Loews Corporation reported earnings on Monday, and I took some notes that I’ve reproduced below. I’ve started following the company closer ever since I listened to CEO James Tisch’s interview with the FCIC in the aftermath of the financial crisis and was intrigued by what he had to say.
Here is a bit about the company and what they do (from the 10-K), with valuations for the company’s positions in publicly traded subsidiaries (as of Aug. 1, 2011):
“We are a holding company. Our subsidiaries are engaged in the following lines of business:
Commercial property and casualty insurance (CNA Financial Corporation, a 90% owned subsidiary) ($6.3 billion);
Operation of offshore oil and gas drilling rigs (Diamond Offshore Drilling, Inc., a 50.4% owned subsidiary) ($4.7 billion);
Exploration, production and marketing of natural gas and natural gas liquids (HighMount Exploration & Production LLC, a wholly owned subsidiary in Houston);
Operation of interstate natural gas transmission pipeline systems (Boardwalk Pipeline Partners, LP, a 66% owned subsidiary) ($3.6 billion); and
Operation of hotels (Loews Hotels Holding Corporation, a wholly owned subsidiary).”
When we back out the publicly valued positions (market cap, holding company – known parts), the remainder is valued at roughly $1.6 billion. Here are some of the higher-level highlights from the company’s second quarter call.
Net income decreased to $252 million from $366 million last year, mainly attributable to two factors at CNA: a lower level of favorable net prior year reserve development ($72 million compared to $265 million) and higher cat losses ($100 million compared to $48 million), partially offset by a 7.2% increase in income before taxes at Diamond. High Mount and Loews Hotels, while relatively small compared to the other pieces of the company, also posted strong year-over-year numbers.
Book value per share increased to $46.81 at June 30, 2011, compared to $45.54 at March 31, 2011, and $44.51 at Dec. 31, 2010 (current stock price - $39.11).
During the three and six months ended June 30, 2011, the company purchased 5.5 million and 9.9 million shares of its common stock at an aggregate cost of $228 million and $415 million. From July 1, 2011, to July 28, 2011, the company purchased an additional 1.0 million shares of its common stock at an aggregate cost of $41 million.
As Mr. Tisch noted on the call, “We have, as I like to say, a long and glorious history of share repurchases. We have less than 1/3 the shares that were outstanding in 1970. And we've done that through what I would call well-timed share repurchases. It's a part of our DNA. We were repurchasing Loews shares long, long, long before repurchases were the corporate vogue. We're not doing it because it's the corporate vogue, but rather because we think that it creates very good long-term value for all our shareholders.”
About the author:
I think Charlie Munger has the right idea: "Patience followed by pretty aggressive conduct."
I run a fairly concentrated portfolio, with a handful of positions accounting for the majority of the total. From the perspective of a businessman, I believe this is sufficient diversification.