetteville and Greenville laterals, increasing the delivery capacities of these pipelines. These compression projects demonstrate the attractiveness and flexibility of Boardwalk's footprint. Boardwalk has increased the cash distribution pay to unit holders each quarter since its IPO in '05. The most recently declared distribution was $15.05 per unit, which when combined with distributions to the Boardwalk general partner represents $65 million of cash flow to Loews during the second quarter.

In the E&P sector, natural gas pricing weakness has resulted in a challenging operating environment. To better position itself to succeed in this environment, HighMount is disposing of its non-core assets in Alabama and Michigan. On April 28, HighMount entered into an agreement to sell its assets in the Black Warrior Basin in Alabama to Walter Energy for $210 million. This sale is expected to close during the second quarter of 2010. Additionally, on April 30, HighMount completed the sale of its Exploration & Production assets in the Antrim Shale in Michigan for $330 million, subject to adjustments. Net proceeds from both transactions total approximately $500 million and will go towards repayment of HighMount’s outstanding $1.6 billion term loan.

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