Loews Corporation (L) reported second-quarter 2014 operating earnings of 79 cents per share surpassing the Zacks Consensus Estimate as well as year ago results by 17.9%.
The quarter witnessed higher earnings at CNA Financial Corporation (CNA) and higher parent company investment income driven by improved performance of the trading portfolio. However, lower earnings at Diamond Offshore Drilling, Inc. (DO) limited the upside.
Including loss from discontinued operations of $187 million (including ceiling test impairment charges at HighMount Exploration & Production, LLC of $167 million), Loews reported net income of $116 million or 30 cents per share. This compares unfavorably with $269 million or 69 cents per share earned in the year-ago quarter.
Operational Performance
Loews’ total revenue slid 0.69% year over year to $3.6 billion in the quarter. Lower insurance premiums and lower contract drilling revenues largely induced the downside.
Total expenses decreased 0.1% year over year to $3 billion due to lower Insurance claims & policyholders' benefits in the reported quarter.
CNA Financial revenues declined 0.4% over the prior-year period to $2.5 billion. It reported net income attributable to Loews Corp. of $244 million, up 35.6% year over year. The improvement largely stemmed from current accident year underwriting results, better performance at the Life & Group Non-Core business and a curtailment gain of $50 million related to the re-measurement of postretirement benefit obligations. Unfavorable net prior year development limited the upside.
Boardwalk Pipeline’s revenues decreased 3% to $295 million from the prior-year level. Its reported net income attributable to Loews Corp. declined 23% to $17 million.
Loews Hotels’ revenues improved about 11% year over year to $112 million. Earnings surged to $5 million from $1 million in the year-ago quarter.
Diamond Offshore Drilling, Inc.’s (DO) revenues declined 7.8% year over year to $701 million. Earnings plunged 52% to $42 million in the quarter. The decline was primarily due to lower utilization, higher contract drilling costs and increase in interest expense from increased debt levels. Nonetheless, higher dayrates earned were a partial dampener.
Book value as of Jun 30, 2014 was $49.74 per share, up about 1% from $49.26 as of Jun 30, 2013.
Share Repurchase
During the second quarter of 2014, Loews spent $171 million to buy back 3.9 million shares. Subsequent to the second quarter, through Aug 1, the company spent another $107 million to repurchase 2.5 million shares.
Our Take
Loews remains on track to strengthen its hotel business and results are exhibiting improvement. The company had been adding properties to reach its goal of talking the tally to 30 and improve earnings three-fold by 2015. Continued share repurchases also enhance shareholders value.
However, soft performance at Diamond Offshore continues to weigh on Loews’ results.
Loews currently carries a Zacks Rank #4 (Sell).
Peer Performance
Cigna Corp. (CI), another multi-line insurer, reported fourth-quarter earnings of $1.96 per share that was ahead of the Zacks Consensus Estimate by 5.9%.
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