For the remainder of my remarks, I'd like to review three headlines:

executive changes at Boardwalk Pipelines, new developments at Loews Hotels and share repurchases. A few weeks ago, Boardwalk announced that Stan Horton will retire as CEO in June and will be succeeded by Scott Hallam, who is currently the company's President and Chief Operating Officer.

Unknown Executive:

Investor Q&A Every quarter, we encourage shareholders to send us questions in advance of earnings that they would like us to answer in our remarks. Please see below for the questions we have received, along with some additional questions we found relevant.

James Tisch:

Growth in artificial intelligence has driven and should continue to drive a proliferation of data centers, creating a substantial uptick in U.S. electricity demand. Incremental demand from data centers also coincides with pressure on the grid from the adoption of electric cars and the onshoring of certain manufacturing facilities. Therefore, after more than a decade of stagnation, electricity demand may grow as much as 20% by the end of this decade. The increase in power demand cannot be met by renewables alone given issues with intermittency, land use and permitting new transmission lines. Therefore, new natural gas-fired power plants will need to be constructed. Boardwalk is already seeing attractive growth projects from new power plants that are being built near its pipeline system.

Jane Wang:

The higher interest rate environment has not materially impacted Loews Hotels' ability to refinance its properties, due in large part to its staggered maturities. That being said, the hotel company anticipates that higher rates may impact interest expense as loans mature. However, as the company replaces construction loans with permanent financing, it will likely benefit from lower spreads. It is important to keep in mind that while higher interest rates are a headwind for Loews Hotels, they are actually a tailwind for Loews Corp overall. As a 92% owner of CNA, Loews benefits from the higher rates that CNA earns on its $47 billion investment portfolio.

James Tisch:

In December of 2022 the Delaware Supreme Court reversed the Delaware Court of Chancery's ruling in favor of the former Boardwalk minority unitholders. The Delaware Court of Chancery held oral arguments on April 12th regarding unresolved issues that the Delaware Supreme Court remanded back to the lower court. We expect a decision from the Chancery Court later this year. Loews has the ability to appeal any unfavorable decision back to the Delaware Supreme Court.

James Tisch:

We continue to believe that our shares trade at a discount to their intrinsic value and therefore share repurchases will remain a key component of our capital allocation strategy. Currently Loews has a market capitalization of $16.2 billion. When you subtract our $10.8 billion stake in CNA (which is a paltry ten times earnings) and our $800 million net cash position, the market is valuing our non-publicly traded subsidiaries at about $4.6 billion. That valuation is extraordinarily cheap when you consider that the sum of Boardwalk's EBITDA and Loews Hotels' Adjusted EBITDA is nearly $1.3 billion.

Unknown Executive:

Loews Hotels has substantially completed its equity investment of nearly $435 million in these four new developments. The total cost incurred for the four properties (including debt and partner equity) through the end of 2023 was $1 billion. Given the hotel company's strong internal cash flow generation, Loews Hotels self-funded the vast majority of its investment in these new projects, with the parent company contributing $38 million in 2023.

Unknown Executive:

Current regulations and permitting requirements regarding new pipeline construction are extremely onerous, which inhibits development of new pipelines. On the positive side, the lack of new pipeline development generally increases demand for existing pipelines.

Unknown Executive:

We believe that natural gas will remain an essential component of the U.S. energy infrastructure due to its ability to fuel dispatchable electricity. As the country adds more renewables to the grid, the increased volatility in natural gas demand may actually create new pipeline storage revenue opportunities. Boardwalk's assets are also well-located to take advantage of demand growth in the Gulf Coast region. Not only are Boardwalk's assets located near LNG export terminals, but the company's pipelines may also be able to take advantage of coal to gas switching in the states it serves. For example, nearly 70% of Kentucky's electricity is still generated by coal-fired plants.

Unknown Executive:

As a reminder, in December of 2022 the Delaware Supreme Court reversed the Delaware Court of Chancery's ruling in favor of the former Boardwalk minority unitholders. As part of that decision, the Delaware Supreme Court remanded the three unresolved issues back to the Chancery Court. The Delaware Court of Chancery will hold a hearing in April of this year on those remaining issues.

Jane Wang:

For the third quarter of 2023, Loews reported net income of $253 million or $1.12 per share, compared with net loss of $22 million or $0.09 per share in last year's third quarter. This year's third quarter results included a $37 million non-cash after-tax charge for the termination of a defined benefit pension plan. As a reminder, last year's third quarter financials were restated for the adoption of the LDTI (Long Duration Targeted Improvements) accounting standard.

Jane Wang:

Most of our subsidiaries have fixed rate debt. Altium has floating rate debt, but approximately half is hedged until 2028. While refinancings will result in higher interest expense, the overall financial impact to Loews is positive as CNA is able to re-invest its portfolio at more attractive yields.

James Tisch:

In the past we have purchased CNA shares to signal to the market that we believe that CNA is significantly undervalued, and this time was no different. I would also point out that this purchase did not impede our ability to continue buying Loews shares. Year-to-date we have spent $775 million to repurchase 12.9 million shares of Loews.

James Tisch:

In my second quarter remarks I discussed how, in the past 10 years, we got to where we are today in terms of the economy and interest rates. At that time, I made the statement that fixed income securities were becoming an investible class of assets for money managers after being non- investible for the past 15 years. Today, ten-year notes yield about 4.85%, up from just under 4% three months ago. While fixed income securities may be investible, I also said not to expect capital gains from investing in those securities. They would provide a good flow of income but might not provide much in the capital gains department.

Finally, turning to the corporate segment:

Loews recorded after-tax investment income of $9 million this quarter compared to a $51 million loss in the prior year's second quarter. This improvement was driven by better performance within the company's common stock and LP portfolio as well as higher interest rates on our cash and short-term investment portfolio.

James Tisch:

Rather than comment on what's going on with inflation or the economy, this quarter I want to speak about my long-term view of interest rates.

Additionally, from 2011 until 2021, the Fed remitted over $900 billion to the Treasury or about $84 billion a year. These remittances were made possible by the spread the Fed earned on its massive balance sheet. It reflected the difference between the yield on their fixed income portfolio of about $8 trillion in government debt and the zero cost of financing those debt purchases. Of course, those happy days for the Fed are now gone:

the cost of financing their low coupon debt has skyrocketed to more than 5%, leaving the Fed with enormous losses and the federal government without its annual $84 billion remittances.

Jane Wang:

For the first quarter of 2023, Loews reported net income of $375 million or $1.61 per share, compared with net income of $322 million or $1.29 per share in last year's first quarter. This year-over-year increase was driven by higher investment income at the Parent Company, as well as higher income from Loews Hotels. A slight increase in CNA's net income was offset by a small decrease in Boardwalk's net income.

Finally, turning to the corporate segment:

Loews recorded after-tax investment income of $33 million in the first quarter of 2023 compared to losses of $13 million in the prior year's first quarter. This improvement was driven by positive income from equities versus losses last year, as well as higher income from our portfolio of short-term cash equivalents.

I had no idea how prescient my words would be:

I would certainly classify what happened in the U.S. banking system in the first few weeks of March as a calamity.

Jane Wang:

For the fourth quarter of 2022, Loews reported net income of $364 million or $1.53 per share, which compares favorably to net income of $343 million or $1.36 per share in last year's fourth quarter. This year-over-year increase was driven by higher investment income from the parent company and higher income from Boardwalk, partially offset by lower net income from CNA.

Moving to our natural gas pipeline business:

Boardwalk contributed EBITDA of $248 million in the fourth quarter compared to $207 million in the fourth quarter of 2021. For the full year, EBITDA increased from $834 million in 2021 to $892 million in 2022. As a reminder, EBITDA is defined and reconciled on page 13 of these remarks.

Finally, turning to the corporate segment:

Loews recorded investment income of $72 million in the fourth quarter of 2022 compared to $46 million in the prior year's quarter, driven by improvement in equity returns. However, full year 2022 had lower investment returns compared to 2021.

Unknown Executive:

Every quarter, we encourage shareholders to send us questions in advance of earnings that they would like us to answer in our remarks. Please see below for the questions we have received, along with some additional questions we found relevant.

Chris Nugent:

Thank you, Shelby. Good morning, everyone, and welcome to Loews Corporation's third quarter earnings conference call. A copy of our earnings release and investor presentation maybe found on our Web site, loews.com. On the call this morning, we will have our Chief Executive Officer, Jim Tisch; and Chief Financial Officer, Jane Wang. Following our prepared remarks this morning, we will have a question-and-answer session with questions from our shareholders. Before we begin, however, I will remind you that this conference call may include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company's statutory forward-looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, we may also discuss non-GAAP financial measures. Please refer to our security filings and investor presentation for a reconciliation to the most comparable GAAP measures. With that, I'd like to turn the call over to Jim. Jim, over to you.

Jane Wang:

Thank you, Jim, and good morning, everyone. For the third quarter of 2022, Loews reported net income of $130 million or $0.54 per share, compared to the net income of $220 million or $0.85 per share in last year's third quarter. This year-over-year decrease was driven mainly by CNA's lower net investment income and higher investment losses. While Hurricane Ian impacted CNA and hotels, both companies posted another quarter of strong, profitable growth. Boardwalk continues its consistent robust performance, and the Loews parent company navigated through volatile equity capital markets. Book value per share declined from $71.84 at year-end 2021, to $58.14 at the end of the third quarter due to effect of higher interest rates lowering the market value of CNA's fixed income investments. Excluding accumulated other comprehensive income where this unrealized loss sits, book value per share actually increased from $71.09 at yearend to $74.11 on September 30th. This increase was driven by our current year's earnings and accretive share repurchases. Turning to our largest subsidiary, CNA contribute a net income of $150 million to Loews this quarter compared to $229 million last year. The year-over-year decline primarily reflects a $68 million decrease in net investment income attributable to Loews driven by lower net investment income from LPs and common stocks, partially offset by higher earnings from the fixed income portfolio. During the third quarter, LPs and common stocks together returned negative 2.1% versus the S&P 500 which had a negative 4.9% return. In comparison in last year's third quarter, LPs and common stock returned a positive 3.8%. In addition, investment gains and losses declined driven in part by realized losses from the sale of short-dated bonds, strategically buy longer dated bonds at higher rates. On the underwriting side, CNA again posted another quarter of strong profitable growth contributing $61 million of incremental underwriting income to Loews. Net written premiums grew 8% driven by several factors. First, new business grew by 12%. Second, retention increased 4 points to 85%. And third, while net written rate increases decelerated to 5%, exposure growth has increased to 3.3%. The all-in combine ratio of 95.8% was 4.2 points better than the third quarter of 2021. This included 5.5 points of catastrophe and 0.8 points of favorable development. So, the underlying combined ratio was 91.1%; flat to last year's third quarter. Underwriting actions and incremental reinsurance has served CNA well. Even with the $87 million impact from Hurricane Ian, catastrophe losses were lower year-over-year as last year's quarter was impacted by Hurricane Ida and incremental losses from Winter Storm Uri. The expense ratio was steady at 30.8%. In the Life & Group segment, CNA continues to proactively manage its runoff long-term care business. The annual growth premium reserve valuation performed at third quarter resulted in an increase in the active life reserve margin from $72 million last year to $125 million this year. The long-term care claim reserve review also resulted in a pre-tax net reserve release of $25 million. We are highly confident in CNA's prudent reserving philosophy in active management to further reduce the risk profile of this block. CNA's unrealized loss position has increased to $4.1 billion from $1.8 billion last quarter as higher interest rates and wider spreads continue to lower the market value of CNA's fixed income investments. As we discussed last quarter, this decline does not imply any deterioration in the credit quality of the portfolio. In fact, the increase in rate is favorable as CNA is able to continue reinvesting at higher rates while also extending the duration of the Life & Group portfolio. These are the highlights of CNA's performance this quarter. Please refer to CNA's Investor Relations Web site for more details on their quarter. Moving to our natural gas pipeline business, Boardwalk contributed EBITDA of $192 million this quarter compared to $184 million last year. Revenues increased due recently completed growth projects, higher re-contracting rates, and higher utilization of its pipeline and storage assets. That revenue growth has been largely offset by higher cost from maintenance project due to revised pipeline safety requirements. The decrease in net income from $38 million in last year's third quarter to $34 million this quarter was driven by higher depreciation expense from recently completed projects and $5 million impairment due to the retirement of an old asset. Turning to Loews Hotels, despite facing Hurricane Ian at the end of September, the company had another strong quarter growing adjusted EBITDA from $59 million in last year's third quarter to $77 million in this year's third quarter. As a reminder, adjusted EBITDA is reconciled in our investor presentation posted to the Web site. The company contributed $25 million in net income to Loews this quarter versus $13 million in the third quarter of last year, driven by continued strong performance across the board due to robust leisure demand, a significant pickup in group travel, and the return of business travel. Occupancy has increased from 71.5% in last year's third quarter, to 84.7% this quarter. The financial impact from Hurricane Ian was very minimal. Wrapping up with the Corporate segment, Loews recorded an after-tax impairment loss of $15 million in the quarter, compared to a $23 million loss in the prior year's quarter. Both losses were driven by declines in our equity portfolio. The Corporate segment also includes our proportionate share of Altium's earnings, which is accounted for under the equity method. Our share of Altium's income improved this quarter driven by a favorable lag in passing through lower resin prices, versus last year's quarter, where increasing resin prices resulted in an unfavorable resin lag. Pricing initiatives helped to offset inflationary cost pressures in lower volume demand. From a cash flow perspective, we received $97 million in dividends from CNA this quarter, and $778 million year-to-date, consisting of three regular quarterly dividends of $0.40 per share, and a special dividend of $2.00 per share. Since June 30, we have repurchased an incremental 4.8 million shares of Loews at a cost of $268 million. That brings our total year-to-date share repurchases, through last Friday, to 11.2 million shares at a total cost of $652 million. As Jim mentioned, we also purchased 670,000 of CNA for a total of $26 million. Loews ended the quarter with $3.2 billion in cash and short-term investments. The majority of these funds are held in treasury bills, and less than 20% are held in equities and limited partnerships. I will now hand the call back to Chris.

A - Chris Nugent:

Moving on to the Q&A portion of the call, we have a number of questions from our shareholders. Every quarter, we encourage shareholders to send us questions in advance that they would like us to answer on our earnings call. Our first question is for Jane. Jane, Jim provided an update on the Boardwalk litigation and referred us to his prior comments earlier in the year. Are you able to give us any further updates on this litigation?

Chris Nugent:

Thanks, Jane. Our next question is for Jim. Jim, does Alex's promotion to President and CEO of Loews Hotels signal any shift in Loews Hotels' strategy?

Chris Nugent:

Thank you, Jim. Our final question is also for you. Would you like to update us on your thoughts about interest rates, inflation, and the economy as we head into the final quarter of 2022?

Chris Nugent:

Thank you, Jim. We have no further questions. So, that concludes our call for today. As always, we appreciate your continued interest. Please feel free to reach out to me with any questions. My email is [email protected]. A replay of this call will be available on our Web site loews.com in approximately two hours. Thank you again. You may now all disconnect.

Chris Nugent:

Thank you, Ashley. Good morning, everyone and welcome to Loews Corporation’s second quarter earnings conference call. A copy of our earnings release, and investor presentation maybe found on our website, loews.com. I’m joined today by our Chief Executive Officer, Jim Tisch; and Chief Financial Officer, Jane Wang. Following our prepared remarks this morning, we will have a question-and-answer session with questions from our shareholders. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company’s statutory forward-looking statements disclaimer, which is included in the company’s filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filing and investor presentation for a reconciliation to the most comparable GAAP measures. With that, I’d like to turn the call over to Jim. Jim, over to you.

Jane Wang:

Thank you, Jim, and morning, everyone. I'm really looking forward to engaging with you all in this new role. Second quarter of 2022, Loews reported net income of $180 million or $0.73 per share compared to net income of $754 million or $2.86 per share in last year's second quarter. Net income for the 6-month period was $518 million or $2.09 per share versus $1 billion or $3.82 per share for the comparable prior period. The decrease year-over-year may seem large, but it's driven by two items that masked a very strong operating performance of our subsidiaries. The first being the non-recurrence of last year's $438 million after-tax investment gain on the partial sale and deconsolidation of Altium Packaging; and the second being lower investment results at both CNA and Loews, which I'll discuss more in detail later. Book value per share declined from $71.84 at year-end 2021 to $62.90 at the end of the second quarter, due mainly to the effect of higher interest rates, lowering the market value of CNA's fixed income investments. As a reminder, this unrealized loss sits in accumulated other comprehensive income or AOCI on the balance sheet within shareholders' equity. If you exclude AOCI, book value per share actually increased from $71.09 at year-end to $73.26 at the end of June 2022. Turning first to our largest subsidiary. CNA contributed net income of $183 million to Loews this quarter compared to $330 million last year. The year-over-year decline primarily reflects lower net investment income from LP and common stocks, partially offset by improved underwriting results and higher income from fixed income securities. In addition, investment gains and losses declined due to the unfavorable change in the fair value of nonredeemable preferred stock. Putting aside the investment results, we are pleased that CNA showed a significant improvement in their P&C underwriting income this quarter, which grew by over 60%. This was driven by both top line growth and better profit margins. Net written premiums grew 13% on an apples-to-apples basis when you exclude last year's one-time catch-up related to a property quota share treaty. This was driven by 27% new business growth, 4 points of improvement on retention to 85% and net written rate increase of 6%. Although written rate increases have decelerated, earned rate increases of 8% remain above loss cost trends. The combined ratio of 91% was 3 points better than the second quarter of 2021. This consists of 1.4 points of favorable prior period development, 1.1 points of improvement in the expense ratio and 1 point of improvement from lower catastrophe losses, offset by 0.5 point of unfavorable underlying loss ratio. As Jim mentioned, CNA has taken advantage of the current interest rate environment to reinvest at attractive rates and extend maturities, particularly within the Life & Group portfolio. In just one quarter, CNA extended the duration within the Life & Group portfolio from 8.9 years at the end of March to 9.7 years at the end of June. Moving on to our natural gas pipeline business. Boardwalk contributed EBITDA of $193 million this quarter compared to $196 million last year. Revenues were higher due to an increase in gas storage demand as well as recently completed growth projects connecting to end-use markets such as power plants. That revenue growth has been largely offset by higher costs from maintenance projects due to revised pipeline safety requirements. The decrease in net income from $47 million in last year's second quarter to $39 million this quarter was driven by higher depreciation expense from recently completed projects. Turning to Loews Hotels. The company contributed $44 million in net income to Loews this quarter versus a loss of $21 million in the second quarter of last year. Adjusted EBITDA, which is defined and reconciled in our investor presentation on our website, was $116 million for the quarter versus $25 million in the second quarter of last year. And as Jim mentioned, this quarter's result is an all-time high for Loews Hotels. The company has performed exceptionally well this year due to strong leisure demand at its resort properties, especially in Orlando and Miami as well as a pickup in group travel at its city center hotels. The hotel properties at the Universal Orlando Resorts contributed meaningfully to the period-over-period improvement as all 9,000 rooms were opened for the entire quarter versus a year ago when two properties were still closed for part of the quarter. Finally, for the Corporate segment. Loews reported an after-tax investment loss of $51 million in the quarter compared to $19 million of income in the prior year's quarter. This loss was driven by declines in our equity portfolio. The Corporate segment also includes our proportionate share of Altium's earnings, which is accounted for under the equity method. Our share of Altium's income slightly improved this quarter due to price increases offsetting lower volume demand. From a cash flow perspective, we received $97 million in dividends from CNA this quarter and $681 million year-to-date, consisting of two regular quarterly dividends of $0.40 per share and a special dividend of $2 per share. Since we updated you last quarter, we have repurchased an incremental 5.2 million shares at a cost of $310 million. That brings our total year-to-date share repurchases through last Friday to 7.7 million shares at a total cost of $459 million. Loews ended the quarter with $3.5 billion in cash and short-term investments. The majority of these funds are held in treasury bills and less than 20% are held in equities and limited partnerships. I will now hand the call back to Chris.

Jane Wang:

Sure. We filed both our appeal brief and our reply brief, and we expect to argue our case before the court on September 14. We anticipate a decision hopefully by the end of the year.

Jane Wang:

No, it did not. And just for context, in early June, there was a fire at Freeport LNG, which is one of the largest LNG export facilities in the U.S. Freeport shut down its operation and does not expect to be back at full capacity until later on this year. However, Boardwalk's transportation contracts with the Freeport shippers are on a take-or-pay basis, so it was not materially impacted by this incident.

Jim Tisch:

Gladly. So a few quarters ago, I discussed labor issues at Altium and at Loews Hotels. Since then, for Loews Hotels, I'm happy to report the labor has become less of a problem. Increased staffing levels are enabling Loews Hotels team members to deliver the high-quality service to which its guests are custom. At Altium, labor continuity continues to be a challenge in some manufacturing locations. To address this challenge, Altium is offering sign-on retention and employee referral bonuses. They've also adjusted base wages to keep up with the market. These actions have enabled Altium to close staffing gaps in many facilities. Overall, we are pleased that both Loews Hotels and Altium are seeing improvements in staffing.

Jim Tisch:

Sure. So since our last call in May, the Fed seems to be following through in their fight against inflation. At that time, the yield on 90-day treasury bills, a market closely tied to the Fed funds rate, has tripled from about 80 basis points to about 2.3%. On the other hand, in that same time period, the 10-year treasury note has moved down in yield from a yield of 3% to about 2.65%. This price action tells me that the market believes that the Fed is delivering on its promise to enact policies to tame inflation. The prices of some commodities helped to tell the story. Since the beginning of the year, lumber is down 50%. Wheat [ph] is pretty much unchanged, notwithstanding the war in Ukraine, and [indiscernible] is down about 20%. As measured from the peaks, the prices are down significantly more than from the beginning of the year. So what does all of this mean? As I look at what's going on, I have a hunch that we may be in for what I would call a full employment recession. The current unemployment rate is 3.6% and job growth for the past 1.5 years has averaged 400,000 new jobs per month. While job openings are about twice the number of job seekers, so there's plenty of room for a decline in the demand for labor, but for unemployed people to still find a new job. What's been going on for the past year is that wages have not kept pace with inflation. For example, in the latest July employment report, average hourly earnings were up 5.1% versus a year-ago, but the CPI was up 9.1% in that time span, meaning that workers fell behind inflation by 400 basis points. The thing that has kept the economy moving forward has been the increase in employment. In the past year, the number of people working has increased by 4.3% year-over-year. So with respect to aggregate demand, the increase in the number of people working has made up for the decline in real earnings. Stated another way, employment is moving up, but workers' real incomes are falling behind. I can see the state of affairs continuing for several more quarters where real wages are declining, but employment is increasing. This might give the Fed the time it needs to engineer a soft landing, whereby unemployment doesn't go above 5%, while at the same time, inflation is given a chance to come down. No, I don't expect that we will see 2% inflation in the coming 12 months. But I can foresee that there will be a significant reduction in inflation in the coming 6 to 12 months and that we might be able to avoid the truly damaging wage price inflation spiral that was so problematic in the 1970s. To accomplish this best of all possible world's outcome, the Fed will have to be steadfast in their fight against inflation, and federal spending will have to remain in check. And as long as I'm prognosticating, I don't foresee a deep and debilitating recession. Rather, I can imagine that the slowdown will be relatively shallow, which would be consistent with a full employment recession. The reason I've come to this conclusion is that we don't seem to have too many excesses in the economy or our financial institutions. There hasn't been ramping investment in housing and the financial institutions are in reasonably good shape and are seemingly not overextended. So overall, I foresee a recession that I would characterize as benign. I have enough self awareness to realize that I'm an optimist. But I consider myself a realistic optimist. And the idea of a full employment recession, as crazy as it might sound, seems like a realistic possibility for the coming 12 months. We will see. Stay tuned for my next update in 3 months from now.

Operator:

Thank you. And this does conclude today's program. Thank you for your participation. You may disconnect at any time.

Mary Skafidas:

Great. Thank you, Katie and good morning everyone. Welcome to Loews Corporation’s first quarter earnings conference call. A copy of our earnings release, earnings supplement and company overview maybe found on our website, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session with questions from shareholders. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to the wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company’s statutory forward-looking statements disclaimer, which is included in the company’s filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings and earnings supplement for reconciliation to the most comparable GAAP measures. With that, I’d like to turn the call over to Jim. Jim, over to you.

David Edelson:

Thank you, Jim, for those kind words. Working with you and the whole Loews team since 2005 has been a tremendously gratifying professional and personal experience. This morning, Loews reported first quarter net income of $338 million, a 30% increase from net income of $261 million in last year’s first quarter. Earnings per share rose 40% to $1.36, spurred on by a 7% year-over-year reduction in average shares outstanding, thanks to our share repurchase activity. All three of our consolidated subsidiaries, CNA Financial, Boardwalk Pipelines and Loews Hotels posted excellent results in the first quarter. While CNA accounted for the bulk of our Q1 net income, the earnings increase was driven by significantly improved results at Loews Hotels as well as by the absence of non-recurring charges related to Altium Packaging that depressed last year’s first quarter results. Partially offsetting these positives was a decline in parent company investment income as equity markets sold off in Q1. Before I walk through our subsidiaries results, let me touch on the impact on our earnings of recent financial market turbulence. The S&P 500 was down 4.6% in Q1, and the NASDAQ 100 was down almost twice that at 8.9%. In fixed income, the 10-year treasury yield increased 83 basis points to 2.34%, and the Bloomberg Barclays U.S. Aggregate Bond Index was down about 6% in the first quarter. Since both CNA and the Loews parent company hold equity securities and LP investments correlated to equities, the decline in equity markets had a negative impact on earnings in these two portfolios. The decline in bond prices caused by higher fixed income yields, however, did not negatively affect current period net investment income at either CNA or the Loews parent company. At the parent company, almost 83% of the portfolio is made up of cash and short-term investments with equity securities comprising the remainder. Changes in interest rates have a little impact on the value of our cash and short-term holdings. As Jim discussed, rising interest rates and yields did cause a decline in the value of CNA’s large portfolio of fixed income investments. While these market value changes reduced CNA’s net book value, they did not run through current period net investment income. In fact, as Jim mentioned, over time, higher yields should enable CNA to enhance net investment income through higher returns on new fixed income investments. CNA’s net investment gains and losses, on the other hand, can be negatively affected by rising fixed income yields. For example, CNA’s portfolio of non-redeemable preferred stock is mark-to-market through net investment gains and losses. Overall, the decline in CNA’s net unrealized gains during the quarter reduced CNA’s common equity by $1.6 billion or just under $6 per share. Let me return to our quarterly results. CNA contributed net income of $281 million, in line with last year’s $279 million. That said, the makeup of CNA’s earnings differed year-over-year. CNA’s net investment income declined because of the selloff in equity markets. Additionally, net investment gains, which were meaningful in last year’s first quarter, swung to a slight loss this year, driven by the unfavorable change in fair value of non-redeemable preferred stock and lower net investment gains on disposals of fixed income securities. Much improved property casualty underwriting results offset the negative earnings impact of financial markets. Continued earned premium growth and underwriting discipline led to a 10% plus increase in P&C underwriting income, excluding catastrophe losses. Earned premium was up 5% year-over-year, and the underlying combined ratio improved 50 basis points to 91.4. CNA’s expense ratio, which, together with the loss ratio makes up the combined ratio, declined to 31 which was 50 basis points better than in Q1 ‘21 and in line with full year ‘21. The company’s expense ratio improvement over the past few years is notable and results from both expense management and premium growth. Catastrophe losses declined materially year-over-year. Last year, the winter freeze in Texas resulted in significant cat losses, whereas cat losses were unusually modest this year. Catastrophe losses added 6.8 points to the combined ratio last year as compared to only 1 point in this year’s first quarter. Overall, CNA posted a combined ratio of 91.9% in Q1 ‘22 as compared to 98.1% last year. In summary, CNA’s results were strong despite a challenging quarter in financial markets, driven by favorable underlying P&C underwriting results and modest catastrophe losses. Boardwalk contributed net income of $91 million, up from $85 million in last year’s first quarter. EBITDA, which is defined and reconciled in our earnings supplement, was $261 million in the quarter compared to $249 million in Q1 ‘21. Boardwalk’s net operating revenues increased more than 3% year-over-year, driven by growth projects recently placed in service. Loews Hotels continues its impressive rebound, as Jim mentioned, driven by its resort properties as well as having all properties open for the entire first quarter of 2022. The company posted net income of $15 million versus a net loss of $43 million in Q1 ‘21. Let me unpack the results a bit further. GAAP operating revenue before reimbursables was $123 million, up from $39 million last year. Given the requirements of joint venture accounting, however, much of the company’s business is not captured in its GAAP revenues. Factoring in its pro rata revenues from its joint venture properties, including all the properties at the Universal Orlando Resort, Loews Hotels revenues in Q1 were about 3x last year’s level. Pre-tax equity income from joint venture properties was $26 million as compared to a $12 million loss last year. Consolidated pre-tax income was $22 million, a sharp increase from last year’s $55 million loss. Adjusted EBITDA, which is defined and reconciled in our earnings supplement, was $68 million in the quarter, up from a $13 million loss last year. The company’s 9,000 rooms in Orlando, together with the Loews Miami Beach Hotel, continued to be the major earnings contributors and the primary drivers of the year-over-year increase. I would highlight, as Jim did, that Q1 ‘22 represents the all-time high for first quarter adjusted EBITDA, surpassing the $61 million earned in 2019. Turning to the Corporate segment. The parent company’s investment portfolio generated a net pre-tax loss of $16 million compared to income of $46 million last year. Like at CNA, negative returns on equity securities caused this year’s loss. The remainder of the Corporate sector generated a $36 million after-tax loss in the quarter versus last year’s $96 million loss. Last year’s results included two non-recurring charges related to Altium Packaging, a debt extinguishment charge in connection with Altium’s recapitalization and a deferred tax liability resulting from the then-pending sale of a 47% stake in Altium. A few words about the parent company. The parent company portfolio of cash and investments stood at $3.8 billion at quarter end, with over 80% in cash and short-term investments. During the quarter, we received $584 million in dividends from CNA, including the $0.40 per share regular quarterly dividend and the $2 per share special dividend. As Jim mentioned, we spent about $129 million repurchasing 2.15 million shares of our common stock at an average price of just over $60 per share. Our repurchase after quarter end was modest at just under 300,000 shares. Before I turn the call back to Mary, let me thank all of you for your interest in Loews and for your questions and suggestions over the years. It has been a privilege to spend the past 17 years at Loews, serving as CFO since 2014. I am thrilled to be able to hand the baton to Jane, who joined the company 16 years ago and is more than ready to take on this role. And with that, I will return the call to Mary.

