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