洛茲集團 (L) 2005 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Loews first quarter 2005 earnings conference call. At this time all participants have been placed on a listen-only mode and the floor will be open for your questions following today's presentation. It is now my pleasure to introduce Mr. Josh Kahn, Investor Relations Director. Sir, the floor is yours.

Thank you. Good morning, everyone. I'm Joshua Kahn, Investor Relations Director for Loews. I'd like to welcome you to Loews Corporation first quarter 2005 conference call.

If you have not received a copy of today's Loews Corporation and Carolina Group earnings releases, and would like either one, please go to our website loews.com. Jim Tisch, the Chief Executive Officer of Loews, and Peter Keegan the Chief Financial Officer of Loews will lead today's discussion and will be joined by Marty Orlowsky of Lorillard.

Before we begin, I'd like to make a few brief disclosures concerning forward-looking statements. This conference call will include the use of statements that are forward-looking in nature. Actual rules achieved by the Company may differ materially from those projections made in any forward-looking statements. Forward-looking statements reflect circumstances at the time they are made and the Company expressly disclaims any obligation to update or advise any forward-looking statements made during this call.

This disclaimer is only a brief summary of the Company's statutory forward-looking statements disclaimer. You are urged to read this disclaimer, which is included in the Company's 10-k and 10-Q filings with the SEC in full.

I'd all like to remind you that during this call today, we may discuss certain nonGAAP financial measures such as operating income. With regard to such financial measures, please refer to our earnings release for reconciliation to the most comparable GAAP measures.

There will be time for questions after Jim, Peter and Marty have discussed our rules. For those who have tuned in via website, please call 877-692-2592 during the Q&A session, if you'd like to ask questions. Now I'd like to turn the call over to our CEO, Jim Tisch.

Thank you, Josh. Good morning, to everybody. Loews enjoyed a good first quarter as business conditions continued to be favorable for all of our subsidiaries. Each of our Companies performed well, some showed dramatic increases in earnings. CNA posted its sixth-consecutive quarter of solid earnings after the restructuring it underwent in '03.

The Company's core PNC operations registered improvements in premium rates, while keeping retention stable and again, registered a combined ratio under 100. We remain confident that CNA's efforts to focus its business, reduce its expenses, and strengthen its balance sheet, will enable it to deliver steady shareholder returns over time.

Lorillard earnings increase significantly over last year, as sales volumes improved and promotional spending declined. The Newport, both volumes and market share were higher, but I don't want to steal Marty Orlowsky's thunder. He'll join us a moment to add more color to our tobacco results.

Diamond Offshore continued to benefit from very robust market conditions in offshore drilling. It's earnings contribution to Loews increased measurably as its net income improved by almost $40 million.

Diamond Offshore results reflect a tremendous surge in day rates, which have nearly doubled since July of '04 for all rig categories. The demand for rigs has been so strong that most of the Companies fleet is now contracted or committed through '05.

Boardwalk Pipelines completed its first full quarter as the reporting entity for Texas Gas and Gulf South. Gulf south, as you remember, was acquired in December of '04. Because the Gulf south acquisition happened late in the year, quarter on quarter performance comparisons are not meaningful.

Nevertheless, the addition of Gulf South to Loews has transpired seamlessly, and low double-digit cash-on-cash returns on equity, we expect from Boardwalk Pipeline continues on plan.

Loews Hotels continued to benefit from strong lodging market conditions, which pushed net income up dramatically year-over-year. Rev par for all of the Company's owned hotels increased nearly 10%, as both occupancy and average room rates improved. As a result, Loews Hotels net income nearly doubled.

Before I turn the call over to our CFO, Pete Keegan, who will provide some more insight into the financial performance of Loews this quarter, I want to alert listeners to our plans to hold our third annual analyst conference on June 3rd. Details will be published soon, so stay tuned. Peter?

Thanks, Jim. Good morning, everyone. Loews Corporation reported consolidated net income of $339.7 million in the first quarter of 2005, versus consolidated net income of 44.9 million in the first quarter of 2004.