Jim Tisch:

So, let me start by saying that I am horrified by the images that I see on the news. I hope and pray that sanity and peace can be restored, but the cost in terms of human lives is already way too high. Because of Europe’s dependence on Russian hydrocarbons, energy has become a focus of many discussions surrounding this conflict. I believe the war in Ukraine has made it clear that we should be encouraging drilling for natural gas along with LNG export development in the United States. We want to be able to supply LNG to Europe and other countries and the world who previously were supplied by Russia. We are fortunate that natural gas is a very abundant resource in the United States and we have more than enough to maintain our energy independence and still be able to safely export large volumes to those who need it. The companies that make the significant investments for LNG facilities will need long-term contracts from Europeans and others in order to make this happen. Looking at the broader picture, I also want to discuss the transition to renewable energy in the U.S. and the world. The increased use of natural gas has meaningfully reduced greenhouse gas emissions worldwide. Globally, natural gas has an important role to play in reducing emissions through the displacement of coal and as a backup to renewable energy by providing reliable power for times when the sun doesn’t shine and the wind doesn’t blow. In the United States, CO2 emissions from power generation are down by 40% over the last 20 years as power plants have switched from coal to natural gas. As the U.S. develops reasonably-priced natural gas exports, we can help wean the world off of coal. Currently, global demand for natural gas is driven by China and India, where coal still accounts for more than 60% of their power generation. Energy transition targets in those countries will likely accelerate natural gas demand to replace coal usage. In the coming decades, the need for electricity will increase because of the electrification of automobiles and heating. Gas power generation will be needed because the wind and solar resources are intermittent, and current battery technology is unlikely to fill the gap. Gas power generation is reliable, dispatchable and natural gas can be stored safely and inexpensively. And while the world is focused on our reliance on carbon-based fuel for power generation, natural gas is also a raw material for a number of items that we rely on every day. There is no easy replacement for natural gas as a raw material. Boardwalk is well positioned to take advantage of higher demand for natural gas and growth in the LNG export market. The company continues to work to make its operations more environmentally friendly by focusing on reducing methane emissions. We believe that natural gas will continue to be an important fuel and raw material for the U.S. and the world, and forecasters predict that worldwide natural gas consumption will increase at least over the next 10 years and probably longer.

Jim Tisch:

Sure. At the end of ‘21, unrealized gains for the CNA portfolio were $4.4 billion. At the end of the first quarter of ‘22, unrealized gains were $1 billion, primarily due to higher prevailing interest rates. Over the long term, however, higher interest rates will generally be beneficial for CNA, allowing the company to invest its cash flow at higher rates than it previously could. On average, CNA invests between $300 million and $400 million a month in its fixed income portfolio, so higher interest rates will improve that portfolio’s return over time. Also, the increase in the general level of interest rates has been very beneficial for CNA’s long-term care book of business. In the current environment, CNA has been able to invest at rates significantly higher than was previously possible. Additionally, until now, the long-term care book of businesses operated at the lower end of its targeted duration. With the current increase in rates above its targeted rate, CNA is now buying long-term securities at yields that previously it could only hope for and has begun the process of lengthening the duration of the long-term care portfolio.

Jim Tisch:

Sure can. First of all, kudos to Jay Powell for finally recognizing the seriousness of the inflation problem. Some may argue whether the next Fed funds rate increase should be 25 basis points, 50 basis points or even 75 basis points, but Powell has stayed out 50 basis points. And to me, it seems perfectly reasonable in the context of more rate increases in the near future as needed. The age of yield curve intervention has ended. Since 2008, the Fed has basically controlled not only the short end of the yield curve, but also the entire maturity spectrum in the fixed income markets. How did we get here, in 2008, I believe the Fed acted appropriately when it intervened in a time of financial emergency. However, the intervention went on for way too long. The Fed’s control of the yield curve by means of quantitative easing squelched any signals that the markets might have sent through price moves in fixed income securities. In other words, the Fed was implicitly saying that their judgments on the shape of the yield curve were better and wiser than the markets. As we now see, that strategy has had disastrous results with regard to today’s level of inflation. We are left with the highest level of inflation in 40 years, brought about by zero-cost money, loose, loose, loose fiscal policy and COVID, all of which caused the inflation genie to come gushing out of the bottle. And unfortunately, the Fed kept the proverbial punchbowl out for so long that there are no easy solutions to the inflation problem that the Fed is currently trying to fix. The market now is in the beginning stages of a big adjustment as investors, and not the Fed, determine term interest rates. Lots of people have guesses, but no one knows where the yield curve will ultimately settle out in the coming months and years. As a result of the high inflation and the Fed no longer controlling the yield curve, the Fed put, which basically guaranteed that the stock market would not decline by unacceptable amounts, is now gone. That put was ushered in by Alan Greenspan and was a great comfort to equity markets for multiple decades. Also washed away in this inflation tsunami is modern monetary theory. MMT was the notion that the U.S. government could spend unlimited amounts of money with no negative repercussions. After the past 2 years, we have seen that, that pipe dream was exactly that, a pipe dream. Now we have seen that there is a limited amount to how much the government debt can be issued and subsequently purchased by the Central Bank. The long and short of the past year in the fixed income markets is that the signals that come from a free market should not be stifled. The Fed imposing its judgment in the place of the market’s judgment, while sometimes necessary in a moment of crisis, is fraught with enormous danger as a long-term policy. This is a lesson that I hope future Fed chairs will remember.

Operator:

Ladies and gentlemen, this concludes today’s event. You may now disconnect.

Mary Skafidas:

Thank you, Ashley, and good morning, everyone. Welcome to the Loews call. A copy of our earnings release, earnings supplement and company overview may be found on our website, loews.com. On this call -- on the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session with questions from shareholders. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company's statutory forward-looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings in earnings supplement for reconciliation to the most comparable GAAP measures. With that, I'd like to turn the call over to Jim. Jim, over to you.

David Edelson:

Thank you, Jim, and good morning, everyone. Today, we reported fourth quarter net income of $343 million or $1.37 per share compared to $397 million or $1.45 per share in last year's fourth quarter. For the full year, we reported net income of $1.58 billion or $6.07 per share, while in 2020, we posted a net loss of $931 million or $3.32 per share. I will briefly review our fourth quarter results and then turn to the full year. The year-over-year decline in our fourth quarter net income obscured impressive operating improvements at CNA and Boardwalk Pipelines as well as a continued rebound at Loews Hotels. Underwriting results in CNA's core P&C business were outstanding. CNA's pretax underwriting gain rose 13% on the back of an 8% increase in net earned premium and a 50 basis point year-over-year improvement in the combined ratio to 92.9%. The underlying combined ratio, which excludes catastrophe losses and prior year development, improved 1.4 points to 91.2% in this year's fourth quarter. CNA's consolidated net investment income was basically flat compared to the prior year quarter. By segment, it was higher in Life & Group and lower in P&C and Corporate. The decline in CNA's year-over-year contribution to our net income was mainly due to lower net investment gains as well as to the Life & Group and Corporate segments. Investment gains were significant in last year's Q4, driven mainly by the mark-to-market on CNA's holdings of nonredeemable preferred stock. Gains were de minimis this year. In the Life & Group segment, the long-term care block experienced slightly adverse morbidity trends this year after experiencing favorable morbidity last year. And in the Corporate segment, aside from the previously mentioned drop in net investment income, two other factors contributed to the year-over-year decline, a higher noneconomic charge relating to CNA's loss portfolio transfer with National Indemnity and unfavorable net prior year development on legacy master exposures. The bottom line is that CNA had another strong quarter in its core P&C underwriting business with all its segments, Specialty, Commercial and International, reporting strong premium growth and improved year-over-year underlying combined ratios. Boardwalk Pipeline's net income contribution declined from $83 million in last year's fourth quarter to $65 million. Last year's Q4 results included $26 million after tax of settlement proceeds related to a customer bankruptcy. Absent this nonrecurring item, Boardwalk's net income contribution increased year-over-year driven by revenue from growth projects recently placed in service and higher system utilization. Loews Hotels continued its strong rebound, posting net income of $37 million versus a net loss of $68 million in Q4 2020. Please note, however, that net income in the quarter benefited by $26 million from the acceleration of government grant payments used to retire outstanding debt prior to maturity for a recent development project. Loews Hotels adjusted EBITDA, which excludes unusual items and is defined in our earnings supplement, was $64 million in Q4, up markedly from a $27 million loss in Q4 2020. As you can see on Page 11 of our earnings supplement, occupancy was about double last year's fourth quarter and essentially flat with the third quarter. Average daily rate rose 24% over last year's fourth quarter. And with all hotel properties fully opened during the quarter, available rooms were 44% higher than Q4 2020. Before turning to the full year, one last observation on the quarterly comparison. The parent company investment portfolio generated less income in the fourth quarter than in the prior year period, driven by lower returns on our holdings of equities and limited partnership investments. For full year '21, we reported net income of $1.58 billion, a sharp rebound from last year's net loss of $931 million. Excluding the second quarter gain on the deconsolidation of Altium Packaging, our net income for 2021 was $1.14 billion. CNA and Boardwalk posted strong operating results and Loews Hotels experienced a dramatic rebound from 2020's dismal pandemic-induced results. CNA contributed almost $1.1 billion to our 2021 net income. The core P&C business experienced strong earned premium growth and a combined ratio of 96.2%, almost 4 points better than the prior year. The decline in the combined ratio was driven by a 1.5-point improvement in the expense ratio and lower catastrophe losses. The underlying combined ratio improved 1.7 points to 91.4%. CNA's net investment income was buoyed by strong returns on limited partnership and common stock investments. Both the P&C and Life & Group segments benefited from these strong returns. Net investment gains also contributed to the year-over-year increase in CNA's net income. The company swung from losses last year to after-tax gains of almost $100 million this year. The Life & Group segment benefited from good underlying results and an uplift in net investment income driven by LP investments. Additionally, for the year, the segment experienced a $38 million pretax net reserve release versus pretax net reserve charges of $83 million in the prior year. Reserve actions in both years related mostly to the company's long-term care book of business. CNA's corporate segment showed a year-over-year earnings decline due to several factors, including lower net investment income, a larger noneconomic charge related to CNA's loss portfolio transfer with National Indemnity and higher unfavorable net prior year development on legacy master exposures. CNA ended the year with total assets of $67 billion, a $50 billion investment portfolio, stockholders' equity of $12.8 billion and book value per share of $47.20. CNA's balance sheet remains rock solid. Its decision to pay a $2 special dividend and raised its regular quarterly dividend by 5% is further evidence of CNA's confidence in its financial position. Boardwalk Pipelines contributed $235 million to our '21 net income, up from $206 million in 2020. Excluding the $26 million customer bankruptcy settlement proceeds received last year, Boardwalk's net income contribution increased $55 million year-over-year. Boardwalk's EBITDA, which is defined in our earnings supplement, was $843 million in 2021 versus $785 million last year, excluding the settlement proceeds. Boardwalk's year-over-year earnings improvement, excluding the settlement proceeds, was driven by a 6-plus percent increase in net operating revenues against a 4% increase in operating expenses including depreciation and amortization. A reduction in interest expense offset higher depreciation and amortization from growth projects recently placed into service. Turning to Loews Hotels and its dramatic improvement over 2020. Loews Hotels contributed a pretax loss of $12 million versus a $274 million loss in 2020. Both periods included nonrecurring items, such as impairments, gains on sale and the previously mentioned acceleration of a government grant. Stripping these out, Loews Hotels' pretax loss declined from $261 million in 2020 to a loss of $44 million in '21. Adjusted EBITDA, which excludes all these nonrecurring items, swung from a loss of $103 million in 2020 to earnings of $135 million in 2021. All properties contributed to this dramatic increase with the Universal Orlando Resort leading the charge. Loews Hotels business strengthened as the year progressed as measured by occupancy, average daily rate, RevPAR and, of course, adjusted EBITDA. Adjusted EBITDA was negative $13 million in Q1, followed by $25 million in Q2, $59 million in Q3 and $64 million this past quarter. Turning now to our Corporate segment. Let me unpack the numbers for you. Net investment income increased year-over-year, driven by higher returns on equities and limited partnership investments. Corporate expenses were flat year-over-year with higher interest expense, offset by lower other corporate expenses. Corporate also includes the operating results of Altium, which were consolidated through Q1 '21 and then, once deconsolidated, have been accounted for under the equity method. Certain nonrecurring items related to the 2021 recapitalization of Altium and the sale of a 47% stake are booked in Corporate as well. Finally, Corporate includes two large unusual items. In 2021, a $438 million after-tax gain on the deconsolidation of Altium Packaging, following our sale of a 47% stake and in 2020, a $957 million after-tax loss on the deconsolidation of Diamond Offshore precipitated by its bankruptcy filing. Our 2020 consolidated results also include a $476 million net operating loss attributable to Diamond Offshore, which represented our share of Diamond results up to the deconsolidation date. Excluding Diamond's impact on 2020 and the Altium gain in '21, our net income more than doubled from $502 million last year to $1.14 billion in 2021. Now for the parent company. The parent company portfolio of cash and investments stood at $3.45 billion at year-end, with about 77% in cash and equivalents. During the fourth quarter, we received $194 million in dividends from our subsidiaries, $92 million from CNA and $102 million from Boardwalk, which represented Boardwalk's only dividend to Loews in 2021. For the full year, we received dividends of $550 million from CNA and $102 million from Boardwalk and a $199 million dividend from Altium as part of its recapitalization. We also received net pretax proceeds of $411 million upon the sale of a 47% stake in Altium. Based on today's CNA dividend declarations, Loews will receive a total of $584 million in special and regular dividends from CNA this quarter. We’ve repurchased 5.4 million shares in the fourth quarter for $306 million and 21 million shares during all of '21 for $1.13 billion. Since year-end, our share repurchase activity has been negligible. I will now hand the call back to Mary. Thank you.

James Tisch:

I sure can. Loews a long-established policy of share repurchases represents a key element of our capital allocation strategy. In 2021, we bought back 21.1 million shares of Loews common stock for a total of $1.1 billion, which was the equivalent of almost 8% of the shares outstanding at the start of the year. During the 10-year period for January of 2012 through December of 2021, Loews has spent $6.8 billion on repurchases, retiring about 37% of our common shares outstanding at the beginning of 2012. Stated another way, 10 years ago, we had about 60% more shares outstanding than we do today. In certain political circle, share buybacks have come under fire, especially over the last few months. It is our strong belief that restricting the company's ability to repurchase their shares would be detrimental to all investors. Stock repurchases benefit investors, promote efficient capital allocation and significantly reduce volatility in the market. The market stabilization, the results from allowing companies to buy back their shares benefits all shareholders, including retail investors. Capital that flows to shareholders from these repurchases may be reinvested, not just in S&P 500 companies, but rather in companies of all shapes and sizes. We believe actions that limit or restrict allocation of capital, either through regulation or by tax will have a negative effect on stock market valuations.

James Tisch:

Sure. Boardwalk is focused on reducing methane emissions from its natural gas pipeline system, not only because it's the right thing to do for the environment, but also because we believe it's the right thing to do for Boardwalk's business. Boardwalk has been focused on meeting and in certain cases, exceeding regulatory obligations by reducing emissions from its pipeline and storage assets. In 2020, Boardwalk achieved about a 30% year-over-year reduction in methane emissions at certain key sites. Boardwalk is also an active member of a coalition whose goal is to lower methane emissions by 2025 to less than 1% of total natural gas produced nationwide. Boardwalk uses a number of strategies to reduce their methane emissions. These strategies include replacing older compression equipment as appropriate with low-emission -- low-emission fuel-efficient units, modifying older fuel systems as necessary on certain reciprocating compression equipment to lower fuel consumption and emissions, and conducting emission surveys and performing maintenance and repairs on identified component leaks. Reducing methane emissions is and will remain a priority for Boardwalk.

James Tisch:

So we look at a number of factors when determining intrinsic value, including industry outlook, our subsidiary's growth potential, operational efficiency and management. When evaluating the industry outlook, we consider cyclical opportunities and risks, potential for technological disruption and how the subsidiary is positioned compared to its peers. When looking at growth potential, we evaluate both organic and inorganic growth opportunities. And consider whether or not the subsidiary can self-fund those opportunities. In terms of operational efficiency, we analyze potential opportunities for improvements and the role of technology in driving efficiency. Our assessment of the die of our subsidiaries is not static, but rather is adjusted as markets and circumstances change. Each subsidiary have metrics that are specific to this industry. For example, one important metric for Loews Hotels is adjusted EBITDA, which we believe is more meaningful to the lodging industry than net income. Keep in mind, however, that in the last full year of non-pandemic affected operations for our hotels in 2019. Since then, Loews Hotels has added about 3,700 rooms and the full earnings potential of these rooms have yet to be realized. We believe that in 2022, Loews hotels will continue to recover from the effects of the pandemic, but it's still uncertain when occupancy rates will return to pre-pandemic levels. In terms of Altium Packaging, we don't make a lot of information public. Instead, we report Altium as part of the Corporate segment. Altium does not have a material impact on Loews, not only due to the size of the company, but also as a result of our reduced stake since the sale of 47% of this subsidiary. However, we continue to believe in the long-term growth potential of the business.

James Tisch:

Mary, I'd be delighted to give you my rant. First, let me recap my comments over the last year. On the earnings call for the first quarter of 2021, I spoke about the nascent cost push and demand pull inflation that was going to be brought about by the easy monetary policy and big deficit spending. For the second quarter, I spoke about the cycle of inflation that was developing along with growing labor shortages. On the third quarter call, I spoke about the wage price spiral and how interest rates were too damn low. At the time, the inflation rate was 5.4%, and that said, still have their head in the sand with respect to the almost 0% Fed funds rate and their monthly $120 billion purchase of federal and mortgage securities. So here we are on the fourth quarter call and the Fed has finally woken up to the problem that they should have foreseen a year ago. The problem now is that the Fed is taking its sweet time putting in place their action plan to deal with the sky rocketing inflation and the overheating economy. Instead of doing something about the 7% year-over-year increase in the CPI, the Fed is only talking about it. And the Fed has led the market to perceive that they will raise Fed funds rates four times in the course of this year. That's 100 basis points this year, meaning that at this pace, it will take them seven years to get Fed funds to the current level of inflation. While I don't think that inflation will stay at the 7% level, I do believe that with our quicker and more decisive action by the Fed, it will be seen that they are fighting a forest fire with a water pistol. As long as interest rates are below the inflation rate, the proverbial punch bowl is still there for all market participants to grab a drink. I understand that the Fed doesn't want to cause a panic and that they have to be careful about what they say. But still, there's something to be said for acknowledging the scope of problem and beginning the process of interest rate normalization. For example, the Fed is still executing its policy of quantitative easing by purchasing government and mortgage securities. As they say, when you're in a hole, the first thing to do is to stop digging. The Fed is still digging. The good news is that it seems that additional fiscal stimulus is off the table, at least for the time being. The last thing about this overheating economy and the Fed needs is more federal government deficit spending. Hopefully, fiscal stimulus will stay off the table. As it stands now, federal spending will be down this year compared to last year. But much of the federal money that was allocated last year is just now beginning to be spent. State coffers are now overflowing with a federal largest, which will be spent over the coming quarters. And the consumer is still flushed with liquidity from their savings being over the past two years. So I'm not worried about the economy slowing down due to a lack of real final demand. For 2022, I foresee an economy that will continue growing with short-term interest rates that will begin their slow rise as the quarterly 25 basis point increases in Fed funds start to accumulate. Inflation will continue to be a major issue as we will still have the dual problems of cost push and demand pull inflation. My guess is that unless the Fed moves quicker, we can expect inflation to stay at elevated levels for this year and likely next. As for fixed income securities, my view is that even though the government 10-year notes are up 80 basis points in yield in the past year, they are still more than 500 basis points below the year-over-year CPI increase. And there are 120 basis points below where they were as little as three years ago when inflation was 2%. There's lots more room for the 10-year notes to go up in yield, and my guess is that the longer it is seen that the Fed isn't serious about controlling inflation, the higher the ultimate peak in 10-year notes will be. In forecasting out a year, I wouldn't be surprised to see 10-year notes yielding between 2.5% and 3% at the end of this year. So that's it from our economic ramping forecast, Stay tuned next quarter for another quarterly economic update.

Operator:

Thank you. And this does conclude today's program. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.

Mary Skafidas:

Thank you, Ashley and good morning, everyone and welcome to Loews Corporation's Third Quarter Earnings Conference Call. A copy of our Earnings Release, Earnings Supplement, and Company Overview may be found on our website loews.com. Also posted on the Home Page of the Loews website is the company’s 2021 Virtual Investor Day Presentations from Loews and CNA. The Loews presentation narrated by James Tisch the company’s CEO focusses on strategic capital allocation. CNA's strategic discussion is hosted by its CEO, Dino Robusto and its Interim CFO, Larry Haefner. We invite you each to access these presentations. We look forward to your feedback and hope you find the presentations informative. On the call this morning, we have our Chief Executive Officer, James Tisch, and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session with questions from our shareholders. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the Company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they're made. The Company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the Company's statutory Forward-looking statements disclaimer, which is included in the Company's filing with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings in earnings supplement for reconciliation to the most comparable GAAP measures. With that, I'd like to turn the call over to Jim. Jim, over to you.

David Edelson:

Thank you Jim and good morning everyone. For the third quarter Loews reported net income of 220 million or $0.85 per share compared to net income of 139 million or $0.50 per share in last year's third quarter. Let me describe the quarter in a net shell before getting into more detail. CNA's performance was driven by strong property casualty underwriting income before catastrophe losses, healthy net investment income, and a net reserve release in the life and group segment. These positives were partially offset by significant weather related catastrophe losses. Boardwalks operating results benefited from strong transportation revenues generated by its growth projects and increased utilization throughout its system. And Loews Hotels continued to emerge from the COVID induced downturn with its resort properties especially those in Florida leading the charge. Loews Hotels generated positive net income for the first time since the fourth quarter of 2019. Let me know dig more deeply into the third quarter and the year-over-year comparison. All three of our consolidated subsidiaries CNA, Boardwalk, Loews Hotels recorded materially higher year-over-year net income contributions with CNA leading the charge. CNA held its earnings call earlier this morning. I would encourage you to review the transcript for more details. In the meantime, let me provide a few highlights. CNA contributed net income of 229 million up from 192 million in Q3 2020. The main drivers of the year-over-year increase were higher property casualty underwriting income before cat losses and the absence of three charges that occurred last year, two of which were in the life and group segment. A charge from the unlocking of the long-term care active life reserve, a charge from strengthening the structured settlement claim reserve, and a less significant charge from the early retirement of debt. Conversely higher catastrophe losses than in last year's third quarter detracted from the year-over-year comparative results. Focusing on property casualty underwriting income. The combination of a 6% increase in net earned premium and a 1.5 point improvement in the underlying combined ratio led to a 27% increase in CNA's underlying underwriting gain which excludes cat losses and prior year development. Net cat losses in the quarter were 178 million pretax including 114 million for Hurricane Ida. Last year's Q3 cat losses were modestly lower at 160 million pretax driven by three Southeast hurricanes and the Midwest [indiscernible]. CNA's expense ratio was just a few years ago hovered in the mid-30s, came in below 31% down from 31.8% in Q3 2020 and 31.6% last quarter. This is the lowest expense ratio posted by CNA in about 13 years. CNA's consolidated after tax net investment income was essentially flat year-over-year as returns on limited partnership and common stock investments were robust in both periods. CNA conducts its annual reserve reviews for its life and group segment in the third quarter. Last year, the company booked a net reserve charge of 83 million pretax for its long-term care and structured settlement books of business. This year the comparable number was in net reserve release of 38 million pretax as CNA had no change in its long-term care active life reserve of 40 million pretax release from its long term care claims reserve and a deminimus charge related to structured settlements. We consider this favorable outcome a further indication of CNA's enhanced insight into and prudent reserving around the long-term care business. CNA ended the quarter with total assets of 66.5 billion, shareholders’ equity of 12.7 billion, and consolidated statutory surplus of approximately 11.1 billion. Turning to Boardwalk. Boardwalk contributed net income of 38 million up from 20 million in Q3 2020. The main driver of the year-over-year increase was higher natural gas transportation revenue, driven like last quarter by growth projects recently placed in service and higher system utilization. Boardwalk’s EBITDA which is shown and defined in our quarterly earnings supplement was 186 million in the quarter and 635 million year-to-date. Through nine months, natural gas transportation throughput increased by more than 11% year-over-year across the system. Turning to Loews Hotels. Loews Hotels contributed net income of 13 million, a dramatic improvement from the 47 million net loss posted in Q3 2020. Adjusted EBITDA which is defined in our earnings supplement and excludes non-recurring items rebounded from a 38 million loss last year to a positive 59 million in Q3 2021 close to a $100 million swing. The year-over-year improvement was driven by dramatic revenue increase as all properties including all 9000 rounds at the Universal Orlando Resort were open for the full quarter. This was the first time all 9000 rooms in Orlando were open for a full quarter. On page 11 of our quarterly earnings supplement there's a good snapshot of Loews Hotels’ year-over-year and sequential operational improvement which highlights the drivers of the company's revenue increases during this COVID period. With more available rooms, higher occupancy, and healthy average daily rates revenues have climbed markedly since the depths of the pandemic. We have invested 32 million in Loews Hotels year-to-date all in the first quarter. Given the company’s stronger than expected cash flow, the parent company does not expect to invest any further cash in Loews Hotels during the remainder of this year. Turning to the corporate segment. The parent company's investment portfolio generated a pretax net investment loss of 30 million as compared to income of 23 million last year, the loss stemmed from the performance of the equity portfolio. The parent company portfolio of cash and investments stood at 3.6 billion at quarter-end with about 80% in cash and equivalents. During the quarter as Jim mentioned, we repurchased 6.2 million shares of our common stock for 333 million and we received about 92 million in dividends from CNA. After quarter-end we spent less than 5 million repurchasing our stock. As of last Friday there were under 254 million shares of Loews common stock outstanding down about 6% since the beginning of the year and about 25% over the past five years. Loews continues to be characterized by strong cash flow into the parent company and an extremely liquid balance sheet with cash and investments far exceeding current company debt. I will now hand the call back to Jim. Jim.

A - Mary Skafidas:

Thanks Jim. Moving to the Q&A portion of the call we have a number of questions from shareholders. The first one is to you Jim, what do you believe will be the role of natural gas in the transition to clean energy?

Mary Skafidas:

Thank you Jim. Next question is also to you, can you please comment on the performance of CNA share price?

Mary Skafidas:

Thank you Jim. Next question related to Boardwalk. David, this one is for you. Can you please tell us how Boardwalk was impacted by recent hurricanes?

Mary Skafidas:

Okay, thank you David. Next question is for Jim. Jim, labor shortages are affecting a number of industries, are these shortages affecting any of Loews’ subsidiaries?

Mary Skafidas:

Thank you Jim. That concludes the Loews call for today. As always thank you for your continued interest. Please feel free to reach out to me with any additional questions at [email protected]. A replay will be available on our website loews.com in approximately two hours.

Mary Skafidas:

Thank you, Crystal (ph), and good morning, everyone. Welcome to Loews Corporation's Second Quarter Earnings Conference Call. A copy of our Earnings Release, Earnings Supplement, and Company Overview may be found on our website loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch, and Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session with questions from Shareholder s. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the Company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they're made. The Company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the Company's statutory Forward-looking statements disclaimer, which is included in the Company's filing with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings with earnings supplement for reconciliation to the most comparable GAAP measures. With that, I'd like to turn the call over to Jim Tisch, our CEO. Jim, over to you.

