CNA
CNA had a good quarter due to an increase in investment income. Rates increased by 6 percent in its property and casualty segment. Rates in its commercial segment increased by 8 percent versus a 2 percent increase a year ago. CNA's loss ratio is declining. In commercial, the loss ratio improved by 2.5 points and CNA is narrowing the loss ratio gap with its peers in its commercial business.
The results for Q3 include Hardy Underwriting, a Lloyd's syndicate that CNA acquired. Hardy is off to a good start.
Loews is not yet pleased with the rates of return on CNA and CNA management will be working hard to increase those rates. Loews is hoping to increase CNA's Moody's rating from A- to A soon.
Diamond Offshore
Net income declined by $79 million from a year ago due to two factors: (1) a lot of rigs rolled off of record day rates from previously-signed contracts, and (2) unplanned downtime.
Demand for drilling in mid-water, deepwater and ultra-deepwater rigs is still strong. Diamond is entering or extending contracts for attractive day rates.
During Q3, Diamond announced its intention to rebuild the Ocean Apex, a Victory-class semisubmersible rig for $300 million. These rigs have an extremely long lifespan and the rebuild makes them equivalent to a new rig, but at a substantially reduced cost. The rebuild will be ready in 2014. The Ocean Onyx, another Victory-class rig, has been rebuilt and will be delivered in 2013.
Boardwalk
Net income of Boardwalk attributable to Loews was $20 million versus $18 million last year. Q3 is seasonally weak for Boardwalk. The slight increase in income was due to storage and transportation revenues earned from HP Storage, plus parking and lending revenues resulting from improved market conditions.
Boardwalk recently acquired PL Midstream, which has been renamed Boardwalk Louisiana Midstream. This acquisition will allow Boardwalk to enter the natural gas liquids storage and distribution business. The acquisition, along with Boardwalk's organize growth projects, such as the Eagle Ford expansion and Southeast market expansion, will result in $1.2 billion of new assets for Boardwalk.
HighMount E&P
Due to low natural gas prices, which hurt its results this quarter, HighMount is drilling in locations that should produce more oil, such as the Mississipian line in Oklahoma and the Wolfcamp strata in Sonora, Texas. So far, HighMount has drilled and completed 12 wells.
HighMount took a ceiling impairment charge due to the decline in natural gas rates, and Loews expects it to take another ceiling impairment charge in Q4.
Loews believes natural gas prices have come back faster than expected. In the last 5 years, natural gas has changed from being a commodity in shortage to one in abundance. The United States could increase its current natural gas production by 50 percent if natural gas prices were $4.00 to $4.50. The natural gas market needs increased demand growth. Loews expects growth in exporting natural gas in the next 3 to 5 years, which would increase jobs and improve our trade deficit. It believes production of every 1 billion cubic feet of gas would result in 7,000 to 10,000 permanent jobs. The company is seeing railroads switching to natural gas.
Loews Hotels & Resorts
The company is continuing with its strategy of growing in key urban areas, such as the new Loews Hollywood. In 2012 and 2013, Loews will be renovating 6 hotels, including the Loews Regency in New York. Increased expenses, including the expense of acquiring Loews Hollywood, contributed to a net loss for Loews in Q3.
Revenue per available room increased $7.53 to $169.31. Occupancy rates increased to 82 percent versus 79.8 percent a year ago. Average room rates increased by $3.70, an 1.8 percent increase from a year ago.
Holding company
The Loews holding company had investment income of $79 million in Q3 versus a $64 million loss last year due to improved performance in equity investments.
Financials.
EPS for Q3 was $.45 versus $.40 a year ago. The company took impairment charges of $166 million at HighMount regarding the carrying value of its natural gas producing properties due to the decline in natural gas. Absent these charges, EPS would have been $.87. The increase is due primarily to higher earnings at CNA and higher investment income for the Loews holding company.
CNA's contribution to Loews' net income in Q3 was $195 million versus $84 million a year ago. Diamond Offshore's contribution to Loews' net income in Q3 was $83 million versus $121 million a year ago. Boardwalk Pipeline's contribution to Loews' net income in Q3 was $20 million versus $18 million a year ago. Excluding the ceiling impairment charge, HighMount contributed $8 million to Loews' net income versus $16 million a year ago. Loews Resorts had a net loss of $1 million versus a break even performance last year.
At the end of Q3, Loews had $3.8 billion in cash and investments. During the quarter, it repurchased 2.2 million shares of stock for approximately $88 million.
The transcript of the earnings conference can be found on Seeking Alpha at the following link:
http://seekingalpha.com/article/959491-loews-management-discusses-q3-2012-results-earnings-call-transcript?page=5&p=qanda&l=last
Copyright 2012 Jaygo's Earnings Conference Call Summaries
This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
Pingates
No comments:
Post a Comment