10-Q 1 brhc10030262_10q.htm 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From ____________ to _____________

Commission File Number 1-6541

LOEWS CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
  
13-2646102
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)

667 Madison Avenue, New York, NY 10065-8087
(Address of principal executive offices) (Zip Code)

(212) 521-2000
(Registrant’s telephone number, including area code)

NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, par value $0.01 per share
L
New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒
  
No ☐
    

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒
  
No ☐
    

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☒
Accelerated filer  ☐
Non-accelerated filer  ☐
Smaller reporting company  ☐

 
Emerging growth company  ☐
  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐
  
No  ☒
    

As of October 29, 2021, there were 253,684,412 shares of the registrant’s common stock outstanding.

INDEX

  Page
No.
   
 
   
 
   
3
 

 
4
 

 
5
 

 
6
 

 
8
 

 
9
   
37
   
57
   
57
   
58
   
58
   
58
   
61
   
62

2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.

Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)

  
September 30,
    
December 31,
  
   
2021
    
2020
  
(Dollar amounts in millions, except per share data)
            
             
Assets:
            
             
Investments:
            
Fixed maturities, amortized cost of $40,342 and $38,963, less allowance for credit loss of $31 and $40
   $ 45,069    
$
44,646
  
Equity securities, cost of $1,552 and $1,456
     1,660      
1,561
  
Limited partnership investments
     1,996      
1,798
  
Other invested assets, primarily mortgage loans, less allowance for credit loss of $26 and $26
     1,140      
1,165
  
Short term investments
     4,178      
4,674
  
Total investments
     54,043      
53,844
  
Cash
     811      
478
  
Receivables
     9,187      
7,833
  
Property, plant and equipment
     9,878      
10,451
  
Goodwill
     349      
785
  
Deferred non-insurance warranty acquisition expenses
     3,418      
3,068
  
Deferred acquisition costs of insurance subsidiaries
     721      
708
  
Other assets
     3,319      
3,069
  
Total assets
   $ 81,726    
$
80,236
  
                 
Liabilities and Equity:
                
                 
Insurance reserves:
                
Claim and claim adjustment expense
   $ 23,832    
$
22,706
  
Future policy benefits
     13,198      
13,318
  
Unearned premiums
     5,577      
5,119
  
Total insurance reserves
     42,607      
41,143
  
Payable to brokers
     665      
92
  
Short term debt
     187      
37
  
Long term debt
     8,925      
10,072
  
Deferred income taxes
     1,089      
1,065
  
Deferred non-insurance warranty revenue
     4,443      
4,023
  
Other liabilities
     4,680      
4,623
  
Total liabilities
     62,596      
61,055
  
                 
Commitments and contingent liabilities
          
 
                 
Preferred stock, $0.10 par value:
                
Authorized – 100,000,000 shares
          
 
Common stock, $0.01 par value:
                
Authorized – 1,800,000,000 shares
                
Issued – 269,574,153 and 269,360,973 shares
     3      
3
  
Additional paid-in capital
     3,120      
3,133
  
Retained earnings
     15,336      
14,150
  
Accumulated other comprehensive income
     191      
581
  
      18,650      
17,867
  
Less treasury stock, at cost (15,807,106 and 150,000 shares)
     (833 )    
(7
)
Total shareholders’ equity
     17,817      
17,860
  
Noncontrolling interests
     1,313      
1,321
  
Total equity
     19,130      
19,181
  
Total liabilities and equity
   $ 81,726    
$
80,236
  

See accompanying Notes to Consolidated Condensed Financial Statements.