David Edelson:

Thank you, Jim, and good morning, everyone. For the second quarter, Loews reported a Net Income of 754 million or $2.86 per share compared to a Net Loss of 835 million or $2.96 per share in last year's second quarter. As Jim commented, our second-quarter operating results were excellent, driven by CNA and Boardwalk, both of which had stellar quarters. While Loews Hotels did post a loss, its business has rebounded more strongly than expected, especially at its highly desirable resort properties. Our second quarter results both this year and last year were impacted by unusual items. Absent these unusual items, which I will describe in a moment, our Q2 Net Income rebounded to $316 million this year from $122 million last year. This year's second quarter included a net investment gain of $555 million before tax and $438 million after-tax on our sale of a 47% stake in Altium Packaging. The investment gain is essentially the sum of the realized gain on the shares sold and the unrealized appreciation on our retained 53% stake. Last year's second quarter included a net investment loss related to the bankruptcy and concurrent GAAP deconsolidation of Diamond Offshore. This loss totalled $1.2 billion before tax and $957 million after-tax. Setting aside these two unusual items, all three of our consolidated subsidiaries; CNA, Boardwalk, and Loews Hotels recorded materially higher year-over-year net income contributions with CNA leading the charge. CNA had its Earnings Call earlier this morning, and I would encourage you to review the transcript for more details on the quarter. In the meantime, let me highlight a few salient points. CNA contributed net income of $330 million, up from $135 million in Q2 '20. The two main drivers of the year-over-year increase were higher property-casualty underwriting income generated by lower catastrophe losses and higher underlying underwriting income as well as higher net investment income. The combination of an 11% year-over-year increase in net earned premium and an almost two point improvement in the underlying combined ratio to 91.4 led to a 41% increase in CNA’s underlying underwriting gain, which excludes catastrophe losses and prior year development. Catastrophe losses were modest in the quarter at 54 million pre-tax, in contrast to the elevated level of catastrophe losses booked in Q2 2020. Last year's second-quarter catastrophe losses were 301 million pre-tax and included reserves for COVID, civil unrest, and weather-related events. CNA 's all-in combined ratio, which includes catastrophe losses and prior year development, improved by over 15 points from 109.2 in Q2 2020 to 94 this year. The year-over-year increase in CNA’s net investment income was driven mainly by higher returns on its portfolio of limited partnership investments. In contrast, net investment gains were lower in Q2 2021 than in the prior-year quarter. A quick comment on CNA’s second quarter net written premium. While net earned premium across all property-casualty segments rose 11%, CNA’s net written premium declined 1% overall and 12% in a commercial. The year-over-year decline in written premium was attributable to a quota share treaty CNA added to its property reinsurance program during the second quarter. Because the treaty will cover property policies already enforced, as well as policies written during the treaty term, CNA recorded a one-time written premium catch-up that reduced the quarter's net written premium by $122 million predominantly in the commercial segment. CNA ended the quarter with total assets of $66 billion, Shareholder's equity of $12.7 billion, and a consolidated statutory surplus of approximately $10.9 billion. Turning to Boardwalk. Boardwalk contributed a Net Income of $47 million up from $34 million in Q2 '20. The main driver of the year-over-year increase was higher natural gas transportation revenue. Boardwalk's more than 5% increase in net operating revenue was driven by growth projects recently placed in service, and by higher system utilization caused largely by deliveries to LNG markets and power plants. Through 6 months, natural gas transportation throughput increased by 11% year-over-year. Turning to Loews Hotels. Loews Hotels contributed a net loss of 21 million, a dramatic improvement from the 72 million net loss posted in Q2 2020. Adjusted EBITDA, which is defined in our earnings supplement and excludes non-recurring items, rebounded from a $54 million loss last year to a positive $26 million in Q2 '21. The year-over-year improvement was driven by a dramatic revenue increase, as most properties were opened for the full quarter and all properties were operational by quarter-end. Business at resort properties benefited especially from increased leisure travel. Looking backward, the second quarter of 2020 was exceedingly difficult for Loews Hotels, as almost all these properties suspended operations for most of the quarter. GAAP net operating revenue plummeted 94% from the second quarter of 2019, and revenue at the Company's JV Properties, which is not included in GAAP net operating revenue, declined a similar percentage. For a good snapshot of Loews ' steady operational improvement, I would encourage you to review I believe it's Page 11 of our quarterly earnings supplement, which shows the meaningful increases since Q2 last year in available rooms, occupancy, and average daily rate. A quick comment regarding Diamond Offshore. We included Diamond Offshore as a reporting segment until its bankruptcy filing and deconsolidation in late April 2020. Our second quarter 2020 results included a net operating loss of 24 million attributable to Diamond. Turning to the corporate segment. Altium has been reported as part of the corporate segment since we acquired the Company in 2017. Following our sale of a 47% stake, it remains in the corporate segment but is now accounted for under the equity method. The corporate segment also includes the unusual items I mentioned earlier, namely a net investment gain this year related to our sale of a 47% stake in Altium, and a net investment loss last year stemming from the bankruptcy and deconsolidation of Diamond Offshore. I would note that this year's second-quarter results also reflect a 15 million pre-tax write-off of our equity investment in Diamond upon its emergence from bankruptcy. The parent Company's investment Portfolio generated a pre-tax net investment income of 24 million, as compared to 110 million last year. Last year's results benefited from the significant recovery of the equity markets in the second quarter, a quarter in which the S&P 500 returned almost 21%. The parent Company's Portfolio of cash and investments stood at 3.9 billion at quarter-end with about 80% in cash and equivalents. As Jim (ph) mentioned, during the quarter, we repurchased 3.9 million shares of our common stock for 219 million and we received about 92 million in Dividends from CNA. In addition, we received about 410 million in net proceeds from the Altium transaction during the second quarter. After quarter-end, we repurchased another 2.6 million shares of our common stock for 140 million. As of last Friday, there are approximately 257 million shares of Loews common stock outstanding, down more than 8% from June 30, 2020. I will now hand the call back to Mary (ph).

Jim Tisch:

CNA's outlook is extremely bright. Let's take a step back and let's look at the insurance industry as a whole first. While interest rates are low, the P&C Industry continues to have disciplined capital management. Overall, P&C pricing continues to be healthy. CNA is attracting high-quality new business and it's improving underwriting margins through focused risk selection and pricing. Let's not forget, CNA's management team is top-notch and the Company continues to attract high-quality professionals. The Company also has a fortress Balance sheet even after paying almost $5 billion in dividends to its shareholders over the past 5 years. Additionally, CNA's long-term care exposure continues to decrease with active policies declining by about one third over the past 5 years. Given CNA's strong performance and future outlook, we believe the Company is greatly undervalued. And speaking of undervalued, when buying Loews ' shares, we're always cognizant of what we call the triple discount. Let me briefly explain what I mean. First, Loews’ shares trade below our view of their intrinsic value. Secondly, the P&C industry tends to be undervalued compared to the stock market. And third, CNA trades at a discount to the P&C industry. Some growth companies trade at 15 times revenue. Some value companies trade at 12 times to 15 times EBITDA. That's EBITDA and not net income. The S&P 500 trades at 20 -- greater than 20 times earnings, but some P&C companies trade at a measly 11 times to 12 times net income, actual net income, which could be distributed directly to shareholders in the form of dividends. Based on this fact, the undervaluation of the P&C industry seems crazy to me, and CNA's undervaluation even more so.

David Edelson:

Thanks, Mary. During our first-quarter earnings call, we stated that before considering proceeds from divestitures or expenditures on new development projects, we expect it to contribute less than 80 million of cash to Loews Hotels in 2021. This revised estimate was materially lower than our earlier estimates given the better than anticipated outlook for Loews Hotels operating cash flow at the end of the first quarter. At that time, we had contributed 32 million to Loews Hotels year-to-date. We have made no further cash contributions since that time to Loews Hotels. Loews Hotels outlook continued to improve during the second quarter. We now anticipate that, again, before considering any proceeds from divestitures or expenditures on new development projects during the second half of the year, Loews Hotels would not require additional cash from the parent company in 2021. I would highlight, however, that if Loews Hotels does close on one or more significant development opportunities in the back half of this year, we would likely be required to contribute additional cash to the Company in 2021 and for all the right reasons. Thanks, Mary.

Jim Tisch:

Loews Hotels has never stopped looking at -- for potential acquisitions. Based on current market dynamics, however, acquiring a new hotel doesn't make economic sense, not when you compare the long-term favourable returns Loews Hotels receives by developing its own hotels. Many markets in the U.S. have older full-service hotels. By building a new hotel with modern spaces or significantly renovating an existing location, we immediately gain a competitive advantage by offering an attractive new product that appeals to both leisure guests and to meeting planners. Over the last 5 years, Loews Hotels has added valuable new properties to its portfolio by building to suit our own exacting standards, as opposed to buying already developed hotels. By building to suit, we developed hotels that focus on one or both of our growth strategy pillars, hotels with more than 300 keys to cater to groups and hotels that operate near built-in demand generators. The first pillar of Loews Hotels ' growth strategy is its well-earned reputation for excellence in the groups and meetings market. In locations attractive to groups as well as the leisure customers, guests are also attracted by the unique local experience these properties offer. The second pillar of growth is Loews Hotels ' focus on immersive destinations such as Universal Studios Orlando Campus, where Loews Hotels, as -- has eight hotels with 9,000 rooms. Loews Hotels has pursued additional immersive destinations where demand for hotel rooms is strong because of the precedence of our built-in demand generators, such as an adjacent sports stadium or other attractions. Live! by Loews in Arlington, Texas is one such hotel that is proven to be very resilient during the pandemic. The Arlington Hotel is located near numerous professional sports and entertainment venues. From 2015 to 2019, Loews Hotels grew adjusted EBITDA from just under $160 million to almost $230 million with a healthy margin. 2020 was clearly a very challenging year for our hotel subsidiary and for the industry. In 2021, Loews Hotels has certainly gained ground, and while we continue to monitor the effects of the pandemic on the hospitality industry, we believe that over the long term, the hotel Company will once again be a profitable growth engine for Loews Corp.

David Edelson:

Sure. Closing arguments took place on July 14, 2021, and the judge is now deliberating. We continue to believe that we have very strong legal and factual arguments and that the plaintiff's case is without merit, but as we all know, litigation is inherently unpredictable, and there's really nothing more we can report at this time.

Jim Tisch:

So the nice thing about getting questions before the earnings gall is that I can prepare a thoughtful response rather than just wing it. Such is the case with the answer to your question, Mary, about interest rates and inflation. Let's start with inflation. On the last Earnings Call, I talked about cost-push and demand-pull inflation. And I said that we are seeing both forms of inflation these days. Today, I want to speak about what used to be called the cycle of inflation. That was a common term in the '60s through the early '80s when inflation was much, much higher than it is today. As you can imagine, the cycle of inflation rates to a dynamic that takes hold in an economy. That relates to increasing prices and the expectation of ever-increasing prices, making it such that employees demand higher wages to maintain their purchasing power and their standard of living. Those higher wages then translate into higher costs for producers, which causes the producers to ask for higher prices for their products thus reinforcing the demand for higher wages from labor. And so the cycle begins and feeds upon itself. I believe that this cycle of inflation is what we are beginning to experience today. Talent is scarce. Just look at the number of Companies that can find employees for their businesses, including Loews for its Hotel and Packaging businesses. Certain goods are also scarce. Here are just a few whose prices have shot up a lot. Computer chips, coffee, polyethylene pellets, tin and aluminum, soybeans, oil, natural gas, and yes, jet fuel. The CRB Raw Industrials Index is up by more than 50% from a year ago. Dishwashers, washing machine driers, and refrigerators are all on long backorders. Housing prices are up approximately 25%, 25% percent in the past year. And of course, there is the shortage of labor in the late -- in the labor market, a very, very serious shortage. An esteemed economist friend of mine said that this year is the eleventh time that the core CPI has risen more than 3% in the first 6 months of the year. On nine of those 10 previous occasions, core CPI inflation for the full year was at least 6%. By that measure, we are on track for inflation of much more than 6% because for the first 6 months of this year, inflation is already at 5.4%. And so it's an easy bet that inflation for all of 2021 will greatly surpass 6%. I believe that our current labor shortage is not a temporary phenomenon and it will only be resolved with significantly higher levels of compensation, causing costs to increase leading to ever-higher inflation. I believe that we are now in a cycle of inflation rather than a spurt within an otherwise benign inflationary period. This year, we are moving from an extended era of less than 2% inflation to a year of more than 6% or 7% inflation. And due to increased labor costs, my expectation for inflation in '22 is for significantly higher inflation than the 2% level we have seen in the recent past. This inflation problem won't go away by simply wishing it away, especially with the Fed's proverbial foot still on the gas pedal. Which, of course, brings us to interest rates. The economist Rudi Dombusch, famously said in the '60s that in economics, things take longer to happen, than you think they will, and then they happen faster than you ever thought that they could. Such as the case, I believe with interest rates in the United States. They're too damn low. And the reason that they are so low is because, in the past year-and-a-half, the Fed has purchased over $4 trillion of government securities. That's $4 trillion of government securities that have been taken out of the market. Poof, they're gone. The Fed has created a squeeze of gargantuan proportions in these Securities that have rippled through all the fixed income markets. The only people that own U.S. fixed-income securities are people who need to own them, like banks and insurance companies, just to name a few. Traders may dabble in government Securities, but investors won't go near them because there isn't a bullish case to be made for investing in Government Securities. Today, the 10-year note yields less than 1.2%. If the rate on those notes goes up just 13 basis points, a little over 1/10th of 1% then the entire interest carries on the bond for the year will disappear. That sounds like a miserable investment to me. Getting back to inflation. If the inflation rate this year is 6% and that's a low number I believe, then the negative real return on a 10-year note will be -4.75%. That's -4.75%. Who would want to own security that guarantees you'll lose almost 5% of your purchasing power in a single year? Most people have already decided to either hold cash or move out the risk curve rather than lock in a real loss of such large proportions. The issuance of government securities will continue. For this year, the Federal deficit is forecasted to be $3 trillion, which means there is no end to the supply of government bonds that need to be issued to finance our government's activities. And with so much issuance of government securities on the way, and with a strong economy, and with inflation running so hot, and with the negative real yield so unattractive, the Fed may have little choice but to take their foot off the proverbial gas pedal and take away the punch bowl, finally allowing interest rates to rise. There's only so long that the Fed can delay the inevitable. And to me, and maybe to Ruby -- Rudi Dombusch, a blessed memory that time may soon be upon us.

Operator:

This does conclude today's conference call. We thank you for your participation and ask that you disconnect your lines.

Mary Skafidas:

Thank you, Laurie, and good morning, everyone. Welcome to Loews Corporation's first quarter earnings conference call. A copy of our earnings release, earnings supplement and company overview may be found on our website, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session with questions from shareholders. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements, due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company's statutory forward-looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings and earnings supplement for reconciliation to the most comparable GAAP measures. With that, I'd like to turn the call over to Jim. Jim, over to you.

David Edelson:

Thank you, Jim, and good morning, everyone. For the first quarter, Loews reported net income of $261 million or $0.97 per share, a sharp rebound from last year's first quarter net loss of $632 million or $2.20 per share. As a reminder, last year's net loss had two main drivers. One, investment results at CNA and the Loews parent company, stemming from financial market disruptions as the pandemic spread; and second, rig impairments at our former consolidated subsidiary, Diamond Offshore. This year's first quarter benefited from dramatically improved investment results at CNA and the parent company, strong P&C underwriting income at CNA, before catastrophe losses and favorable results posted by Boardwalk Pipelines. Also, the year-over-year comparison benefited from the absence of losses from Diamond Offshore. Conversely, losses at Loews Hotels reduced quarterly results, as the pandemic continued to mute travel and thus, hotel demand. Additionally, earnings in the corporate segment were reduced by some items related to Altium, our packaging subsidiary. Let me get into more detail about the quarter. CNA contributed net income of $279 million, up dramatically from a $55 million net loss in Q1 2020. The year-over-year turnaround was driven primarily by investment results, both net investment income and net investment gains. But before I discuss investment results, I wanted to highlight CNA's continued solid property casualty underwriting performance. CNA's core property casualty business posted terrific underwriting results before catastrophe losses. Net earned premium was up almost 6% year-over-year and the combined ratio, excluding CAT losses, was 91.3%, 1.7 points better than last year's first quarter and 1.1 points better than full year 2020. The loss ratio, excluding CATs, was 59.5%, an excellent result that was in line with last year's first quarter and with full year 2020. I would note that prior development was comparable this year and last, with less than 1 point of favorable development in both periods. CNA's expense ratio, which, together with the loss ratio makes up the combined ratio, declined to 31.5%, which was 1.6 points better than in Q1, 2020. The company's expense ratio improvement is notable and results from both expense management and premium growth. As a historical footnote, the company's expense ratio in, say, 2017 was over 34%. So you can see how far CNA has come in a few short years. Catastrophe losses, however, were elevated during this year's first quarter thanks largely to winter storms Uri and Viola in Texas. CNA booked 6.8 points of CAT losses in Q1, up from 4.3 points in last year's first quarter. As a result, the company's overall combined ratio was up slightly to 98.1 from 97.3 last year. I would highlight that CNA's Q1 CAT losses were essentially in line with its market share in the affected areas. CNA's after-tax net investment income increased $133 million or 48% from last year, with common stocks and limited partnership investments accounting for the entire improvement. The S&P 500 returned 6.2% in this year's first quarter as compared to a negative 19.6% total return in Q1 of last year. The turnaround in CNA's net investment gains was substantial, swinging from net pretax investment losses of $216 million in Q1 '20 to investment gains of $57 million in Q1 '21. Last year's large losses were mainly attributable to market value declines of nonredeemable preferred stock as well as impairment losses on corporate bonds. Taken together, the uplift in CNA's net investment income and the turnaround in its net investment gains benefited Loews' year-over-year net income by $306 million. In summary, CNA's investment and non-CAT underwriting results were strong during the quarter with CNA and its peers, impacted by an unusually high level of natural catastrophes. Boardwalk posted an over 8% increase in net revenue and a net income contribution of $85 million, up from $65 million in last year's first quarter. Turning to Loews Hotels. While the company continues to suffer from the COVID-induced downturn in travel, business is gradually improving, as Jim described. The company posted a net loss of $43 million in the quarter versus a net loss of $25 million in Q1 '20. GAAP operating revenue was $39 million, down from $109 million last year, and the pretax equity loss from joint venture properties was $12 million as opposed to a $4 million loss last year. In last year's first quarter, business was quite strong during January and February and into the first week of March, only to decline precipitously thereafter. So precipitously, in fact, that most properties suspended operations between March 19 and the end of the quarter. To provide a comparative sense of the hotel company's results, let's look at adjusted EBITDA, which is defined and reconciled in our earnings supplement. It includes all properties and excludes nonrecurring items. Adjusted EBITDA was $61 million in Q1 of 2019, declined to $17 million in Q1 of 2020, and was a loss of $13 million in this year's first quarter. The low point for profitability was last year's second quarter when Loews Hotels posted an adjusted EBITDA loss of $54 million. Adjusted EBITDA has improved steadily since that low point as business has steadily come back. For a good snapshot of this operational improvement, I would encourage you to review Page 11 of our quarterly earnings supplement, which shows the increase in available rooms occupancy and average daily rate since Q2 last year. We currently expect absent any divestitures or development projects to make a net cash contribution to Loews Hotels of less than $80 million in 2021, down materially from our earlier estimates given better-than-anticipated cash flow. During the first quarter, we invested $32 million in Loews Hotels. Turning to the corporate segment. The parent company's investment portfolio generated net pretax income of $46 million as compared to a loss of $166 million last year. Like at CNA, equities and alternatives led the decline last year and the rebound this year. The remainder of the corporate sector generated a $75 million pretax and $106 million after-tax loss in the quarter. Two main factors, both connected to Altium, drove this larger-than-normal loss. One, Altium undertook a recapitalization during the quarter, refinancing its existing term loans with a single $1.05 billion term loan. The company booked a $14 million pretax debt extinguishment charge in connection with the recap. And second, the sale of a 47% stake in Altium to GIC, which was pending at quarter end, required Loews to book a $35 million deferred tax liability, which impacted net income, but not pretax income. Diamond Offshore materially affected our year-over-year earnings comparison, given Diamond's $452 million net loss in last year's first quarter, driven largely by rig impairments. Diamond was consolidated effective April 26, 2020, and had no impact on our results this past quarter. A few words about the parent company. As always, we remain determined to maintain a strong and liquid balance sheet. During the quarter, we repurchased 5.6 million shares of our common stock for $274 million, and we received about $274 million in dividends from CNA in the quarter, including the $0.38 regular quarterly dividend and the $0.75 special dividend. We also received, as Jim mentioned, a $199 million dividend from Altium, pursuant to its recapitalization. The parent company portfolio of cash and investments stood at $3.6 billion at quarter end, with about 80% in cash and equivalents. After quarter end, we received about $410 million in net proceeds from the sale of 47% of Altium, and have repurchased another 599,000 shares of common stock for about $32 million. Finally, let me clarify some details relating to the sale of a stake in Altium to GIC. The transaction price implied a total enterprise value of $2 billion for the company and a total equity value of about $900 million. As a reminder, we purchased the company for a total enterprise value of $1.2 billion in 2017 and have not invested any additional capital in Altium since the acquisition. In the second quarter, upon deconsolidation, we will book a net pretax gain of approximately $560 million, which reflects both the net realized gain on the stake sold to GIC and the unrealized gain on our retained 53% stake. The 53% stake will be held as an equity investment in a nonconsolidated subsidiary at approximately $475 million, reflecting the valuation implied by the price paid by GIC for its 47% stake. I will now hand the call back to Mary.

Jim Tisch:

Sure, Mary. On CNA's earnings call earlier today, Dino Robusto, the CEO of CNA, mentioned that in March of 2021 that CNA had sustained, what he called, a sophisticated cybersecurity attack. The attack caused a network disruption and impacted some of CNA's systems. As soon as they detected the attack, CNA took steps to address the incident including, among other things, engaging a team of third-party forensic experts and notifying law enforcement and also key regulators. CNA has restored the network systems and resumed full normal operations. The company is continuing to assess the full extent of the impact from the incident, as well as determining any additional actions that it might take in order to improve its existing systems. Based on what CNA knows now, it does not appear, it's important, it does not appear that the cyberattack will have a material impact on CNA's business, either financially or operationally.

Jim Tisch:

Sure. That's a reasonable question. There were a number of reasons, especially from a portfolio optimization standpoint, that we felt that the time was right for us to monetize a portion of our ownership in Altium. As I said in my remarks, our goal when acquiring a new subsidiary is to have it return capital to Loews when the time is right, and we thought the time was right now. Through Altium's dividend recap in February of this year, and then with the sale of a 47% stake of the company to GIC, the Singapore Wealth Fund, we have recouped our entire initial equity investment in Altium. And we still own 53% of the company, which allows us to be able to participate in the company's future growth. So we fully believe in Altium's long-term prospects. And I think the management team at Altium is truly top-notch. And we've also added a strong partner in GIC and the new ownership structure provides financial flexibility for Altium, especially if they pursue larger acquisitions.

David Edelson:

Sure, Mary. Not much to say here. The Boardwalk trial was held the week of February 22. Post-trial oral arguments are scheduled for July 14 this year, after which the judge will deliberate. And there's really nothing more to report at this time.

Jim Tisch:

Or as I call it, the Texas freeze off. So the impact of February winter storm in Texas was devastating for the people of Texas, leaving many people without power or heat for the duration of the storm. The Boardwalk team did an incredible job, though, due in large part to many planning hours that were dedicated to the preparation for such an event. And as a result, the company was ready to deliver gas to customers on time during and after the storm. Through careful operational management and increased staffing in a number of key areas, Boardwalk was able to successfully meet their customers' need for gas despite low inflows into the Boardwalk Pipelines system. As was with the rest of the area, the Boardwalk system faced historically low temperatures and widespread power outages, but was able to continue operating on backup power when necessary. So they really performed admirably during that event.

David Edelson:

Sure, Mary. I'll be a bit redundant with some of my prepared remarks. Loews Hotels cash flow has improved materially since the onset of the pandemic. Properties have resumed operations, management company and property level expenses have been managed aggressively and capital spending has been rightsized for the current environment. The low point in Loews Hotels results was last year's second quarter, when GAAP revenue was just $9 million and adjusted EBITDA was a loss of $54 million. During this year's first quarter, GAAP revenue was $39 million, and the adjusted EBITDA loss had been shrunk to just $13 million. And as I noted in my remarks, the table on Page 11 of our earnings supplement does show how available rooms occupancy and average daily rate have all increased quite markedly from last year's second quarter. Now as a reminder, in terms of cash, during all of last year, the Loews parent company contributed net cash of just over $150 million to Loews Hotels. For 2021, the year we're currently in, we currently expect, absent any divestitures or development projects, to make a net cash contribution to Loews Hotels of less than $80 million. This is down materially, of course, from our earlier estimates given better-than-anticipated cash flow at Loews Hotels. And we've contributed in the first quarter, $32 million to the company. Overall, travel is picking up. Confidence is growing as vaccination rates increase both domestically and internationally. While business travel and group meetings have yet to gain real momentum, leisure travel to resort destinations, in particular, has picked up and is driving Loews Hotels' evolving rebound. And as Jim mentioned, with so many of its rooms located in resort destinations, such as Orlando and Miami Beach, Loews Hotels is well positioned to continue benefiting as we move through the spring into the summer. Thanks, Mary.

Jim Tisch:

It reminds me of the old saying, he who lives by the crystal ball and must learn to eat ground glass, but I will persevere nonetheless. So in my opinion, the economy is doing very well, thank you. There's enormous pent-up consumer demand and with the combination of government stimulus and vaccines, that will add yet more fuel to this fire in the economy, this growth in the economy. For many in the middle and upper income classes, there was very little to spend on during the lockdowns. There was no travel. There were no restaurants. There was no entertainment other than Netflix. And the savings rates for the past year has been at all-time highs at close to 20%, which is extraordinary, considering that the norm is about 7.5%. In our hotel business, we're seeing the beginnings of the increase in travel. In some areas, one of the chief constraints to increasing our occupancy rate is staffing. Staffing is also a constraint in our packaging subsidiary, Altium. So what I can foresee are double-digit increases in GDP, driven by consumer demand, but I can also see significant inflation coming from two very distinct sources. The first source is cost push inflation. Especially at the lower end of the pay grade, I see significant increases in wages needed to get people back on to the job. As I said, we're having trouble finding people to work at Altium, and likewise, Loews Hotels, and to combat that, there's been serious increases in wages. The other thing that's adding to the cost push inflation is that commodities of all sorts are breaking out on the upside. There's copper, there's corn, iron ore, wood, lumber, you name it, commodities are rallying. So businesses are experiencing a lot of increases in their inputs into what they sell. The second part of the inflation story, in my mind, comes from the demand pull inflation. I see -- I foresee significant consumer inflation coming from the easing of the pandemic and people making up for a lost year last year of spending. So inflation that was 1.5% to 2%, in my opinion, could be significantly higher in the coming years, because of the dramatic increase in demand, combined with the dramatic increase in costs at businesses. So with this as my base, for the life of me, I don't understand what the Fed and what the Biden administration are doing. Let's start with the Fed. They've got their heads in the sand, in my opinion. The economy is starting to boom, yet we have 0% short-term interest rates, 0%, and inflation is moving up. And they're still managing -- the Fed is still managing both medium and long-term rates. So that 10-year notes are now under 160. Inflation is significantly over that and typically, 10-year notes traded at 200 basis points to 300 basis point premium to inflation. So as a result, no one wants to own term treasury securities. And in fact, the only people who are buying them are people who need to own them, for example, insurance companies that have to have fixed income securities. And the other major, major purchaser of those securities is the Fed itself. My fear -- my fear is that the Fed is keeping the proverbial punch ball out for the revelers for much too long. In fact, they've said that, that's exactly what they're doing. The Fed said that. And to me, it seems crazy. With respect to fiscal policy, there are so many trillion-dollar proposals out there that I can't keep them straight. In Washington, D.C., modern monetary theory is the new paradigm. Modern monetary theory says that basically, deficits don't matter. That the government can spend whatever it wants. My view, these politicians and economists are truly kidding themselves. We as a nation are in an extended sugar high that is being elongated by the Fed and the administration's policies, and I'm concerned that at some point down the road, we, as a nation, are going to have to pay a serious price for it. So just to sum up, as a result of increased consumer demand coming out of the pandemic and also the dramatically increasing government spending, and as I mentioned, the cost push pressures and also the demand pull pressures, as a result of all of these factors, I see very strong growth for at least the next several quarters, combined with relatively high inflation, which makes me bearish on intermediate and long-term interest rates. So Mary, that's a brief summary of my view of where we are in the economy and where I see it going.

Mary Skafidas:

Thank you, Sia. Good morning, everyone and welcome to Loews Corporation's fourth quarter earnings conference call. The copy of our earnings release, earnings supplement and Company overview maybe found on our website loews.com. On the call this morning we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session with questions from our shareholders. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the Company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The Company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the Company's statutory forward-looking statements disclaimer, which is included in the Company's filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings and earnings supplement for reconciliation to the most comparable GAAP measures. With that, I'd like to turn the call over to Jim. Jim, over to you.