Net income for Loews' common stock was $293.2 million, or $1.58 per share in the first quarter 2005, compared to net income of 10.5 million, or $0.06 per share in the first quarter of 2004.

First quarter 2004 results included an impairment loss of 368.3 million after taxes and minority interest, related to the sale of CNA's individual life insurance unit.

2004 results have been restated to reflect corrections to CNA's accounting for several reinsurance contracts, primarily with a former affiliate and CNA's equity accounting for that affiliate. Loews will file a form 10-KA for 2004 reflecting the effects of their restatement, which will reduce shareholder's equity as of December 31st, 2004 by 27.3 million, or two-tenths of 1%

For the first quarter of 2004, this accounting revision resulted in increase in net income for Loews' common stock of 1.3 million or $0.01 per share. Net operating income for Loews' common stock determined by excluding per net income, net investment losses was 308 million in the first quarter of 2005, versus 310.8 million in the first quarter of 2004. Net investment results for the first quarter 2005 yielded a loss of 14.8 million, versus a loss of 300.3 million in the first quarter 2004. 2004 investment results reflect the previously mentioned impairment loss of CNA.

Net income for Carolina Group stock was 46.5 million, or $0.68 per Carolina Group share in the first quarter 2005, versus 34.4 million or $0.59 per Carolina Group share for the first quarter 2004.

Income for Carolina Group stock increased in the first quarter 2005, as total cigarette volume grew three-tenths of a percent. The increase in income for Carolina group shareholders reflects improvement in Lorillard's operating performance, as well as the higher weighted average number of Carolina Group shares outstanding during the quarter.

The weighted average Carolina Group shares outstanding increase from 57.97 million in the first quarter 2004 to 68 million in the first quarter 2005, as a result of the sale of 10 million shares of Carolina Group stock by Loews in December of 2004. Loews Group currently holds 60.8% of total shares and share equivalents of Carolina group.

Lorillard contributed 94.7 million to net income for Loews common stock in the first quarter 2005, versus 93 million in the first quarter 2004. Lorillard's contribution to Loews' net income grew despite the decline in Loews' common shareholder's interest in the earnings of Carolina Group.

Lorillard recorded charges of 121.4 million, and 122.7 million, after taxes, for the first quarter of 2005 and 2004, respectively, to accrue its obligations under various state settlement agreements.

CNA contributed 180 million to Loews' net operating income in the first quarter 2005, versus 195.5 million in the first quarter of 2004.

Loews interest in CNA's net realize investment gains and losses improved to a loss of 11.7 million in the first quarter 2005, from a loss of 302.2 million in the first quarter of 2004. CNA's first quarter 2004 investment losses reflect the charges relating to the sale of its individual life insurance business.

Diamond Offshore's contribution to net profits improved to 14.2 million in the first quarter of 2005, from a loss of 6.9 million in the first quarter of 2004. This improvement reflects the continued strength of the offshore drilling market. Day rates and utilization were significantly higher for all Diamond Offshore's rig categories in the quarter.

Loews Hotels benefited from continued strength in the travel and leisure industry, which drove net income to 13.2 million in the first quarter of 2005, from 6.9 million in the first quarter 2004.

The average room rate for all owned hotels was $201.17 in the 2005 quarter, compared to $186.24 last year. Occupancy for all owned hotels were 71.9%, up from 70.7% in the first quarter of 2004.

First quarter 2005 is the first quarter where the results of Boardwalk Pipelines reflect the performance of both Texas Gas transmission and Gulf South Pipelines.

As a result, year-over-year comparisons are not meaningful. Nonetheless, Boardwalk registered a solid performance in the quarter, contributing $37.9 million to Loews net income.

Net investment income in other, which is comprised of Loews investment income, corporate interest expense, income from operations at Bulova, equity earnings from Majestic Shipping Corporation and other allocated -- unallocated expenses declined from a loss of 3.7 million in the first quarter 2004, to a loss of $32 million in the first quarter of 2005.

