01—Abstract
Summary
Summary of the 10-K filed February 24, 2014. Cited figures are marked; the original filing is the authoritative source.
Loews Corporation is a holding company whose subsidiaries span commercial property and casualty insurance (CNA Financial Corporation, a 90%a owned subsidiary, which accounted for 67.2% of consolidated total revenue in 2013), offshore drilling (Diamond Offshore Drilling, Inc., 50.4% owned), natural gas and NGL transportation and storage (Boardwalk Pipeline Partners, LP, 53% owned), natural gas and oil exploration and production (HighMount Exploration & Production LLC, wholly owned), and hotels (Loews Hotels Holding Corporation, wholly owned).
Consolidated revenues were $15.05 billionb in 2013 versus $14.55 billion in 2012, and net income attributable to Loews Corporation was $595 million, or $1.53 per diluted share, compared with $568 million, or $1.43 per share, in 2012. Income before ceiling test and goodwill impairment charges, the LPT charge and net investment gains was $1.3 billion in 2013 versus $968 million in 2012. Results were weighed down by non-cash charges at HighMount, which recorded a $584 million goodwill impairment (all of its remaining goodwill) and a $291 million ceiling test impairment in 2013, and by a $398 million after-tax goodwill impairment at the parent level.
Book value per share rose to $50.25c from $49.67. Boardwalk Pipeline cut its February 2014 quarterly distribution to $0.10 per unit from $0.5325, citing weaker transportation and storage market conditions, and Diamond Offshore reported softening ultra-deepwater and deepwater dayrates and a backlog of $6.8 billion as of February 5, 2014.
At year-end 2013, total debt was $10.85 billiond and shareholders' equity was $19.46 billion, and the Parent Company held $4.7 billion of cash and investments net of receivables and payables. Subsequent to year-end, CNA agreed on February 10, 2014 to sell the majority of its run-off annuity and pension deposit business, with an expected approximately $200 million after-tax impairment in the first quarter of 2014.
02—Key points
Key Highlights
- Consolidated net income attributable to Loews Corporation was $595 million, or $1.53 per diluted share, up from $568 million, or $1.43 per share, in 2012.
- Consolidated revenues were $15.05 billion in 2013 compared with $14.55 billion in 2012.
- HighMount recorded a $584 million goodwill impairment ($382 million after tax) and $291 million of ceiling test impairment charges in 2013, reflecting low natural gas and NGL prices.
- CNA's combined ratio improved to 97.9% in 2013 from 105.0% in 2012 for its property and casualty operations, and CNA's net income attributable to Loews rose to $847 million from $570 million.
- Boardwalk Pipeline declared a February 2014 quarterly distribution of $0.10 per unit, down from $0.5325 per unit in recent periods, and Loews offered up to $300 million of subordinated loans to Boardwalk.
- Diamond Offshore's contract drilling backlog was $6.8 billion as of February 5, 2014, with Petrobras accounting for approximately 34% of 2013 consolidated revenues.
- Book value per share increased to $50.25 at December 31, 2013 from $49.67 a year earlier.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 24, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $14.61B$14.07B | +3.8% |
| Operating Income | $1.15B$968.00M | +18.7% |
| Interest Expense | $425.00M$426.00M | −0.2% |
| Net Income | $595.00M$568.00M | +4.8% |
| EPS (Basic) | $1.53$1.44 | +6.3% |
| EPS (Diluted) | $1.53$1.43 | +7.0% |
| Shares Outstanding (Basic) | 388.64M395.12M | −1.6% |
05—Questions
Frequently Asked Questions
What drove the increase in Loews' 2013 earnings despite large impairment charges?
Income before ceiling test and goodwill impairment charges, the impact of the LPT charge and net investment gains was $1.3 billion in 2013 versus $968 million in 2012. The increase was primarily due to higher earnings at CNA and increased investment income at the Parent Company from improved performance of equities and limited partnership investments, partially offset by lower earnings at Diamond Offshore.
What impairment charges affected Loews' 2013 results?
HighMount recorded a goodwill impairment charge of $584 million ($382 million after tax) for all of its remaining goodwill and ceiling test impairment charges of $291 million ($186 million after tax). Boardwalk Pipeline recorded a $52 million goodwill impairment ($16 million after tax and noncontrolling interests). Consolidated goodwill impairment expense totaled $636 million.
Why did Boardwalk Pipeline reduce its distribution?
In February 2014 Boardwalk Pipeline declared a quarterly distribution of $0.10 per unit, below the $0.5325 per unit declared and paid in recent periods. The filing attributes this to market conditions, including narrower basis differentials and time period price spreads, which lowered transportation rates and storage and PAL service revenues. Boardwalk intends to use the retained cash to fund growth and reduce leverage.
What did CNA agree to do after year-end 2013?
On February 10, 2014, CNA entered into a definitive agreement to sell the majority of its run-off annuity and pension deposit business through the sale of the common stock of CAC and a 100% coinsurance agreement on a separate small block of annuity business. The business had gross insurance reserves of approximately $3.4 billion at December 31, 2013. The sale is expected to close in the first half of 2014, with an impairment loss of approximately $200 million after tax and noncontrolling interests expected in the first quarter of 2014.
What is the outlook for Diamond Offshore's contract drilling business?
The filing describes the ultra-deepwater market as having weakened, with downward dayrate trends and limited tendering activity in early 2014, and many analysts predicting an oversupply of ultra-deepwater floaters by the end of 2014. The deepwater market is also weakening, with dayrates projected to continue softening in 2014. Approximately 100 newbuild floaters are on order for delivery between 2014 and 2016, and Petrobras has announced plans to construct locally 28 ultra-deepwater units beginning in 2015.
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