3
Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)

  
Three Months Ended
    
Nine Months Ended
  
    September 30,     September 30,  
   
2021
    
2020
    
2021
    
2020
  
(In millions, except per share data)
                        
                         
Revenues:
                        
Insurance premiums
   $ 2,059    
$
1,953
     $ 6,056    
$
5,672
  
Net investment income
     483      
540
       1,649      
1,347
  
Investment gains (losses) (Note 2)
     22      
46
       657      
(1,312
)
Non-insurance warranty revenue
     357      
317
       1,054      
926
  
Operating revenues and other
     450      
609
       1,580      
2,241
  
Total
     3,371      
3,465
       10,996      
8,874
  
                                 
Expenses:
                                
Insurance claims and policyholders’ benefits
     1,632      
1,616
       4,684      
4,683
  
Amortization of deferred acquisition costs
     368      
360
       1,084      
1,046
  
Non-insurance warranty expense
     330      
293
       973      
859
  
Operating expenses and other
     638      
876
       2,208      
3,894
  
Interest
     99      
137
       324      
404
  
Total
     3,067      
3,282
       9,273      
10,886
  
Income (loss) before income tax
     304      
183
       1,723      
(2,012
)
Income tax (expense) benefit
     (58 )    
(21
)
     (391 )    
284
  
Net income (loss)
     246      
162
       1,332      
(1,728
)
Amounts attributable to noncontrolling interests
     (26 )    
(23
)
     (97 )    
400
  
Net income (loss) attributable to Loews Corporation
   $ 220    
$
139
     $ 1,235    
$
(1,328
)
                                 
Basic net income (loss) per share
   $ 0.86    
$
0.50
     $ 4.71    
$
(4.70
)
                                 
Diluted net income (loss) per share
   $ 0.85    
$
0.50
     $ 4.70    
$
(4.70
)
                                 
Weighted average shares outstanding:
                                
Shares of common stock
     256.76      
279.40
       262.27      
282.63
  
Dilutive potential shares of common stock
     0.54       0.09       0.50          
Total weighted average shares outstanding assuming dilution
     257.30      
279.49
       262.77      
282.63
  

See accompanying Notes to Consolidated Condensed Financial Statements.

4
Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

  
Three Months Ended
    
Nine Months Ended
  
    September 30,     September 30,  
   
2021
    
2020
    
2021
    
2020
  
(In millions)
                        
                         
Net income (loss)
   $ 246    
$
162
     $ 1,332    
$
(1,728
)
                                 
Other comprehensive income (loss), after tax
                                
Changes in:
                                
Net unrealized gains (losses) on investments with an allowance for credit losses
            
6
              
(3
)
Net unrealized gains (losses) on other investments
     (138 )    
207
       (465 )    
354
  
Total unrealized gains (losses) on investments
     (138 )    
213
       (465 )    
351
  
Unrealized gains (losses) on cash flow hedges
     2       1       14      
(18
)
Pension and postretirement benefits
     16      
7
       32      
27
  
Foreign currency translation
     (33 )    
38
       (19 )    
(17
)
                                 
Other comprehensive income (loss)
     (153 )    
259
       (438 )    
343
  
                                 
Comprehensive income (loss)
     93      
421
       894      
(1,385
)
                                 
Amounts attributable to noncontrolling interests
     (9 )    
(49
)
     (49 )    
363
  
                                 
Total comprehensive income (loss) attributable to Loews Corporation
   $ 84    
$
372
     $ 845    
$
(1,022
)

See accompanying Notes to Consolidated Condensed Financial Statements.

5
Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF EQUITY
(Unaudited)

        
Loews Corporation Shareholders
        
                           
Accumulated
    
Common
        
               
Additional
          
Other
    
Stock
        
         
Common
    
Paid-in
    
Retained
    
Comprehensive
    
Held in
    
Noncontrolling
  
   
Total
    
Stock
    
Capital
    
Earnings
    
Income (Loss)
    
Treasury
    
Interests
  
(In millions)
                                          
                                           
Balance, July 1, 2020
  
$
18,413
    
$
3
    
$
3,371
    
$
14,316
    
$
5
    
$
(491
)
  
$
1,209
  
Net income
    
162
                      
139
                      
23
  
Other comprehensive income
    
259
                              
233
              
26
  
Dividends paid ($0.0625 per share)
    
(27
)
                    
(17
)
                    
(10
)
Purchases of Loews Corporation treasury stock
    
(195
)
                                    
(195
)
        