First quarter 2004 results include equity income from Majestic, while both the first quarter 2005 and the first quarter 2004 include additional after-tax interest expense of 23.1 million and 11.1 million, respectively, relating to the early redemption of the Company's long-term debt.

March 31st, 2005, total cash and investments excluding CNA, Diamond Offshore, and Texas Gas was $4 billion.

Approximately 2.8 billion of cash and investments were at the holding company level, and 1.2 billion resided in Lorillard.

Loews and Loews Hotels together at $2.56 billion of long-term debt at the end of March.

In April, as we had indicated in a March press release, Loews spent approximately $1.2 billion of its cash to redeem its 3 1/8th exchangeable subordinated notes due 2007. As a result, both the cash and outstanding long-term debt balances of Loews are lower than they were at the end of the first quarter by that amount. That concludes my remarks.

Now I'll turn the call over to Marty Orlowsky of Lorillard. Marty.

Thank you, Peter. First quarter '05 operating and net income of 218.6 million and 140.4 million were up 8.7 and 10.1%, respectively, as compared with the first quarter of '04.

Major contributors to these results were lower promotion spending, primarily, and lower legal expenses that offset higher settlement and grower buyout assessment expenses.

Please note that the comparative results of Lorillard's first quarter of '05 financial performance with that of the first quarter '04 may not be predictive of a full-year 2005 results, given the potential variability of unit ship, future promotion spending, and the timing and scope of legal expenses.

As I have stated on previous calls, our goal is to maintain and grow Newport's market share. Depending on the brands, trends and competitive factors, we will make whatever adjustments to spending we deem consistent with that strategy.

As some might be aware, effective on January 17th, 2005, Lorillard announced a price increase of $5 per 1,000 cigarettes to the following brands: Kent, True, Max and Satin.

Given the relatively low volumes to these brands, the net effect of this increase will not have a significant financial impact for 2005. Marketplace performance was positive comparing the first quarter of '05 with the first quarter of '04. And at the wholesale level, total Lorillard shipments were basically -- slightly up by about three-tenths of 1%, and domestic units increased by nine-tenths of 1%.

Newport's domestic shipments increased 1.9% in the first quarter of '05, versus the first quarter of '04. Shipment market share for total Lorillard was 8.9%, an increase of six-tenths of a point, over the first quarter of '04.

Newport's wholesale market share was 8.55% in the first quarter of '05, as compared with 8.04% share in the first quarter of '04. An increase of .51 points.

Basis our retail database, total Lorillard retail share for the first quarter of '05 was 9.63%, up .39 points, as compared with the first quarter of 2004. Newport's retail share was 8.82%, versus 8.37%, an increase of .45 points over the first quarter of 2004.

Overall, according to our data, the menthol segment was basically flat at 27% of the total market for the first quarter of 2005, as compared with the first quarter of 2004.

For the first quarter of '05, Newport share of the premium segment was 12% and of the menthol segment 32.6%. Increases of four-tenths and 1.7 segment points, respectively, over the first quarter of '04. Sequentially, at retail, Newport improved by .29 share points in Q1 '05, versus Q4, and increased its share of the menthol segment by 0.7 points. Now I'm going to turn it back to Josh.

Thank you, Marty. At this point, operator, please open up the call to questions.

Thank you. The floor is now open for questions. [OPERATOR INSTRUCTIONS] Our first question is coming from Bob Glasspiegel with Langen Mcalenney. Please go ahead.

Good morning. I have got my normal question on corporate, just to telescope in there to see if there was anything unusual, and are you breaking out trading gains in the numbers?

No. Separately? Other than what we showed investment gains and losses. No, Bob.

I thought there was a trading line that's now sort of been the operating income, and out of -- out of the realized gains and losses --

Interest income in other. There are some. There are some gains and losses.

Do you have that number handy?

It looks like we had -- let me get back to you in a second. Let's go on to another one.

