Loews: Counting on CNA Earnings

Loews (L) is the closest company I can find to Berkshire Hathaway (BRK.A). I base this comparison on the following:

1. Both are conglomerates
2. Both companies take advantage of float
3. Both companies have well respected managers that look for value opportunities
4. Beyond insurance, both companies are in the gas pipeline business

Loews is a company that basically owns: 90% of CNA Insurance (CNA), 50% of Diamond Offshore, 70% of Boardwalk Pipeline (BWP), 100% of Highmount Energy and 100% of Loews Hotels.

Well, Diamond Offshore and Boardwalk Pipeline have already reported, so we already know what those segments will look like. We also now that Highmount Energy and the hotel business will be bad.

In my opinion, the true make or break operations for this conglomerate will be CNA. For the first quarter, my guess is that the insurance operations do well, with a combined ratio in the 95% neighborhood. Hopefully, the first quarter also reveals a turn in the investment performance. I am sure investment income will be down from the prior year (as interest rates are lower), but let's hope the investment writedowns turn positive.

If CNA holds up, I think Loews will go up. With another disappointing quarter from CNA, Loews will go down.

Overall, I am suggesting that the entire 1st quarter for Loews will be contingent on CNA. I am hoping for income of around 100 million for CNA. Let's see!

Comments

[Patrick in ...:]

Have you looked at MKL? I also find this to be very close to BRK.

Both utilize insurance and spend the float on investments etc...

As for L - I believe there is another piece to keep in mind. If Obama does raise Cap. Gains taxes I believe L would be up for sale. If you were the Tisch family would you want to pay taxes at 15% or some much higher rate?

May 03 09:13 AM

[Dan Braem:]

Patrick,

With all due respect, I have owned Markel in the past - they own some small businesses, but the conglomerate structure is a little bit of a reach. If I remember, they own a bakery and some other small businesses, nothing like Loews.

There is no way the Tisch family is selling out. I agree with you that Obama will raise the 15% rate.

May 03 07:57 PM

[helplessobs...:]

Jim Tisch is smart, smart and one of the best investment managers on Wall Street. Little by little he is selling out L's other businesses and investing in energy projects. The hotels may be next sold when the market is right as their return on investment far lags the energy sector.

May 03 08:11 PM

[Eye Forget:]

Start off with the significant discount verus L's sum of its parts.

Combine that with a higher rate affecting management.

You have two very good reasons to spin off the few parts to shareholders. The only reason to hold is to hope the discount narrows. In a spin-off, its instantly.



On May 03 07:57 PM Dan Braem wrote:

> There is no way the Tisch family is selling out. I agree with you
> that Obama will raise the 15% rate.

May 21 11:12 AM