洛茲集團 (L) 2013 Q4 法說會逐字稿

Good morning, my name is Jackie and I will be your conference operator today. At this time I would like to welcome everyone to the Loews fourth-quarter 2013 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. I would now like to turn the call over to Mary Skafidas, Vice President of Investor and Public Relations. Please go ahead.

Thank you, Jackie. Good morning, everyone, and welcome to the Loews fourth-quarter earnings and year-end 2013 conference call. A copy of our earnings release and earnings snapshot may be found on our website, Loews.com.

On the call this morning we have our Chief Executive Officer, Jim Tisch, and our Chief Financial Officer, Peter Keegan. Following our prepared remarks this morning we will have a question-and-answer session.

Before we begin, however, I will remind you that this conference call may include statements that are forward-looking in nature. Actual results 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 revise any forward-looking statement. This disclaimer is only a brief summary of the Company's statutory forward-looking statements disclaimer, which is included in the Company's filings with the SEC.

During the call today we might also discuss non-GAAP financial measures. Please refer to our security filings for the reconciliation to the most comparable GAAP measures.

I will now turn the call over to Loews' Chief Executive Officer, Jim Tisch.

Thank you, Mary, and thank you for joining us on our call. Today's reports contain some disappointing news. No business or industry can escape the occasional bump in the road and it just so happens that several of our companies have hit bumps at the same time.

But before I share any of that news with you, I want to make clear that this quarter has not altered my view of the fundamental strength of Loews and all of our subsidiaries. I feel certain that there are smoother roads ahead. Loews maintains a strong and flexible balance sheet, including significant amounts of cash, so we can manage through cyclical downturns and position ourselves and our subsidiaries for future success and long-term value creation.

Enough of the preamble, on with the call.

As you have seen from our press release, Loews reported full-year 2013 net income of $595 million compared to $568 million in 2012. And, likewise, for the fourth quarter Loews reported a net loss of $198 million compared to a net loss of $32 million in the fourth quarter of 2012. I want to touch on some key points and then turn the call over to Pete Keegan who will go into more detail about our quarterly and full-year results, which include several unusual items.

2013 was a mixed year for our subsidiaries. It was a very good year for CNA as the Company continued to improve its underwriting margins and generated its highest income since 2006. CNA's combined ratio, excluding catastrophes and developments, improved by 5 points. Its statutory capital grew by 11% year over year and net operating income was very strong.

As evidence of CNA's strong capital position and improved underwriting performance, CNA announced this morning that it has declared a special dividend of $1 per share and increased its quarterly dividend to $0.25 per share. With a quarterly dividend at that rate, for the full year 2014 Loews would receive close to $500 million in dividends from CNA alone. We are very pleased with CNA's improvement and believe that the Company is well positioned for growth and profitability.

For other subsidiaries, such as Boardwalk and HighMount, the past year was challenging as both companies operated in difficult environments. Let's start by reviewing the current state of the US natural gas market, which affects both Boardwalk and HighMount.

Production from shale plays, such as the Marcellus and Utica shales, continues to grow making more traditional natural gas flows like HighMount's Sonora field uneconomic to drill at current gas prices. The Marcellus and Utica shales are also having a significant impact on the economics of natural gas transportation.

Natural gas, which traditionally has been transported from the Gulf Coast to markets in the Northeast, is being displaced in the Northeast by Marcellus and Utica shale production. In just two years natural gas production has grown from 6 billion cubic feet per day to 13 billion cubic feet per day and could exceed 25 billion cubic feet per day by 2020.

As a result, dramatically less natural gas is being shipped from the Gulf Coast to the Northeast. Therefore, long-haul transportation rates are under pressure and, likewise, pipeline contracts are being renewed at lower prices and for shorter terms. Increased Northeast gas production has also led to a compression of seasonal spreads and reduced volatility, thereby diminishing the value of natural gas storage.

All of these factors have significantly impacted Boardwalk's financial performance and its ability to maintain its current distribution to shareholders. In response to the current environment and in order to strengthen its balance sheet and better position the Company for long-term growth, Boardwalk announced earlier today a reduction in its cash distribution per unit.