Okay. The second question. I was wondering if Jimmy or someone else could outline, what your sort of overall investment strategy is? I assume you, along with the rest of the world that I talk to, is positioned for interest rates to go higher in the margin, and how much so are you?

We are, Bob, and it's has been the case for awhile now, we have been positioned in a barbell -- with a barbell strategy. Meaning that we have a significant amount of funds in cash and short-term investments, and we also have funds at the long-end of the market.

More recently, with the run-up of two-year notes to close to 4%, we have weighted a bit out into the two-year sector, but we've basically abandoned the 2 1/2 year sector out to the ten-year sector. So we get yield from both the short-end of the curve, and also from the long-end of the curve.

How big is your short position currently?

We manage -- we manage -- when I'm speaking here, I'm talking about primarily the CNA portfolio. That portfolio is about 35 to $40 million. And 35 to $40 billion. And it's not -- it's not helpful to say how much of that portfolio is kept in short-term investments.

Okay. Thank you very much.

Thank you. Our next question is coming from Christine Farcus (ph) with Merrill lynch. Please go ahead.

Good morning. A question for Marty. In your press release, you talk about promotional activity. My question has to do with on a sequential basis by our calculation, profit per thousand in the fourth quarter of '04 was 3163 and this has dropped to 2606 in the first quarter. Can you explain the reduction in promotional activity, versus last quarter and give us color as to perhaps why it was so sharp? Thank you.

Right. We, in fact, did reduce our spending in promotion in the first quarter of '05, versus my first quarter '04 -- I'm sorry the fourth quarter of '04.

I think one of the factors that affected our income per thousand, is the fact that in the fourth quarter of '04, we had some credit and slightly lowered depreciation on a per thousand basis -- that per thousand units, that affected the overall yield on income per thousand.

Okay. And if I can follow up to that, given you have a higher proportion of your volumes in the premium segment relative to PM USA, yet the unit per -- profitability per thousand has dropped, or the GAPP has narrowed significantly to PM USA. Is there anything here that would suggest a trend? Or what would this say regarding the brand equity of Newport?

Well, I think that our spending pattern over the last year and a half, two years has been such -- and I'm not speaking to 2005. I'm speaking to the past, really. The trend has been on a per thousand basis that the GAPP has narrowed, given our increased promotional spending in '03 and '04.

I think that we -- I don't know the exact ratio of difference to the first quarter of '05 between ourselves and Philip Morris, but I -- I'm just checking my numbers here. I believe that our spending pattern, for our yield on that level improved in the first quarter -- I don't know what the exact ratio of difference is, but there's no major deterioration in terms of our equity value of Newport. I think it's a combination of whatever we are spending in promotion, which is less than what we had spent in the fourth quarter of last year, and based on other costs. That's where the number came out.

Okay. And just as a final point, is some of this reduced profitability then? Or is any of this the result of activity being taken by Marlboro Menthol, or Kool and to a lesser extent Salem in the quarter? Thanks, Marty.

Our reduced activity?

Just the competitive environment in general, what has the effect been or how aggressive have your competitors been in the quarter?

I think Philip Morris, with Marlboro Menthol, even though they lowered their discount rate by $1, a thousand, I think, if I remember correctly. They're still very aggressively promoting Marlboro Menthol packings, and with additional, beyond their invoice allowance with an additional amount on the buydown. That is really not changed in terms of 100% of their Menthol volume is discounted. Where as, in Newport's case, it's not. And hasn't been. And wasn't during the first quarter.

So, while there's an easing, if you will, of the amount of the promotional discount by both Philip Morris and ourselves, there's still a fairly aggressive level of discounting. Particularly on Philip Morris on the Marlboro Menthol, "Buy Some, Get Some Free" promotion. They still have a high percentage or proportion of their volumes that are on that kind of promotional program.