David Edelson:

Thank you very much, Jim and good morning, everyone. Today we reported fourth quarter net income of $397 million or $1.45 per share compared to $217 million or $0.73 per share in last year's fourth quarter. For the full year, we reported a net loss of $931 million or $3.32 per share while in 2019 our net income was $932 million or $3.07 per share. I will briefly summarize our strong fourth quarter results and then turn to the full year. CNA drove the year-over-year increase in our fourth quarter income with an assist from Boardwalk. The absence of results from Diamond Offshore which last year posted a fourth quarter loss also helped. Let me share some highlights on CNA's fourth quarter. For more details, check out the transcript from today's CNA Investor Call. CNA's net income contribution to Loews rose 42% to $346 million making up the bulk of our consolidated fourth quarter net income of $398 million. The core P&C business performed extremely well. Net written premium grew 12% year-over-year. Thanks to robust new business together with rate increases averaging over 12%. The combined ratio improved 2.1 points to 93.5 driven by lower expense and underlying loss ratios as well as reduced cat losses. After tax P&C net investment income was down slightly, as higher returns on LP and common stock investments were not able to fully offset the impact of lower yields on the fixed income portfolio. Net investment gains, however, were greater than during the prior-year quarter. The Life & Group segment posted strong results. Thanks principally to favorable morbidity trends in the long-term care block. Boardwalk pipelines net income contribution rose from $48 million in last year's fourth quarter to $83 million which included $26 million after-tax of settlement proceeds related to a customer bankruptcy. Fourth quarter net revenues excluding these proceeds were up 4% driven by growth projects recently placed into service. Loews Hotels posted a net loss of $68 million in Q4 2020 versus a net loss last year of $59 million. This year's net loss was caused by the continuing revenue challenges stemming from the pandemic with operating revenue, down 81% year-over-year. In last year's fourth quarter, Loews Hotels incurred a $69 million after-tax charge from the impairment of two hotel properties as well as some pre-opening expenses on properties under development. Before turning to the full year, one last observation on the quarterly comparison. The fourth quarter of 2019 included a $38 million net loss from Diamond Offshore. Diamond is no longer one of our consolidated subsidiaries and thus did not affect our Q4 2020 earnings. Now for our full year results. We reported a net loss of $931 million or $3.32 per share. Let me start by recapping the drivers of the loss, which primarily relate to Diamond and Loews Hotels. Diamond filed for a Chapter 11 bankruptcy protection on April 26, 2020. Through that date, Diamond had contributed net losses of $476 million to Loews mainly attributable to rig impairment charges. Further because of the bankruptcy filing, in the second quarter, we deconsolidated Diamond, wrote down the carrying value of our investment in the Company and booked a $957 million after-tax investment loss. In total, Diamond accounted for $1.43 billion of net losses to Loews in 2020. Loews Hotels has been severely impacted by the COVID-19 pandemic with operating revenue, down 71% for the full year. Similarly, income in joint ventures swung from positive $69 million in 2019 to a $73 million loss in 2020. This dramatic change in Loews Hotels operating environment caused the Company to incur a net loss of $212 million for the year. Loews' net income declined even after entirely excluding the impact of Diamond in the Loews Hotels from our results in both years. This decline was entirely attributable to higher catastrophe losses at CNA and lower results from investment-related activities at CNA and the parent Company. CNA booked pretax catastrophe losses of $550 million in 2020, up from $179 million in 2019. Weather related events comprised 50% of the year's cat losses with COVID-19 and civil unrest making up the remainder. The negative year-over-year impact to Loews of CNA's unusually elevated catastrophe losses was $262 million after-tax. After-tax net investment income in CNA's P&C business fell year-over-year because of lower returns on fixed income securities and limited partnership in common stock investments. This accounted for $148 million decline in Loews' net income. Similarly, the Loews parent company's net investment income declined $141 million after-tax, driven mainly by lower returns on LP and equity investments. Finally, CNA swung from net investment gains in 2019 to net investment losses in 2020. This swing reduced our net income by $60 million. In total, these items, cat losses net investment income at CNA and Loews and CNA's net investment losses accounted for a year-over-year decline in Loews' net income of $611 million. Thankfully, there were numerous positives during 2020 worth highlighting. CNA's core P&C business excluding catastrophes performed extremely well. Net written premium increased 6% on the back of new business growth, solid retention and rate increases averaging 11%. The underlying combined ratio for the full year, which excludes cat losses and prior year development was $93.1 million down from $94.8 million in 2019, with improvement in both the loss and expense ratios. All of this led to a 38% increase in pretax underlying underwriting income. CNA's long-term care business continues to benefit from active, operational, and risk management of the block. Even including the impact of this year's active life and claim reserve reviews, the Life & Group business generated positive results driven by better than expected morbidity in long-term care. CNA's balance sheet remains rock solid. Its decision to pay a $0.75 special dividend which was announced this morning is further evidence of CNA's dedication to financial soundness. Moreover, it continues to reduce its risk profile, most recently with the agreement signed last week to cede a legacy portfolio of excess workers' compensation policies to a subsidiary of Enstar. Boardwalk had a good year operationally. Net operating revenues excluding the settlement proceeds from a customer bankruptcy in each year were down less than 1% reflecting the last vestiges of expirations and renewals at lower rates of long-term contracts put in place 10 plus years ago. The Company's growth projects together with a strong market for storage and park and loan services made up for most of the falloff, and Boardwalk continues to effectively manage its expenses. Altium Packaging, which is included in our corporate segment had a strong year operationally with revenues up almost 10% driven by organic growth, new business, exceptional results in its recycled plastics business, the full year impact of acquisitions made in 2019 and higher year-over-year resin prices. 2020 was a record year for new business awards for Altium, further highlighting its reputation for quality, reliability, innovation and customer service. As I've mentioned in the past, Altium's results have had little effect to-date on our net income, while Altium generate healthy EBITDA and free cash flow, its GAAP income has been weighed down by depreciation and amortization from recent acquisitions and accelerated trade name amortization. Last week, Altium completed a recapitalization, issuing a $1.05 billion seven-year secured term loan. The proceeds of which went to refinance its existing debt and pay Loews' a dividend of $199 million. As Jim mentioned, this is the first distribution Loews has received from Altium since we acquired the company in 2017. Importantly, this transaction in no way hamstrings Altium's ability to continue pursuing tuck-in acquisitions. As a reminder, our initial equity investment in Altium was slightly more than $600 million. Turning to the parent company. The parent company portfolio of cash and investments stood at $3.5 billion at year-end, with about 77% in cash and equivalents. During the fourth quarter, we received $192 million in dividends from our subsidiaries, $90 million from CNA, and $102 million from Boardwalk, which represented Boardwalk's only dividend to Loews in 2020. For the full year, we received total dividends of $947 million from CNA and Boardwalk. Today, CNA declared a $0.75 per share special dividend and a regular quarterly dividend of $0.38 per share up a penny from $0.37. Combining the two, Loews will receive $275 million in dividends from CNA this quarter as well as the $199 million received from Altium last week. We repurchased 5.8 million shares in the fourth quarter for $244 million and 22 million shares during the full year for $917 million. Since year-end, we have repurchased an additional 2.2 million shares for a total of $100 million. I will now hand the call back to Mary.

Jim Tisch:

Sure. So, one of the good things about getting the questions in advance is, I can prepare thoughtful and detailed answers, as I have especially on this one. So, we assess Loews' some of the parts value based on our view of the intrinsic value of each of our subsidiaries. Intrinsic value is our view of what our subsidiaries are worth based on our medium to long range outlook. And the valuation can and often does differ from the current market value of those enterprises. Our outlook for each subsidiaries is informed by our view of the industry in which it operates and the competitive strengths and weaknesses of our subsidiaries. So, let's take a look at these subsidiary by subsidiary. Starting with CNA. The primary indicators that we look at our core earnings, the combined ratio, we look at earnings per share, dividend capacity, pricing, and loss trends. Based on these metrics, we believe CAN is undervalued compared to its peers and even more so compared to the overall markets. We are bullish on the commercially property and casualty insurance industry, and we also believe that CNA will be able to continue to take advantage of the current hard market. For Boardwalk, the factors that we consider for assessing intrinsic value are EBITDA, free cash flow, natural gas volumes, regulatory environment, industrial demand for both gas and gas liquids, the revenue backlog, organic growth potential along with several other measures and characteristics. We're positive on the natural gas industry and believe the gas will be an important transition fuel for a greener economy. When we think about Loews Hotels, we consider adjusted EBITDA, cash flow, comparable asset valuations and occupancy and room rates. Loews Hotels has a unique business model since it's both an owner and an operator of its hotel properties. This differentiator has enabled Loews Hotels to successfully compete for attractive projects over demand, near demand generators such as Orlando, Arlington, Texas. Although the hotel industry has been hard hit by COVID, we believe that Loews Hotels is uniquely positioned to succeed in a post-COVID world. And finally for Altium, we primarily look at organic volume growth, EBITDA and cash flow as well as the Company's ability to make accretive acquisitions in diversified end-markets. Since we purchased Altium, the Company has made seven accretive acquisitions of compelling multiples that have diversified our businesses into higher growth end-markets such as pharma. These factors are just the beginning of how we come to our assessment of each of our subsidiaries’ intrinsic value. Additionally, we assess the businesses, management teams, the Company's competitive position within its industry, and the long-term outlook for each of those industry.

Jim Tisch:

Sure. So, I think the Board made the right call here. CNA's board declared a $0.75 special dividend and increased its common dividend by $0.01 to $0.38 per share. The increase in the common dividend is reflected of the CNA Board's confidence in the Company's ongoing operational improvements. The reduction in the special dividends reflects events of 2020 that reduced CNA's earnings. 2020 was a terrible year for the insurance industry. With the impact of COVID, hurricanes, with civil unrest, the industry experienced unprecedented cat losses. In spite of all that though, CNA came through the year very well. One of our highest priorities is for CNA to retain its rock-solid capital position. Heading into 2021, we think that CNA is setting up for a very good year. Operationally and financially, CNA ended 2020 very strong with the continuing hard market. Rate increases are robust, retentions are good, and there's solid new business generation. All this points to 2021 being a much more successful year for CNA than 2020.

Jim Tisch:

Sure. So when we think about how to best allocate capital, we traditionally think of it in four ways. And I think many people on the call have heard this before. We can invest in our existing subsidiaries. We can make an acquisition. We can repurchase our shares or as I like to say if there is nothing to do, we can do nothing. With our stock trading considerably below our view of its intrinsic value, share repurchases have been almost compelling capital allocation option. As I said in my remarks, our decision to buyback stock has not come at the expense of investing in any of our subsidiaries. For example, we've provided capital to Loews Hotels to help it write out the effects of COVID on its business. Our three other subsidiaries’ CNA, Boardwalk, and Altium Package have not recently required parent company capital, and in fact they've returned capital to the parent company. In terms of adding a new subsidiary, I think valuations are still too damn high. When buying a new business, there's no amount of due diligence that we can do that will result in the same knowledge that we have of our own businesses, and considering where valuations are today when you compare allocating capital towards a new business with buying in shares when our stock is trading so far below our view of its intrinsic value, well, it's really a no-brainer. When we think about allocating capital, we really think of it from the perspective of a shareholder. After all, management's interests are totally aligned with those of our shareholders since senior management has significant shareholdings and the Tisch family overall owns about one-third of the Company.

David Edelson:

Sure, Mary. Happy to. The economic aftershocks of the pandemic have caused revenue of Loews Hotels to decline precipitously. Both Jim and I mentioned that in our prepared remarks. If one looks just at the last three quarters of 2020, operating revenue was down 86% from 2019. The three main drivers of Loews Hotels business, leisure travel, business travel and group meetings were all stopped in their tracks by COVID. Leisure travel is slowly returning mainly in drive-in markets for our resort properties. Loews Hotels responded to the sudden downturn by temporarily suspending operations at all four of its properties and taking tough actions to reduce property level and management Company expenses. Early on, the hotel company established programs to assist its affected team members, including a multimillion-dollar relief fund, and continuing to provide medical insurance benefits for furloughed team members for extended timeframes. Additionally, in solidarity with Loews Hotels team members, the three members of our Office of the President Jim, Jon and Andrew Tisch reduced their 2020 salaries by 50% and their 2020 bonuses by the same amount. As properties began resuming operations in May, the Company put in place significantly enhanced safety and well-being standards and protocols for team members and guests. Now let me comment on the hotel company's cash flow. On our first quarter earnings call, I noted that as long as operations, we're almost completely suspended. The hotel company would likely have negative cash flow of about $25 million monthly. I also noted that management intended to reopen properties only when doing so improved earnings and cash flow. As anticipated, cash flow has improved as properties have resumed operations, expenses have been aggressively managed and capital spending has been rightsized. Today 22 out of 27 properties are operating albeit at depressed occupancy rates. The Company continues to generate negative cash flow, although significantly better than the $25 million per month sited in early May. During 2020, the Loews parent company contributed $151 million of cash to Loews Hotels to fund working capital and other capital needs. We will contribute cash again in '21 for working capital to fund operations. Although, we expect such amounts to be less than in 2020. Because of the Company's improved cash flow, we also expect the contributions to be skewed towards the first half of the year. One last note. If financially attractive hotel development opportunities surfaced in 2021, we would certainly consider helping Loews Hotels fund them. Back to you, Mary.

Jim Tisch:

Sure. At year-end 2020, the CNA portfolio had a market value of about $50 billion. It had an average credit rating of A and had net unrealized gain of about $5.7 billion. Additionally 89% of the portfolio is made up of fixed maturity securities and 94% of CNA's fixed maturity securities are investment grade. Loews maintains high coordination with CNA to align the management of the portfolio to CNA's broader strategy. Managing the investment portfolio internally rather than outsourcing its management gives us a better ability to act on dislocations in markets when they occur. Additionally, we can carefully focus on objectives and constraints including managing portfolio book yield as well as capital considerations. Almost every year we have met objectives as agreed upon with CNA with a focus on stability of income as well as outperforming indices across broad asset classes. Our goal is to create stable and growing investment income throughout a balanced risk return approach. We don't focus on hitting home runs. Our approach is more like Moneyball. We hit a lot of singles and don't strike out very often. We try to be opportunistic in the face of market volatility and fluctuations, seeking assets that fit within our risk profile. In the beginning of 2020, we took advantage of market dislocations to reallocate assets into corporate high grade securities when they were trading at a relatively widespread. In the spring of 2020, the muni market had a dislocation that lasted about a week or so, but we were able to actually put a lot of money into work and it paid off for CNA by being so quick on the trigger there. We have built parameters around volatility and risk with a focus on consistent returns. For example, we maintain single issue position limits by rating, which generally speaking keep us from being hurt by surprises in the credit world. These credit limits result in a diversified portfolio that has served CNA very well. I also want to comment briefly on the short squeeze of game stock and other stocks that resulted in losses for several hedge funds. In late 2018, we began to rebalance CNA's alternatives portfolio meaningfully reducing hedge fund investments. Over the last three years, CNA has reduced its investments in hedge funds by half and as of year-end 2020, the portfolio only had about $800 million invested in hedge funds. We expect these funds to report normal January returns.

David Edelson:

Mary, the litigation is ongoing. Trial date in the Delaware Court of Chancery has been scheduled for late this month. Beyond that, we really can't comment.

David Edelson:

Sure. Altium had an excellent year with record operating revenues of more than $1 billion, up almost 10% from 2019. The revenue increase came from several areas, mainly the full year impact of 2019 acquisitions, including Altium Healthcare. Stellar performance from the recycled plastics business, organic volume growth and new business and higher year-over-year resin prices passed through to customers on a lagged basis. The Company also posted record EBITDA and cash flow. When we acquired what was then Consolidated Container in 2017, a key plank of our thesis related to tuck-in acquisitions. We saw fragmented industry, numerous targets, and the opportunity for purchasing and expense synergies. In November, Altium completed its seventh acquisition under our ownership. A privately held company specializing in the blow molding of industrial containers. This acquisition had only a small impact on 2020 revenue, but will benefit all of 2021. Acquisitions completed in 2019 accounted for about 70% of Altium's 2020 revenue growth. Altium Healthcare, the company's pharmaceutical packaging business acquired in June of 2019 led the charge. Altium continues to look for accretive tuck-in acquisitions to add further scale and diversification. Altium had record new business awards in 2020 as the company's reputation for reliability, innovation, and customer service continued to differentiate Altium in the market. This new business will mainly benefit revenue in 2021 and beyond. Envision the Company's recycled plastics arm had its best performance in 2020 since Altium acquired the business in 2014. Demand for recycled plastic has been robust as Altium's end markets focus more and more on sustainability. In January, Altium recapitalized its debt structure, replacing its roughly $850 million of debt with a new $1.05 billion seven-year term loan. The deal price strongly at LIBOR plus 275 with a 50 basis point LIBOR floor. The recapitalization raises Altium's interest expense only very slightly and should not impair its ability to grow organically or execute tuck-in deals. Altium's key bank credit ratios are essentially in line with or slightly better than they were when Loews acquired the company. Loews received $199 million dividend last week out of the excess proceeds representing the return of about one-third of our initial equity investment. We posted on our website this morning, the lender presentation used in conjunction with Altium's term loan financing. The presentation includes both business and financial information about the Company and we hope you find it helpful. Thanks, Mary.

David Edelson:

So we're looking at how the new administration will handle a number of issues over the long term. First off, the administration's climate agenda has created some new risks for the natural gas sector by implementing a pause on new natural gas leases on federal lands and also on offshore waters. In my view, natural gas is an important transition fuel to cleaner energy in the US and it is also a growing export opportunity to help the rest of the world meet their similar climate change goals. The recent executive orders, in my mind, are troubling sign of new federal restrictions that may make it more difficult to access this plentiful American resource. Additionally, the Federal Energy Regulatory Commission that regulates Boardwalk is changing. While it's too early to know exactly what impact these changes will be, will have, we believe that there will continue to be increased pressure on the industry's ability to build pipelines. However, the administration is focused on the environment could be beneficial for Envision, Altium's Packaging, Recycled Resin business as well as for Dura-Lite, the plastic packaging Altium has designed that uses significantly less resin without compromising the strength of the container. Certainly, the Biden administration's focus on stemming the tide of the virus should be beneficial to Loews Hotels and help increase demand for the travel and tourism industry. While our largest subsidiary CNA is mostly regulated through the stage, the new administration and Congress pose some policy challenges and opportunities. For example, changes to the corporate tax code would affect Loews and our subsidiaries, but such changes aren't expected until later in the year when there is more evidence of economic recovery. And from what we understand corporate taxes probably will not go back to their pre-2017 levels. We're going to continue to watch these issues as they develop. It's only been a few weeks now and we've just got to wait and see what happens.

Operator:

Ladies and gentlemen, thank you for participating in today's conference call. You may now disconnect.

Operator:

[00:00:00] Ladies and gentlemen, thank you for standing by and welcome to the Loews corporation third quarter 2020 earnings conference call. At this time, all participants have been placed in a listen only mode. And the forum will be open for your questions following the presentation. If you would like to ask a question at that time, please press star one on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing the pound key. If you should require operator assistance, please. Press Star zero. Oh, now turn the call over to Mary Skafidas, vice president of investor relations and corporate communications for Lowe's.

Jim Tisch:

[00:02:43] Thank you, Mary, and good morning. Let me start by focusing on capital allocation, specifically share buybacks. During our second quarter conference call, I emphatically stated my strong belief that the market was significantly undervaluing the shares. I also stated that while those plans to maintain a substantial liquidity position as our rainy day fund, we also would take advantage of the market's discount and continue to buy back our stock during the third quarter. We did just that, purchasing over five point four million shares of loans for about one hundred ninety five million dollars, while preserving ample liquidity and ending the quarter with about three and a half billion dollars in cash and investments. Maintaining high levels of liquidity is fundamental to our business model because it lets us both capture opportunity and withstand uncertainty and it's like any portfolio manager. We have to balance, retaining our liquidity with taking advantage of investment opportunities as they arise. Buying back shares is one of Lowes three capital allocation tools, with the other two being investing in our subsidiaries and buying another business with our stock trading considerably below our view of its intrinsic value, share repurchases have recently been our most attractive capital allocation option. That being said, our decision to buy back stock has not come at the expense of any of our subsidiaries. For example, we have provided capital to Lowes Hotels to help but ride out the effects of cozied on the hospitality industry. [00:04:33] All three other subsidiaries, you know, Boardwalk and Altium and Packaging have not recently required parent company capital. Instead, Boardwalk and Altium have largely used their free cash flow to finance growth opportunities. And CNN has chosen to pay dividends since it hasn't had a need for additional capital, as Mary mentioned during the Q&A. We will be discussing topics submitted by our shareholders. However, I did want to highlight two key items up front CNN long term care business and the situation that most hotels. Starting with CNN before he got into long term care, let me emphasize that CNN is under the underlying property casualty underwriting performance for the quarter was stellar. The company had an underlying combined ratio of ninety two point six, compared with ninety four point six in last year's third quarter due to improve loss and expense ratios. Property and casualty pricing momentum continues with rates increasing over 12 percent in the third quarter, compared to an increase of just under six percent for the same period last year. With respect to long term care, my guess is that is long term care exposure is a significant reason why CNN's valuation wise, its peers. We are closer comfortable with the reserves that CNN has set up for long term care. The company has been proactive in managing the long term care business and prudent in their approach to setting LTC reserves. [00:06:21] In the third quarter, FEMA took an LTC net reserve charge of thirty seven million dollars before tax, comprising a 74 million dollar active life reserve deficiency offset by a thirty seven million dollar claim reserve release. The active life reserve deficiency resulted from the continued low interest rate environment and its impact on future assumed reimbursement rates. In my opinion. CNN is taking a conservative view on future interest rates, which hopefully means that they will not have to adjust for lower interest rates again going forward. Since the end of 2015, Sienna's overall exposure to long term care has been reduced by 31 percent, with the number of active policies declining from four hundred and nineteen thousand to two hundred and eighty eight thousand. So why are we so confident in Sienna's management of long term care, even in the face of the market skepticism? Because we know that over the past seven years, CNN has been laser focused and immersed in their long term care book of business. For the six years prior to becoming Funi, chief financial officer, Amaral's was head of long term care at the company and did an outstanding job mitigating the LTC risk for CMA. And the team in place today continues to do so. CNN has managed more than 100000 long term care claims today, providing CNN with reliable claims experience across all policy types and age cohorts. [00:08:10] CNA reviews its long term care reserves in the third quarter of every year, and they post significant information regarding their review on the CNN website. If you have not already done so, please take a look at the information that they make available. Now for the second topic, I want to cover those hotels. The fallout from the current pandemic continues to negatively affect the travel and tourism industry, and Loews Hotels is no exception. We believe and hope that the second quarter was a bottom for the hotel industry and we have seen business pick up and Loews Hotels since then, while occupancy rates are still low by any historical standard. Twenty one of those hotels, twenty seven properties had resumed operations by the end of the third quarter. The resumption of operations, combined with significant expense controls enacted by Loews Hotels Management, have improved the company's cash flow situation. When the pandemic struck and Loews Hotels substantially suspended operations, we estimated that the company would generate negative cash flow of approximately twenty five million dollars per month while still negative. Those hotels with cash flow is much improved going forward. We do not expect Loews Hotels as cash needs to be material to those corporations balance sheet. And with that, let me turn the call over to David.

A - Mary Skafidas:

[00:19:28] Thank you, David. Let's move on to the Q&A section of the call. We have a number of questions to respond to from shareholders. The first one is from for Jim. Jim, have you considered buying in the outstanding shares of CNN to take advantage of the discount in stock?

Mary Skafidas:

[00:21:48] Great, thank you, Jim. The next question has to do with the exceptional year for catastrophe losses in the insurance business. Jim, would you please discuss housing and the insurance industry are managing through these challenges?

Mary Skafidas:

[00:25:27] Great, thank you, Jim. Next question also has to do with DNA focusing on seniors long term business, Jim. Could you tell us if you your assessment of seniors, long term care business and the risks that it poses to CMA antelopes?

Mary Skafidas:

[00:28:17] Thank you, Jim. The next question also staying on the CNN topic, dazzlers expect to get a special dividend from CNN.

Mary Skafidas:

[00:29:07] Ok, we're switching to Boardwalk, the shareholder would like to know our growth projects slowing in the midstream space. Can you comment on that, Jim?

Mary Skafidas:

[00:30:03] Thank you. The next question is for David. David, there have been several recent bankruptcies of exploration production companies. Can you please comment on the financial strength of Boardwalk's customers?

Mary Skafidas:

[00:32:04] Right, we have another question for our CFO, David. Can you provide an update on the cash needs of those hotels?

Mary Skafidas:

[00:34:51] Thank you, David. Staying with those hotels, Jim, this next question is for you. It's about hotels looking to buy or sell any hotels and how had covid impacted its development projects?

Mary Skafidas:

[00:37:41] Thank you, Jim. The next one is for you as well. Can you please comment on when you expect to see the hotel industry recover from the effects of the pandemic with Lozes? Would Loews Hotels this recovery lead or lag the industry's recovery?

Mary Skafidas:

[00:39:39] Ok, thank you, Jim. And our last question is for David. David, how has covid-19 affected your packaging business? Altium, can you please give us an update?

Mary Skafidas:

[00:41:57] Thanks, David. Thank you, David and Jim, this concludes the close call. As always, thanks to all of you for your continued interest. Please feel free to reach out to me with any additional questions at M Scafidi settler's dot com. A replay will be available on our website WLOS dot com in approximately two hours. Over to you to and the call.

Mary Skafidas:

Thank you, Maria. Good morning, everyone. And as Maria said, welcome to Loews Corporation’s second quarter earnings conference call. A copy of our earnings release, earnings supplement and company overview maybe found on our website, loews.com. On this call this morning, we have our Chief Executive Officer, Jim Tisch and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session from that has questions from our shareholders. Before we begin however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company’s statutory forward-looking statements disclaimer, which is included in the company’s filings with the SEC. During the call today, you may also discuss – we may also discuss non-GAAP financial measures. Please refer to our security filings and earnings supplement for reconciliation to the most comparable GAAP measures. In a few minutes, our CFO, David Edelson, will walk you through the key drivers for the quarter. But before he does, Jim Tisch, CEO will kick off the call. Jim, over to you.

David Edelson:

Thank you, Jim and good morning everyone. For the second quarter, Loews reported a net loss of 835 million or $2.96 per share compared to net income of $249 million or $0.82 per share in last year’s second quarter. This year’s second quarter included a net investment loss related to the deconsolidation of Diamond Offshore caused by its bankruptcy filing in late April. This loss totaled $957 million after-tax. Two other items furthered the year over year decline, catastrophe losses at CNA and losses at Loews Hotels stemming from the severe impact of the pandemic on travel. On a positive note, CNA's underlying underwriting results were excellent. Investment results were favorable at both CNA and the parent company and operations at both Boardwalk Pipelines and Altium Packaging were strong. Before I jump into the quarter and the ongoing impact of the COVID-19 pandemic, let me remind you what gave rise to the Diamond related net investment loss. Up to the bankruptcy filing date of April 26, we accounted for Diamond on a consolidated basis, just as we have historically. These results are shown on Page 4 of our earnings release on the Diamond Offshore line. Once Diamond filed for bankruptcy, Loews no longer control Diamond for GAAP purposes. As such, we seized consolidating Diamond and began accounting for Diamond at fair value. Our net GAAP carrying value of Diamond was $988 million as of the bankruptcy date. At quarter end, the carrying value of our stake was $31 million based on the fair value of our shares and a related deferred tax asset. The difference between these two values, are $957 million is included in the corporate segment as the net investment loss. Now, let me turn to the performance of CNA, Boardwalk, Loews Hotels and Altium Packaging. CNA's contribution to our net income declined 46% year-over-year to $135 million. The P&C business performed well, posting an underlying combined ratio of 93.4% and an average rate increase of almost 11%. As a reminder, CNA’s underlying combined ratio for full year 2019 was 1.4 points higher at 94.8%. However, as pre-announced on July 15, CNA booked $300 million of pre-tax – $301 million of pre-tax catastrophe losses in Q2, up from $38 million in last year’s second quarter, 60% of these cat losses related to the COVID-19 pandemic, with civil unrest and weather related events accounting for about 20% each. CNA's $182 million of Q2 COVID related cat losses, combined with a $13 million booked in Q1, represent the company’s current best estimate of its ultimate insurance losses and loss adjustment expenses, including defense costs resulting from the pandemic in the consequent economic crisis. Second quarter cat losses in total added 17.5 points to CNA's loss ratio and reduced our net income by $212 million. Last quarter, we discussed how COVID induced volatility in the financial markets reduced CNA's net investment income, caused significant net investment losses and materially shrunk the unrealized gain in the company’s investment portfolio. In Q2, net investment income benefited from a strong quarter for equities and alternatives and net investment gains were significant, largely thanks to the market appreciation on CNA’s holdings of non-redeemable preferred stock. Moreover, as Jim described, CNA’s net unrealized gain increased more than 100% from March 31 to $4.4 billion, surpassing the year end level of $4.1 billion. Moving on to Boardwalk, the company contributed $34 million to our net income in Q2, down from $53 million last year. Last year’s second quarter included a $19 million net benefit from a customer bankruptcy and related contract cancellation. Excluding this non-recurring item, Boardwalk’s net income contribution was flat year-over-year. As we have discussed previously, Boardwalk has experienced contract expirations and restructurings over the past few years related to pipelines placed into service between 2008 and 2010. The net effect has been for contracts to be renewed or replaced at lower rates. This re-contracting activity essentially concluded by year end 2019. This year’s second quarter results fully reflect the re-contracting activity. Net operating revenue in Q2, excluding last year’s non-recurring item, was down less than 2% year-over-year with pipeline growth projects, park and loan and storage and other items almost fully offsetting the revenue loss from contract expirations and restructurings. Natural gas throughput and liquid volumes increased more than 7% year-to-date in 2020 versus 2019. Boardwalk management is actively monitoring the credit quality of its customers, given the declines in crude oil and natural gas prices. Thus far, the impact has been de minimis. Boardwalk will have spent approximately $2 billion on growth projects during the 2016 to 2020 period. These investments have helped the company compensate for the re-contracting pressures faced over the last 2 years. These investments have also allowed the company to execute on its strategy to diversify its revenue stream by increasing the percent of revenues coming from end user demand pull customers. Now, turning to Loews Hotels. The second quarter was tough for Loews Hotels, as almost all its rooms were out of service for most of the quarter. Operations were not suspended at only 4 properties. The company posted a net loss of $72 million in Q2 as compared to net income of $12 million last year. GAAP operating revenue was just $9 million, down 94% from last year’s second quarter. Revenue at the company’s JV properties, which is not included in GAAP consolidated operating revenue, declined a similar percentage. Adjusted EBITDA, which is defined in our earnings supplement and excludes non-recurring items decreased $122 million year-over-year to a loss of $54 million. 13 properties resumed operations in Q2, spread out from May 29 through June 26 and the Loews Kansas City opened on June 1, after its grand opening was delayed by COVID. 5 more properties resumed operations during July. As of today, 4 properties plus the yet to be opened Endless Summer Dockside property in Orlando, are not operational. We stated last quarter that during each month of suspended operation – of fully suspended operations, the hotel company was expected to generate negative cash flow of about $25 million. We explained that this amount should decline as properties resume operations since Loews Hotels’ management intended to restart operations of properties only when doing so improve cash flow. This has thus far proven to be the case as the hotel company is effectively and aggressively managing property level and management company expenses. Turning to Altium Packaging, Altium continued to experience strong revenue and EBITDA growth as it benefited from its recent acquisitions, namely its pharmaceutical packaging business as well as increased demand for such core products as household chemicals, water and beverages. Conversely, demand weakened somewhat in segments, including automotive, commercial foodservice, and institutional dairy. Altium contributed a slight net loss despite its robust EBITDA increase. Depreciation and amortization were up from their prior year driven by the recent acquisitions and by the accelerated amortization of the CCC trade name. All-in-all, Altium is performing above plan and has been very successful in winning new business by demonstrating reliability and customer focus. Across the board, we remain focused on ensuring that our subsidiaries implement effective policies and procedures to protect the safety and health of their employees. Loews’ long-term success rests on the success of our subsidiaries. So the well-being of their employees is our foremost concern. Finally, a few words about the parent company. As always, we are focused on maintaining a strong and highly liquid balance sheet. At quarter end, the parent company portfolio of cash and investments totalled $3.6 billion, with about 80% in cash and equivalents and the remainder mainly in marketable equity securities and a small portfolio of limited partnership investments. The parent company investment portfolio generated pre-tax income of $110 million in Q2, up from $33 million in Q2 2019 and well ahead of the $166 million loss in Q1. Equities drove the parent company investment results. We received $90 million in dividends from CNA during the second quarter. As a reminder, Boardwalk has adopted an annual dividend policy and we expect to receive a dividend in the fourth quarter approximating last year’s $100 million. I will now hand the call back to Mary.

