01—Abstract
Summary
Summary of the 10-K filed February 24, 2010. Cited figures are marked; the original filing is the authoritative source.
Loews Corporation is a holding company whose operating subsidiaries span commercial property and casualty insurance (CNA Financial Corporation, 90%a owned), offshore drilling (Diamond Offshore Drilling, 50.4% owned), natural gas exploration and production (HighMount, wholly owned), interstate natural gas pipelines (Boardwalk Pipeline Partners, 67% owned), and hotels (Loews Hotels, wholly owned).
CNA accounted for 60.0% of consolidated total revenue in 2009, Diamond Offshore for 25.9%, and HighMount for 4.4%. For 2009, consolidated revenues were $14,117 millionb and income from continuing operations was $566 million, or $1.31 per share, compared with a loss of $182 million, or $0.38 per share, in 2008. Net income attributable to Loews Corporation was $564 million, compared with $4.5 billion in 2008, which included a tax-free non-cash gain of $4.3 billion from the Separation of Lorillard.
The 2009 improvement was driven mainly by improved net investment income and net investment gains at CNA, partly offset by a $660 millionc after-tax non-cash impairment charge at HighMount on its natural gas and oil properties. Book value per share of Loews common stock rose to $39.76 from $30.18. Shareholders' equity was $16,899 million at year-end, and total debt was $9,485 million.
The filing notes that results at Boardwalk Pipeline were lower because of lost revenue while remediating pipeline anomalies, and that Loews Hotels posted a net loss of $34 million as revenue per available room fell to $134.60d. The filing identifies material risks including the holding company's reliance on subsidiary dividends, CNA's exposure to investment losses and reserve development (particularly asbestos and environmental claims), commodity price volatility affecting HighMount, and Boardwalk Pipeline's need for PHMSA authority to operate expansion pipelines at higher pressures. Loews also disclosed the repurchase of 10,523,800 shares for $348 million during 2009 and a February 2010 sale of 10 million Boardwalk Pipeline common units for about $289 million.
02—Key points
Key Highlights
- Consolidated revenues of $14,117 million in 2009, up from $13,247 million in 2008.
- Income from continuing operations of $566 million, or $1.31 per share, versus a loss of $182 million, or $0.38 per share, in 2008.
- Net income attributable to Loews of $564 million, down from $4.5 billion in 2008, which included a $4.3 billion gain on the Separation of Lorillard.
- HighMount recorded a non-cash after-tax impairment of $660 million in 2009 on its natural gas and oil properties, reflecting lower commodity prices.
- Book value per share of Loews common stock increased to $39.76 from $30.18 at December 31, 2008.
- CNA's net investment income rose to $2,320 million from $1,619 million, driven by improved limited partnership results, and it recognized a $370 million pretax gain on its Verisk Analytics holdings.
- Loews repurchased 10,523,800 shares of its common stock for $348 million during 2009, and in February 2010 sold 10 million Boardwalk Pipeline common units for about $289 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 24, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $14.12B$13.25B | +6.6% |
| Operating Income | $566.00M-$182.00M | +411.0% |
| Interest Expense | $448.00M$345.00M | +29.9% |
| Net Income | $564.00M$4.53B | −87.5% |
| EPS (Basic) | $1.30— | — |
| EPS (Diluted) | $1.30— | — |
| Shares Outstanding (Basic) | 432.81M— | — |
| Shares Outstanding (Diluted) | 433.45M— | — |
05—Questions
Frequently Asked Questions
What drove the swing from a 2008 loss to 2009 income from continuing operations?
The filing attributes the improvement primarily to improved net investment income and net investment gains at CNA, compared with a loss from continuing operations in 2008. Net investment income benefited from higher limited partnership results, and net investment losses narrowed to $503 million after tax from $754 million, helped by a $217 million after-tax gain on CNA's sale of Verisk Analytics stock and lower other-than-temporary impairment losses. These gains were partly offset by the HighMount impairment.
How did the 2008 Lorillard separation affect Loews' reported results?
Loews disposed of its entire interest in Lorillard, Inc. in June 2008 through the Redemption of former Carolina Group stock and the Exchange Offer. The filing reports a $4.3 billion gain from the Exchange Offer, recorded as a gain on disposal of discontinued operations. Lorillard's results are presented as discontinued operations, so 2008 net income of $4.5 billion is far higher than income from continuing operations.
What are the main risks the filing highlights for the parent company?
As a holding company, Loews depends on invested cash and dividends from subsidiaries, which are subject to state laws, insurance dividend limits, and loan covenants. The filing also cites possible investment losses and lower parent cash at CNA and the parent during market disruption, potential tobacco-related lawsuits (with Lorillard indemnifying Loews), and possible rating downgrades that could affect CNA's ability to write business.
What is the status of Boardwalk Pipeline's expansion projects?
In December 2009 Boardwalk Pipeline received PHMSA authority to operate its 42-inch expansion pipelines at higher than normal pressures. It continues to seek similar authority for the Fayetteville Lateral, and without it, Boardwalk cannot transport all contracted volumes on that pipeline beginning in mid-2011. The filing estimates up to $580 million of remaining capital expenditures for expansion and growth projects, mainly by the end of 2010, and states that the company does not expect to need to raise further capital to complete them.
06—Continue