So, while there's an easing of the absolute of cost relationship, there's still a fairly intense amount of activity there. With respect to Salem, there has been a reduction, as far as we can tell, of their spending and promotion. However, Kool, who changed their list price, which I'm sure you're aware of, increased their list price, but they're compensating for that through the buydown. They're still fairly aggressively promoting Kool.

I would say net- net with some modest decline in spending on promotion for all Companies. There's still a pretty intense competitive factor going on out there.

Great. Thanks a lot, Marty.

Okay.

Thank you. Our next question is coming from Judy Hong with Goldman Sachs. Please go ahead.

Good morning. I guess I'll start with a few question for Marty, as well. Marty, can you talk about why costs went up by about $20 million in the first quarter?

Well, we had -- versus what, first quarter of '04?

Yeah.

Essentially, we had incurred slightly higher what I will call in general terms, settlement expense, and that's part of the -- part of it is due to our expensing our projected inflationary factors for this year, which increased our settlement costs for the basic settlement by about -- let's see, about $7 million.

And then the grower buyout portion was -- there's a net increase, even though we had the offset from the trust payments, we're expensing based on our pro-projected volumes since it's an assessment on units. That also took it up by about 6 1/2, $7 million. That's the bulk of the influence on cost of goods, cost of sales. There's a slight increase in depreciation, but it's not significant.

Okay. Then just following on the earlier question about the discount level, if you look at Newports in the first quarter. Would you say that brand is -- is -- and if you look at Newport's pricing in a market, relative to other premium menthol brands are the price points relatively comparable? I mean, is Newport pricing higher or lower in markets, versus the other menthol brands?

On average -- and I don't have specific numbers, but on average, Newport's price per -- net price per packet retail is higher than the average net retail price of the other brands.

That would be because of the geographic skew, right?

I don't know what you mean by geographic -- well, the way we apply our promotional discounts, which is not as I just said a moment ago, it's not 100% of our volume. Just by that alone, average net price at retail is going to be higher than some of the competitive menthol brands.

Okay. Then just looking at what Reynold's is doing in terms of de-emphasizing Salem, to what extent are you seeing benefits of that in terms of Newport share performance at retail?

Well, I don't know the precise influence or effect, but clearly, the fact that Newports share, either on the wholesale level or at the retail level, pretty decent increases. Obviously, we're being more than competitive and some of that business could be coming from Salem. Although, I can't give you an exact answer to that.

Okay. And then just a question for Pete. I know that you -- we don have the numbers for Gulf South on a year ago. So can you just give us how much Gulf South contributed in the first quarter? And the number for Boardwalk Properties?

Hold on a second, Judy. Of the 37.9 total approximately 24.6 Texas Gas and 19.2 is Gulf South.

Okay. So was Texas Gas down, versus a year ago then?

Slightly.

Okay. All right. Thank you.

Thank you. Our next question is coming from David Adelman with Morgan Stanley. Please go ahead.

First, either Jim or Pete, could you comment on the rational for the decision to refinance the diamond Offshore obligation?

Yes. We refinanced the 3 1/8, because we figured that there could be room to go in the upcycle for the offshore drillers. And we had the opportunity to call these bonds, so we did. At the time, and still today , it's basically a push between the cash -- the amount that we're earning on our cash, and what we were paying out on the bonds. So we decided that it was just -- it made sense to call them in about 2 or 2 1/2 years before their maturity, and to extinguish the ability of people to call away 17 million shares of Diamond Offshore.

Are you keen, Jim, to put more debt and have more cash on Loews holding company levels, both store or are you perfectly comfortable with having less debt and less cash?

Let me speak out of the end of the -- the end of the third quarter. The end of the first quarter. We're very comfortable with the level of debt we had then. And I don't want to speak about any future plans for debt, especially with lawyers sitting in the room and telling me not to say anything about it.

Okay. And, Jim, could you also comment on the decision by Diamond Offshore to invest in the building of new rigs? That seems to be fairly uncharacteristic of how you've tried to behave opportunistically in that business. Can you enlighten us a little about the strategy behind that move?

