01—Abstract
Summary
Summary of the 10-K filed February 13, 2019. Cited figures are marked; the original filing is the authoritative source.
Loews Corporation's 2018 Form 10-K reports consolidated net income attributable to Loews Corporation of $636 milliona, or $1.99 per diluted share, compared with $1.16 billion, or $3.45 per share, in 2017.
The prior year benefited from a $200 millionb net benefit from the Tax Act. Excluding that effect, earnings decreased due to lower results at CNA and Diamond Offshore, partially offset by higher earnings at Loews Hotels & Co and Boardwalk Pipeline. Consolidated revenues were $14.07 billion in 2018 versus $13.74 billion in 2017.
The company is a holding company with five reportable segments: CNA Financial (commercial property and casualty insurance, 89% owned), Diamond Offshore Drilling (53% owned), Boardwalk Pipeline Partners (wholly owned after Loews acquired the public units for about $1.5 billionc in July 2018), Loews Hotels Holding Corporation (wholly owned), and Corporate, which includes Consolidated Container (99% owned, acquired in 2017). Segment net income attributable to Loews in 2018 was $726 million at CNA, $135 million at Boardwalk, $48 million at Loews Hotels, a loss of $112 million at Diamond Offshore, and a corporate loss of $161 million. Financially, Parent Company cash and investments, net of receivables and payables, were $3.1 billion at year-end 2018, down from $4.9 billion.
Parent Company liquidity was reduced by the $1.5 billiond Boardwalk unit purchase and $1.0 billion of treasury stock purchases. Total assets were $78.3 billion and shareholders' equity was $18.5 billion. Diamond Offshore faces ongoing industry oversupply, with its contract backlog at $2.0 billion as of January 1, 2019, and its credit ratings were downgraded to below investment grade by S&P and Moody's during 2018.
02—Key points
Key Highlights
- Net income attributable to Loews Corporation was $636 million ($1.99 per diluted share) in 2018, versus $1.16 billion ($3.45 per share) in 2017, which included a $200 million net Tax Act benefit.
- Total revenues rose to $14.07 billion in 2018 from $13.74 billion in 2017, with Consolidated Container's full-year contribution and higher resin pass-through driving growth in Corporate revenues.
- CNA Financial net income attributable to Loews was $726 million in 2018 versus $801 million in 2017; CNA's Property & Casualty combined ratios were 96.7% in 2018, and net catastrophe losses were $252 million.
- Diamond Offshore reported a $112 million loss attributable to Loews in 2018, with contract drilling revenue down $391 million and both S&P and Moody's downgrading its corporate credit ratings to below investment grade.
- Loews completed the purchase of all publicly held Boardwalk Pipeline common units for about $1.5 billion in July 2018, leaving Boardwalk wholly owned; Boardwalk's 2018 net income attributable to Loews was $135 million.
- Parent Company cash and investments fell to $3.1 billion from $4.9 billion at year-end 2017, reflecting the Boardwalk purchase and $1.0 billion of treasury stock purchases in 2018, with 20.3 million shares repurchased.
- Shareholders' equity was $18.5 billion at December 31, 2018, down from $19.2 billion, while book value per share rose to $59.34 from $57.83 as share count declined.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 13, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $14.07B$13.73B | +2.4% |
| Cost of Revenue | $923.00M$299.00M | +208.7% |
| Gross Profit | $13.14B$13.44B | −2.2% |
| Interest Expense | $574.00M$646.00M | −11.1% |
| Net Income | $636.00M$1.16B | −45.4% |
| EPS (Basic) | $1.99$3.46 | −42.5% |
| EPS (Diluted) | $1.99$3.45 | −42.3% |
| Shares Outstanding (Basic) | 319.06M336.61M | −5.2% |
| Shares Outstanding (Diluted) | 319.93M337.50M | −5.2% |
05—Questions
Frequently Asked Questions
Why did Loews' net income fall so sharply in 2018?
Net income attributable to Loews Corporation was $636 million in 2018 versus $1.16 billion in 2017. The 2017 result included a $200 million net benefit from the Tax Act. Excluding that effect, the filing says earnings decreased due to lower results at CNA and Diamond Offshore, partially offset by higher earnings at Loews Hotels & Co and Boardwalk Pipeline.
How did Diamond Offshore perform in 2018?
Diamond Offshore recorded a net loss attributable to Loews of $112 million in 2018, compared with a $27 million loss in 2017. Contract drilling revenue fell $391 million, driven by 955 fewer revenue-earning days. Its contract backlog was $2.0 billion as of January 1, 2019, and it faces oversupply of rigs and low dayrates, according to the filing.
What did Loews do with its capital in 2018?
Loews paid $1.5 billion to acquire the outstanding public common units of Boardwalk Pipeline, repurchased $1.0 billion of its own common stock (20.3 million shares), and paid $80 million in common dividends at $0.25 per share. Parent Company cash and investments decreased to $3.1 billion at year-end 2018 from $4.9 billion.
What are the main risks flagged for CNA Financial?
The filing highlights risks including the adequacy of insurance reserves, particularly for long term care and A&EP claims covered under the NICO loss portfolio transfer with an aggregate limit of $4.0 billion; catastrophe losses; intense competition and pricing cycles; and rating agency downgrades. It also notes that CNA's European business faces higher compliance costs due to Brexit.
How is the Consolidated Container acquisition reflected in the 2018 results?
Consolidated Container, acquired on May 22, 2017 for $1.2 billion, is included in the Corporate segment. Its 2018 revenues were $868 million, reflecting a full year of operations versus about seven months in 2017. Corporate other revenues rose $368 million in 2018, partly due to pass-through effects of higher resin prices.
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