01—Abstract
Summary
Summary of the 10-K filed February 19, 2016. Cited figures are marked; the original filing is the authoritative source.
Loews Corporation reported 2015 consolidated net income attributable to Loews Corporation of $260 milliona, or $0.72 per share, compared with $591 million, or $1.55 per share, in 2014.
Income from continuing operations fell to $260 millionb from $962 million, driven mainly by a $177 million after-tax reserve charge at CNA for its long term care business and asset impairment charges at Diamond Offshore. Total revenues were $13.415 billion in 2015 versus $14.325 billion in 2014, and book value per share was $51.67 at December 31, 2015, essentially flat with $51.70 a year earlier. Shareholders' equity declined to $17.561 billion from $19.280 billion, largely reflecting $1.265 billion of treasury stock purchases, and the company retired all treasury stock during the year.
The company is a holding company whose principal subsidiaries are CNA Financial (90% owned, commercial property and casualty insurance, 67.8% of 2015 consolidated revenue), Diamond Offshore Drilling (53% owned, offshore drilling, 18.1% of revenue), Boardwalk Pipeline Partners (51% owned, natural gas pipelines and storage, 9.3% of revenue) and Loews Hotels (wholly owned, 24 hotels, 4.5% of revenue). Diamond Offshore recorded asset impairment charges totaling $861 millionc pretax in 2015, and management describes depressed oil prices and a floater rig oversupply that are expected to persist. Boardwalk Pipeline faces contract renewals at lower rates, and CNA recorded a premium deficiency of $296 million in its long term care business.
Parent company cash and investments, net of receivables and payables, totaled $4.3 billiond at year end, down from $5.1 billion. The company received $816 million in dividends from subsidiaries, including a $485 million special dividend from CNA, and paid $1.3 billion to fund share repurchases. Quarterly dividends remained at $0.0625 per share.
02—Key points
Key Highlights
- 2015 net income attributable to Loews Corporation was $260 million ($0.72 per diluted share), down from $591 million ($1.55 per share) in 2014.
- Income from continuing operations fell to $260 million from $962 million, primarily due to a $177 million after-tax CNA long term care reserve charge and Diamond Offshore asset impairments.
- Diamond Offshore recognized aggregate asset impairment losses of $861 million pretax in 2015 and reported a net loss attributable to Loews of $156 million.
- Total revenues declined to $13.415 billion from $14.325 billion, and Diamond Offshore contract drilling revenues fell to $2.360 billion from $2.737 billion.
- Parent company cash and investments declined to $4.3 billion from $5.1 billion, as the company bought $1.3 billion of its common stock and paid $816 million was received in subsidiary dividends.
- Book value per share was $51.67 at December 31, 2015, versus $51.70 a year earlier, while book value per share excluding AOCI rose to $52.72 from $50.95.
- Diamond Offshore discontinued its quarterly dividend in February 2016, and Moody's placed its Baa2 rating under review for possible downgrade.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 19, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $13.41B$14.32B | −6.4% |
| Operating Income | $260.00M$962.00M | −73.0% |
| Interest Expense | $520.00M$498.00M | +4.4% |
| Net Income | $260.00M$591.00M | −56.0% |
| EPS (Basic) | $0.72$1.55 | −53.5% |
| EPS (Diluted) | $0.72$1.55 | −53.5% |
| Shares Outstanding (Basic) | 362.43M381.92M | −5.1% |
| Shares Outstanding (Diluted) | 362.69M382.55M | −5.2% |
05—Questions
Frequently Asked Questions
Why did Loews earnings decline sharply in 2015?
The filing attributes the decline mainly to a $177 million after-tax reserve charge at CNA related to a premium deficiency in its long term care business, and to asset impairment charges at Diamond Offshore, including $341 million after tax and noncontrolling interests for 17 drilling rigs. Lower parent company investment income from trading securities and limited partnerships also contributed.
How exposed is Loews to the oil and gas downturn?
Diamond Offshore, 53% owned, faces declining demand, with oil prices falling to a 12-year low below $30 per barrel in early 2016. Its contract backlog was $5.2 billion as of February 16, 2016, down from $6.8 billion a year earlier, and 17 rigs were not under contract. Boardwalk Pipeline also faces risk, as about 50% of its 2015 revenues came from natural gas producers.
What did Loews do with its capital in 2015?
Loews purchased 33.3 million shares of its common stock for $1.3 billion and bought 1.1 million shares of Diamond Offshore for $29 million. It also acquired hotels for approximately $330 million and invested $1.555 billion in property, plant and equipment, mostly for Diamond Offshore drillships and Boardwalk Pipeline growth projects.
What is the outlook for CNA's long term care business?
CNA's long term care active life reserves now carry no margin for adverse deviation after a $296 million premium deficiency was recognized at December 31, 2015. The filing states CNA may have to unlock its reserve assumptions in the future if actual experience diverges from its best estimates, which could result in further charges.
What dividends does Loews pay?
Loews paid regular dividends of $0.0625 per share in each quarter of 2015 and 2014, totaling $0.25 per share annually. Subsidiary CNA paid a special dividend of $2.00 per share in 2015 and declared another $2.00 special dividend in February 2016 alongside a quarterly dividend of $0.25.
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