Loews Corporation’s (L) first-quarter 2014 operating earnings of 68 cents per share failed to meet the Zacks Consensus Estimate by 9.3% and fell short of year ago earnings by 18%.
Including ceiling test impairment charges of $19 million, net investment gains of $24 million and discontinued operations of loss from discontinued operations of $186 million, Loews reported net income of $59 million or 15 cents per share, comparing unfavorably with $242 million or 62 cents per share earned in the year-ago quarter.
The quarter witnessed higher parent company investment income resulting from better performance of the trading portfolio as well as lower ceiling test impairment charges at HighMount. Loews also incurred charges in the quarter for the write-off of all previously capitalized costs incurred by it and Boardwalk Pipeline for the Bluegrass project.
Operational Performance
Loews’ total revenue inched up 0.9% year over year to $3.701 billion in the quarter. An increase in insurance premiums largely aided the upside.
Total expenses increased 2.2% year over year to $3.26 billion. The increase was mainly due to higher Insurance claims & policyholders' benefits in the reported quarter.
During the reported quarter, CNA Financial Corporation’s (CNA) revenues declined 0.6% over the prior-year period to $2.42 billion. It reported net income attributable to Loews Corp. of $176 million, down 14.6% year over year.
Lower net investment income, higher catastrophe losses and lower favorable net prior-year development induced the year-over-year decline. However, improved non-catastrophe current accident year underwriting results and higher realized investment gains limited the downside.
The Boardwalk Pipeline’s revenues increased 8.5% to $357 million from the prior-year level. The segment incurred loss of $18 million, comparing unfavorably with the year-ago earnings of $33 million.
Loews Hotels’ revenues improved about 12% year over year to $105 million. Earnings were $3 million in the reported quarter.
Diamond Offshore Drilling, Inc.’s (DO) revenues declined 3.0% year over year to $710 million. Earnings decreased 16% to $69 million in the quarter. The decline was primarily attributable to lower utilization and increase in interest expense due to increased debt levels. Nonetheless, higher dayrates earned were a partial offset.
HighMount’s revenues declined 19% year over year to $105 million in the quarter. The segment incurred loss of $1 million, compared with $4 million profit generated in the year-ago quarter.
Book value as of March 31, 2014 was $49.43 per share, up 1.9% from $48.48 as of March 31, 2013.
Share Repurchase
During the first quarter of 2014, Loews spent $24 million to buy back 0.5 million shares. Subsequent to the first quarter, through April 24, the company spent another $22 million to repurchase 0.6 million shares.
Our Take
Loews remains on track to strengthen its hotel business – results are exhibiting improvement. Continued share repurchases also enhance shareholders value.
However, sustained soft performance at Diamond Offshore and HighMount continues to weigh on Loews’ results.
Zacks Rank
Loews currently carries a Zacks Rank #4 (Sell). Assurant Inc. (AIZ), another multi-line insurer, reported fourth-quarter earnings of $1.68 per share that was ahead of the Zacks Consensus Estimate by 7.7%.
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