Keep in mind that Boardwalk still generates copious amounts of cash. Boardwalk has reduced its distribution, not to because of the Company -- not because the Company is financially distressed, rather this action was driven by Boardwalk's desire to reduce its leverage ratios through a combination of higher EBITDA from internally-funded capital projects and debt reduction. The distribution reduction should also dramatically reduce the Company's need to access the equity markets, which should allow Boardwalk to avoid what could be considerable dilution to all unitholders.

Additionally, Loews is prepared to offer Boardwalk up to $300 million in subordinated debt to support planned growth projects in 2014. While in the short term the Marcellus and Utica shale plays are creating challenges for Boardwalk, they could in the long run provide significant opportunities for growth.

Boardwalk concluded its open season for the Ohio-to-Louisiana Access Project on its Texas Gas Interstate Pipeline system, which will provide natural gas transportation from the Marcellus and Utica shales to diverse delivering markets in Louisiana. Although small, it is indicative of future opportunities that may arise from growth in the Marcellus and Utica shale plays.

As Boardwalk's CEO, Stan Horton, mentioned on their call earlier today, the Company also concluded its open season for the proposed Bluegrass project. Boardwalk continues to analyze results of the open season, engage in ongoing discussions with potential customers, and evaluate the project. In the past, we have expressed our willingness to offer financial support for growth projects at Boardwalk. Should Bluegrass go forward, we would expect to continue to partner with Boardwalk on this project. Loews would also consider partnering with Boardwalk on other larger opportunities.

Let's turn to HighMount. As we have mentioned for a number of quarters, HighMount's operating results continue to be negatively affected by relatively low prices for natural gas and natural gas liquids, as well as the lack of successful development of new proved reserves. Both of these factors are reflected in HighMount's ceiling test impairment charge and goodwill write-down.

HighMount has more than 500,000 acres in Sonora, Texas, where it has historically drilled for and produced natural gas. As you know, HighMount previously suspended its natural gas focused drilling program in Sonora and has refocused its efforts on drilling for oil, primarily in the Wolfcamp zone within its Sonora acreage. HighMount continues its science experiments by testing landing zones, frac design, and completion techniques to determine the economic viability of developing an oil drilling program in the Wolfcamp.

We are hopeful that HighMount's science experiment will be successful and that the Company will be able to commercially exploit the oil reserves within the Wolfcamp. Stay tuned.

Before I turn the call over to Pete Keegan, I want to add a shameless pitch for the newly-reopened Loews Regency Hotel in New York. They have truly done an incredible job -- the place sparkles. Please come visit the Regency and see for yourself.

Now over to Pete.

Thanks, Jim, and good morning, everyone. As Jim mentioned, Loews Corporation today reported net income for 2013 of $595 million, or $1.53 per share, compared to $568 million, or $1.43 per share, in 2012. For the fourth quarter of 2013 Loews reported a net loss of $198 million, or $0.51 per share, as compared to a net loss of $32 million, or $0.08 per share, in the fourth quarter of 2012. Loews' fourth-quarter and full-year 2013 results included the following two unusual items.

First, CNA took $123 million after-tax charge in the fourth quarter related to the reinsurance contract for asbestos and pollution liabilities that it entered into in 2010 with National Indemnity, a subsidiary of Berkshire Hathaway. As you may recall, CNA purchased $4 billion in reinsurance coverage from National Indemnity in return for $2.2 billion of assets in a transaction referred to as a Loss Portfolio Transfer.

Under the arcane rules of retroactive reinsurance accounting, as CNA increases its reserves for asbestos and pollution above $2.2 billion, it is allowed to recognize only a portion of that reserve increase as a reinsurance benefit. CNA is required to record the balance as a period expense. Over the life of the contract the net income impact of these reserve increases, up to the $4 billion limit, will net to zero.

However, because of the requirements of retroactive reinsurance accounting, for the life of the contract, CNA will recognize gains in some years and losses in others. Notably, these accounting entries will have no cash impact on CNA. More information on the charge is available in the fourth-quarter slide deck on the CNA Investor Relations website.

And secondly, at HighMount, as a result of continued softness in the price of natural gas liquids pricing together with negative reserve revisions, the Company incurred a $52 million after-tax ceiling test impairment charge in the fourth quarter and $186 million for the full year. Additionally, as a result of continued low-market prices for natural gas and natural gas liquids, the recent history of quarterly ceiling test impairment charges and negative reserve revisions, HighMount's goodwill impairment analysis determined a write-off for the remaining goodwill balance associated with the Loews acquisition of HighMount was required. The change -- the charge in the fourth quarter was $382 million after-tax.