Jim Tisch:

So, we have always believed that having a public marker for CNA is beneficial for Loews, especially for our shareholders. And I dare say that if CNA wasn’t public, there would be clamoring for us to take it public. However, it’s really rare for CNA to be trading as drastically undervalued as it is now. The public – my sense is that the public market today doesn’t make much sense and is certainly not an accurate reflection of the value of CNA. Also, all P&C companies, as I said in my remarks, are undervalued. Of course, there are lots of good reasons for keeping CNA as a public company and those outweigh what I consider to be the short-term problem of the undervaluation. Number one, it’s important to regulators and credit rating agencies. It’s important for attracting talent to be able to give them long-term incentive that is based on the stock and it’s also important just for transparency. And as for the added expense of keeping CNA public in the context of the size of Loews and of CNA there really aren’t any significant expenses that could be saved.

Jim Tisch:

No, we are not. We are not actively looking at any deals right now in these uncertain times. As I said in my remarks, our focus is on conserving cash. Both CNA and Loews are so cheap that when we think the time is right, we will continue to buy in Loews shares. But as I say all the time, we like to keep an open mind. And if the relative values of Loews and the deal markets change, then it is very possible that we could switch from repurchasing our own shares to hunting for new businesses to buy.

Jim Tisch:

Washout, it certainly is. First, let me start by saying something that was told to me when I was in college, it’s an old expression. He who lives by the crystal ball must learn to eat ground glass. And with that as a caveat, let me add that I think 2020 will be the bottom of the hotel industry in terms of the effects of the pandemic and I believe that 2021 will be dramatically better than 2020 and if I am going to forecast longer than that, I think that ‘22 will even be better than ‘21. Currently, we are seeing more of a pickup in driving leisure type travel at our resorts destinations. The business travel and hotels and city centers are lagging the resorts at this point in time. My guess is that this will persist for some time as companies weigh employee safety and security as well as reassess their travel budgets. But I believe that in the fullness of time, those – that travel and those budgets will be come back at similar levels to where they were before this all began. Keep in mind that we are seeing a pickup in occupancy from a few months ago, but occupancy is still very, very low measured at 10%, 20%, 30% or 40% most of the time. We opened the hotels, because we found that we lose less cash by keeping the hotel hotels open rather than keeping them closed, but we are still losing money in those hotels.

Jim Tisch:

So, that’s a very good question. We keep – as you all know, we keep our level of cash and investments above our debt levels, because it’s important for the company to maintain its bond ratings and the rating agencies like to see us have more cash and investments than debt. The Loews rating provides an uplift to some of our subsidiary ratings giving them among other things, access to cheaper debt. So under exceptional circumstances, we would certainly consider allowing our cash and our investment balances to go below our debt levels, but buying in Loews’ shares at an exceptional price isn’t yet included in my definition of an exceptional circumstance. Currently, given the ongoing uncertainty in the world, we think it makes a lot of sense to be cautious and maintain ample liquidity. But as Loews shares continue to be remarkably undervalued, my calculus on this is very possible to change.

Jim Tisch:

Well, you are right, I did cover it in my opening remarks and for people that are just reading a transcript, I’d recommend that you go back – sorry, just reading the Q&A of the transcript, I recommend that you go back and read those remarks. But I will just go over this briefly. Over the – our purchase say 2 years ago of the outstanding common units of Boardwalk, not placed an equity valuation of about $3 billion on Boardwalk. And as I said previously, nothing has occurred in the performance of the company that would lead us to reconsider that purchase at all. Prior to the COVID pandemic devaluation of our hotel business was measured in the billions of dollars and I still feel comfortable that in the recovery from the pandemic, which I see coming, certainly in the next year or so, we will see that valuation again. And finally, our equity check for Altium was $600 million, as we said in my remarks. And due to the good results and the good investments at Altium, I believe the valuation should be higher now. So, when you add all that up, in my mind, the market valuation of $500 million for all of our non-publicly traded subsidiaries is to me ludicrous when they are clearly worth dramatically more than that.

Operator:

And thank you, ladies and gentlemen. This does conclude today’s conference call. You may now disconnect.

Mary Skafidas:

Thank you, Maria, and good morning, everyone, and welcome to Loews Corporation's first quarter earnings conference call. A copy of our earnings release, earnings supplement and company overview may be found on our website, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, David Edelson. Questions that have been submitted by shareholders will be addressed during this call. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company's statutory forward-looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, you may also discuss - we may also discuss non-GAAP financial measures. Please refer to our security filings and earnings supplement for reconciliation to the most comparable GAAP measures. Now let me hand the call over to Jim Tisch, our CEO, who will kick off the call. Jim, over to you.

David Edelson:

Thank you, Jim, and good morning, everyone. For the first quarter, Loews reported a net loss of $632 million or $2.20 per share, compared to net income of $394 million or $1.27 per share in last year's first quarter. This year's first quarter loss and the substantial year-over-year decline had 2 main causes

Operator:

Thank you, ladies and gentlemen. This does conclude today's Loews Corporation First Quarter 2020 Earnings Conference Call. You may now disconnect.

Mary Skafidas:

Thank you, Laurie. Good morning, everyone. And welcome to Loews Corporation's fourth quarter and year-end earnings conference call. A copy of our earnings release, earnings supplement, and company overview, may be found on our Web site, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session with question committed by shareholders. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company's statutory forward-looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings and earnings supplement for reconciliation to the most comparable GAAP measures. In a few minutes, our CFO, David Edelson will walk you through key drivers for the quarter. Before he does, Jim Tisch, our CEO, will kick off the call. Jim, over to you.

David Edelson:

Thank you, Jim and good morning. Today, we reported fourth quarter net income of $217 million or $0.73 per share compared to a net loss of $165 million or $0.53 per share in last year's fourth quarter. For the full year, we reported net income of $932 million or $3.07 per share, up from $636 million or $1.99 per share in 2018. I will start by summarizing our much improved fourth quarter results, and then turn to the full year. The earnings turnaround in Q4 was driven mainly by investment results at both CNA and the parent company, as well as higher P&C underwriting income at CNA. CNA's net income contribution swung from the $75 million loss in Q4 2018 to income of $244 million, an improvement of $319 million. Returns on CNA's holdings of LPs and common stocks accounted for $146 million of the improvement, and a pivot from net investment losses to net investment gains accounted for another $61 million. P&C underwriting income at CNA accounted for $119 million of our year-over-year net income increase, driven by lower cat losses and stronger underlying underwriting results. CNA's overall combined ratio declined almost 10 points from Q4 2018 to 95.6, and its underlying combined ratio, which excludes cats and prior year development, improved 3.1 points to 94.9. Like CAN, Loews parent company investment results benefited from more favorable equity market conditions, as they swung from the $57 million after-tax loss to income of $67 million in Q4. Loews Hotels and CNA's corporate segment were the main year-over-year negatives. Loews Hotels incurred a $69 million after-tax charge from the impairment of two hotel properties in Q4. Absent this charge and other nonrecurring items, such as pre-opening expenses and properties under development, Loews Hotels’ contribution to our net income would have been up around 20%, as operating results continued to be robust. CNA booked a $48 million after-tax charge in Q4 related to its legacy asbestos and environmental pollution reserves, which reduced our net income by $43 million. In last year's fourth quarter, CNA incurred a net retroactive reinsurance charge that reduced our net income by $24 million. As a reminder, in 2010, CNA exceeded substantially all its legacy asbestos and environmental pollution liabilities to national indemnity, pursuant to a loss portfolio transfer. Before turning to the full, one year one last observation on the quarter. Average shares outstanding declined about 6% from last year's fourth quarter, reflecting our ongoing share repurchase activity. Now for our full year results, we reported net income of $932 million, up 47% over 2018. CNA, Boardwalk and the parent company investment portfolio, drove the increase with Diamond and Loews Hotels posting year-over-year declines. Let me start with CNA whose net income contribution rose 23% in 2019 to $894 million, as CNA itself, posted net income of $1 billion. Favorable investment performance propelled the increase. Net investment income rose, thanks to LPs and common stock investments, while net investment gains swung from losses in 2018 to gains in 2019. The swing in net investment gains was dominated by the change in market value of CNA's holdings of non redeemable preferred stock. P&C underwriting income was essentially flat year-over-year as better underlying underwriting income and lower catastrophe losses were offset by lower level of favorable net prior development in 2019 than in the prior year. For the year, CNA posted an underlying combined ratio of 94.8, marking its third consecutive year of improvement. This result included an underline loss ratio of 61. While CNA has already made great strides in enhancing its underwriting profitability, it remains laser focused on further reducing both its loss and expense ratios. The long-term care reserve charge taken in the third quarter was the main detractor from CNA's 2019 results. During 2019, CNA unlocked and strengthened its long-term care active life reserves and action it hadn't taken since year-end 2015. This charge reduced Loews' net income by $151 million. When factoring in long-term care claims reserve releases in both years, however, LTC reserve actions accounted for $133 million year-over-year reduction in CNA's contribution to our net income. The bottom line is this, CNA's balance sheet is strong, its underwriting performance continues to improve with opportunities for further premium growth and combined ratio reduction. And its long-term care business continues to be aggressively and prudently managed to reduce risk and improve results. Boardwalk also had a good year as reflected by the significant increases in ts contribution to our pre-tax and net income. Since the increase in net income contribution is due in large part to increasing our ownership from 51% to 100% in July of 2018, I will focus my comments on pre-tax income. Pre-tax income was up $50 million in 2019 to $281 million as revenues generated by growth projects more than offset net revenue losses from contract restructurings, expirations and renewals. Also, about half of the year-over-year increase was from proceeds received when a customer filed for bankruptcy. The parent company portfolio of cash and investments was the final driver of our year-over-year improvement. This portfolio generated $188 million of after tax income in 2019 versus an $8 million loss in 2018. The beat was almost entirely attributable to returns on equity holdings. The parent company portfolio of cash and investments averaged $3.9 billion in 2018 and $3.4 billion in 2019. On the flip side, Diamond and Loews hotels, both showed year-to-year income declines. Diamond had a tough year with its pre-tax loss growing from $226 million in 2018 to $402 million in 2019. Diamond’s 2019 can be summarized by two statistics, revenue earning days up 4% but average daily rate down 17%. As a result, contract drilling revenues were down 12% and contract drilling margin declined from 32% to 15%. Contract drilling expenses were up almost 10%, largely due to the mix of rigs working in 2019 versus 2018, as well as the accelerated amortization of contract preparation costs on several rigs. In 2019, Diamond invested approximately $325 million in its fleet to ensure its raise continue to be considered top tier by customers. The company expects significantly reduced capital spending in 2020. Diamond ended the year with an undrawn revolver of almost $1.2 billion. Revolver capacity will decline to $950 million later this year. Loews hotels had a strong year operationally, but its contribution to our reported income was impacted by impairment charges and non-recurring pre-opening expenses. The company reported an annual net loss of $31 million versus net income last year of $48 million. Excluding impairments and other nonrecurring items, Loews hotels’ net income increased 8% from $49 million to $53 million. Loews hotels’ adjusted EBITDA, which is defined and disclosed in our quarterly earnings supplement, was essentially flat from 2018 to 2019 at $227 million. However, when properties that Loews hotels’ no longer owns are excluded in both years, adjusted EBITDA was up about 2%. Turning to the parent company. We continue to maintain an extremely strong and liquid balance sheet. At year end, the parent company portfolio totaled $3.3 billion with 77% in cash and equivalents and 22% in LP investments and marketable equity securities. During the fourth quarter, we received $110 million in dividends from our subsidiaries, $85 million from CNA and $25 million from Boardwalk. For the full year, we received total dividends of $927 million from CNA and Boardwalk with CNA contributing $825 million of that amount. Today, CNA declared a $2 per share special dividend and an increased regular quarterly dividend of $0.37. Combining the two, Loews will receive $575 million in dividends from CNA this quarter. Please note that since Boardwalk is now wholly owned, it will no longer pay Loews a fixed quarterly dividend and will likely pay an annual dividend toward the end of the year. We currently expect Boardwalk’s dividend to Loews in 2020 to approximate 2019’s $100 million. I would highlight that we have worked diligently over the past couple of years to streamline the parent company. Net corporate operating expenses, which include investment expenses, now netted against investment income and exclude corporate interest expense, dropped about 20% from 2018 to 2019. While some of this decrease relates to slightly higher allocations to our subsidiaries, much of it relates to parent company efficiencies. We repurchased 8.3 million shares in the fourth quarter for $417 million and 21.5 million shares during all of 2019 for $1 billion. Since year end, we have repurchased an additional 3.3 million shares for a total of $172 million. I will now hand the call back to Mary.

Jim Tisch:

So right now, we believe that the public floating CNA while small is very important for a number of reasons. First of all, it provides transparency. Transparency for credit agencies and regulators, which I think they value very much and they like seeing a public start for CNA. Number two, it's a barometer for all Loews shareholders just what the market is valuing CNA. And I dare say if CNA went public, then a lot of people would be asking why don't we take it public so that they can actually see what the value of CNA is in the free market. Additionally, in order to attract the best talent, it's important to have public shares so that it can be, those shares can be used for employee compensation plans. And I dare say if CNA weren't public, if we didn't have those shares directly reflecting the value of CNA it might be more difficult to attract the best and the top talent. One other thing that I'd add is that as long as Loews owns over 80% of CNA, and right now it owns close to 90%. But as long as we own over 80%, we can do a tax consolidation and get all the benefits of owning 100% of the stock. So there's absolutely no penalty vis-à-vis cash income taxes, resulting from Loews’ owning 90% instead of 80% of the stock -- 90% I'm sorry instead of 100% of the stock.

Jim Tisch:

So at this point in time, it hasn't had much of an impact at all. Yes, the virus is affecting areas like China and Asia dramatically, but we haven't seen so much of an impact here in the United States. Our hotel people are continuing to monitor the situation. In terms of inbound travel to Loews hotels from China represents less than 1% of our business. So if the status quo continues to hold, I don't see there being much effect of corona virus on our hotel business.

Jim Tisch:

So Diamond may have a big impact in a GAAP sense on Loews’ results. But our downside is really limited to our stake in the company, which today represents less than $1 per Loews corporation share. I would say that the current share price Diamond is really trading more like an option than it is like a stock. Regarding the offshore drilling industry in '89, knowing that it was highly cyclical when the current downturn started in '14, we thought we've seen this movie before having weathered a number of drilling cycles downside. However, this downturn now has lasted much longer than we are, I dare say anyone could have anticipated. Nevertheless, Diamond, the management continues to focus managing its cost and maximizing earnings potential on the assets through diversification and good operating performance. One other thing, I think the bearishness in Diamond is really -- has been around just since the beginning of the year. At the end of last year, oil prices West Texas Intermediate was $61 a barrel, it traded up to $63 a barrel in early January and now as you all know it's down to $50. And I think that move down to $50, which was due in large part to the corona virus and also a sense that the world production capacity would be a bit higher than demand this year, but not in the future. So those two factors have caused a dark bearishness to overcome the whole offshore drilling industry. I could easily foresee at some point oil prices getting back to the $60 and $65 barrel level. I think that, shale oil cannot be -- the growth will not -- in shale oil production, will not grow significant at those prices. And I ultimately say next year could see oil prices at the $65 to $70 a barrel level, which would I believe lead to significant improvement in the offshore drilling industry. What happened now is that this is an industry-wide phenomenon. What's going on is not just accessing Diamond offshore. The low day rates are going to affect all companies and in order for day rates to improve, I think we need to see an increase in oil prices, which as I said I think is coming in as we say the fullness of time.

Operator:

Thank you for participating in the Loews Corporation Q4 2019 earnings conference call. You may now disconnect.

Mary Skafidas:

Thank you, Laurie, and good morning everyone. Welcome to Loews Corporation's third quarter earnings conference call. A copy of our earnings release, earnings supplement, and company overview, may be found on our Web site, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session, which will include questions from shareholders. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company's statutory forward-looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings and earnings supplement for reconciliation to the most comparable GAAP measures. In a few minutes, our CFO, David Edelson will walk you through key drivers for the quarter, but before he does, Jim Tisch, our CEO, will kick off the call. Jim, over to you.

David Edelson:

Thank you, Jim. Good morning everyone. For the third quarter, Loews reported net income of $72 million or $0.24 per share down from $278 million or $0.88 per share in last year's third quarter. Page 13 of our earnings supplements sets forth the key quarterly drivers. A quick summary of the quarter, CNA accounted for most of the year-over-year decline in net income, largely due to the strengthening of its long-term care active life reserves. CNA's property casualty results also reflected a modest reserve charge this year compared to a meaningful reserve release in Q3 last year. Importantly, however, underlying P&C underwriting results at CNA continue to show improvement. Boardwalk's earnings contribution was essentially flat with the prior year, whereas contributions from Diamond and Loews hotels were down for reasons I'll explain shortly. Parent company investment income showed a nice year-over-year quarterly increase, driven namely by better returns on equities and short-term investments. Now for more detail, CNA is after tax earnings contribution was $96 million down from $300 million in Q3 2018. Let me start by focusing on the positive, which is continued progress in CNA's core P&C business. The underlying combined ratio was 94.6, the same as the last quarter and almost 1 point better than full year 2018. Net written premium was up 8% in the quarter and rate was up almost 6% and what is typically a heavy quarter for catastrophe losses, CNA incurred only 1.8 points of cat losses compared to 2.6 points in last year's third quarter and 3.7 points for full year 2018. The year-over-year comparison for P&C, however, was hurt by modest adverse prior year development compared to meaningful favorable prior development in last year's third quarter. This adverse development was driven by legacy [indiscernible] exposures in commercial and health care and specialty. Several other lines in commercial and specialty, however, including surety and management liability posted reserve releases during the quarter. Absent the impact of prior year development in both periods, CNA's after tax PNC underwriting income increased 33% from Q3 2018 to Q3 2019. CNA completed its review of its long-term care reserves this past quarter. As a reminder, CNA's GAAP long-term care reserves have two components, future policy benefit reserves commonly referred to as active life reserves as well as claims and claims adjustment expense reserves. During the quarter, CNA strengthened his active life reserves by 216 million pretax and released 56 million pretax from its claims and claims adjustment expense reserves. To put these numbers in perspective, at June 30, 2019, CNA had over $9 billion of GAAP active life reserves and almost $3 billion of GAAP claims reserves. CNA assesses the adequacy of its GAAP long-term care active life reserves annually by performing what's known as a gross premium valuation or GPV. In the GPV, management uses its current best estimate actuarial assumptions to calculate required reserves. If the required reserves exceed recorded reserves and unlocking occurs and active life reserves are increased based on the current best estimate assumptions. CNA as Jim said, CNA last unlocked its LTC active life reserves at year end 2015. The company subsequently conducted reviews of these reserves in each of 2016, 2017 and 2018 and concluded that no unlocking was necessary. In this year's third quarter, when CNA applied its current best estimate actuarial assumptions towards LTC active life reserves, the result was an approximate 400 million increase in required reserves. The interest rate environment caused CNA to lower; it's assumed future new money rates and thus its discount rate. While there were gives and takes with respect to other actuarial assumptions such as morbidity, persistency, and premium rate actions lowering the discount rate drove the unlocking. Given that CNA had $182 million of margin in its active life reserves before the review, this 400 million reserve increase resulted in a $216 million pretax strengthening of CNA's active life reserves. Note that this is a GAAP reserve charge and does not impact CNA statutory long-term care reserves. The strengthening of the active life reserves and the release from the claims and claims adjustment expense reserves taken together reduce Loews' net income by 112 million in Q3. Recall that in last year's third quarter, CNA booked a claims reserve release that added 21 million to our net income. CNA has disclosed more information about its long-term care business in its quarterly investor presentation, which can be found on its IR Web site. In summary, CNA's underlying P&C results were healthy, but its contribution to our Q3 results was hurt by the interest rate driven LTC active life reserve charge and the modest adverse prior year development in P&C. Turning to Diamond Offshore. Diamond contributed a net loss of $48 million in Q3 2019 as compared to a net loss of $27 million last year reflecting the continued difficult conditions in the offshore drilling market. Contract drilling revenues declined 14% while Diamond's contract drilling expenses increased 7%, revenue earning days were actually up 14%, but this was more than offset by a 24% decline in average daily revenue earned. The drivers of the revenue decline were rigs working at lower day rates as well as shipyard time for two of the company's high [spectro] [ph] ships which had previously been earning day rates well above current market. As a reminder, Diamond incurred the cost of illegal settlement in last year's third quarter which reduced our net income in that quarter by $8 million. Boardwalk's contribution to our net income was basically flat year-over-year at $29 million. As revenue declines from contract expirations and restructuring were more than offset by revenues from growth projects recently placed into service. Operating margins declined somewhat, however, in part due to the timing of maintenance expenses. Loews hotels had a noisy third quarter as it contributed 3 million to our net income in Q3 down from 11 million in last year's third quarter. There were two main reasons for the year-over-year decline in net income contribution. The first was the substantial disruption caused by the threat of Hurricane Dorian, which caused widespread cancellations at the company's properties in Orlando and Miami Beach. And the second were pre-opening expenses occurred in connection with properties under development including properties in Orlando, Kansas City and Arlington, Texas. As Jim said, and I'd remind you that was so much hotel development activity taking place, the company's underlying earnings will continue to be massed by pre-opening and startup costs. Loews hotels adjusted EBITDA which is disclosed in our quarterly earnings supplement also declined year-over-year. The hurricane related disruption at the company's Florida properties was a major factor. Additionally, three properties were divested since last year's third quarter with one property leaving the chain altogether and two becoming managed only hotels. Despite what appears to be a weak quarter, Loews hotels continues to expand its footprint and post improved results at many of its properties. Turning to the parent company, pretax investment income was $36 million up $31 million from the prior year's third quarter driven by returns on equities and short-term investments. During Q3 2019, we received $111 million in dividends from our subsidiaries, $85 million from CNA and $26 million from Boardwalk. We repurchased 3.4 million shares during the third quarter at an aggregate cost of $168 million. We purchased an additional 1.8 million shares since quarter-end for about $90 million. We have repurchased 15 million shares during 2019 for just over $730 million representing almost 5% of our shares outstanding at year-end 2018. Loews ended the quarter with $3.5 billion in parent company cash and investments with cash and equivalent accounting for over 75% of the portfolio. Let me now turn it back to Mary.

Jim Tisch:

So, all of us at Loews, we're extremely comfortable with how the CNA management team is managing the long-term care business. We're impressed by the operational discipline that they've brought to the business and we're also impressed by their efforts to mitigate the risks of this business. For quarter's reserve unlocking, which was caused by the current interest rate outlook, it doesn't change our view in any way. Let me step back and give you a bit of history. About a dozen years ago, the CNA management team decided that one of the long-term care block of business is in runoff. It still needs to be vigorously and strategically managed. So CNA selected some of the best and the brightest within the company to run the business as a business, actively managing it from every angle. They looked at it from an operations, claims actuarial and more. The goal was to aggressively mitigate the risk and to manage the liability. Changing the mindset from it being a runoff business to an active business has been critical in this whole process. So, the new team set about gaining a deeper understanding of the business, not just actuarially, but every facet of the business. This understanding has led the team to identify opportunities to mitigate the risks such as more supportable rate increase filings and offerings to policy holders that benefit them, while also enabling CNA to reduce risk. I truly believe that CNA's actuarial understanding of its block of business is much deeper than it has ever been. Just two years ago, CNA moved to what's called first principles reserving and that gave us the ability to slice and dice the block much more deeply than they previously could. One huge advantage of the company's actuarial advances has been the ability to support ratings increases with much more targeted and credible data, including data from over a 100,000 claims that the company has already processed. When I take a look at the assumptions made in the company's last unlocking in 2015 compared to the current unlocking what I see on net is a business that is actually pretty reasonably predictable in the medium term. I don't want to diminish the long-term tail risk, but over the medium term, our block of businesses performed basically in line with our expectations with a major exception of interest rates. Here are some stats that I find compelling. So, since the end of 2015, total claims paid are 2% lower than expected. Our active policy count is 5% lower than expected and the total claim count during that period is slightly lower than expected. These broad measures help to define the risk in the block and they were all predicted quite accurately in the context of a five-year timeframe. So, what CNA got wrong was the interest rate and the spread environment, a problem that's being addressed this quarter. So, while I understand there's a lot of noise around the various long-term care blocks, what I have seen first-hand at CNA is that with the right data, with the management focus and with the appropriate resources thrown at the problem of these blocks are more predictable than I think most outsiders have come to believe.

Jim Tisch:

Absolutely. I think that Diamond has done a really good job of managing its costs. It's cut expenses by about 50%. That's at the home office and also across the company. I would say that the head count is as low as possible while also operating efficiently and safely. No expense categories have been spared; there has been cuts in just about everything including employee benefits as well as free coffee within -- at the home office. So, they're aggressively, aggressively managing their expenses and the company is doing its best to manage in what is a very difficult environment.

Operator:

Your next question comes from the line of Josh Shanker of Deutsche Bank.

Jim Tisch:

Good morning, Josh.

Jim Tisch:

Not really. I think of it that both CNA is undervalued and the stub is undervalued. So, and we've talked about this an awful lot. And that's what makes me so bullish on the stock.

Jim Tisch:

You have to look at is how much stock we buy in a particular quarter. And that will give you a pretty good insight into what our appetite is.

Jim Tisch:

It's generally been steady. We bought $1 billion of stock in 2018 and in 2019, through now we're just about at three quarters of $1 billion. So, yes, look, I'm frustrated. I think the stock has a lot of value. We haven't been shy about saying that and notwithstanding that to me, the stock still looks very cheap, but markets are markets.

Jim Tisch:

Yes. I don't think so. First of all, if we issued debt, if you read the rating agency reports, they want us to hold as much cash as we have debt. So, there is nothing so exciting about issuing debt. Secondly, there isn't enormous volume in low shares, so there's just a limit to how much you can buy. So, I don't know that issuing debt would really do us any good. Additionally, we have about $3.5 billion of cash now, if we wanted to -- and if the opportunity presented itself, we could use a good portion of that to repurchase more shares.

Jim Tisch:

First things first, I don't think the public equities are expensive. I think that valuations in private equity land are expensive.