Sure. For those who may not know, last night it was announced that Diamond Offshore was going to buy two new jack-up rigs, 350-foot rigs capable of drilling deep gap wells, and the total amount is $300 million.

We made that decision because, I believe, that even though we could see a downturn in gas prices over the short term, over the relatively longer term, over the next three to five to seven years, we could see strong gas prices. Certainly strong enough to warrant that oil companies drill for gas.

Combined with that, if you look at the age profile of the worldwide jack-up fleet, you see that there's a big bulging construction in the very early 1980's, and there's very little construction since then. There are 20 or 30 jack-ups on order, but there are -- there's a total fleet in excess of 500 units.

And it's my belief and the Company's belief, that the jack-up market could have a good sustained cycle because of the confluence of the desire of oil companies to drill for more reserves, the level of oil and gas prices, and the state of the current fleet.

And let me ask Marty a couple of questions, if I could. Marty, balance has reversed, or is in the process of reversing some of its Phase 2 MSA accruals that it booked last year. Is it still the case that you have elected not to do that at this point?

Yes. As I think, we discussed on the last call, I believe. We are not making any decision to reverse until the matter is resolved.

Balance of profitability and share, would you agree that Lorillard had a particularly good share quarter, up about 30 basis points, and perhaps as the ability to moderate the spending somewhat from here going down? I know you want to grow share, but you don't need to grow it at a 30-basis point sequential basis going forward, correct?

When you say we don't need to, that depends on your view, I suppose. You know, I think this question's come up before, David, and my answer to that has been and will be today, that it's awfully difficult to fine tune spending to correlate it to an exact share result. You know, we have to -- we're looking at the competitive environment, not only basis menthol brands that we compete directly with, but in general. And we have to make decisions with respect to how we're going to support Newport, taking many factors into consideration.

So, it's not a highly precise process to come up with a spending figure that would equate precisely to come share result. And we're looking at in general terms, and we've done that in the past and we're going to -- pending, depending on circumstances, we'll continue to look at it that way.

But it's very hard to say that, well, we could live with a one-tenth of 1% share increase, so we'll spend "X" dollars to achieve that. There's always a risk.

Given the competitive environment, and the total market environment , that if you lower your spending by some huge amount or some significant increment, you run the danger of losing some momentum. And so, we're making the judgment, as we have.

Marty, on a net basis, there's been some convergence over the last six months between Newport's net per pack promotional spend rate and that of it key competitive brands?

I'm not sure I understand when you say convergence.

Convergence, in other words, their spending has come down more than your spending. And, therefore, you might still spend less, but that differential may not be as large as it was six months ago?

That's possible. They're spending because of the nature of Marlboro Menthol spending, because, as I keep saying, it's on all of their volume that they ship out, basis the off invoice allowance. Their reductions may have a proportionately greater effect than our reductions might on a per pack basis, on a relative Newport's, than let's say Marlboro Menthol.

So, you know, there's probably -- there's been a reduction, obviously, on our end. How it matches up historically with competitive brands, I really can't answer that. Specifically anyway.

Thank you.

Okay.

thank you. Our next question is coming from Brad Smith with Merrill Lynch. Please go ahead.

Yes. Thanks very much. I just had a question with respect to your investment in CNA Financial. I was wondering if you could just reset or update me on the planned repatriation of capital there? And any comments that you might have with respect to the regulatory review of Continental Casualty Company? And if that is having any impact on the timing of capital repatriation from CNA Financial?

As you know, CNA has not paid a dividend since Loews has acquired it, but at this point, CNA's capital ratios are such that on a purely statistical basis, one would expect that CNA's ratings would be about two levels higher.

We would very much like for CNA to be able to pay a dividend, but I would say at the current time, I don't see that happening until CNA's -- until CNA is taken off the "credit watch list" and also, such time as we see an improvement in CNA's ratings.

Thank you. Unfortunately, I was not on the CNA call. Is there a time frame with respect to this particular regulatory review at Continental?