For Loews, book value per share, excluding accumulated other comprehensive income, increased to $49.38 at December 31, 2013, from $47.94 at December 31, 2012. CNA's contribution to Loews results for the fourth quarter was income of $199 million as compared to a net loss of $7 million last year. For the full year 2013, net income to Loews was $847 million as compared to $570 million for 2012.

CNA's earnings increased primarily from improved non-catastrophe current accident year underwriting results, higher investment income, and lower catastrophe losses. These increases were partially offset by the charge mentioned earlier which impacted Loews' net income by $111 million after-tax and non-controlling interest. The prior year was unfavorably affected by catastrophe losses of $170 million after-tax and non-controlling interest related to Storm Sandy.

Diamond Offshore's contribution to Loews' results for the fourth quarter was income of $44 million as compared to $73 million last year. For the full year 2013 net income attributable to Loews was $257 million as compared to $337 million for 2012. For the fourth quarter and for the full year, the main factors behind the decrease in Diamond's earnings were lower rig utilization, principally due to downtime for scheduled surveys and shipyard projects, and an income tax provision of $57 million, or $27 million to Loews after non-controlling interest, related to Egyptian operations.

Also contributing to the decline was a gain in 2012 of $32 million after-tax and non-controlling interest from the sale of six jack-up rigs. The decreases in 2013 were partially offset by higher day rates as well as the receipt by Diamond of $25 million from Niko Resources as part of the contract settlement related to the Ocean Monarch.

Diamond has taken delivery of the Ocean Onyx, which has begun working for Apache in the US Gulf of Mexico. In addition, Diamond has taken delivery of the Ocean BlackHawk, the first of its four newbuild drill ships, which is headed for the US Gulf where it will work for Anadarko on a five-year contract.

Boardwalk Pipeline's contribution to Loews' net results for the fourth quarter was $4 million as compared to $31 million last year. For the full year 2013, net operating income attributable to Loews was $78 million as compared to $111 million for 2012. HighMount's results were significantly impacted by the ceiling test and goodwill impairment charges I already discussed.

Excluding these charges, HighMount reported a loss of $19 million for the fourth quarter 2013 compared to income of $9 million in the fourth quarter of 2012. For the full year 2013 HighMount posted a net loss of $5 million as compared to income of $26 million for 2012.

HighMount's fourth-quarter production volumes and realized prices, which included the benefits of hedges, are as follows. Natural gas production was 8 billion cubic feet at an average realized price of $4.38 per 1000 cubic feet. Natural gas liquids production was 496,200 barrels at an average realized price of $36.10 per barrel. And oil production was 133,300 barrels at an average price of $92.97 per barrel. HighMount had hedges in place as of December 31, 2013, that covered approximately 59.9% and 20.9% of its total estimated 2014 and 2015 natural gas equivalent production at weighted average prices of $5.52 and $4.24 per Mcfe.

Loews Hotels and Resorts had a net loss of $5 million for the fourth quarter of 2013 as compared to a net loss of $2 million last year. For the full year 2013, Loews Hotels had a net loss of $3 million as compared to net income of $7 million for 2012. Results were significantly impacted by the renovation of the Loews Regency Hotel in New York, which reopened in January 2014 after being closed for about a year, as well as acquisitions and transition costs of newly acquired hotels.

Holding Company cash and investments as of December 31, 2013, totaled $4.7 billion as compared to $4.8 billion for the period ended September 30, 2013. We received $189 million in dividends from our subsidiaries in the fourth quarter of 2013 and $736 million in dividends for the full year.

From CNA, Loews received $49 million in dividends in the fourth quarter of 2013 and $194 million in dividends for the year. From Diamond, Loews received $62 million in dividends in the fourth quarter of 2013 and $245 million in dividends for the year. From Boardwalk, Loews received a $78 million in dividends in the fourth quarter of 2013 and $297 million in dividends for the year.

We paid $24 million in cash dividends to our shareholders during the fourth quarter of 2013 and $97 million for the year. We did not buy back any shares in the fourth quarter. For the year, we bought back 4.9 million shares of Loews common stock for $218 million.

And that completes my remarks and I will turn the call back over to Jim.