Jim Tisch:

Okay. Yes. No, that I agree. With respect to hotels, we are operating in a very discrete, niche in the hotel industry. So, we're -- let's put aside Orlando for a second. We're not developing motels. We're not developing low service hotels. We're developing what we call and what the market calls upper upscale hotels. And generally we're marketing, we're building those hotels with significant meeting space to fit into the core competencies that we have. So, we're building hotels with meeting space near demand drivers. And, we're also doing it generally with help of one sort or another from the local municipalities, to make it so that, our hotels without that help just would not be economic to one that is economic without help. In order to do that, you have to have a long-term view because it's not a matter of just putting a shovel in the ground. It's a matter of working with the community and negotiating a transaction that's both good for the hotel company as well as the community. And so, this is not an area where we've seen private equity participate. So, no, they're not a factor in this.

Josh Shanker:

Okay. Those are all very complete and thorough answers. I appreciate it. Thank you.

Mary Skafidas:

Thank you, Josh. And thank you everyone for listening. That concludes Loews' third quarter 2019 earnings call. A replay will be available on our Web site, loews.com at approximately two hours.

Mary Skafidas:

Thank you, Stephanie, and good morning everyone, and welcome to Loews call. A copy of our earnings release, earnings supplement, and company overview, may be found on our website, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session, which will include questions from our shareholders. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company's statutory forward-looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings and earnings supplement for reconciliation to the most comparable GAAP measures. In a few minutes, our Chief Financial Officer, David Edelson will walk you through key drivers for the quarter, but before he does, Jim Tisch, our CEO, will kick off the call. Jim, over to you.

David Edelson:

Thank you, Jim, and good morning. For the second quarter, Loews reported net income of $249 million or $0.82 per share compared to $230 million or $0.72 per share in last year's second quarter. Our net income was up 8% over the prior year, while our earnings per share increased 14%. As average shares outstanding declined almost 5% from Q2 2018, given our share repurchase activity CNA continues to be by far the largest contributor to our net income and it posted a slight year-over-year increase. The bulk of the quarterly increase, however, was driven by Boardwalk Pipelines as its net income contribution more than tripled mainly due to two factors; number one, our ownership increase from 51% last year to the current 100%; and two, Boardwalk booked a net benefit of $19 million resulting from a customer bankruptcy and related contract cancellation. Offsetting the increases from Boardwalk and CNA were lower year-over-year contributions by Diamond Offshore and Loews Hotels. Despite the fact that Loews Hotels had an excellent quarter operationally. Let me now delve into the results in more depth. CNA contributed net income of $249 million, up from $240 million last year. This modest increase resulted from several nearly offsetting factors, underlying underwriting income, which excludes catastrophe losses and prior year development improved with CNA posting an underlying combined ratio of 94.6%, which was 0.7 points better than last year's second quarter. Despite the increase in underlying underwriting income, however, total underwriting income declined because of a lower level of favorable prior year development and marginally higher cat losses. CNA's calendar year combined ratio was 95.7%, which was 1.9 points above last year's second quarter result, but still highly respectable. CNA's after-tax investment income in its P&C segment was essentially identical to Q2 2018. The Corporate and Life & Group segments both had significant favorable variances. In last year's second quarter, CNA incurred one-time costs from transitioning to a new IT infrastructure service provider. These non-recurring costs were booked in CNA's Corporate segment. And in Life & Group, results improved largely from continuing favorable persistency and long-term care as many policyholders chose to lapse coverage or reduce benefits in lieu of premium rate increases. Finally, an early redemption charge on the retirement of debt reduced CNA's contribution to our net income by $15 million. In summary CNA posted strong P&C underwriting and investment results and improved results in its non-P&C segments. Turning to Diamond Offshore. Diamond contributed a $52 million net loss compared to a $37 million net loss in last year's second quarter. Diamond's results continue to be negatively affected by the challenging conditions in the global offshore drilling market, while numerous factors impacted Diamond's quarterly results and comparison, let me highlight three of them. Number one, contract drilling revenues were down 22% year-over-year as revenue earning days declined 8%, and average daily revenue per working rig was down 14%. Downtime, contract timing and lower day rates drove these declines. Number two, contract drilling expenses were up 19%, with the increase largely attributable to the adverse impact of the amortization of deferred contract prep and more costs incurred to ready certain rigs for their current contracts. And number three, Diamond booked a rig impairment charge last year which reduced Diamond's contribution to our Q2 2018 net income by $12 million and a gain on sale this year, which increased our net income by $5 million. As we have highlighted for the past several quarters, Diamond remains focused on maintaining a healthy liquidity position while investing in its fleet to ensure its rigs are considered top tier by customers. Boardwalk's net income contribution was $53 million, up from $16 million in Q2 2018, mainly due to the increase in our ownership from 51% to 100% and the contract cancellation payment referenced earlier. Operationally Boardwalk had a good quarter, absent the contract cancellation payment, net revenues were up 5.7%, EBITDA margins expanded by about 50 basis points and EBITDA rose 6.3%. The underlying revenue increase was propelled by growth projects recently placed in service, revenue offsets included the net impact of contract restructurings, expirations and renewals. Let's turn to Loews Hotels, which contributed $12 million to our net income, down from $17 million last year. Loews Hotels underlying year-over-year earnings gains were obscured this quarter by pre-opening expenses on properties under development and by the write-off of capitalized costs related to our terminated development project. These items totaled $7 million after-tax in Q2 versus almost no such expenses last year. Revenues declined mainly due to the sale of two owned hotel properties during the past 12 months as well as renovations at a few owned hotels. As a reminder, Loews Hotels uses the equity method of accounting for its joint venture properties meaning the revenues for those properties, which include the hotels at the Universal Orlando Resort are not shown as revenue in our GAAP financial results. Loews Hotels adjusted EBITDA which excludes non-recurring items and is reported and defined in our quarterly earnings summary was $68 million in the quarter, up from $67 million in last year's second quarter. Year-to-date, adjusted EBITDA is $129 million versus $123 million last year. I would note that the renovation activity cited above and the sale of three properties over the last 12 months, two owned in one JV, held back the year-over-year adjusted EBITDA comparison. The opening of almost 4,100 rooms in Kansas City, Orlando, St, Louis, and Arlington, Texas from Q2 2019 through Q4 2020 should provide a boost to adjusted EBITDA. Turning to the parent company. Investment income was down modestly. Contributing to the decline was a lower level of invested assets including a much smaller portfolio of limited partnership investments. At June 30, the parent company portfolio of cash and investments totaled $3.5 billion with 80% in cash and equivalents and the remainder, mainly in marketable equity securities and a portfolio of limited partnership investments. The LP portfolio has declined from about $950 million at June 30, 2018 to $250 million at quarter end, consistent with our decision to shrink the size of this portfolio. As a reminder, the parent company portfolio totaled $4.7 billion on June 30, 2018, which was just prior to the July 2018 purchase for $1.5 billion of the Boardwalk LP units not previously owned by Loews. Consolidated Container, which is reported as part of other corporate results completed the acquisition of Tri State distribution late in the second quarter. Non-recurring expenses connected to the acquisition negatively affected other corporate results in Q2. We received $110 million in dividends from our subsidiaries during the past quarter, $25 million from Boardwalk and $85 million from CNA. Dividends received year-to-date totaled just over $700 million. We repurchased 3 million shares of our common stock during the second quarter for a total of $151 million. After quarter end, we repurchased an additional 421,000 shares for just under $23 million. Year-to-date, we have repurchased 0.4 million shares or 3.3% of our shares outstanding at the beginning of the year. I will now hand the call back to Mary.

Jim Tisch:

Sure. So as David said, a year ago, we had about $4.7 billion in cash and liquid investments and today that number is about $3.5 billion. The reason the cash and liquid investments has declined is because offsetting the close to $1 billion of cash inflow that we had from dividends over the past year from our subsidiaries, we spent $1.5 billion acquiring the minority interest in Boardwalk, we also spent approximately $1 billion on share repurchases. So with $3.5 billion rather than close to $5 billion, we decided that we needed to make some adjustments in our investment portfolio. And one of the areas where we especially wanted to make an adjustment was in our hedge funds. We've decided that the returns that we've received on the hedge funds haven't been sufficient for the risk. My guess for why that's been the case, is that, the hedge fund space, as I think everybody knows is very, very crowded and returns have been competed away. So we still retain about $250 million in hedge funds, and we also have approximately $600 million in equities and other than that, our investments are primarily in treasury bills, treasury notes and other short-term money market instruments.

Jim Tisch:

So what I find so amazing is that dry powder within the private equity world continues to move upwards and the leverage markets have also been very accommodating to highly levered transactions. So in my mind this has created a massive supply demand imbalance between assets that are for sale and buyers that are equal - that are eager to buy them. So what's happened is that multiples have moved up rather significantly and they've moved up in just about every sub-sector of the market. Making matters worse, investment bankers and sellers have found adjustments to earnings with which to market their assets. There is now a term called adjusted EBITDA, and as you might imagine, when someone is selling a business, adjusted EBITDA is higher oftentimes, significantly higher than the stated EBITDA. Those adjustments reflect what sellers considered to be one-time cost that should be excluded and future benefits, that should be included. So as a result, while the fancy charts may show private asset multiples approaching their 07 peaks. It's my estimation that in fact, they far surpass it. And as I would like to say, welcome to the world of low interest rates. My guess is that what we've seen going on will persist for some time and while we remain dutifully on watch for any potential opportunities, I'm basically pretty skeptical that we'll be adding a new leg in this environment. What I'm seeing today is that you really need synergies in order to make the math on any corporate acquisition work. So for all of these reasons, we continue to acquire assets where we currently have strong businesses that can make use of the synergies, but it seems to me, highly unlikely that we'll get into any new industry or business at this point in time.

Jim Tisch:

So let me start with an update on our investment thesis in CCC, a reminder for you. We were attracted to CCC because it was a good size player in a highly, highly fragmented market that we felt could serve as a platform for growth for Loews in the packaging industry. As I mentioned on the call, in the past several years, Loews - since Loews acquired CCC, we've made six tuck-in acquisitions. These acquisitions have helped us to diversify CCC away from the dairy and water packaging business which has been declining and it's also these acquisitions have also added very significant post acquisitions synergies. These tuck-ins were all financed self funded by CCC. But all is not entirely sunshine in those, there are headwinds on the - in the industry, including increased labor costs and also a steeper decline in the dairy and water volumes than we had previously expected. But overall, the original investment thesis still holds. Now in terms of adding value to their customers, CCC's first step with any customer is to try to understand what their priorities are and to develop our customized packaging solution for them. So one example of providing value added is our recent CCC innovation that adds value not only by helping customers meet their needs, but also by reducing the impact of plastic packaging on the environment, and specifically, what I'm talking about is a product from CCC called Dura-Lite, it's a - in the packaging world, it really is a major leap forward. Dura-Lite was introduced in 2016, and it's a technology that creates a plastic container that is as strong or stronger than the original, but using the 10% to 20% less resin. So Dura-Lite bottles now make up more than 50% of all the dairy and water gallon bottles that CCC ships. And a side effect of that is that the Dura-Lite product has translated into 9 million fewer pounds of resin being used by CCC which gets us to the environmental part of the question. CCC is also, I'm proud to say, the second largest producer in United States of recycled high-density polyethylene, which is the major resin that CCC uses. In the past, manufacturers have been reticent to use recycled resin in packaging, because it was more expensive per unit than virgin resin. But more recently, do I believe to the focus on sustainability, that picture has started to change and we're seeing that more companies are taking an interest in using this greener somewhat more expensive packaging material. I'd like to add that CCC takes very seriously the impact the plastic packaging has on the earth and it continues to develop solutions that are better for the world and better for CCC's customers. Thanks.

Operator:

Your next question comes from the line of Josh Shanker with Deutsche Bank.

Jim Tisch:

So my outlook is that the offshore drilling business is going to come back at some point in time. What I'm pleased about with respect to Diamond is that it has a fleet that is very strong and capable and when the recovery comes which eventually will, I believe that Diamond will be able to do well in that environment. I think that a big problem for offshore drilling has been the price of oil, which has been not only volatile, but relatively low, it's competing with Shale production, which offshore drilling has been competing with Shale production and right now that is the flavor du jour for the oil markets. But while all this time has passed and while the offshore drilling market has been weak, what we've seen is a large amount of scrapping in the offshore drilling space. I've been through this movie once before in the supertanker business, in the early to mid '80s and there are two things that are going on simultaneously. Number one, we're seeing that demand is going down and we're also seeing that rigs are being laid up, and as they get laid up and those companies don't have the funds to maintain and invest in those rigs, they deteriorate sitting on the water as they do a highly corrosive environment and after a few years of that rigs become more and more expensive to reactivate. So my guess is that over the next several years, we're going to - if oil prices don't improve and if activity doesn't increase - does not increase significantly, we will see more rigs scrapped no longer in the market. And then at some point in time, the supply and the demand curve will change, there will be more demand for rigs and bingo, there won't be enough supply and before you know it, rates will go up again. So my view is that there will be at some point in time a change in the marketplace. Going back to my $2 comment, I mentioned that because Diamond Offshore is consolidated with Loews. And so it's earnings show up in our net income numbers and the mention of $2 was simply a reflection of the fact that even though those profit and loss numbers may be significant within Loews that the total value of our investment according to Mr. Market is less than $2 per Loews share.

Jim Tisch:

So Diamond has added 4.5 years of backlog at attractive rates. We believe the Diamond based on the way it's financed has a very strong runway. And we believe that Diamond can do well in an improving environment which I think is coming. As for additional investments, we'll have to wait and see just what the opportunities are, and we will do whatever is in the best interest of the Loews shareholders.

Jim Tisch:

No, not really. The - we have - the coupons that we have are Loews debt range from 2% and 5% ways to 6%. We don't feel that additional debt at the Loews level will make a significant difference for how we operate the business. So notwithstanding the low rates, Loews is now looking to raise any more debt. For our subsidiaries, they're using the opportunity to refinance some of their debts, but we're not borrowing speculatively at this point in time, and have no intention to do so.

Jim Tisch:

So as you know from time to time, we have provided financing for our subsidiaries. But as a general principle, we want our subsidiaries to finance themselves and they all know and understand that and have structured the finances in such a way that they can get that outside financing.

Jim Tisch:

My pleasure.

Operator:

Thank you. This concludes today's conference call. You may now disconnect.

Mary Skafidas:

Thank you, Christie, and good morning everyone. And welcome to Loews Corporation's first quarter earnings conference call. A copy of our earnings release, earnings supplement, and company overview, may be found on our website, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session, which will include questions from shareholders. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company's statutory forward-looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings and earnings supplement for reconciliation to those comparable GAAP measures. In a few minutes, our CFO, David Edelson, will walk you through the key drivers for the quarter. But before he does, Jim Tisch, our CEO, will kick off the call. Jim, over to you.

David Edelson:

Thank you, Jim, and good morning. For the first quarter, Loews reported net income of $394 million or $1.27 per share compared to $293 million or $0.89 per share in last year's first quarter. This healthy increase was driven by two main factors. Number one, strong investment results at both CNA and the parent company stoked by the first quarter's robust equity market performance; and number two, Boardwalk Pipeline whose contribution to our net income more than doubled year-over-year mainly due to the increase in our ownership from 51% to the current 100%. While our net income was up 34% over the prior year, earnings per share increased 43% as average shares outstanding declined 5.6% from last year's first quarter. Now let me walk through the ins and outs of the quarter, starting with CNA which accounted for over 75% of our net income in Q1 2019. CNA contributed net income of $305 million. This 17% increase was driven by three main factors. Number one, higher net investment income; number two, a higher level of investment gains; and number three, improved performance in CNA's corporate segment. Before describing these three drivers, I'd highlight that CNA continues to successfully execute on its strategy of profitable premium growth. P&C underwriting income was down, however, year-over-year as CNA posted an all-in combined ratio in the quarter of 97.8% versus 93.1% in Q1 2018. The increase in the combined ratio was attributable to higher year-over-year cat losses, a lower level of favorable prior-year development, and a slightly higher underlying combined ratio. Importantly, the underlying combined ratio, which excludes cat losses in prior year development came in at 94.9%. While this is higher than last year's first quarter, it is below CNA's full-year 2018 underlying combined ratio of 95.4%. CNA's underlying loss ratio in the quarter was extremely strong coming in below 61%, about one point better than the underlying loss ratio for full-year 2018. On the CNA earnings call earlier today, CFO James Anderson highlighted why it makes sense to compare this quarter's underlying underwriting results to full-year 2018. Let me return to the three things that drove CNA's year-over-year earnings increase. Number one, CNA reported after-tax net investment income of $465 million, up $60 million over last year's first quarter and $186 million better than fourth quarter results. The fourth quarter was negatively impacted by the sell-off in the equity markets. The year-over-year improvement in NII was attributable almost entirely to returns on CNA's portfolio of limited partnership in equity investments. This portfolio returned 4.5% in Q1 2019 versus 1.3% last year and a negative 5.7% last quarter. Number two, CNA reported after-tax investment gains of $24 million versus $10 million last year. CNA records the mark-to-market on its non-redeemable preferred stock holdings in investment gains and losses. And number three, the after-tax loss in CNA's corporate segment declined to $6 million in Q1 2019 compared to a $60 million loss last year as the company recorded a net retroactive reinsurance benefit this year as compared to a net charge in Q1 2018. As a reminder, the retroactive reinsurance results relate to the 2010 loss portfolio transfer with National Indemnity involving CNA's asbestos and environmental pollution reserves. CNA conducted an LPT reserve review in last year's first quarter. Subsequently, however, the company decided to conduct these reviews in the fourth quarter going forward. As such there was no review or charge in Q1 2019. In fact, results benefited from the amortization of the deferred gain associated with the LPT. Taken together, the year-over-year favorable variances in CNA's investment income, investment gains, and corporate segment amounted to $114 million after-tax for Loews. Turning to Diamond Offshore. Diamond contributed $37 million net loss in the first quarter compared to a $10 million positive contribution in last year's first quarter. As a reminder, Diamond's after-tax contribution last year would have been a $13 million loss if not for the favorable impact of the reversal of an uncertain tax position in the quarter. The increase to year-over-year loss was an outgrowth of the challenging conditions in the global offshore drilling market. Diamond experienced a 21% year-over-year decline in contract drilling revenues as revenue earning days were down 9% and average daily revenue per working rig was down 12%. Contract drilling margins declined 10 points from 36% to 26%. Diamond remains focused on maintaining a healthy liquidity position, while investing in its fleet to ensure its rigs are considered top tier by customers. Boardwalk's net income contribution more than doubled to $79 million predominantly due to the increase in our ownership from 51% to 100% in the third quarter of 2018. Operationally, Boardwalk had a good quarter. Net revenues were up 3.6% and EBITDA margins expanded by about two points. Pre-tax income at Boardwalk rose 11% over Q1 2018. The revenue increase was propelled by growth projects and the transportation storage of natural gas liquids. Revenue offsets included a decline in parking and lending and natural gas storage and the net impact of contract restructurings, expirations, and renewals. Moving on to Loews Hotels which contributed $13 million to our net income in Q1 2019 the same amount as last year. Those hotels underlying year-over-year earnings gains from ongoing operational improvements were obscured by strategic repositioning activity as the company both develops new hotels and selectively divests properties that no longer fit its strategy. The company booked unusual charges of $3.6 million after-tax in Q1 made up largely of an impairment charge on a property held-for-sale and pre-opening expenses on properties under development. Such charges were negligible in last year's first quarter. Those hotels adjusted EBITDA which excludes non-recurring items and as reported and defined in our quarterly earnings summary was $61 million in the quarter, up from $57 million in last year's first quarter. Turning to the Parent company, investment income was up markedly with higher returns on equities driving the year-to-year increase. At March 31, the Parent company portfolio of cash and investments totaled $3.4 billion with over 70% in cash and equivalents and the remainder mainly in marketable equity securities and a portfolio of limited partnership investments. As a reminder, the Parent company portfolio totaled close to $4.9 billion on March 31, 2018. The decline over the past 12 months resulted primarily from share repurchase activity together with the purchase last summer of the Boardwalk LP units not previously owned by Loews. Importantly, over the past year, we have kept our focus on liquidity by reducing our holdings of non-cash assets in favor of maintaining a high-level of cash and equivalents. We received $596 million in dividends from our subsidiaries during the first quarter, $26 million from Boardwalk, and $570 million from CNA which includes the $0.35 regular quarterly dividend and the $2 special dividend. As Jim mentioned, we repurchased 6.8 million shares of our common stock during the first quarter for a total of $322 million. After quarter-end, we repurchased an additional 960,000 shares for $47 million. Let me now hand the call back to Jim.

A - Mary Skafidas:

Thank you, Jim. Before we open up the call for questions, we have four questions submitted to us from shareholders. We encourage shareholders to send us questions that they would like us to answer, and we hope that they continue to do so. Our first question is to Jim. Jim since the P&C industry has always traded at a discount to the market, why is today's discount significant as you think about share repurchases?

Mary Skafidas:

Okay, thank you, Jim. Our next question is from a shareholder who wants to know about CCC Loews' recent acquisition or most recent acquisition. So they ask, it’s been about two years since you acquired CCC. Can you please give us an update?

Mary Skafidas:

Excellent, thank you. Our next question is about Diamond. How does Loews feel about Diamond especially in this protracted down cycle?

Mary Skafidas:

Okay, thank you, Jim. Our last question from shareholders has to do with CNA, Jim obviously you think CNA is trading cheap to its peers. What do you think about that valuations of Loews other subsidiaries?

Mary Skafidas:

Thank you. Okay. Christie we'd like to turn it --

Mary Skafidas:

Clearly. Christie, we'd like to turn the call over to you and open up the call for additional questions from conference call participants.

Josh Shanker:

Good morning. So I don't mean to be reductive but I call Loews a multiline investment conglomerate. I hope you won't be too disappointed.

Josh Shanker:

Okay. So one of your not early competitor, but one of your peers who was a very established company said recently that he would expect to warn your shareholders over the long run that he doesn't think you can much outperform the S&P 500. And is that a function of -- you don't have to speak about his company. But when you think about Loews, is Loews ability, I'm thinking long-term, do so a function of size and does that diminish over time or is it that you have an unusual mix of businesses you believe that are better than market businesses?

Josh Shanker:

Okay. By extension look you're also -- you do generally a lot of free cash and you can use that to buy back your own stock or you can use that to become an expert in another company and buy that company. Do you believe that ultimately the valuation discount of Loews is so great that the benchmark necessary to put new money to work in a sixth business is quite high for you to try and exceed?

Josh Shanker:

And then I guess I might misquote you, Jim, but a few times you've had a Eureka moment, where you could say, "This little money buys this much stuff". I don't think that's exactly how you said it. Do you expect to have one of those again or is market efficiency gotten to the point where the idea that you're going to find oil tankers available at scrap value just doesn't possibly make sense anymore?

Josh Shanker:

All right. And one final question that may dovetail. You mentioned getting out of hotels that no longer fits the strategy of Loews Hotels and acquiring more properties that do. Can you enunciate in a concise way what the strategy is right now?

Josh Shanker:

Great. I make sure that I call you after I develop my novels into a Theme Park as well.

Mary Skafidas:

Thank you, Josh. That concludes our call for today. As always we want to thank you for your continued interest. A replay will be available on our website, loews.com in approximately two hours. Thanks again.

Mary Skafidas:

Thank you, Laurie, and good morning, everyone. Welcome to Loews Corporation’s fourth quarter and year-end earnings call. A copy of our earnings release, earnings supplement and company overview, may be found on our website, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session, which will include questions from our shareholders. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the Company’s statutory forward-looking statements disclaimer, which is included in the Company’s filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings and earnings supplement for reconciliation to the most comparable GAAP measures. In a few minutes, our CFO, David Edelson will walk you through the key drivers for the quarter and the year. But before he does, Jim Tisch, our CEO, will kick off the call. Jim, over to you.

David Edelson:

Thank you, Jim, and good morning. Today we reported fourth quarter net loss of $165 million or $0.53 per share, as compared to net income of $481 million or $1.43 per share in last year’s fourth quarter. For the full year, we reported net income of $636 million or $1.99 per share, down from $1.16 billion or $3.45 per share in 2017. As a reminder, included in last year’s fourth quarter and full year net income was a $200 million net benefit related to the passage of the Tax Cuts and Jobs Act. We have included a table in our earnings supplement laying out the impact of this net benefit by reporting segment. In my ensuing remarks, I will speak to results before the Q4 2017 impact of the Tax Act. Note that the year-over-year comparisons were also affected by the ongoing impact of the lower U.S. corporate tax rate. Let me start by discussing the key drivers of our fourth quarter loss and then turn my attention to our full year results. As Jim mentioned, the two main drags on our earnings in Q4 were investment results at both CNA and the parent company caused by difficult equity market conditions and catastrophe losses at CNA caused primarily by Hurricane Michael and the California wildfires. At CNA, the Company’s limited partnership and common stock investments lost ground in the fourth quarter, yielding a negative return versus positive results in Q4 2017. This swing accounted for $126 million of the decline in CNA’s contribution to our net income. As Jim highlighted, negative returns in a quarter when the S&P 500 was down 14% are no surprise. Additionally at CNA, the company had realized investment losses in the fourth quarter versus realized gains last year. This change accounted for another $73 million of the decline in CNA’s net income contribution. The Loews parent company portfolio of limited partnership and common stock investments also lost ground in Q4, accounting for $82 million of the decline in after-tax investment income. A lower level of invested assets in 2018 also contributed to the year-over-year decline. As for catastrophe losses, CNA booked $146 million of pre-tax losses in the fourth quarter, as compared to just $38 million in last year’s fourth quarter. CNA is in the business of assuming risk, so it fully expects to absorb catastrophe losses in the quarter with such significant catastrophe activity. The higher level of catastrophe losses at CNA accounted for $81 million of the year-over-year decline in CNA’s contribution to our net income. To summarize, the factors cited above in total accounted for over 80% of the year-over-year decline in our quarterly net income, excluding the one-time impact of the Tax Act. A couple more observations on the quarter before turning to the full year. Average shares outstanding declined 7% from last year’s fourth quarter, reflecting our share repurchase activity and the reduction in the corporate tax rate, actually exaggerated the size of the year-to-year quarterly variance in our after-tax results given the pre-tax losses at CNA, Diamond and the parent company. Now let me review our full year results. As I mentioned earlier, our net income of $636 million in 2018 was lower than the $964 million we earned in 2017, which excludes the $200 million one-time impact of the Tax Act. CNA’s core underwriting results were strong in 2018, as it posted a consistent underlying combined ratio of 95.4% and net written premium growth of 4%. Catastrophe losses were actually down on an annual basis, but offsetting this, the company posted a lesser amount of favorable prior year development. All in all, at CNA, pre-tax underwriting income was up modestly. The main drivers therefore, of the year-to-year decline in CNA’s contribution to our net income were net realized investment losses, lower P&C net investment income and increased charges related to the loss portfolio transfer. Let me touch on [indiscernible] CNA swung from realized gains in 2017 to losses in 2018. This swing reduced our net income by $112 million relative to last year. P&C investment income for 2018 was hurt by a $42 million pre-tax loss generated by limited partnership and common stock investments, as compared to $207 million of pre-tax gains in the prior year. This change reduced our net income by $150 million versus last year. Finally CNA’s Corporate segment contributed to the year-to-year decline, largely due to prior year development on the loss portfolio transfer with National Indemnity. As a reminder, in 2010, CNA sees a substantially all of its legacy asbestos and environmental liabilities to National Indemnity, through a loss portfolio transfer. Activity under the loss portfolio transfer is accounted for using retroactive reinsurance accounting, which is described in all its glory in our 10-K. CNA recorded adverse net prior year reserve development under the loss portfolio transfer in 2018, which reduced Loews’ year-over-year net income by $34 million. Turning to Diamond. Diamond Offshore reported a pre-tax loss of $226 million as compared to a loss of $22 million in 2017. Stripping out non-recurring items, such as asset impairments in both years and a loss on the early extinguishment of debt in 2017, the year-to-year pre-tax comparison is a pre-tax loss of $176 million in 2018, against pre-tax income of $118 million in 2017. Diamond continued to experience a fall-off in revenues in 2018, given the difficult market conditions and the effects of contract renegotiations. Contract drilling revenues fell 27% at both revenue earning days and average daily revenue declined. Operating expenses excluding non-recurring items declined only 6%, resulting in a swing from pre-tax operating income in 2017 to an operating loss in 2018. As we’ve discussed, Diamond is positioning itself for an eventual upturn. In 2019, Diamond will be investing approximately $350 million in its fleet to ensure its race continue to be considered top tier by customers. Diamond ended the year with over $450 million in cash and equivalents. The company has over $1.2 billion of revolver capacity until 2020 and $950 million of capacity into 2023. Boardwalk experienced a 32% decline in pre-tax income in 2018, which excludes the loss on the sale of a processing plant in 2017. Net revenues declined 5%, as transportation revenues from growth projects and higher system utilization were more than offset by unfavorable parking loan and storage revenues, as well as the net negative impact of transportation contract expirations, renewals and restructurings. Moreover, expenses were up given higher depreciation expense from new growth projects, resulting in pre-tax margins declining from 27% to 20%. Despite the decline in pre-tax income, Boardwalk’s contribution to our net income, excluding the loss on sale and one-time Tax Act impacts rose from $101 million in 2017 to $135 million in 2018. The increased net income contribution relates to our purchase in July of 2018 of the outstanding publicly held common units of Boardwalk. For the second half of the year, we included 100% of Boardwalk’s earnings in our net income, versus just 50% – 51% during all of 2017 and the first half of 2018. As Jim mentioned, Loews Hotels had a strong year, generating pre-tax income of $73 million, up from $65 million in 2017. Excluding all non-recurring items such as impairments, disposition gains and losses and pre-opening expenses, pre-tax income increased from $54 million in 2017 to $72 million in 2018. The extent of Loews Hotels non-recurring items primarily relates to ongoing portfolio management along with the development of new properties, all consistent with the company’s strategic focus on group meetings hotels and immersive destinations. Loews Hotels adjusted EBITDA, which is defined and disclosed in our quarterly earnings supplement, rose 15% in 2018 to $228 million. Numerous properties, including the six hotels at the Universal Orlando Resort, the Loews Miami Beach and the Loews Philadelphia to name just a few performed well during the year. Parent company net investment income was down meaningfully in 2018. The small loss we posted for the year, stemmed from disappointing returns on our holdings of equity securities and LPs, again, largely attributable to the equity market drop in Q4. Also, our portfolio of cash and investments averaged $3.9 billion in 2018, down from an average of over $5 billion in 2017. Share repurchase activity and the purchase of the Boardwalk units, caused the decrease. We continue to maintain an extremely strong and liquid balance sheet. At year-end, the parent company portfolio totaled $3.1 billion with 62% in cash and equivalents, 33% in LPs and marketable equity securities and the remaining 5% in fixed maturities. During the fourth quarter, we received $110 million in dividends from our subsidiaries. $85 million from CNA and $25 million from Boardwalk. For the full year, we received total dividends of $878 million from CNA and Boardwalk, with CNA contributing $801 million of that amount. Today CNA declared a $2 per share special dividend in addition to its regular $0.35 quarterly dividend. Combining the two, Loews will receive $570 million in dividends from CNA this quarter. We repurchased 2.9 million shares in the fourth quarter for a $135 million and 20.3 million shares during all of 2018 for just over $1 billion. Since year-end, we have repurchased an additional 0.9 million shares at an average price of about $46.50. I will now hand the call back to Mary.

