Loews Corporation ( L - Analyst Report ) reported third quarter 2012 adjusted net income of 86 cents per share, beating the Zacks Consensus Estimate of 72 cents by a significant margin. Earnings also soared 95% year over year from 44 cents per share. Adjusted net income stood at $339 million, surging 92% year over year.

Including post-tax non-cash ceiling test impairment charges of $166 million and net investment gains of $4 million, Loews reported net income of $177 million or 45 cents per share, comparing favorably with $162 million or 40 cents per share in the year-ago quarter. The prior-year quarter includes net investment losses of $15 million.

Lower earnings at Diamond Offshore Drilling Inc. ( DO - Analyst Report ) weighed on the results, while improved earnings at CNA Financial Corporation ( CNA - Snapshot Report ) and enhanced results from equity and limited partnership investments at the parent company were the positives.

Operational Performance

Total revenue at Loews in the quarter came in at $3.72 billion, up 8.1% from $3.44 billion in the prior-year quarter. Substantially higher net investment income and investment gains, along with enhanced insurance premiums, led to the overall improvement in top line, partly offset by lower contract drilling revenues.

Total expense in the quarter increased 10.2% year over year to $3.31 billion. The increase was mainly due to higher insurance claims & policyholders’ benefits, which was partly offset by lower contract drilling expenses.

Loews Hotels posted the highest growth in revenue in the quarter, which improved 19.5% year over year to $98 million. Net loss amounted to $1 million.

CNA Financial’s revenue increased 11.5% over the prior-year period to $2.5 billion in the quarter under review. The company reported net income attributable to Loews Corp. of $195 million, improving 132% year over year. The improvement largely stemmed from lower catastrophe losses and improved net investment income due to strong limited partnership investment results.

The Boardwalk Pipeline’s revenue inched up 0.7% to $271 million from the prior-year level. Earnings improved 11.1% to $20 million in the quarter.

Diamond Offshore’s revenue decreased 17.1% year over year to $730 million. Earnings plunged 31.4% year over year to $83 million, largely due to reduced rig utilization and lower average dayrate.

HighMount’s revenue declined 22.1% year over year to $74 million in the quarter under review. Earnings plummeted 50% year over year to $8 million. The company also recorded a ceiling test impairment charge of $166 million.

Book value as of September 30, 2012, was $50.41 per share, up 6% from $47.58 as of September 30, 2011.

Share repurchase

During the third quarter, Loews spent $88 million to buyback 2.2 million shares.

Peer Comparison

Loews’ peer, The Travelers Companies Inc. ( TRV - Analyst Report ) , reported earnings of $2.22 per share in the third quarter of 2012, outshining the Zacks Consensus Estimate of $1.61 per share. Results surged 181% from 79 cents earned in the year-ago quarter. Operating income in the reported quarter was $867 million, jumping 161% year over year.

Lower catastrophe losses and sturdy underwriting results fueled the better-than-expected results.

Total revenue in the quarter under review was $6.5 billion, increasing 2% year over year, driven by the augmentation in premiums earned and net investment income. Revenue surpassed the Zacks Consensus Estimate of $6.3 billion.

Zacks Rank

We maintain our Neutral recommendation on Loews over the long term. The quantitative Zacks #3 Rank (short-tem Hold rating) for the company indicates no clear directional pressure on the shares over the near term.