Thank you, Pete. Before we open up the call to questions, I wanted to add that we at Loews firmly believe in the benefits of portfolio diversification. At any given time our subsidiaries face different market environments, some challenging, others more hospitable.

Today Boardwalk faces market headwinds that remain financially sound. Although Boardwalk's recent announcement may be disappointing, we believe that the Company's actions will support long-term financial strength and future growth of the Company. And it will benefit all of its shareholders, including Loews, in the long term.

Now we will turn the call back over to Mary.

Thank you, Jim. Jackie, at this time we would like to open up the call for any questions.

(Operator Instructions) David Adelman, Morgan Stanley.

A couple of things I wanted to ask, Jim. First, is there any linkage whatsoever between what will obviously be a cash shortfall or a significant reduction in the cash flow that Loews will receive from Boardwalk in the coming -- at least in the coming year, with respect to both the action of CNA to pay a one-time special dividend and/or the timing of that action?

Believe it or not, there absolutely was no connection between the two. CNA came to the realization on their own that they had excess capital and wanted to pay a special dividend and so notified us. The people at CNA did not know what was going on at Boardwalk and, likewise, we did not tell them, nor did we prod them for a special dividend. This was purely coincidence.

Okay. Then, Jim, as it relates to the magnitude of the reduction in the dividend at Boardwalk, what was the thinking to do something so dramatic as opposed to perhaps a more moderate increase, build up the -- improve the capital structure there over time and not have such a dramatic, immediate effect?

Well, first of all, this dividend reduction is done from a position of strength. The reason that Boardwalk -- the Board of Boardwalk cut the dividend so dramatically is because they wanted to make sure that the Company would have the capital that it needed to finance growth projects for Boardwalk as well as having the ability to bring the debt-to-EBITDA levels down to the 4-to-1 range.

So it was really done from the position of strength. It was done with the thought in mind that they want to protect the holders of Boardwalk from dilution that might occur from a reduction in -- a modest reduction in the dividend whereby the Company would have to continue to access the equity markets. And the Board decided that the best way to protect long-term investor value was to make this more draconian cut so that the Company would not have to access nearly as much of the capital markets.

And when you look at over time, Jim, at the capital pipeline for Boardwalk, its investment opportunities including Bluegrass, do you feel as if Boardwalk will be able to fund its level of contribution to those development projects without incurring significant dilution, without having to issue a significant number of new units, and remotely close to the current unit price?

Yes, Boardwalk is going to save hundreds of millions of dollars that otherwise would have been paid as our dividends, but now can be used to finance these capital projects. And as you have heard me say before, and I will say it again, I think there will be lots of opportunities for Boardwalk to invest at attractive rates.

Yes, there is no doubt that the Company is suffering from the effects of the Marcellus -- the increased Marcellus and Utica shale production. But the other thing that is going on is that the amount of natural gas that's going to be produced in the United States is increasing and will increase dramatically.

Natural gas produced in the United States now is about 66 billion cubic feet per day. In the next 10 years that could increase by one-third with the effects of increased gas consumption in the United States, as well as the exports of natural gas. All that gas is going to have to move on pipelines from one place to another, and that is going to mean that there will have to continue to be a very significant buildup of our natural gas pipeline system. And Boardwalk is now very well positioned to be able to participate in that and to benefit from it.

Okay. Two other things, Jim. The issues at Boardwalk and at HighMount, do they make Loews less inclined, more inclined, or no change at all with respect to the appetite to do a -- to buy a business outside of one of your core existing operations?

You know, when we think about investing, we think about buying outside of our business, about repurchasing our shares, and about investing in our subsidiaries. So, yes, with respect to Boardwalk, we have said that we are willing to commit $300 million in subordinated debt and we're also, on a case-by-case basis, willing to help them out with large investments.

When we think -- so that will cause some -- we will have to reserve some of our cash for that. And, likewise, if Boardwalk moves ahead with the Bluegrass project, we will have to reserve cash for that. But, remember, we are going to have more cash flow at Loews this year from our subsidiaries, assuming the current dividend rate, compared to last year. So Loews will still have significant amounts of cash flow and we are starting from a base of $4.7 billion. So to the extent that we should find an acquisition candidate that we think has real long-term value creation possibility for us, we would be happy to move forward.

Okay. And then one last thing, if I could. It appears that in the discrete fourth quarter at HighMount, there was an impairment charge not related to goodwill impairment. Am I correct? And what exactly was written down?

