Loews Corporation Q1 FY2024 earnings call

• Executive changes at Boardwalk Pipelines: Stan Horton to retire as CEO in June, succeeded by Scott Hallam; Stan to remain on Board and Scott to join; Stan guided Boardwalk through growth and transformation.
• Loews Hotels developments: Opened 888-room property in Arlington, Texas; construction continues on three hotels in Orlando related to Universal's 'Epic Universe' campus, with opening dates for first two hotels in 2025.
• Share repurchases: Spent $67 million to repurchase almost 900,000 shares since end of 2023; slowed repurchases in Q1 due to share price near all-time highs.
• Passing of Joe Rosenberg: Long-time Chief Investment Strategist at Loews passed away; he was a respected mentor and proficient investor.

CNA

• Net income for Loews in Q1 2024: $310 million (up from $268 million in Q1 2023).
• Net investment income increased 16% due to improved LP and common stock returns and favorable reinvestment rates on fixed income securities.
• Net earned Property & Casualty premiums up 9%, net written up 6%.
• Combined ratio: 94.6% in Q1 2024 (vs 93.9% in Q1 2023), driven by 1.4-point increase in catastrophe losses, but underlying combined ratio 91.0%.

Boardwalk Pipelines

• EBITDA in Q1 2024: $307 million (up from $256 million in Q1 2023), driven by higher recontracting rates for natural gas transportation and storage and greater product sales.
• Net income contribution to Loews in Q1 2024: $121 million (up from $86 million in Q1 2023).

Loews Hotels

• Adjusted EBITDA in Q1 2024: $80 million (down from $86 million in Q1 2023).
• Net income contribution to Loews in Q1 2024: $16 million (down from $24 million in Q1 2023).
• Impacted by lower occupancy in Orlando (partially offset by higher occupancy at city-center hotels) and higher depreciation/pre-opening expenses from the Arlington property.

Parent Company

• After-tax investment income in Q1 2024: $43 million (up from $33 million in Q1 2023), driven by higher returns on common stock portfolio.

• Loews Hotels anticipates managing and having a 50% interest in 11 properties in Orlando with a combined 11,000 rooms by end of 2025.
• Share repurchases remain integral to capital allocation strategy; company believes stock trades at a discount to intrinsic value.

• Boardwalk litigation: Delaware Supreme Court reversed prior ruling, Chancery Court to decide later in 2024; Loews can appeal unfavorable decision to Delaware Supreme Court.
• Higher interest rates for Loews Hotels: May impact interest expense as loans mature, though replacing construction loans with permanent financing may benefit from lower spreads.

Q: How will data centers impact natural gas demand and Boardwalk?

A: Growth in AI drives data center proliferation, increasing U.S. electricity demand. Incremental data center demand, plus grid pressure from EVs and onshoring, means electricity demand may grow 20% by end of decade. Renewables can't meet demand alone, so natural gas-fired power plants needed; Boardwalk seeing growth projects from new power plants near its pipeline system.

Q: How has the higher interest rate environment impacted Loews Hotels?

A: Higher interest rates haven't materially impacted refinancing due to staggered maturities. However, higher rates may impact interest expense as loans mature; replacing construction loans with permanent financing may benefit from lower spreads. Higher rates are a headwind for Loews Hotels but a tailwind for Loews Corp via CNA's higher rates on its investment portfolio.

Q: Are there any updates on the Boardwalk litigation?

A: Delaware Supreme Court reversed Chancery Court's ruling in 2022; Chancery Court had oral arguments on April 12th, expect decision later in 2024; Loews can appeal unfavorable decision to Delaware Supreme Court.