No. No, there isn't.

No. Okay. Thank you.

Thank you. Our next question is coming from Sachian Shah with Cathay Financial. Please go ahead.

Hi. Good morning. I have a question regards to the total cash flow generation from Boardwalk Pipelines in the quarter. I know you mentioned the net income of 38 million, but wanted to get the DNA and other fees -- measurement fees?

We don't have that right now. We'll have to get back to you.

Okay. I think the margin, the operating margin for the quarter was about 42%, or going forward -- just wanted to find out if those margins were going to continue? And maybe any guidance for second quarter and the rest of '05?

42% for what?

For Boardwalk Pipelines.

Okay.

41.5 to be exact, I think.

Okay. We do not issue guidance for any of our Companies.

Okay. And I guess my last question is, your latest notional debts, associated with CG? .

Just a little bit under $1.8 billion.

So, basically no change.

That's right. 1.797 billion.

Okay. Thank you.

Thank you.

Thank you. Our next question is coming from Michael Millman with Soleils Securities. Please go ahead.

Thank you. I think, you indicated in the press release, I think you spoke about, that there was a reduction in equity caused by some, I guess, reductions in unrealized gains, I think at CNA.

Could you talk a little bit more about that? And, secondly, it's been noted that Loews and I'm not sure if the holding company or CNA is the largest holder of GM bonds, and whether you continued to hold the GM bonds? And how much of GM bonds that you do hold?

First concerning General Motors bonds, I don't want to speak about individual holdings that we have of securities. That's just a general policy that we have. So I can't answer that question. And I don't know where the information came from that you're quoting.

Secondly, with respect to the unrealized loss, if you look at what happened to bond rates over the period from the beginning of the quarter to the end of the quarter, you see that there was actually a rather significant increase.

For example, five-year notes went from about a 370 yield, to about a 410 yield. So it increased in yield by about 40-basis points. And that increase in yield, no matter how well barbelled we are positioned, what will result in a loss of market value in the securities. And so the decline in book value simply reflects the mark-to- market of the bond portfolio on our equity value.

And could -- how much was that mark-to-market decline in the quarter?

I don't have the exact number, but it was -- it's -- you should be able to define it from our -- you should be able to define it from our financial statement because, I think, we show -- we will show it in our queue. It's basically equal to the change in book value, minus the income, plus the loss on the securities.

And, also, I guess take into account the impairment to some extent? Or the change in accounting. So, can we assume that -- if we're assuming that rates continue to rise, we should assume similar declines in unrealized or similar declines in portfolio value?

There's good news and bad news by rising interest rates. The bad news is, that it will have a negative effect on our book value because the value of our existing portfolio will decline.

The good news is, that we are relatively short in our -- we have a relatively short duration in our portfolio and to the extent that interest rates rise, we will be able to invest our cash at higher and higher rates.

And so in the first quarter, however, getting back to the first questioner's question about how much you have in the short end, you didn't have enough in the short end to offset what you're losing in the long end. Is there some point at which sort of equalizes?

No. You will never have gains in the short end, but you won't have losses. To the extent that you ever want to tiptoe out the yield curve, you risk having losses.

That's what happened to us. We were lucky not to have had significant investments in the intermediate area because the increase in interest rates was much larger than the increase in interest rates was in something like the long sector of the market. But, the barbell can only protect you so much, and you still have to deal, though with, the major moves in the bond market.

Okay. Thank you.

Thank you. There appears to be no further questions at this time. I'll turn the floor back over to you for any further or closing remarks.

Thank you, very much. Thank you for joining us this morning. Before we conclude, I'd just like to reiterate that we'll be holding our Analyst Conference this coming June 3rd. More details to follow shortly. Also, as a reminder, replay of this call will be available on our website loews.com and the earnings conference call held earlier this morning by CNA, our PNC Insurance subsidiary will also be archived for replay on its website, cna.com. Thank you very much.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time and have a wonderful day.