Stock-based compensation
    
8
              
8
                                  
Other
    
-
                      
(1
)
             1          
Balance, September 30, 2020
  
$
18,620
    
$
3
    
$
3,379
     $ 14,437    
$
238
    
$
(685
)
  
$
1,248
  
                                                         
Balance, July 1, 2021
  
$
19,398
    
$
3
    
$
3,121
    
$
15,132
    
$
327
    
$
(500
)
  
$
1,315
  
Net income
     246                       220                       26  
Other comprehensive loss
     (153 )                             (136 )             (17 )
Dividends paid ($0.0625 per share)
     (27 )                     (16 )                     (11 )
Purchases of Loews Corporation treasury stock
     (333 )                                     (333 )        
Stock-based compensation
     (2 )             (2 )                                
Other
     1               1                                  
Balance, September 30, 2021
   $ 19,130    
$
3
     $ 3,120     $ 15,336     $ 191     $ (833 )   $ 1,313  

See accompanying Notes to Consolidated Condensed Financial Statements.

6
Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF EQUITY
(Unaudited)

        
Loews Corporation Shareholders
        
                           
Accumulated
    
Common
        
               
Additional
          
Other
    
Stock
        
         
Common
    
Paid-in
    
Retained
    
Comprehensive
    
Held in
    
Noncontrolling
  
   
Total
    
Stock
    
Capital
    
Earnings
    
Income (Loss)
    
Treasury
    
Interests
  
(In millions)
                                          
                                           
Balance, January 1, 2020, as reported
  
$
21,930
    
$
3
    
$
3,374
    
$
15,823
    
$
(68
)
  
$
(13
)
  
$
2,811
  
Cumulative effect adjustment from change in accounting standards
    
(5
)
                    
(5
)
                        
Balance, January 1, 2020, as adjusted
    
21,925
      
3
      
3,374
      
15,818
      
(68
)
    
(13
)
    
2,811
  
Net loss
    
(1,728
)
                    
(1,328
)
                    
(400
)
Other comprehensive income
    
343
                              
306
              
37
  
Dividends paid ($0.1875 per share)
    
(141
)
                    
(53
)
                    
(88
)
Deconsolidation of Diamond Offshore
    
(1,087
)
                                            
(1,087
)
Purchases of Loews Corporation treasury stock
    
(673
)
                                    
(673
)
        
Purchases of subsidiary stock from noncontrolling interests
    
(37
)
            
5
                              
(42
)
Stock-based compensation
    
17
              
(1
)
                            
18
  
Other
    
1
              
1
                       1      
(1
)
Balance, September 30, 2020
  
$
18,620
    
$
3
    
$
3,379
    
$
14,437
    
$
238
    
$
(685
)
  
$
1,248
  
                                                         
Balance,  January 1, 2021
  
$
19,181
    
$
3
    
$
3,133
    
$
14,150
    
$
581
    
$
(7
)
  
$
1,321
  
Net income
     1,332                       1,235                       97  
Other comprehensive loss
     (438 )                             (390 )             (48 )
Dividends paid ($0.1875 per share)
     (103 )                     (49 )                     (54 )
Purchases of Loews Corporation treasury stock
     (826 )                                     (826 )        
Purchases of subsidiary stock from noncontrolling interests
     (18 )                                             (18 )
Stock-based compensation
     5               (11 )                             16  
Other
     (3 )             (2 )                             (1 )
Balance, September 30, 2021
   $ 19,130    
$
3
     $ 3,120     $ 15,336     $ 191     $ (833 )   $ 1,313  

See accompanying Notes to Consolidated Condensed Financial Statements.