It was some equipment that can no longer be used.

Okay. Thank you.

Thank you.

Bob Glasspiegel, Janney Capital.

A question on natural gas prices. When I look at the Henry Hub price that was up 25% in 2013 and another 39% year-to-date, how does that impact the reserve charges that you took? I mean, if you had been using the $5.99 price, would there have been less of a write-down?

Peter, why don't you talk about the mechanics behind the reserve charge?

No, it really wouldn't have materially affected it. The way you do the ceiling test, Bob, it is a fourth-quarter historical rolling average, so any one quarter doesn't really change it that much. So, the ceiling test might have been minimally impacted, but not much.

The goodwill test is a totally different test. It is a two-step process. You either pass or fail step one, which is based on all kinds of market metrics. If you fail, which we did, you then go to step two and it's like redoing purchase price accounting, you allocate between gas assets and whatever is left over is goodwill. We did that calculation; there was nothing left over for goodwill. And that was -- while it is related to pricing, it is not heavily related to current pricing.

If the Henry Hub price had been $5.99 for the trailing four quarters, would that have mattered?

Yes.

And if it stays at (multiple speakers) --

I don't know how much. We would have to go do the calculation, but, yes.

And my assumption is if it stays at $5.99 there is no sort of write-up?

There is no write-up. You just don't have another write-down potentially.

That is number one. And number two, if it stayed at $5.99 that would really be in defiance of the forward curve which shows --

Right.

-- natural gas moving back down towards $4.

Right. What does where the forward curve imply to sort of the economics of the business today? Where does it have to go to, to be economic, to process the gas?

So, as you look out at the United States there are different areas that have different costs of -- different areas have different costs of producing natural gas, different economics. But, generally, we have assumed that after the Marcellus the next area that's going to come on with additional production would be a place like the Haynesville. And Sonora is behind the Haynesville and a few other shales, such that those other areas will probably have to come on first before it is economic for us to drill for natural gas in Sonora.

So what price would it have to be? I didn't quite follow that, Jim.

Oh, a dollar price? Probably north of $5.

So north of $5. What is your thought process in retaining this business unit? You still think there is long-term potential, I assume, or there is no market to sell? But what's the argument for keeping this --?

The gas there that is in the ground that has not been drilled is not going to disappear and one day that could become economic to produce. Two things could happen. Number one, prices could increase and, number two, there could be new technologies that make it possible to drill that.

Next, as we said, we are -- there are different stratas within our fields in Sonora that do hold large amounts of oil. And, specifically, I mentioned during my comments that we are drilling in the Wolfcamp within Sonora. We have drilled a number of wells -- that is what we call our science experiment -- to see if we can figure out how to move to development drilling in a commercial manner. We are not there yet, but over the next several quarters hopefully we will have more to say about that.

Okay. Last series of questions. What was your pension gain from a book perspective in the fourth quarter? What do you think the EPS impact prospectively will be and what will the funding needs change prospectively?

Our recall type pension is pretty small, Bob, so while we did get a pickup in -- and it is essentially fully funded -- we did get a pickup as a result of the change in the discount rate, as virtually everybody did. The impact on expense is pretty minimal because our plan is fully funded. There isn't much expense and it isn't going to move the needle very much.

Pete's answer is for Loews, the parent company, and does not necessarily include the subsidiaries.

I'm sorry; I assumed that is what you asked. Did you want more than that?

Well, the CNA changes don't impact Loews?

Yes, ultimately, well, you'll see it in the consolidated balance sheet. I mean we are still -- that is still a work in process putting all that together. You heard on their call that they had (multiple speakers) --

So the $300 million would flow through, that is essentially the nuts of how that flows through for you guys?

Yes, that will be reflected in the consolidated balance sheet. That improvement.

Okay, thank you.

Thank you.

Andy Baker, Barclays.

Thanks for taking the call. A couple of questions on Boardwalk, first of all. Can you discuss the thought process around the timeframe of this cut? I mean it is a pretty dramatic cut; I assume it is not intended to be resetting Boardwalk's distributions at a dramatically lower level, just addressing the current environment in which they operate.

Repeat the question.

Just the timeframe you are thinking about these cuts. I assume these are not cuts intended to last resetting $0.10 as the ongoing distribution. I assume it's to get to rightsize their leverage and then, ultimately, they will be moving back up.

