01—Abstract
Summary
Summary of the 10-K filed February 22, 2012. Cited figures are marked; the original filing is the authoritative source.
Loews Corporation reported 2011 consolidated net income attributable to Loews Corporation of $1,064 milliona, or $2.63 per share, compared with $1,288 million, or $3.07 per share, in 2010.
Revenues were $14,127 millionb (2010: $14,615 million). The decline was driven primarily by lower investment income from limited partnership results at CNA, higher catastrophe losses, lower favorable net prior year development at CNA, and a $104 million after-tax increase in payout annuity reserves. Book value per share rose to $47.49 from $44.51 at year-end 2010.
Loews is a holding company whose results depend on five operating subsidiaries: CNA Financial (90%c owned), Diamond Offshore Drilling (50.4% owned), HighMount Exploration & Production (wholly owned), Boardwalk Pipeline Partners (61% owned), and Loews Hotels (wholly owned). The filing highlights concentrated exposures and capital commitments. CNA accounted for 63.4% of consolidated revenue in 2011.
Diamond Offshore's revenue depends heavily on Petrobras (35% of its 2011 revenue) and OGX (14%), and it has three ultra-deepwater drillships under construction at an aggregate cost of about $1.8 billiond. HighMount's natural gas price realizations weakened, and the filing states that if prices stay at their then-current levels through 2012, HighMount would likely incur one or more material non-cash ceiling test impairments.
Parent Company cash and investments, net, fell to $3.3 billion from $4.6 billion, largely due to $718 million of share repurchases. The filing also discloses ongoing risk items, including CNA's reserve uncertainty and its $4.0 billion aggregate-limit Loss Portfolio Transfer for asbestos and environmental pollution claims with National Indemnity Company, and two pending tobacco-related lawsuits naming the company, for which Lorillard has agreed to indemnify Loews.
02—Key points
Key Highlights
- Net income attributable to Loews fell to $1.06 billion ($2.63 per diluted share) in 2011 from $1.29 billion ($3.07 per share) in 2010.
- Total revenues were $14.13 billion in 2011, versus $14.62 billion in 2010; CNA Financial contributed 63.4% of consolidated revenue.
- Book value per common share increased to $47.49 at December 31, 2011, from $44.51 a year earlier.
- CNA's 2011 net income attributable to Loews was $559 million, down from $636 million, reflecting lower limited partnership investment income, higher catastrophe losses and a $104 million after-tax payout annuity reserve increase.
- Diamond Offshore faces customer concentration, with Petrobras at 35% and OGX at 14% of its 2011 consolidated revenues, and its contract backlog was $8.6 billion as of February 1, 2012.
- HighMount's proved reserves declined 166 Bcfe during 2011, and the filing warns of likely ceiling test impairments if gas prices remain at 2012 levels.
- Loews repurchased 18.2 million shares for $718 million in 2011 and paid $0.25 per share in regular annual dividends ($0.0625 quarterly).
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 22, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $14.13B$14.62B | −3.3% |
| Operating Income | $1.06B$1.31B | −18.8% |
| Interest Expense | $522.00M$517.00M | +1.0% |
| Net Income | $1.06B$1.29B | −17.6% |
| EPS (Basic) | $2.62$3.08 | −14.9% |
| EPS (Diluted) | $2.62$3.07 | −14.7% |
| Shares Outstanding (Basic) | 404.53M418.72M | −3.4% |
| Shares Outstanding (Diluted) | 405.32M419.52M | −3.4% |
05—Questions
Frequently Asked Questions
What drove the decline in Loews' 2011 earnings?
The filing attributes the decrease in net income excluding the prior-year $328 million Loss Portfolio Transfer charge primarily to lower investment income from CNA's limited partnerships, higher catastrophe losses, lower favorable net prior year development at CNA, and a $104 million after-tax increase in CNA payout annuity reserves. Results at the parent company trading portfolio also declined.
How concentrated are Loews' subsidiary revenues?
CNA accounted for 63.4% of consolidated revenue in 2011, with Diamond Offshore at 23.6%, Boardwalk Pipeline at 8.1%, HighMount at 2.5% and Loews Hotels at 2.4%. Diamond Offshore's revenue is concentrated in Petrobras and OGX, which together accounted for 49% of its 2011 consolidated revenues.
What are the major capital commitments disclosed?
Diamond Offshore has three ultra-deepwater drillships under construction with an expected aggregate cost of about $1.8 billion, of which $478 million was paid in 2011, and a moored semisubmersible rig expected to cost about $300 million. Boardwalk Pipeline acquired HP Storage caverns for about $550 million, and HighMount expects to spend about $320 million on capital expenditures in 2012.
What legal and reserve risks does the filing highlight?
CNA's loss reserves involve significant estimation uncertainty, and CNA may need to increase reserves through unfavorable prior year development. CNA ceded substantially all legacy asbestos and environmental pollution liabilities under a Loss Portfolio Transfer with an aggregate limit of $4.0 billion. Loews is a defendant in two pending tobacco-related lawsuits, but Lorillard has agreed to indemnify it for these liabilities.
06—Continue