7
Loews Corporation and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

Nine Months Ended September 30
  
2021
    
2020
  
(In millions)
            
             
Operating Activities:
            
             
Net income (loss)
  
$
1,332
    
$
(1,728
)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities, net
    
(85
)
    
2,503
  
Changes in operating assets and liabilities, net:
                
Receivables
    
(1,115
)
    
(273
)
Deferred acquisition costs
    
(15
)
    
(36
)
Insurance reserves
    
1,891
      
1,479
  
Other assets
    
(853
)
    
(411
)
Other liabilities
    
701
      
238
  
Trading securities
    
(180
)
    
(481
)
Net cash flow provided by operating activities
    
1,676
      
1,291
  
                 
Investing Activities:
                
                 
Purchases of fixed maturities
    
(7,127
)
    
(8,466
)
Proceeds from sales of fixed maturities
    
2,510
      
5,023
  
Proceeds from maturities of fixed maturities
    
3,360
      
2,706
  
Purchases of equity securities
    
(242
)
    
(373
)
Proceeds from sales of equity securities
    
237
      
275
  
Purchases of limited partnership investments
    
(281
)
    
(144
)
Proceeds from sales of limited partnership investments
    
239
      
305
  
Purchases of property, plant and equipment
    
(327
)
    
(584
)
Dispositions
    
52
      
47
  
Sale of interest in Altium Packaging
    
417
          
Deconsolidation of Diamond Offshore
            
(483
)
Change in short term investments
    
725
      
706
  
Other, net
    
13
      
(120
)
Net cash flow used by investing activities
    
(424
)
    
(1,108
)
                 
Financing Activities:
                
                 
Dividends paid
    
(49
)
    
(53
)
Dividends paid to noncontrolling interests
    
(54
)
    
(88
)
Purchases of Loews Corporation treasury stock
    
(825
)
    
(678
)
Purchases of subsidiary stock from noncontrolling interests
    
(18
)
    
(37
)
Principal payments on debt
    
(1,154
)
    
(1,157
)
Issuance of debt
    
1,199
      
2,393
  
Other, net
    
(12
)
    
(13
)
Net cash flow (used) provided by financing activities
    
(913
)
    
367
  
                 
Effect of foreign exchange rate on cash
    
(6
)
        
                 
Net change in cash
    
333
      
550
  
Cash, beginning of period
    
478
      
336
  
Cash, end of period
  
$
811
    
$
886
  

See accompanying Notes to Consolidated Condensed Financial Statements.

8
Loews Corporation and Subsidiaries
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation


Loews Corporation is a holding company. Its consolidated subsidiaries are engaged in the following lines of business: commercial property and casualty insurance (CNA Financial Corporation (“CNA”), an 89.6% owned subsidiary); transportation and storage of natural gas and natural gas liquids (Boardwalk Pipeline Partners, LP (“Boardwalk Pipelines”), a wholly owned subsidiary); and the operation of a chain of hotels (Loews Hotels Holding Corporation (“Loews Hotels & Co”), a wholly owned subsidiary). Unless the context otherwise requires, the term “Company” as used herein means Loews Corporation including its consolidated subsidiaries, the term “Net income (loss) attributable to Loews Corporation” as used herein means Net income (loss) attributable to Loews Corporation shareholders and the term “subsidiaries” means Loews Corporation’s consolidated subsidiaries.


On April 1, 2021, Loews Corporation sold 47% of its interest in Altium Packaging, previously a 99% owned subsidiary. See Note 2 for further discussion.


In the opinion of management, the accompanying unaudited Consolidated Condensed Financial Statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company’s financial position as of September 30, 2021 and December 31, 2020, results of operations, comprehensive income (loss) and changes in shareholders’ equity for the three and nine months ended September 30, 2021 and 2020 and cash flows for the nine months ended September 30, 2021 and 2020. Net income (loss) for the third quarter and first nine months of each of the years is not necessarily indicative of net income (loss) for that entire year. These Consolidated Condensed Financial Statements should be read in conjunction with the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.


The Company presents basic and diluted net income (loss) per share on the Consolidated Condensed Statements of Operations. Basic net income (loss) per share excludes dilution and is computed by dividing net income (loss) attributable to common stock by the weighted average number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the three and nine months ended September 30, 2021, there were no shares attributable to employee stock-based compensation awards excluded from the diluted weighted average shares outstanding amounts because the effect would have been antidilutive.