Yes. I agree with you; ultimately, they will be moving back up. That is a decision for the Board of Boardwalk and I don't think that they are thinking right now about when the dividend is going to move up. They are going to -- as any Board would do, they are going to look each quarter at the finances of the Company, at the prospects, at the list of investments they have, at the market price for Boardwalk shares, and they will make their decision accordingly.

And the $300 million of subordinated debt, is that just to meet any needs for growth CapEx or can they also use that to -- for them to pay down their senior debt?

It is really targeted for growth projects, but it is cash if the whole thing is funded, so in theory it could go to pay down debt. But the thinking was it is project related.

Okay. As we talked about the dividend policy of all of your subsidiaries today, it seems like an appropriate time to pick up the dividend policy of Loews again. Obviously as your cash now continues to grow up through the $4.7 billion and you haven't raised your dividend, I don't think, in about seven or eight years.

Any thought process on if the current Loews parent quarterly distribution is at the appropriate level given your capitalization?

Well, the Board discusses it from time to time and beyond that I really don't want to go any further on it.

Fair enough. I guess last question, Jim. Any changes to where this $4.7 billion is invested and how you are looking at where the opportunities for returns are in the market?

No changes at all. We continue to kick tires. We continue to assess the needs of our subsidiaries and also continue to assess possibility for share repurchase.

But I mean, where it currently sits in terms of equities versus fixed income versus hedge funds used.

Oh, I'm sorry. No, no significant change. We have, I think, about $700 million of hedge fund investments and another $400 million to $500 million of equity investments. And then beyond that it is mostly in short-term investments that earn very, very little.

Great, thank you very much.

Josh Shanker, Deutsche Bank.

Sorry to make this so much about Boardwalk; obviously it's timely. I know that Andrew sits on the Board and I was wondering to the extent to which -- that this was an obvious decision on the part? Or this was complicated? If Boardwalk is indeed in a state of financial strength right now, in terms of thinking about the timing and everything, to some extent was this -- is this an obvious thing to do from the Board's perspective with all their information?

Yes, I think so. I can't speak for the Board because I wasn't at the meeting but -- where they decided to do this, but I wholly support the decision. Look, the Board had two different routes that they could go.

They could stress and strain and to continue to pay the dividend or pay a slightly reduced dividend, knowing that they would have to then go into the equity markets to raise capital in order to make investments in growth projects. And I think what the Board saw is that there could be very, very significant dilution to the existing shareholders.

So the Board decided instead to go the route of significantly cutting the dividend so that -- the distribution -- so that the Company could make those accretive investments without any dilution to unitholders. And I would say that the hope and expectation is that in the future, the distribution will be able to be increased to levels that approach the historic levels that they have been at. This is all based on the Board's view of the business outlook and the changes that take place within the natural gas pipeline business.

Understandable. And historically you guys have been patient and understandable owners of cyclical businesses and you understand the concept about buying low and selling high. Would you ever consider increasing your stake in one of your subsidiaries that you have already sold down a piece as prices weaken for that security?

Let me just say this, we never say never to anything. So, we just look at what is going on, we assess our portfolio. We assess the prospects for the business. We assess the other calls for our cash. There is an awful lot that goes into the assessment and, like I said, we never say never.

Okay, thank you very much.

Mike Shinnick, Wasatch.

I would like to shift the discussion, if we might, to Diamond, which we haven't talked about. Could you comment, since you do sit on that Board, Jim, and chair it, as to, one, the CEO search and when you expect to have an announcement; what you are looking for there? And, two, with respect to that valuation, it would seem that there are many in the market who think the prospects have worsened dramatically in the last six weeks. Wondering if you could comment on that?

And then picking up on that last question, willingness, ability to buy more shares in Diamond, and/or expectations of changes to dividend policy there with so much in the special? Thank you.

Okay. So, first item is the CEO search. I would say that we had -- the Board of Diamond has not been asleep at the switch. They have been moving with, I will say, great dispatch in the search for a CEO and we are hopeful that there can be an announcement from Diamond in the near future on that score.

With respect to the offshore, the rate for rigs in the offshore drilling market, I truly don't know which way day rates are going to go. It is a very complicated mosaic where you have got oil companies that contract with us that feel pressure on their cash flow to make capital investments. They also feel pressure to increase their oil and gas production.

