Disappointing CNA Insurance Results Hurting Loews

By Jonathan Stempel
April 28, 2008

Loews Corp. posted an unexpected drop in first-quarter profit Monday, hurt by disappointing results from its CNA Financial Corp. insurance unit.

In Monday afternoon trading, shares of Loews were down $2.07, or 4.6 percent, at $42.56, while CNA slid $2.90, or 10.4 percent, to $25.09.

Net income at New York-based Loews, a conglomerate run by the billionaire Tisch family, declined 14 percent to $662 million from $768 million a year earlier.

Profit attributable to Loews shareholders fell 15 percent to $555 million, or $1.05 per share, from $650 million, or $1.20.

Excluding investments and discontinued operations, profit was $503 million, or 95 cents per share, down from $1.07 per share a year earlier. On that basis, analysts on average expected $1.14 per share, according to Reuters Estimates.

Revenue fell 2 percent to $4.54 billion. Results included an $82 million gain from the Jan. 10 sale of the Bulova Corp. watch-making unit to Japan's Citizen Holdings Co.

Results suffered from a larger-than-expected 28 percent drop in operating profit at Chicago-based CNA, a commercial insurer in which Loews owns a 90 percent stake. Premiums and investment income fell, and catastrophe losses increased. CNA profit has declined for four straight quarters.

"Loews managers seem to be very good at everything except insurance, which is their biggest business," said Matt Nellans, an analyst at Morningstar Inc. in Chicago. "Including run-off businesses, CNA is paying out more than it's taking in."

James Tisch, Loews' chief executive, said on a conference call that most operating units performed well, but that "CNA's net operating income for the quarter comes as a disappointment."

Loews' businesses include financial, tobacco, energy and hotel companies. The company is thus exposed to several areas of the U.S. economy, which many economists say may have slipped into a recession in the first quarter.

DRILLING, ENERGY UNITS IMPROVE

Profit at CNA fell 37 percent to $187 million, or 69 cents per share, while operating profit was $221 million, or 82 cents per share. Analysts on average expected $1.01 per share. Premiums declined 6 percent to $1.62 billion.

Earnings at the Lorillard Inc cigarette unit fell 10 percent to $171 million. Profit attributable to shareholders of Carolina Group, a tracking stock for Lorillard, was $107 million, or 98 cents per share, matching forecasts. Net sales rose 1 percent to $921 million as prices increased.

Lorillard brands include Newport, Kent and True. Loews said it remains on track to spin off Lorillard around mid-year.

Carolina shares fell $4.08, or 5.6 percent, to $68.35 in afternoon trading.

Houston-based Diamond Offshore Drilling Inc., in which Loews has a 51 percent stake, said on Thursday quarterly profit rose 30 percent to $290.6 million, or $2.09 per share, as the use of drilling rigs increased.

Profit rose 10 percent at Boardwalk Pipeline Partners LP , in which Loews has a 70 percent stake, and was unchanged at Loews Hotels. HighMount Exploration & Production LLC, a natural gas unit, posted a $47 million profit.

(Editing by Dave Zimmerman, Phil Berlowitz)