Recently issued ASUs – In August of 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-12, “Financial Services – Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts.” The updated accounting guidance requires changes to the measurement and disclosure of long-duration contracts. The guidance requires entities to update annually cash flow assumptions, including morbidity and persistency, and update quarterly discount rate assumptions using an upper-medium grade fixed-income instrument yield. The effect of changes in cash flow assumptions will be recorded in Net income and the effect of changes in discount rate assumptions will be recorded in Other comprehensive income (“OCI”). This guidance is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. The guidance may be applied using either a modified retrospective transition method or a full retrospective transition method. The guidance requires restatement of prior periods presented. The Company plans to adopt on the effective date, using the modified retrospective transition method and is currently evaluating the effect the updated guidance will have on its consolidated financial statements, including the increased disclosure requirements. The annual updating of cash flow assumptions is expected to increase income statement volatility. While the requirements of the new guidance represent a material change from existing accounting guidance, the underlying economics of the business and related cash flows will be unchanged.

2.  Significant Transactions

Altium Packaging


On April 1, 2021, Loews Corporation sold 47% of its interest in Altium Packaging to GIC, Singapore’s sovereign wealth fund, for $420 million in cash consideration. Loews Corporation shares certain participating rights with GIC related to capital allocation and other decisions by Altium Packaging. Therefore, in accordance with Accounting Standards Codification (“ASC”) 810, “Consolidation,” Altium Packaging was deconsolidated from Loews Corporation’s consolidated financial statements effective as of April 1, 2021. Effective April 1, 2021, Loews Corporation’s investment in Altium Packaging is accounted for under the equity method of accounting, with the investment reported in Other assets on the Consolidated Condensed Balance Sheets and equity income (loss) reported in Operating expenses and other on the Consolidated Condensed Statements of Operations.

9

The transaction resulted in a gain of $555 million ($438 million after tax) for the nine months ended September 30, 2021, which is recorded in Investment gains (losses) on the Consolidated Condensed Statement of Operations. Loews Corporation’s retained investment in Altium Packaging was recorded at an estimated fair value of $473 million. The difference between the fair value of Loews Corporation’s investment in Altium Packaging and Loews Corporation’s 53% share of the carrying value of Altium Packaging’s net assets was attributed to definite lived intangible assets and goodwill. The amortization of the amounts attributed to definite lived intangible assets will be recognized as a component of equity income (loss) reported in Operating expenses and other on the Consolidated Condensed Statements of Operations. The assets and liabilities deconsolidated from the Consolidated Condensed Balance Sheets were property, plant and equipment of $490 million, goodwill of $436 million, intangible assets of $488 million, other assets of approximately $370 million, long term debt of $1.1 billion and other liabilities of approximately $380 million.

Diamond Offshore


As a result of the April 26, 2020 (“the Filing Date”) bankruptcy filing of Diamond Offshore Drilling, Inc. (“Diamond Offshore”) and certain of its subsidiaries and applicable accounting principles generally accepted in the United States of America (“GAAP”), Diamond Offshore was deconsolidated from Loews Corporation’s consolidated financial statements in the second quarter of 2020. Through the Filing Date, Diamond Offshore’s results were included in Loews Corporation’s consolidated financial statements and Loews Corporation recognized in its earnings its proportionate share of Diamond Offshore’s losses through such date. The deconsolidation resulted in the recognition of a loss of $1.2 billion ($957 million after tax) during the nine months ended September 30, 2020, which is reported within Investment gains (losses) on the Consolidated Condensed Statements of Operations. During the nine months ended September 30, 2020, Diamond Offshore also recorded an aggregate asset impairment charge of $774 million ($408 million after tax and noncontrolling interests), which is reported within Operating expenses and other on the Consolidated Condensed Statements of Operations. For additional information regarding the deconsolidation of Diamond Offshore and the Diamond Offshore asset impairments, see Notes 2 and 6 of the Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

3. Investments


Net investment income is as follows:

  Three Months Ended   Nine Months Ended  
September 30,
  
September 30,
  
 
2021
  
2020
  
2021
  
2020
  
(In millions)
                
                 
Fixed maturity securities
  
$
425
    
$
432
    
$
1,278
    
$
1,300
  
Limited partnership investments
    
89
      
71
      
285