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Loews Corporation (L - Analyst Report) reported third-quarter 2013 operating net income of 83 cents per share, which outperformed the Zacks Consensus Estimate of 77 cents. However, results missed the year-ago earnings of 86 cents by 3.5%.

The year-over-year decline was largely attributable to decrease in earnings at Diamond Offshore Drilling Inc. (DO - Analyst Report) and lower investment income at the parent company. Nevertheless, higher earnings at CNA Financial Corporation (CNA - Snapshot Report) limited the downside.

Including non-cash ceiling test impairment charges of $42 million, Loews reported net income of $282 million or 73 cents per share, comparing favorably with income of $177 million or 45 cents per share earned in the year-ago quarter.

Operational Performance

Loews’ total revenues were $3.704 billion in the reported quarter, up nearly 0.3% year over year. An increase in insurance premiums as well as contract drilling revenues aided the upside.

Total expenses in the quarter declined 3.7% year over year to $3.184 billion. The decrease was mainly due to lower insurance claims & policyholders' benefits.

During the reported quarter, CNA Financial’s revenues increased 1.7% over the prior-year period to $2.50 billion in the quarter under review. It reported net income attributable to Loews Corp. of $244 million, improving 25% year over year.

Better non-catastrophe current accident year underwriting results as well as favorable net prior year development drove the upside. However, higher catastrophe losses and soft results from the Life & Group Non-Core segment as a result of unfavorable morbidity in the long-term care business limited the upside.

The Boardwalk Pipeline’s revenues improved 6.3% to $277 million from the prior-year level. Earnings slipped 5% to $19 million in the quarter.

Loews Hotels’ revenues declined 3.1% year over year to $95 million. Earnings of $1 million rebounded from a loss of $1 million incurred in the year-ago quarter.

Diamond Offshore’s revenues declined 3.3% year over year to $706 million. Earnings plunged 47% year over year to $44 million. The decline was primarily attributable to lower utilization as well as lost revenue and bad debt write-offs relating to termination of rig contracts.  However, the reported quarter experienced higher day rates.  

HighMount’s revenues declined 16% year over year to $62 million in the quarter under review. Earnings declined 37% year over year to $5 million.

Book value as of Sep 30, 2013 was $44.9 per share, down 0.8% from $50.41 as of Sep 30, 2012.

Share Repurchase

During the third quarter, Loews spent $41 million to buy back 0.9 million shares, taking the year-to-date tally to 4.9 million shares bought back for $218 million.

Our Take

Loews remains on track to strengthen its hotel business by doubling its hotel count within the next two to four years and expects to triple the net income by 2015. Strong balance sheet with low leverage, adequate cash and strong rating scores are among the positives for Loews. CNA Financial continues to post solid numbers.

Its foray into the natural gas liquids business with the acquisition of Louisiana Midstream supports its strategy to focus on diversification, which in turn would help the company become less dependent on its base gas transportation business.

However, sustained soft performance at Diamond Offshore and HighMount continues to weigh on Loews’ results.

Loews currently carries a Zacks Rank #5 (Strong Sell). Assurant Inc. (AIZ - Analyst Report), another multi-line insurer with a Zacks Rank #1 (Strong Buy), reported third-quarter earnings of $1.71 per share, that was significantly ahead of the Zacks Consensus Estimate of $1.45 per share. Earnings also increased 10.3% year over year.

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