A - Mary Skafidas:

Our first question is, CNA’s earnings this quarter are pretty ugly. Can you add to your prepared remarks and comment further on their results?

Mary Skafidas:

Thank you, Jim for that additional clarification. Our next question is on Loews Hotels. Loews Hotels has a number of development projects under way. Can you expand on the Loews Hotels strategy?

Mary Skafidas:

Great. Thank you, Jim. Next question is on Diamond Offshore. How do you feel about the offshore drilling market is recovering on the horizon? Why hasn’t Diamond taken part in industry consolidation?

Mary Skafidas:

Okay. Thank you, Jim. Laurie, we’d like to turn the call over to you to open up the call for additional questions.

Josh Shanker:

Yes. Good morning, everybody.

David Edelson:

Hi.

Jim Tisch:

Sure. So first, let me address the issue of results. At Loews, in the first five weeks, five or six weeks of this year, we have earned back all that we lost in the fourth quarter of last year. So we reported a loss of about $70 million in our portfolio in the fourth quarter of last year, and the portfolio was up by more than that at Loews. At CNA, they’ve recovered over 60% of their losses. But let me take a minute and talk about the different types of things that people can be invested in. You can invest in stocks, you can invest in hedge funds, you can invest in private equity. And one of the things that’s – that’s struck me in this past – in the past few months is that in the fourth quarter, the S&P 500 was down 14%, our hedge funds were down about 6%, and generally, across the board private equity firms have reported no loss at all. And I actually find that quite incredulous. It’s what I would call a self-graded exam. There was a temporary drop in the market and the private equity firms didn’t report a loss. It’s inconceivable to me that stocks could be down 14% and that there is no loss in private equity. So CNA is in some ways bearing the pain of being mark-to-market, whereas in private equity, there is more of what I would call a mark to moving average, but it’s just something that we have to deal with. In terms of the strategy, CNA’s had a very good run with hedge funds as has Loews. We’re starting to de-emphasize them because we think that, number one, there’s an awful lot of capital that’s invested in them. We think the returns has been competed down. Additionally, in today’s – over the past 10 years, you were able to earn zero on your cash balances. Today you can easily earn 2.5% to 3%. So simply investing in cash is not such a terrible alternative to hedge funds. We’re looking at risk assets that go beyond hedge funds and private equity. We’re looking at certain debt instruments. We’re looking at certain, what I would call, nontraditional private equity investments. We’re just trying to figure out over the coming year what will be the best vehicles for risk assets for both CNA and for Loews.

Josh Shanker:

Okay. Thank you. And if I can get one more in. Changing gears, can we talk about acquisition pipeline and how it looks for Consolidated Container?

Josh Shanker:

Would all acquisitions that CCC does be self-funded?

Josh Shanker:

Okay. Thank you very much.

Operator:

Thank you. That does conclude the Q&A portion of the conference. I’ll now return the call to Mary Skafidas for any closing comments.

Operator:

Thank you for participating in the Loews Corporation Q4 2018 earnings conference call. You may now disconnect.

Analysts:

Joshua Shanker - Deutsche Bank

Mary Skafidas:

Thank you, Samantha. Good morning, everyone, and welcome to Loews Corporation third quarter earnings conference call. A copy of our earnings release, earnings supplement and company overview may be found on our website, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session. Before we begin, however, I will remind you that this conference call might include statements that are forward looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company's statutory forward-looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings and earnings supplement for reconciliation to the most comparable GAAP measures. In a few moments, our Chief Financial Officer, David Edelson, will walk you through the key drivers for the quarter. Before he does, Jim Tisch, our CEO, will kick off the call. Jim, over to you.

David Edelson:

Thank you, Jim, and good morning. For the third quarter, Loews reported net income of $278 million or $0.88 per share, up from $157 million or $0.46 per share in last year's third quarter. Our EPS comparison benefited from share repurchase activity over the past 12 months. Page 13 of our earnings supplement sets forth the key quarterly drivers. A quick summary of the quarter. CNA accounted for the bulk of our year-over-year net income improvement as lower catastrophe losses and continued strong underlying -- underwriting income drove the results. Boardwalk and Loews Hotels also posted favorable year-over-year contributions. Offsetting these increases were lower contributions from Diamond Offshore and the parent company investment portfolio. As in Q1 and Q2, the lower corporate tax rate benefited our year-over-year after-tax results. Now for more detail. CNA's after-tax earnings contribution was $300 million, up $170 million from Q3 2017. P&C underwriting income drove the increase. CNA's third quarter combined ratio improved almost 10 points from 103.7 in 2017 to 94.2 in 2018, translating into a $161 million increase in pretax P&C underwriting income at CNA. Lower catastrophe losses at CNA drove the year-over-year underwriting improvement. In 2017, CNA had pretax catastrophe losses of $269 million or 16.5 points versus only $46 million or 2.6 points in this year's third quarter. Catastrophe losses reduced Loews' third quarter net income by $32 million this year versus $170 million last year. CNA booked favorable prior year development in both Q3 2018 and Q3 2017, although the amount of favorable development was less this year than last, partially offsetting the earnings impact of this substantially lower catastrophe losses. CNA's underlying combined ratio of 94.8, which excludes cats and prior year development, was essentially in line with last year's third quarter. Other factors favorably impacting CNA's year-over-year comparison were higher after-tax net investment income, the absence this year of last year's loss on the early redemption of debt and higher income in the Life & Group segment, which includes long-term care. CNA has disclosed more information about its long-term care business in its quarterly earnings presentation, which can be found on its IR website. Please note that CNA completed its long-term care reserve review in Q3 and intends to shift its reserve review to the third quarter going forward. The company's GAAP LTC reserves, which totaled just under $12 billion, are split approximately 77-23 between reserves for future policy benefits, also known as active life reserves, and claims reserves. This year's review resulted in a modest favorable release from its claims reserve and no unlocking of its active life reserves. Turning to Diamond Offshore. Diamond contributed a net loss of $27 million in Q3 2018 as compared to net income of $6 million last year, reflecting their continued decline in drilling activity and average day rate for Diamond fleet. Contract drilling revenues declined 21% versus only a 5% decline in contract drilling costs. Revenue earning days and average daily revenue were both down as the company experienced contract expirations as well as rigs rolling to lower day rates. Unusual items affected Diamond's earnings in both years' third quarters. Diamond's 2018 contribution was reduced by $8 million because of a legal settlement. Last year, a loss on the early retirement of debt reduced our earnings by $11 million. Diamond continues to focus on ensuring it has ample liquidity during this extended market trough. At the beginning of our October, Diamond executed a new 5-year $950 million revolving credit facility. The new revolver is in addition to Diamond's existing revolver, which was reduced to $325 million, $100 million, of which matures in 2019 and the remainder in the fourth quarter of 2020. Currently, both of the facilities remain undrawn. Boardwalk contributed $28 million to our net income, up from $17 million last year. The year-over-year comparison was affected by Loews' 100% ownership of Boardwalk in Q3 2018 versus 51% last year. Had Loews owned 100% of Boardwalk in last year's third quarter, net income contribution would have declined year-over-year even with the reduction in the corporate tax rate. The decline in profitability stemmed from margin compression, which caused Boardwalk's pretax income to drop from $69 million to $38 million in Q3 2018. The company experienced a $17 million decrease in net operating revenues, a $12 million increase in operating expenses and a slight increase in interest expense. The revenue decline was driven by contract expirations, contract renewals at lower rates, contract restructurings and lower parking & lending and storage results. Partially offsetting these declines were revenues generated by the growth projects and higher system utilization. Boardwalk's operating expenses increased because of the depreciation property taxes and employee-related costs. Loews Hotels had a terrific third quarter. Its net income contribution was $11 million, up from $4 million in Q3 2017. Its adjusted EBITDA, which is reported and defined in our quarterly earnings supplement, rose nearly 17% from last year's third quarter to $49 million. Loews Most Miami Beach and Coronado were the main drivers of the improved performance. Continued earnings growth generated by the Universal Orlando joint venture was masked by costs associated with the opening of the 600-room Aventura Hotel during the third quarter. Turning to the parent company. Pretax investment income was $5 million, down $43 million from the prior year's third quarter driven by lower returns on equities and alternatives. The corporate tax rate differential between the 2 years benefited the year-over-year after-tax comparison. Corporate and other was consistent with the prior year on a pretax basis. The higher after-tax loss was solely attributable to the lower tax rate in Q3 2018. During Q3 2018, we received $111 million in dividends from our subsidiaries, $85 million from CNA and $26 million from Boardwalk. We repurchased 1.8 million shares during the third quarter at an aggregate cost of $88 million. We purchased an additional 1 million shares since quarter end for approximately $47 million. As Jim mentioned, we have repurchased 18.4 million shares during 2018 for about $923 million, representing 5.5% of our shares outstanding at year-end 2017. Loews ended the quarter with $3.2 billion in cash and investments. As I stated last quarter, we are rebalancing our invested assets in light of the cash used to acquire the Boardwalk units. At quarter end, cash and equivalents accounted for over 60% of the parent company portfolio. Let me now turn it back to Mary.

Operator:

[Operator Instructions]. And your first question comes from the line of Josh Shanker with Deutsche Bank.

James Tisch:

When you say another 10%, do you mean...

James Tisch:

You mean at selling shares down to 80%?

James Tisch:

We're very happy with our investment in CNA. We're buying in the shares of Loews. For every share of Loews, there's more than 0.77 shares of CNA. So for the life of me, I can't imagine why it is we should sell shares of CNA. We think Loews is cheap. We think CNA is cheap.

James Tisch:

The last sentence of my comments said that if the market isn't going to price our shares and CNA's shares accordingly, we'll just take the gift and buy in the shares. Listen, I would love for CNA to be at a price that reflects its true value. But as you know, I don't complain about it. We put our money where our mouth is instead.

James Tisch:

So we're pleased with the increase in treasury rates. That should allow CNA to get a higher rate of returning on money that it has to reinvest that is otherwise might have earlier this year or over the past few years. In terms of equities, we're not making a big change to our portfolio now. As David has said, we have reduced our hedge fund portfolio somewhat, reflective the fact -- of the fact that we have $3 billion to $3.5 billion of investment assets rather than $5 billion. And likewise, there's been a slight reduction of hedge funds at CNA. But otherwise, there has been no major moves in the portfolios. One other thing that -- I'm sorry, one other thing that's happened is that as a result of the tax bill, we've -- at CNA, they've begun to reduce their municipal bond portfolio, and that's because with a 35% tax rate, immunities have a lot more value to CNA than when the corporate tax rate is 21%.

James Tisch:

Yes. And when you think about it, CNA has a 21% tax rate. Individuals in New York State, they have close to a 50% tax rate. So immunities are much more valuable to individuals than they are to corporations.

Mary Skafidas:

Great. Thanks, Samantha, and thanks to all of you for your continued interest. A replay will be available on our website, loews.com, in approximately 2 hours. That concludes Loews call for today.

Analysts:

Robert Glasspiegel - Janney Montgomery Scott Joshua Shanker - Deutsche Bank

Mary Skafidas:

Thank you, Christy, and good morning, everyone. Welcome to Loews Corporation's second quarter earnings conference call. A copy of our earnings release, earnings supplement and company overview may be found on our website, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the Company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The Company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the Company's statutory forward-looking statements disclaimer, which is included in the Company's filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our Security filings and earnings supplement for reconciliation to the most comparable GAAP measures. In a few minutes, our CFO, David Edelson will walk you through the key drivers for the quarter. Before he does, Jim Tisch, our CEO, will kick off the call. Jim, over to you.

David Edelson:

Thank you, Jim, and good morning. Loews reported net income of $230 million in the quarter essentially unchanged from $231 million in last year's second quarter. However, earnings per share increased to $0.72 from $0.69 as average shares outstanding declined 5% due to share repurchase activity. Before I walk through the key drivers for the quarter, I’d like to briefly discuss the recently closed purchase of the common units of Boardwalk Pipeline not previously owned by Loews, as well as the status of our parent company portfolio of cash and investments. As Jim commented, we spent approximately $1.5 billion in the Boardwalk transaction. Following the transaction, and our share repurchase activity, the parent company investment portfolio stands at approximately $3.1 billion, down from $4.7 billion at the end of the second quarter. In keeping with our strategy of holding substantial liquidity, we are rebalancing the parent company portfolio more toward cash and equivalents. I would note that even after the Boardwalk transaction, we hold cash and investments far exceeding our $1.8 billion of parent company debt. The rating agencies have all maintained their Loews rating and outlooks. Now for some comments on our segments. CNA contributed net income of $240 million in Q2, down slightly from the second quarter of 2017. P&C underwriting income was up year-over-year, as CNA posted a combined ratio of 93.8, basically comparable to last year’s second quarter along with a 5% increase in net earned premium. The lower corporate tax rate benefited after-tax underwriting income. Investment income was also strong with improved returns on the LP portfolio and higher after-tax returns on the fixed income portfolio. CNA incurred one-time costs in Q2 2018 as it transitioned to a new IT infrastructure service provider. Additionally, CNA had significant realized gains in last year’s second quarter versus minimal realized losses this year. CNA's core income, which excludes realized gains and losses was up 13% in the quarter. Diamond Offshore contributed a net loss of $37 million in Q2 2018, as compared to net income of $7 million last year. Diamond’s profit margin was hurt by a 32% year-over-year decline in contract drilling revenues versus only a 3.6% decline in contract drilling costs. Revenue earning days and average daily revenue were both down. Diamond booked rig impairment charges in both periods, which reduced Diamond’s contribution to our net income by $12 million this year and $23 million in last year’s second quarter. Boardwalk’s net income contribution was $16 million, up from $6 million in Q2 2017. During Q2, 2017, Boardwalk’s net income contribution reflected a $15 million loss on the sale of a processing facility. Excluding this loss, Boardwalk’s contribution declined $5 million year-over-year. Boardwalk experienced a 7% year-over-year decline in net operating revenues, as incremental revenues from growth projects did not make up for the negative revenue impact including the 2017 restructuring of the firm’s transportation agreement, a decline in storage and parking and lending revenues and contract expirations. Boardwalk’s operating expenses were up slightly due to an increased asset base from recently completed growth projects. For many months, equity analysts were overestimating Boardwalk’s revenue and earnings prospects for the second quarter and full year. I would note that the company’s performance is consistent with our expectations and those of Boardwalk’s management. As a reminder, Boardwalk will continue to file with the SEC because it has bonds outstanding. However, the company will no longer hold quarterly earnings calls. Loews Hotels contributed net income of $17 million, up from $10 million in Q2 2017. Miami Beach drove the increase with Coronado, Ventana Canyon, Orlando and many others also contributing. A lower effective tax rate in Q2 2018 enabled Loews Hotels to drop more of its income to the bottom-line. Loews Hotels' adjusted EBITDA, which is reported and defined in our quarterly earnings supplement rose 8% from last year's second quarter to $66 million. During the third quarter, Loews Hotels and Universal will open the 600 room Aventura Hotel at Universal, Orlando. Loews Hotels will then have 6200 rooms at Universal Orlando with another 2800 rooms expected to come online in Orlando over the next two years. Turning to the parent company. Pretax investment income was $42 million, up $40 million from the prior year’s second quarter driven by higher returns on alternatives, equities and cash. The lower corporate tax rate benefited after-tax results in Q2 2018. Corporate and other improved $11 million in pretax year-over-year primarily due to the absence of CCC-related transaction expenses in 2018 as well as other corporate expenses – lower other corporate expenses. The higher after-tax loss was solely attributable to the lower tax rate. We received $86 million in dividends from our subsidiaries during the second quarter, $73 million from CNA, and $13 million from Boardwalk. As long as Boardwalk maintains its current distribution, our quarterly distribution from Boardwalk would be close to $26 million going forward. CNA announced this morning a $0.05 increase in its quarterly dividend to $0.35. At that rate, Loews would receive ordinary dividends of $85 million quarterly, and $340 million annually from CNA before considering its special dividend. We repurchased 5.8 million shares during the second quarter at an aggregate cost of $290 million. During July, we have repurchased another 1 million shares for $49 million. As Jim mentioned, we have repurchased a total of 16.6 million shares year-to-date representing 5% of our shares outstanding at the beginning of the year. Finally, I’d point out that the accounting for the Boardwalk transaction resulted in our book value increasing by $2 per share at June 30. Let me now hand the call back to Jim.

Mary Skafidas:

Thank you, Jim. Christy, we are ready for the Q&A portion of the call. If you would like to queue the folks listening.

Robert Glasspiegel :

Good morning, everyone. I am going to dig around on Boardwalk to the best I can. Jim, you put $1.5 billion in and you sort of gave a low key discussion of it. Are you really excited about this? Is this something you just had to do? How should we think about it? Then I have some accounting questions.

Robert Glasspiegel :

What sort of cash-on-cash return, you talked about some of your other investments at the current runrate?

Robert Glasspiegel :

Okay, that’s sort of your dividend return, but, just sort of on the value of an investment, at some point the cash flow starts to grow a decent bit if these investments come through, right?

Robert Glasspiegel :

Okay. And then a less substantive question on Boardwalk. Just an accounting question. You are doubling sort of the dividend and doubling the earnings, but there is some purchase accounting adjustments in perhaps goodwill that might offset that. On a simplistic basis, if we double sort of the current runrate of earnings, what other adjustments need to be considered goodwill, purchase accounting et cetera?

Robert Glasspiegel :

Okay. So, if we double the earnings runrate will it be close to where you are doing?

Robert Glasspiegel :

And you are using cash, so it should be a decent bit accretive from an EPS perspective, correct?

Robert Glasspiegel :

Okay. Thank you.

Operator:

Thank you. Your next question is from Josh Shanker of Deutsche Bank.

James Tisch:

No, I don’t think so. Loews has a market cap of 16 – $15 billion or $16 billion. This adds another $1.5 billion of exposure to energy Boardwalk. Already it was a $1.5 billion exposure. So now, it’s $3 billion out of a total of $16 billion, add another $1.5 billion for Diamond Offshore and you see that CNA dwarfs both of those investments. So, in terms of portfolio management, I am not so concerned about the size of Boardwalk.

David Edelson:

Well, I would say, Josh, you are right. Obviously, you are in – when you are in building mode, you are not generating revenue and you are incurring expense although a good bit of expense is capitalized of course. And then as you approach opening, you have preopening expenses which are expense. So – and then, takes just a wee bit of time for a hotel to get up and running into it sort of earnings revenue and earnings runrate. But I would say, given the magnitude of Loews Hotels at this point, a 600 room hotel is not – it obviously the company can withstand it and generate strong profitability and strong year-over-year growth as well. Remember, this is the only hotel under construction. There are Kansas City that we have discussed, Arlington Texas that we have discussed, St. Louis that we have discussed and of course, these new hotels in Orlando. So there is certainly the prospect for significantly higher revenue and goodwill and profitability going forward.

Joshua Shanker :

And if you’ll put me one more, because I know there is usually a long queue. The – in terms of Consolidated Container, I have not looked at the new presentations on the website. But I want if one of you can talk to me about the pipeline for bolt-ons in general, how many general conversations you are having with potential future partners or future acquisitions at a given time? And over – like a three year period, is there a way to gauge how much money we can Consolidated Container will be spending on bolt-ons?

David Edelson:

And Josh, I would say, just given the fragmented nature of the industry, in terms of the number of conversations going on in any given time, many, but at various different stages of course. So, there is a significant pipeline that is being nurtured.

David Edelson:

Yes, I mean, they’ve done two in the past year. We would hope that they would continue if not accelerate that pace. So…

Joshua Shanker :

And then, quickly one more. You might have already said it, what gives the imbalance of unencumbered cash on the balance sheet at Loews right now post the Boardwalk transaction?

David Edelson:

Yes.

David Edelson:

And by the way, I would just – I would be remised to not pointing out that the debt comes due anywhere between 2023 and 2043. So, it’s not that if there is a short-term call.

David Edelson:

Thank you.

Mary Skafidas:

Great. Thank you, Jim. Christy, we’d like to conclude the call for today. We want to thank everyone for their continued interest. A replay will be available on our website loews.com in approximately two hours and we’ll talk to you all next quarter.

Analysts:

Robert Glasspiegel - Janney Montgomery Scott Joshua Shanker - Deutsche Bank Michael Millman - Millman Research Associates

Mary Skafidas:

Thank you, Maria, and good morning, everyone, and welcome to Loews Corporation's first quarter earnings conference call. A copy of our earnings release, earnings supplement and company overview may be found on our website, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company's statutory forward-looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, we might also use non-GAAP financial measures. Please refer to our Security filings and earnings supplement for reconciliation to the most comparable GAAP measures. In a few minutes, our CFO, David Edelson, will walk you through the key drivers for the quarter. But before he does, Jim Tisch, our CEO, will kick off the call. Jim, over to you.

David Edelson:

Thank you, Jim, and good morning. For the first quarter, Loews reported net income of $293 million or $0.89 per share compared to $295 million or $0.87 per share in last year's first quarter. Average shares outstanding declined 3% year-over-year, resulting in higher earnings per share despite a slight reduction in net income. Now let me walk through the ins and outs of the quarter. I will start with CNA, which contributed almost 90% of our net income this quarter and accounted for the biggest year-over-year positive earnings variance. CNA contributed net income of $261 million, up 12% from the first quarter of 2017. There were two main drivers of the increase, improved underwriting income and higher after-tax investment income. CNA posted outstanding P&C underwriting results in the quarter. This strength was broad-based and spanned all 3 P&C segments, commercial, specialty and international. While CNA once again experienced favorable prior year development, its underwriting results in Q1 2018 were robust even before prior year development and catastrophe losses. During the first quarter, CNA's P&C combined ratio was 93.1 and its underlying combined ratio, which excludes prior year development and catastrophe losses, was almost identical at 93.2. Both represented over 4 points of improvement versus last year's first quarter. Let me highlight CNA's loss ratio, which is a component of its combined ratio. CNA posted an underlying loss ratio of 60 in Q1, an improvement of more than 2 points from last year's first quarter and 1 point better than full year 2017. CNA's loss ratio shows real improvement and compares favorably to peers. The meaningful decline in CNA's combined ratio led to a significant increase in the company's P&C underwriting income, which climbed more than 160% pretax and even more after-tax given the lower corporate tax rate. Net investment income was lower year-over-year on a pretax basis due entirely to LP income, but the reduced corporate tax rate resulted in an increase in after-tax net investment income. Despite the year-over-year decline in LP income, CNA's LP portfolio returned a respectable 1.2% in a quarter during which the S&P 500 returned negative 1.2%. Before leaving CNA, I will note that CNA completed its review of its asbestos and environmental pollution liabilities in the first quarter and booked a noneconomic retroactive reinsurance charge related to the 2010 loss portfolio transfer. This charge, which is essentially a deferred gain, reduced CNA's contribution to our net income by $28 million this year and by $12 million last year. Diamond Offshore. Diamond Offshore made a $10 million positive contribution to our net income in the first quarter despite a $25 million pretax loss. The pretax loss was an outgrowth of the continuing difficult conditions in the global offshore drilling market. Diamond experienced a 21% year-over-year decline in contract drilling revenues caused by a similar decline in revenue earning days. The swing from a pretax loss to positive net income was caused by a tax benefit as Diamond reversed an uncertain tax position it had booked in Q4 2017 related to the deemed repatriation of previously deferred non-U.S. earnings. Further guidance issued by the U.S. Treasury and the IRS in the first quarter clarified certain provisions in the Tax Act, permitting Diamond to reverse its liability for this uncertain tax position. Boardwalk's net income contribution was essentially flat year-over-year despite a decline in pretax income. The reduction in pretax income was precipitated by a 5% decline in net revenues as incremental revenues from growth projects recently placed into service and the benefits of colder weather did not make up for the near-term negative revenue impact of the previously announced restructuring of existing firm transportation agreements with Southwestern Energy as well as a decline in storage and parking and lending revenues caused by unfavorable market conditions. The lower corporate tax rate booked at the Loews level resulted in Boardwalk's after-tax earnings being almost flat with the prior year. Moving on to Loews Hotels. As Jim mentioned, Loews Hotels posted excellent results in Q1 as many of its properties, including Loews Miami Beach Hotel and the properties at the Universal Orlando Resort, posted strong operational and financial results. Loews Hotels contributed net income of $13 million, up from $10 million in Q1 2017. The quarterly comparison looks even better once last year's results are adjusted for the $10 million pretax, $6 million after-tax net gain attributable to the sale of a JV property and the write-down of another JV property. Loews Hotels' adjusted EBITDA, which is reported and defined in our quarterly earnings summary available on our IR website, was $57 million in the quarter, up $13 million from last year's first quarter. Turning to the parent company. Pretax and after-tax investment income were down from an exceptionally strong quarter in Q1 2017 with lower returns on equities and LP investments driving the year-to-year decline. The bulk of the portfolio continues to be invested in cash and equivalents. The Corporate and other segment improved $10 million on a pretax basis for two main reasons, the absence of transaction-related expenses incurred in 2017 in connection with the acquisition of Consolidated Container and income generated by Consolidated Container in the first quarter of 2018. The parent company balance sheet continues to be extremely strong and liquid. At March 31, the parent company portfolio of cash and investments totaled just under $4.9 billion, was slightly more than 50% in cash and short-term investments and the remainder in fixed maturities, marketable equity securities and a diversified portfolio of limited partnership investments. We received $571 million in dividends from our subsidiaries during the first quarter; $558 million from CNA, which includes the $0.30 regular quarterly dividend and the $2 special dividend; and $13 million from Boardwalk. We repurchased 9.9 million shares of our common stock during the first quarter for a total of $497 million. After quarter end, we've purchased an additional 4-plus million shares for a total of $207 million. Taken together, we have repurchased over 4% of our shares outstanding since year-end 2017. I will now hand the call back to Mary.

Operator:

[Operator Instructions]. Our first question comes from the line of Bob Glasspiegel of Janney.

James Tisch:

So, no, neither Diamond nor CNA have anything resembling this right that we have at Boardwalk.

James Tisch:

Bob, I said in my comment that no decision has been made. So no decision has been made. And as for the rest of your question, I really have to let our filings speak for themselves. They run multiple pages. They are very informative and they should be able to answer all the questions you have.

David Edelson:

I believe the difference is Consolidated Container, which is in the Corporate and other segment.

Joshua Shanker:

So the share repurchase has been going rather aggressively recently. How do you weigh share repurchase from operational cash flow versus perhaps increasing the leverage at the company through debt issuance given where we are in the interest rate cycle?

Joshua Shanker:

Okay. And on the hotels, can you talk about the difference in revenues and profits from a hotel that's under renovation, [indiscernible] Miami, versus coming out of renovation? What happens to the income statement of a hotel going through that transition?

David Edelson:

For example, when it was under -- occupancy is down and rate is down. And for example, group business doesn't come to a property under that level of renovation.

David Edelson:

In terms of the uptick in income, how much of it is solely attributable to Miami?

James Tisch:

Yes, there was a lot going on and the hotel had, I think, just come back in the first quarter. And additionally, Miami and Florida tourism was affected by Zika last year and that hasn't been an issue this year. So I don't have the specific numbers for the hotel, but there was a significant increase in EBITDA margin that came from those hotels this year compared to last year.

Joshua Shanker:

And with Loews San Francisco, that property, is that fully online? Or are there renovations to be done there?

Operator:

[Operator Instructions]. Our next question comes from the line of Michael Millman of Millman Research.