There are new rigs coming into the market. There is an awful lot going on. The thing that I know is that that means for Diamond is that there could be lots and lots of opportunities. There could be opportunities to buy rigs in the markets because Diamond is financially the strongest competitor in the industry.

There are some competitors that are highly levered. There are some that, to us, seem to have really extended themselves in terms of their capital commitments. So there could be lots of opportunities to create long-term value.

And what Diamond does is that they watch carefully what is going on around them and they, like Loews, look to build long-term value in whichever way they can. And they are willing to use their balance sheets in order to do that.

Picking up on what I was trying to ask, is, as to their valuation and balance sheet, it would seem that the capital there is spoken for with the CapEx commitments previously made that you are still paying for this year and some into 2015. And with that the special dividend appears to be funded.

But what about the opportunity to buy back stock? Is that something that you would encourage them to do? Or would that make more sense, if Loews saw value, to do at the parent Company, i.e., take your stake up above 51%?

So, Diamond goes first and I leave it to the Board to decide specifically what they want to do with respect to share repurchases.

And so if they decided not to, again to that prior gentleman's question, just from a portfolio management, if you wanted to, are there any constraints on you buying more shares of Diamond here if you think it is undervalued?

Are there constraints? No. But like I said, there are lots of things that we take into consideration in thinking about share repurchases and other investments by Loews.

Right. I will leave it there, thank you.

Thank you.

(Operator Instructions) Michael Millman, Millman Research.

Following up on the last one and a couple of other things. For those -- on Diamond, particularly for those who are not that close, when I look at some of the numbers, the stock is at a 52-week low, yet the Street almost unanimously seems to think that earnings in 2015 will be substantially higher. So a question, does that seem reasonable to you?

And then on CNA, could you just repeat what last year's dividends were? And on Boardwalk, current price, does that suggest that you may have to take any write-downs?

So, on Boardwalk, no, Loews doesn't have to take any write-downs. On CNA, the dividend last year was at a $0.20 per quarter rate and the year before that it was at a $0.15 per quarter rate. And what was the question about Diamond again?

Well, on the CNA also, what was the -- you expect $500 million this year; what did you get last year? On the Diamond is that the -- it is a 52-week low despite the Street seemingly agreeing that earnings would be substantially up in 2015. I was wondering if we are missing -- if those of us who are not that close are missing something -- a lot.

Mike, I can't speak for why Diamond is priced where it is. You will have to ask some analysts on Wall Street. From my perspective, it seems like a crazy valuation, but who am I to say?

Diamond is a -- as I said, has the strongest balance sheet in the industry. It has a phenomenal record of investment in offshore drilling rigs. Rather than build new rigs, they completely refurbished old rigs, and we had the equivalent of a brand-new rigs at half the price that are able to earn just about what a new rig out of a shipyard costs. We've got four new rigs coming out of the shipyard now.

Some markets or the analysts seemed to be focused on the age of the Diamond fleet, but by my life the Diamond fleet does not nearly have the age that the analysts calculate. When I look at the age of the Diamond fleet, I think in terms of the market value weighted age. So that when you multiply the age by the market value of the rig and then compute the average age for the fleet, our numbers show that our fleet is about the same age as the Transocean fleet.

So, I think Diamond is tremendously strong, has lots of financial flexibility, and I don't really understand what the market is focused on.

Okay. Just on the CNA, what was (multiple speakers) --

And, Jim, your question relates to how much did we receive in distributions in 2013.

Right.

Loews received $194 million.

And $500 million this year?

Just under -- it will be -- at the current dividend rate it will be just under $500 million.

Let me answer that question mechanically. If you subtract the special dividend, which they declared of $1, and you then take the quarterly distributions and multiply them by four, you will end up with a number that is somewhat under $500 million. But that is -- the Boards obviously have declared nothing beyond the first quarter distributions.

You add those, not subtract them.

Add them, sorry. Well, to get to the number you have got to subtract it then add it back. You can't multiply the first quarter by four.

Right. Okay.

Thank you.

That was our final question. I would now like to turn the floor back over to Mary Skafidas for any additional or closing remarks.

Thanks, Jackie, and thank you all for joining our call today. That concludes our call and we will hear you next earnings call. Bye.

Thank you. This concludes today's conference call. You may now disconnect.