NEW YORK (TheStreet) - Loews Corp. (L), the holding company with majority ownership of CNA Financial (CNA), Diamond Offshore Drilling (DO) and a hotels business, is exposed to Boardwalk Pipeline's (BWP) falling shares after the midstream master limited partnership (MLP) cut its dividend by about 80%.
Loews owns about 57% of Boardwalk Pipeline's shares, meaning that the company's equity ownership stake fell by more than $1 billion on Monday after Boardwalk Pipeline said it would cut its quarterly dividend to 10 cent from the company's previous 53-cent distribution in November.
The falling value of Boardwalk Pipeline combined with sharply lower quarterly distributions could impact Loews 2014 earnings. In 2013, the midstream MLP contributed nearly $300 million to Loews' bottom line, mostly from the company's high quarterly dividend. Now, annual distributions of just 40 cents are poised to bring in only $50 million a year to Loews as a majority shareholder.
CNA Financial, Loews' biggest investment, however, said on Monday it would sell a life insurance unit for $615 million, leading to a surge in the company's stock. CNA Financial shares rose more than 7% to a new five-year high of $42.67 in afternoon trading. CNA also announced a $1-a-share special dividend and a 25% increase to the company's quarterly dividend.
The Chicago-based insurer's share gains and rising capital returns to investor are likely to help Loews offset some of the impact of Boardwalk Pipeline's Monday tumble. Loews owns nearly 90% of CNA Financial's outstanding shares, meaning the company will see most of the cash from a special dividend and dividend increase.