James Tisch:

So the Tax Act will benefit Loews. It will help us at basically all of our subsidiaries and so we should be seeing the benefits of that coming through in our income statements. In terms of the parent company and our investments, it's -- we're paying lower tax on gains and investment income, but otherwise it hasn't changed the way that we invest those funds.

James Tisch:

Yes, so my current thinking is that the reduction of the corporate tax rate from 35% to 21% will make a very -- cause there to be a significant change in corporate behavior across the economy. In terms of Loews, yes, you have a good memory. About 10 years ago, we thought that the level of the capital gains tax -- corporate capital gains tax at 35% really prevented a lot of transactions from occurring. And now that we're down to a tax rate of 21%, I think that, economy-wide, it will foster transactions to occur that otherwise might not have happened with a 35% tax.

Mary Skafidas:

Thank you, Maria. As always, thank you for your continued interest. A replay will be available on our website, loews.com, in approximately two hours. Thanks for joining us today.

Analysts:

Michael Millman - Millman Research Josh Shanker - Deutsche Bank Bob Glasspiegel - Janney Montgomery Scott

Mary Skafidas:

Thank you, Kristy, and good morning everyone. A copy of the Loews' earnings release, earnings supplement, and company overview may be found on our Web site, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company's statutory forward-looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings and earnings supplement for a reconciliation to the most comparable GAAP measures. In a few minutes, our CFO, David Edelson will walk you through the key drivers for the quarter. Before he does, Jim Tisch, our CEO, will kick off our call. Jim, over to you.

David Edelson:

Thank you, Jim, and good morning everyone. We reported fourth quarter net income of $481 million or $1.43 per share, up from $290 million or $0.86 per share in last year's fourth quarter. Included in our fourth quarter net income was a $200 million net benefit related to the passage in December of the Tax Cut and Jobs Act. The benefit, which had no cash impact, stems largely from the re-measurement of our net deferred tax liability. Absent the $200 million benefit, our net income was $281 million or $0.83 per share, down $9 million from last year's fourth quarter. Before I discuss the drivers of fourth quarter net income, I'd like to draw your attention to page seven of our earnings release and page five of our earnings supplement, where we show the impact of tax reform by reporting segment for the fourth quarter and full-year. Let me briefly summarize the impact by segment. CNA booked a charge in the fourth quarter as it wrote down its deferred tax asset due to the lower tax rate. In 2018 and beyond, tax reform should be quite positive for CAN. For Diamond itself tax reform had offsetting impacts. The company benefited as it wrote down its deferred tax liability because of the lower tax rate, while it also took a charge for the one-time mandatory deemed repatriation of foreign earnings. I would note that this charge had no cash impact. At the Loews level however we did book a charge in the Diamond segment reflecting the impact of changing tax rates on the differential between our book basis and tax basis in Diamond. As a reminder, Diamond is not included in our consolidated tax return. For Boardwalk, Loews booked a substantial benefit as the lower tax rate caused us to write down the deferred tax liability we had built up over the past decade from Boardwalk's capital projects. And for those hotels we also benefited from the lower tax rate through the write-down of a deferred tax liability. Going forward, excluding any changes in marketplace behavior, corporate tax reform especially the reduction in the federal corporate rate should be positive for Loews on a consolidated basis. Turning to the quarter, rather than plough through each segment's year-over-year quarterly variance, let me instead highlight the key drivers of fourth quarter earnings and what caused the slight decline from Q4 2016. These highlights will exclude the previously noted impact of tax reform. Diamond Offshore drove our slight year-to-year earnings decline with net income contribution down $74 million from Q4 2016. Contract drilling revenues were up 12%, and rig margin declined substantially, largely due to fewer rigs working and lower day rates on re-contracted rigs. In addition, during the quarter the company impaired one of its rigs and booked restructuring and separation costs as it continues to [technical difficulty] expense base. On the bright side, CNA had a strong quarter to top off a strong year. Its quarterly net income contribution was up $54 million year-over-year, driven mainly by a substantial increase in underwriting income. CNA posted a combined ratio of 94 in Q4 2017, down from 99.9 in last year's fourth quarter. As a reminder, when it comes to combined ratios lower is better. Excluding catastrophe losses and prior year development, the underlying combined ratio improved, from 98.3 to 95.8. And for the full-year, the underlying combined ratio was 95.5, down 2.4 points from 97.9 in 2016. Jim mentioned the focus at CNA on underwriting excellence as the key lever to improving underwriting profitability. The fourth quarter and full-year combined ratios demonstrate the progress being made. Another bright spot was Loews Hotels, which posted net income of $13 million in Q4, up from $5 million last year. The joint ventures at the Universal Orlando Resort posted excellent results, as did the Loews Miami Beach, which was just completely a renovation during last year's fourth quarter. As Jim outlined during last quarter's remarks, Loews Hotels appears to be hit its stride operationally and strategically. Boardwalk's contribution to our net income was essentially flat on the quarter as were the earnings generated by the parent company investment portfolio. Corporate, which includes our newest subsidiary Consolidated Container, improved versus the prior year largely due to the timing of compensation accruals. Let me now turn to a brief review of the drivers of our full-year results. Loews reported 2017 net income of 1.16 billion or $3.45 per share, up from 654 million or $1.93 per share last year. Excluding the 200 million net benefit related to tax reform, our net income was 964 million or $2.86 per share, up 310 million from the prior year. Again rather than walk through each segment in detail, let me highlight a few key drivers of the substantially year-over-year increase. Lower rig impairments at Diamond offshore accounted for 235 million of the earnings improvement. Excluding impairments, Diamond's earnings contribution declined 40 million year-over-year reflecting the weaker operating environment and some unusual items. CNA in the aggregate accounted for 105 million of the increase attributable mainly to improvements in non-cat underwriting income and life and group results. Additionally, 2016 results were impacted by adverse development related to the 2010 last portfolio transfer. Net investment income and realized gains were also up over the prior year. Partially offsetting these improvements were elevated catastrophes losses in 2017 given the high incidence of natural catastrophes during the year. Loews Hotels contributed to the net income increase thanks to improving operating performance and a gain on the sale of a joint venture hotel property in 2017. Boardwalk's net income contribution was essentially flat year-over-year. However, absent the loss Boardwalk took in 2017 on the sale of a processing facility, its net income contribution would have been up $12 million. Parent company net investment income was flat year-over-year, and the elevated cost in corporate and other for full-year 2017 are almost entirely attributable to cost incurred in connection with the acquisition of Consolidated Container. We continue to maintain an extremely strong and liquid balance sheet. At year-end, the parent company portfolio totaled 4.9 billion with 57% in cash and equivalent, 20% in LP investments, 13% mixed maturities and 10% marketable equity securities. During the fourth quarter, we received 86 million in dividend from our subsidiaries, 73 million from CNA, and 13 million from Boardwalk. For the full-year, we received total dividend of 804 million from CNA and Boardwalk with CNA contributing the lion share of that amount. Today, CNA declared a $2 per share special dividend in addition to its regular $0.30 quarterly dividend. Combining the two, Loews will receive approximately 560 million in dividend from CNA this quarter. As Jim mentioned, we repurchased 4.6 million shares in the fourth quarter for $231 million. Since year end, we have repurchased an additional 4.3 million shares for $218 million. Shares outstanding adjusted for all share repurchase activity currently stand at around 328 million. I will now hand the call back to Jim.

Mary Skafidas:

Thank you, Jim. Kristy, we're ready for the question-and-answer portion of the call.

Michael Millman:

Thank you. So want to talk about a little -- your intrinsic value, what's that based on? Related to that, you have for -- you have past 12 months or more said that the -- you thought the equity market was too high, and therefore you didn't want to buy back shares. The market is higher, yet you bought back shares. Kind of related to that, you or the company over the past several months has bought a lot of GE, for example, and kind of wondered if you thought that either the market was going up even more or GE was hugely undervalued?

Michael Millman:

So, your comfort was to some extent or the difference was to some extent based upon what the market was doing. Thus I assume that you thought that market price was reasonable, no longer overpriced. Is that a fair assumption of what you're saying, a fair…

Michael Millman:

I see. And then to switch, another question, if I may, sort of on DO, the prices for oil are going up, are you seeing any demand for drilling or are those prices really based upon a reduction in production?

Michael Millman:

Great. Thank you very much.

Operator:

Your next question comes from Josh Shanker with Deutsche Bank.

Jim Tisch:

So, CCC is doing very well. They have their own development people that go out and look for deals. There are two that are in the process of being done now. CCC will be able to finance those transactions with its own balance sheet and using the loan that was used to purchase CCC. So we do not anticipate that the current transactions under consideration will rely on the Loews treasury for financing.

Josh Shanker:

And are there some acquisitions that are large in nature that would require you to loan further money to CCC to do them or the strategy is that they'll all be self financed?

Josh Shanker:

And when do you think that you would look to all the investment mature such that you'll receive dividends from it?

David Edelson:

But if they can use their free cash flow to invest at attractive returns on invested capital then we're happy to have them do that.

Jim Tisch:

We have -- all right, let's talk about what we have in the Loews portfolio. We have $250 million of equities; we have another billion dollars or so of hedge funds. My guess is it's very difficult for you as an investor to be able to track those, but what I can tell you is that their performance is doing reasonably well. Our equities this past year I think exceeded the S&P 500 better than a lot of mutual funds I know. And we are very, very comfortable and pleased with our asset managers.

Jim Tisch:

Josh, we're a $15 billion company. We have a portfolio of over $50 billion. You're asking us to provide more disclosure on a $250 million equity portfolio. That sounds crazy to me.

David Edelson:

Yes, but remember, on average, let's say 60% to 65% -- we're not at 57%. But 60% to 65% of it has been cash and equivalents. So you know the return we're getting on that.

David Edelson:

So when you look at the investment income generated by the parent company you can, if you wanted to, you could assume what we're earning on our cash, and then you could intuit what the yield or what the earnings are on the remainder.

David Edelson:

Sure.

Bob Glasspiegel:

Good morning, Loews.

Bob Glasspiegel:

The hotels, you're excited about the strategic direction. You had a really nice earnings and EBITDA improvement. And I know the earnings don't always match the sort of underlying dynamics in that business, but are we in a position where we're going to start to see a similar sort of growth as we had this quarter, seems like the tax rate will be able to help on your after tax earnings. Just some general comments about where we're going from a reported basis, and what are the strategic positives that the Jon is bringing?

Bob Glasspiegel:

Hotels, yes.

Jim Tisch:

Robert, let me add a little to provide a little bit depth to that. In my comments, I said that we are focusing on what we do best at Loews Hotels, group travel and immersive destinations. Kansas City is all about group travel. We are going to have an 800 room hotel atop - or alongside the Kansas City Convention Center. We will be the newest hotel in Kansas City in decades. Newest Convention Hotel and we expect that hotel to do very well as a major regional convention center hotel. We think that the demand is built in by the location and the newness of the hotel. In Arlington, St. Louis and Orlando, that's all about immersive destination that there are -- those are venues where we believe people will naturally gravitate, want to go to. And for all of those, we see the hotels that we are building as hotels that can cater to the people that coming to these locations. The strategy has been proven to us many times over in Orlando and also in Miami Beach where we are able to achieve especially in Orlando occupancy rates and room rates that is substantially above what is available to others in the market. And we think there is a good opportunity for that to occur in the other immersive destinations in which we are building. The problem is that you can't build a hotel overnight. It takes some time. And so, these hotels won't be coming online in '18. Some of them will just be starting up in 2019. So, it will take some time to show up in the numbers.

David Edelson:

Well, we are consolidated with all but Diamond. And so, I think we do benefit from the lowering of the corporate tax rate. But, CNA is a big piece of that. And I think you understand what its tax position is and that sort of then gets consolidated into hours.

David Edelson:

Oh, I am sorry. Hotels, yes…

David Edelson:

It's also impacted by state and local taxes in the jurisdictions where it operates. So, it's not just a pure federal rate.

David Edelson:

Our pleasure.

Mary Skafidas:

Thanks, Kristy, and thanks to all of you for your continued interest. A replay will be available on our Web site at loews.com in approximately two hours. That concludes Loews' call for today.

Analysts:

Josh D. Shanker - Deutsche Bank Securities, Inc. Robert Glasspiegel - Janney Montgomery Scott LLC

Mary Skafidas - Loews Corp.:

Thank you, Kristen. Good morning, everyone, and welcome to Loews Corporation's quarterly conference call. A copy of our earnings release, earnings supplement and company overview may be found on our website, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks, uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company's statutory forward-looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings and earnings supplement for a reconciliation to the most comparable GAAP measures. In a few minutes, our CFO, David Edelson will walk you through the key drivers for the quarter. However, before he does, Jim Tisch, our CEO, will kick off our call. Jim, over to you.

David B. Edelson - Loews Corp.:

Thank you, Jim, and good morning. For the third quarter, Loews reported net income of $157 million or $0.46 per share, down from $327 million or $0.97 per share in last year's third quarter. Page 17 of our earnings supplement sets forth the key quarterly and year-to-date drivers. Two principal factors caused the $170 million year-over-year decline in our third quarter net income. Catastrophe losses at CNA, related largely to hurricanes Harvey, Irma and Maria, reduced our third quarter net income by a $170 million. Last year, the negative impact of catastrophes was only $10 million. Additionally, both CNA and Diamond incurred debt redemption charges during the quarter, which combined to reduce our net income by $35 million. Absent CNA's catastrophe losses and the debt redemption charges, our pro forma net income was $362 million, up 7% from last year's third quarter. Now for more on CNA. The company had a strong quarter operationally, which isn't obvious from the $178 million year-to-year decline in CNA's contribution to our third quarter net income. Let me say a bit more about CNA's catastrophe losses and debt redemption charge before highlighting the company's continued underwriting progress. CNA is in the insurance business, so catastrophe losses are par for the course. The good news is that CNA's losses were very much in line with, if not somewhat below, its market share in the affected areas. We believe this highlights the company's strong risk management. Overall, CNA incurred $269 million pre-tax of catastrophe losses in the quarter versus only $16 million in Q3 2016. As previously mentioned, these cat losses reduced our net income by a $170 million this quarter as compared to $10 million last year. Now for the debt redemption charge. During the quarter, CNA issued $500 million of tenure notes and redeemed $350 million of notes due in November 2019. This early redemption generated a $42 million pre-tax charge at CNA, which reduced its contribution to our net income by $24 million. Absent the catastrophe losses and the debt redemption charge, CNA's contribution to our net income would have been $324 million, up slightly from the prior year. CNA's underwriting results continue to show real progress in the quarter. Its combined ratio before cat losses and prior-year development improved 2.9 points from the prior year from 97.5% down to 94.6%. Additionally, the company booked a hefty 7.4 points of favorable prior-year development, slightly lower than last year's 8 points, but still extremely positive. So overall, excluding catastrophes but including prior-year development, CNA's combined ratio for the quarter was 87.2% as compared to 89.4% last year. Two more CNA observations. Number one, net investment income was down slightly year-over-year mainly due to slightly lower, but still quite positive LP returns. And number two, realized gains on the investment portfolio which flow through net income, were higher last year than this year. Together, these two items accounted for a $29 million negative year-to-year net income variance for Loews. Turning to Diamond Offshore. Diamond contributed $6 million to our net income this quarter, about the same as last year. During the third quarter, Diamond issued $500 million of eight-year notes and redeemed $500 million of notes scheduled to come due in May 2019. This redemption generated a $35 million pre-tax charge which reduced Diamond's contribution to our Q3 net income by $11 million. Absent this debt redemption charge, Diamond's contribution to our net income would have been $17 million, up $10 million from the prior year. Diamond's effective tax rate can differ materially across quarters. So let me comment instead on its pre-tax income, which was down 9% excluding the debt redemption charge. Contract drilling revenues were up about 5% from the prior year and depreciation was also favorable because of prior-period rig impairments. However, these positives were offset by higher expenses, mainly contract drilling expenses as well as higher interest expense, as some interest was capitalized during last year's third quarter before the Ocean GreatWhite went on contract. As you know, the offshore drilling market remains extremely challenging. Diamond is laser-focused on maintaining its strong liquidity profile and maximizing its operating cash flow. On to Boardwalk, which posted excellent results in the quarter. The company's operating revenues net of fuel and transportation expenses were up almost 3%. EBITDA was up 9% and net income was up 48%. Boardwalk's contribution to our net income was $17 million versus $14 million in Q3 2016. Its contribution would have been $21 million this quarter, if not for a state tax-related deferred tax true-up booked at the Loews level. Boardwalk's $1.2 billion of growth projects are on time and on budget and are backed by long-term fixed-fee firm contracts. Results at Loews Hotels improved year-over-year as pre-tax income rose 132% and adjusted EBITDA was up about 13%. The company's five properties at the Universal Orlando Resort, propelled these improvements as did the Loews Miami Beach, which was under renovation during last year's third quarter. Earnings were negatively affected this year by lagging results at a few of the company's group-oriented hotels, caused mainly by renovation activity and a shift in the holiday schedule. In keeping with Jim's focus on Loews Hotels, we have added information about this business to our quarterly earnings supplement, including adjusted EBITDA and adjusted debt. These non-GAAP metrics quantify the pro rata EBITDA and mortgage debt attributable to Loews Hotels. We disclosed these metrics in part because GAAP joint venture accounting makes it difficult for investors to understand the underlying earnings power of Loews Hotels portfolio of joint venture properties. To answer an anticipated question, we do not plan to begin providing property-by-property detail. That said, we hope to provide useful color on Loews Hotels' results in future quarters. Turning to the parent company. Pre-tax net investment income was $48 million, up from $36 million last year and just $2 million last quarter. Equities drove the year-over-year improvement, offset in part by alternatives and gold-related securities. The improvement from last quarter was attributable predominantly to alternatives and equities. And now for our newest subsidiary, Consolidated Container. On page 5 of our earnings release, CCC's revenues are shown in investment income and other and its pre-tax and net income are included in corporate and other. This is the first full quarter that CCC is included in our results, so it's obviously still early days. Overall, CCC is performing well and the company remains solidly on track to deliver attractive double-digit cash-on-cash returns to Loews. On a net income basis, the company essentially broke even during the quarter. Operationally, CCC experienced some Hurricane Harvey related disruptions in Q3. CCC's management team continues to impress us with its professionalism, operational knowhow, and strategic focus. We will have more to say about CCC during our year-end earnings call. Loews continues to maintain an extremely strong and liquid balance sheet. At September 30, the parent company portfolio of cash and investments totaled $5.1 billion, with approximately 65% in cash and short-term investments and the remainder in fixed maturities, marketable equity securities and a diversified portfolio of limited partnership investments. During the third quarter, we received $86 million in dividends from our subsidiaries; $73 million from CNA and $13 million from Boardwalk. And with that, I will now hand the call back to Mary.

Operator:

Thank you. Our first question comes from the line of Josh Shanker with Deutsche Bank.

James S. Tisch - Loews Corp.:

Hello?

James S. Tisch - Loews Corp.:

For the Loews – incentive compensation?

James S. Tisch - Loews Corp.:

So, what I would direct you to do is take a look at our proxy statement, which has a very long and detailed explanation not only of our incentive compensation system, but also of our incentive compensation philosophy. And I think that that's really important. I look at that section often every year to make sure it reflects management's view of how our compensation system works here, and I think that what we have put together while unconventional, really suits us just fine.

James S. Tisch - Loews Corp.:

Let me describe briefly what it is. We have a very collegial group of senior executives here. We are managing here for the intermediate to the long term. We are not managing for an individual year. As I constantly say, our goal is to increase long-term value. And so, the thing that we do not want to do is encourage actions that might lead to spiking earnings in one year or the next, or doing things that might not lead to long-term value, but instead might just lead to a short-term pop. So we've constructed a compensation system that focuses on generally consistent earnings for senior executives, that compensates them fairly for what they do and generally results in compensation that does not have spikes because of one action or another. By doing that, we have a very collegial group here at the Loews senior management team, because everybody knows that this is a team effort to build value. And additionally, because I think in part of the way our compensation system works, there is absolutely no desire on anybody's part to spike earnings in one year or the next. And so, it's a system that is different than many other systems. We do give, to senior executives and other Loews' employees, restricted stock units that hopefully will reflect – hopefully and ultimately will reflect the value that has been created and provide some incentive, not that it's needed, but provide some incentive to the senior executives to focus on long-term value at Loews.

James S. Tisch - Loews Corp.:

In terms of what, I'm sorry?

James S. Tisch - Loews Corp.:

The investments in Loews Hotels is entirely manageable. Loews Corporation will be providing some of the planned investments, but it's not going to be significant draw on the Loews treasury.

James S. Tisch - Loews Corp.:

Thank you.

Robert Glasspiegel - Janney Montgomery Scott LLC:

Good morning, Loews.

David B. Edelson - Loews Corp.:

Good morning, Bob.

James S. Tisch - Loews Corp.:

So in order to determine the value, I think what you have to do is look at it on a case-by-case basis, right. If you want to do a sum of the parts for Loews Hotels, you've got – for some hotels, it's fine to look at EBITDA; for a lot of them it is, but you have to understand the marketplace in which they're operating. There are other hotels that for one reason or another might not be earning in one year or multiple years significant EBITDA, but that can nonetheless be worth a lot of money. So, it's really a difficult job for someone to value all the hotels. It takes a lot of time, attention and focus. Oftentimes, it means going and visiting properties and just understanding what the potential value might be. It's something that really needs to be done by someone who is well immersed in the hotel business, who understands relative values and they should be able to come up with a pretty accurate number of what each of the individual hotels might be worth.

David B. Edelson - Loews Corp.:

Yeah.

Robert Glasspiegel - Janney Montgomery Scott LLC:

On oil, you were – on the fourth quarter 2015, kudos to you for saying oil was bouncing along in the bottom and I think you threw out somewhere between $60 and $70 as a price in three to five years, and we're more than halfway towards that target. Where does it have to get before we start to see kernels of positive in your businesses?

Robert Glasspiegel - Janney Montgomery Scott LLC:

Well, I didn't mean to under-congratulate you, but it's nice to hear that there could be light at the end of the tunnel within a couple of years. Is that what you're saying?

Robert Glasspiegel - Janney Montgomery Scott LLC:

Fourth quarter 2015 call, yeah.

Robert Glasspiegel - Janney Montgomery Scott LLC:

Appreciate the answers, Jimmy.

Operator:

That will conclude the question-and-answer portion of today's call. I will hand the program back over to Mary.

Operator:

Ladies and gentlemen, thank you for joining the Loews Corporation quarter three 2017 earnings conference call. You may now disconnect your lines, and have a wonderful day.

Analysts:

Robert Glasspiegel - Janney Montgomery Scott LLC Michael Millman - Millman Research Associates Josh D. Shanker - Deutsche Bank Securities, Inc.

Mary Skafidas - Loews Corp.:

Thank you, Nicole. Good morning, everyone and welcome to the Loews' second quarter earnings conference call. A copy of our earnings release, earnings supplement and company overview may be found on our website, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session, which will include questions submitted via email by our shareholders. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief statement of the company's statutory forward-looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings and earnings supplement for a reconciliation to those most comparable GAAP measures. In a few minutes, our CFO, David Edelson will walk you through the key drivers for the quarter, but before he does Jim Tisch, our CEO, will kick off the call. Jim, over to you.

David B. Edelson - Loews Corp.:

Thank you, Jim, and good morning. For the second quarter, Loews reported net income of $231 million or $0.69 per share, up from a loss of $65 million or $0.19 per share in last year's second quarter. Diamond Offshore and CNA Financial accounted for the bulk of the $296 million year-over-year positive earnings swing, while parent company investment income was the main detractor versus the prior year. Lower rig impairments at Diamond contributed to the year-over-year improvement. Rig impairments reduced Loews' net income in Q2 2016 by $267 million whereas in this year's second quarter the impairments' hit dropped to $23 million. Excluding the Diamond impairments, Loews' net income was $254 million in Q2 2017, up from $202 million in Q2 2016. The key drivers for the quarter are set forth on page 12 of our earnings supplement, which has been posted to our investor relations website. CNA had an excellent quarter and was by far the largest contributor to our consolidated net income at $244 million. This represents a $55 million or 29% year-to-year increase. Two factors drove this increase. Stronger P&C underwriting income and higher realized investment gains. Net investment income was in fact down slightly year-over-year, given a modest fall-off in LP results. The improvement in P&C underwriting income came from a meaningfully lower combined ratio. CNA's calendar year combined ratio declined from 97.4% in Q2 2016 to 93.5% in this year's second quarter, a 3.9-point improvement on $1.6 billion of quarterly net earned premiums. Given the catastrophe losses and favorable prior year development essentially offset one another this quarter, I would highlight the improvement in CNA's combined ratio, excluding cats and prior year development, also known as the non-cat accident year combined ratio. Specifically, the company's non-cat accident year combined ratio dropped 3.7 points from 98.3 in Q2 2016 to 94.6 in this year's second quarter. All three of CNA's P&C segments, Specialty, Commercial and International, showed excellent year-over-year improvement. The improvement was particularly notable in the company's Commercial and International segments, as those non-cat accident year combined ratios dropped by 3.2 points and 14.2 points, respectively. This quarter highlights CNA's enhanced underwriting discipline, its ongoing favorable prior year development and its focus on expense control. Dino Robusto and his team are singularly focused on continual improvement across CNA, building on the solid foundation created by Tom Motamed during his tenure as CEO. Turning to Diamond Offshore. While Diamond contributed only $7 million to our net income this quarter, that is over $300 million more than last year's second quarter. The previously mentioned rig impairments accounted for most of the year-over-year swing. That said, even after excluding the impairment charges, Diamond's contribution to our net income increased $57 million year-over-year, driven mainly by higher contract drilling revenues, strong cost controls, reduced depreciation expense owing to last year's rig impairments and a lower effective tax rate. Boardwalk posted excellent results in the quarter after excluding a one-time loss associated with the sale of a gas processing facility, and related gathering assets. The loss decreased Boardwalk's contribution to our net income by $15 million, thus accounting for the year-to-year decline in net income contribution. Absent this loss however, Boardwalk would have contributed $21 million to our Q2 2017 net income versus $17 million last year. And remember that in last year's second quarter, Boardwalk benefited from the legal settlement that increased its net income contribution by $4 million. Loews Hotels also had a good quarter, with net income of $10 million. During last year's second quarter the company wrote down an equity investment in one of its joint venture hotel property. So, while the year-over-year net income comparison was still favorable, it's not as dramatic as it first appears. The Hotel company's adjusted EBITDA, which excludes the write-down in other non-recurring items was $61 million for the quarter, up from $56 million in Q2 2016. The increase was principally driven by Loews Hotel's joint venture properties at the Universal Orlando Resort. Our earnings supplement includes a definition of adjusted EBITDA. Turning to the Parent company, net investment income was weak in Q2 2017 as results from gold related equities were down meaningfully versus the prior year as were results from other equity strategies. While our holdings of gold-related equities can be volatile from one period to another, we have under 3% of Parent company cash and investments devoted to this asset class. And over time, these investments have performed as intended within the context of the overall parent company portfolio. As you know, we closed on the purchase of Consolidated Container Company on May 22. In the segment results on page 5 of our release, CCC's revenues for the period of our ownership are included in investment income and other. CCC's pre-tax net income are included in corporate. CCC essentially broke even during the first six weeks of our ownership as the company's income was negatively affected by deal-related expenses and the impact of purchase accounting entries. Please note that we will be disclosing in our Form 10-Q the purchase price allocation for the acquisition. We expect to show CCC as its own reporting segment beginning with our Form 10-K for the year ending December 31, 2017. Loews continues to maintain an extremely strong and liquid balance sheet. At June 30, post the funding of the CCC acquisition, the Parent company portfolio totaled $5 billion with approximately two thirds in cash and short-term investments and the remainder in fixed maturities, marketable equity securities and a diversified portfolio of limited partnership investments. During the second quarter, we received $74 million in dividends from our subsidiaries, including $61 million from CNA and $13 million from Boardwalk. CNA announced this morning that it had increased its quarterly dividend from $0.25 per share to $0.30 per share, which translates into an incremental $12 million per quarter to Loews. This dividend hike is yet further evidence of CNA's rock solid capital position and its improving operating performance. I will now hand the call back to Jim.

Mary Skafidas - Loews Corp.:

Thank you, Jim, for answering that important question from shareholders. At this time, Nicole, we'd like to hand the call back over to you for questions.

Robert Glasspiegel - Janney Montgomery Scott LLC:

I'd like to pursue a little bit a few questions on CCC. I think, you said you think it's a 10% cash-on-cash return. But it sounds like purchase accounting might offset some of that. Now that you've had it in your hands for longer, any sense on the conviction on that 10% cash return and what sort of goodwill offsets might there be to that?

David B. Edelson - Loews Corp.:

Bob, I'd also note that the purchase accounting and certain of the purchase accounting entries in the six weeks of the second quarter really related only to the six weeks of the second quarter. There will, of course, be ongoing purchase accounting given the accounting, but these were sort of one-time setup sort of purchase accounting entries.

David B. Edelson - Loews Corp.:

Yes.

Robert Glasspiegel - Janney Montgomery Scott LLC:

Are you going to disclose it in the Q.

Robert Glasspiegel - Janney Montgomery Scott LLC:

Yes.

Robert Glasspiegel - Janney Montgomery Scott LLC:

In the Q, okay.

Robert Glasspiegel - Janney Montgomery Scott LLC:

And now that you don't do the sort of parent rollup, I have to bother you with a couple other questions. Hotel carrying value?