Subprime Hurts Loews Fourth-Quarter Profit
Loews said Monday fourth-quarter profit fell 31 percent, hurt by subprime investment losses and weaker-than-expected results in its insurance, tobacco and drilling businesses.
Shares of Loews were off $2.65, or 5.9 percent, to $42.08 in morning trading. Shares of its CNA Financial Corp insurance unit were down $4.28, or 13.3 percent, to $27.95, while those of Carolina Group, a tracking stock for the Lorillard tobacco unit, were off $3.44, or 4.3 percent, to $77.14.
Net income at New York-based Loews, a conglomerate run by the billionaire Tisch family, fell to $512 million from $746 million a year earlier.
Profit attributable to shareholders fell to $384 million, or 72 cents per share, from $609 million, or $1.11 per share.
Excluding investments, profit was 81 cents per share, 26 cents below analysts' average forecast, according to Reuters Estimates. Revenue fell 5 percent to $4.57 billion. Loews' businesses include financial, tobacco, energy and hotel companies.
Profit at Chicago-based CNA, a commercial insurer in which Loews owns an 89 percent stake, fell 50 percent to $164 million, or 60 cents per share. Premiums fell as competition intensified, causing operating profit to fall 10 percent to $223 million, or 82 cents per share. Analysts expected $1.02.
Results included $61 million of investment losses, compared with $108 million of gains a year earlier. CNA said credit market turmoil caused "credit spread widening and exposures to subprime collateral in our fixed-income securities."
CNA Chief Executive Stephen Lilienthal said on a conference call, "2008 will present significant challenges as the market continues to deteriorate and the weather will not always be our friend."
Financial companies in the last few months have written off well over $100 billion tied to credit market turmoil.
"Given a lack of flexibility in capital management, stemming from lower ratings and a large parent ownership, we believe returns will continue to deteriorate," Goldman Sachs analyst Christopher Neczypor wrote.
Tobacco, Drilling Weaken
Earnings at Lorillard fell 6 percent to $206 million, hurt by a $46 million charge for litigation.
Profit attributable to Carolina shareholders was $128 million, or $1.18 per share. Excluding items, profit was $1.30 per share, 7 cents below the average analyst forecast, Reuters Estimates said.
Net sales at Lorillard rose 2 percent to $957 million as higher cigarette prices offset a 4.3 percent drop in domestic shipments. Lorillard brands include Newport menthol cigarettes, Kent and True.
Houston-based Diamond Offshore Drilling , in which Loews has a 51 percent stake, Thursday said quarterly profit fell 25 percent to $164.9 million, or $1.19 per share, as the use of drilling rigs declined. Excluding items, profit was $1.61 per share, 7 cents below the average forecast.
Profit rose 10 percent at Boardwalk Pipeline Partners, in which Loews has a 70 percent stake, and rose to $7 million from $3 million at Loews Hotels.
Loews announced plans in December to spin off Lorillard, saying tobacco wasn't a key focus and that it wanted to reduce risk. Loews sold its Bulova watch-making unit to Japan's Citizen Holdings Jan 10.