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Loews Corp (L) (Q1 2024) Earnings Call Transcript Highlights: Strong Performance with Notable ...

  • Net Income: $457 million, up from $375 million in Q1 2023.

  • Earnings Per Share (EPS): $2.05, increased from $1.61 in Q1 2023.

  • Book Value Per Share: Increased to $72.87 from $70.69 at end of 2023.

  • CNA Net Income: $310 million, up from $268 million in Q1 2023.

  • CNA Net Investment Income: Increased 16% year-over-year.

  • Boardwalk EBITDA: $307 million, up from $256 million in Q1 2023.

  • Boardwalk Net Income: $121 million, up from $86 million in Q1 2023.

  • Loews Hotels Adjusted EBITDA: $80 million, down from $86 million in Q1 2023.

  • Loews Hotels Net Income: $16 million, decreased from $24 million in Q1 2023.

  • Parent Company Investment Income: $43 million, up from $33 million in Q1 2023.

  • Share Repurchases: Approximately 900,000 shares at a cost of about $67 million.

  • Cash and Short-term Investments: Ended Q1 2024 with $3.2 billion.

Release Date: May 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Loews Corp reported a significant increase in net income to $457 million in Q1 2024, up from $375 million in Q1 2023, driven by strong performances at CNA and Boardwalk.

  • CNA continued its streak of robust underlying underwriting income, contributing significantly to the quarter's success with a net income increase of $42 million year-over-year.

  • Boardwalk Pipelines experienced a 20% increase in EBITDA, driven by higher recontracting rates and the acquisition of Bayou Ethane, contributing to a net income increase of $35 million from the previous year.

  • Loews Hotels opened a new 888-room property in Arlington, Texas, enhancing its portfolio and attracting substantial group business due to its prime location.

  • Loews Corp's investment income at the parent company level increased by $10 million compared to the previous year, reflecting higher returns on the common stock portfolio.

Negative Points

  • Despite overall growth, Loews Hotels reported a decrease in Adjusted EBITDA and net income due to lower occupancy in Orlando, impacted by ongoing renovations.

  • CNA's combined ratio worsened slightly due to an increase in catastrophe losses, indicating higher costs relative to premiums earned.

  • The increase in Boardwalk's net income was less than the increase in EBITDA, partially due to higher depreciation expenses from recent acquisitions and growth projects.

  • Loews Corp slowed down the rate of share repurchases in Q1 2024 due to the share price being at or near all-time highs, which could suggest a cautious approach to capital return strategies.

  • The passing of Joe Rosenberg, Loews's long-time Chief Investment Strategist, marks a significant loss for the company, potentially impacting its investment strategies moving forward.

Q & A Highlights

Q: Jim, how will data centers impact natural gas demand and Boardwalk? A: James S. Tisch - Loews Corporation - President, CEO & Director: Growth in artificial intelligence has driven and should continue to drive a proliferation of data centers, creating a substantial uptick in U.S. electricity demand. Incremental demand from data centers also coincides with pressure on the grid from the adoption of electric cars and the onshoring of certain manufacturing facilities. Therefore, after more than a decade of stagnation, electricity demand may grow as much as 20% by the end of this decade. The increase in power demand cannot be met by renewables alone given issues with intermittency, land use and permitting new transmission lines. Therefore, new natural gas-fired power plants will need to be constructed. Boardwalk is already seeing attractive growth projects from new power plants that are being built near its pipeline system.

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Q: Jane, how has the higher interest rate environment impacted Loews Hotels? A: Jane J. Wang - Loews Corporation - Senior VP & CFO: The higher interest rate environment has not materially impacted Loews Hotels' ability to refinance its properties, due in large part to its staggered maturities. That being said, the hotel company anticipates that higher rates may impact interest expense as loans mature. However, as the company replaces construction loans with permanent financing, it will likely benefit from lower spreads. It is important to keep in mind that while higher interest rates are a headwind for Loews Hotels, they are actually a tailwind for Loews Corp overall. As a 92% owner of CNA, Loews benefits from the higher rates that CNA earns on its $47 billion investment portfolio.

Q: Jim, are there any updates on the Boardwalk litigation? A: James S. Tisch - Loews Corporation - President, CEO & Director: In December of 2022 the Delaware Supreme Court reversed the Delaware Court of Chancery's ruling in favor of the former Boardwalk minority unitholders. The Delaware Court of Chancery held oral arguments on April 12th regarding unresolved issues that the Delaware Supreme Court remanded back to the lower court. We expect a decision from the Chancery Court later this year. Loews has the ability to appeal any unfavorable decision back to the Delaware Supreme Court.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.