Loews Corporation L reported second-quarter 2015 operating earnings of 46 cents per share, which missed the Zacks Consensus Estimate of 70 cents. Earnings also deteriorated about 42% year over year. The quarter suffered due to lower earnings at CNA Financial and a less favorable performance by the trading portfolio of the parent company.
Revenues
Loews’ total revenue declined 4.4% year over year to $3.4 billion in the quarter. Lower insurance premiums, net investment income as well as decreased contract drilling revenues can be held responsible for the downside.
Behind the Headlines
Total expenses increased 6.3% year over year to $3.1 billion due to higher insurance claims & policyholders' benefits and other expenses.
CNA Financial’s CNA revenues decreased 5% over the prior-year period to $2.3 billion. It reported net income attributable to Loews Corp. of $121 million, down 50% year over year. The decline stemmed from the charge related to a retroactive reinsurance agreement to cede its legacy asbestos and environmental pollution liabilities. An improvement in net prior-year development in CNA's commercial business segment compensated partially.
Boardwalk Pipeline Partners, LP’s BWP revenues increased 1.4% year over year to $299 million. Its reported net income attributable to Loews Corp. decreased 29% year over year to $12 million.
Loews Hotels’ revenues improved about 49% year over year to $167 million. Earnings attributable to Loews increased 60% year over year to $8 million driven by higher income from joint venture properties.
Diamond Offshore’s DO revenues declined 9.8% year over year to $632 million. Net income attributable to Loews increased 7.1% year over year to $45 million. The improvement came as lower contract drilling expenses were partially offset by lower rig utilization and increased depreciation and interest expense.
Book value as of Jun 30, 2015 was $51.77 per share, up about 4.1% from $49.74 as of Jun 30, 2014.
Share Repurchase
During the second quarter of 2015, Loews spent $233 million on buying back 5.8 million shares. It bought another 3.3 million shares for $127 million subsequent to the second quarter through Jul 31.
Our Take
Loews remains on track to strengthen its hotel business as evident by a considerable improvement in its quarterly performance. However, Diamond Offshore experienced lower rig utilization.
Despite a still soft interest environment, investment income showed strength. Loews also continues to deploy capital to enhance shareholders’ value via share buyback.
Loews currently carries a Zacks Rank #4 (Sell).
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