CNA surges as profit exceeds analysts' estimates
CNA Financial Corp., the insurer controlled by Loews Corp., gained the most in three months after second-quarter profit beat analysts' estimates on improved investment returns.
CNA posted operating income, which excludes writedowns of some holdings, of $1.02 a share, beating by 43 cents the average estimate of three analysts surveyed by Bloomberg. The Chicago- based insurer gained $2.66, or 16 percent, to $19.71 at 4 p.m. in New York Stock Exchange composite trading.
Investment income gained 17 percent to $675 million on gains from "partnerships," which generally include private equity, real estate and hedge fund holdings. Partnerships posted a $165 million gain after losses in the three prior quarters, the insurer said in a presentation on its Web site.
"Our investment income rebounded nicely," Chief Executive Officer Thomas F. Motamed said today in a statement.
Net income at CNA dropped 42 percent from a year earlier to $105 million on impairments and a decline in policy sales. Loews Corp., the holding company run by New York's Tisch family, said income from continuing operations fell 33 percent on lower profit from CNA and oil drilling operations.
Loews earned $341 million, compared with $511 million a year earlier, not counting operations such as a tobacco business the firm no longer owns, the New York-based company said in a statement today. Operating income, which also excludes some investment results, was $1.19 a share, beating by 29 cents the average estimate of two analysts surveyed by Bloomberg.
Energy Exploration
Loews climbed $2.06, or 6.9 percent, to $32.08. Loews owned 90 percent of CNA as of April 1, according to Bloomberg data.
Declines at Loews' hotel and energy-exploration businesses weighed on results. Consumers have cut back on travel amid the recession. Hotel revenue per available room fell 18.7 percent in the first half of the year from year-earlier period, Smith Travel Research said in a July 28 statement. Crude oil futures and natural gas prices slipped in the past year, reducing demand for drilling operations.
Net income from the hotel business fell to $3 million from $19 million. Loews CEO Jim Tisch said pressures on the hotel industry provide acquisition opportunities.
Hotels are "the equivalent of a poor man's football team," Tisch said on a conference call today. "If you can't own the football team in town, you might as well own the best hotel. As a result, they trade at very steep prices. It's my expectation that in the coming quarters we will see hotels that can be acquired at more attractive prices."
Diamond Offshore
Loews owned 50 percent of Diamond Offshore Drilling Inc., the largest deepwater oil driller in the U.S., as of April 1. The Houston-based company reported in a July 23 statement that second-quarter net income fell 6.9 percent to $387.4 million.
Diamond Offshore said second-quarter operating income for jack-ups, so called because of the retractable legs that extend to the sea floor, was $56.9 million, down from $69 million a year earlier.
"The jack-up market isn't as strong because of gas prices in the United States," Tisch said today in an interview on CNBC. "Oil prices traded down to $35 a barrel in the winter. Now with oil prices at double that amount, my guess is that over the next several quarters we are going to see the oil companies start to get confidence again and come back to contract to use semi-submersibles and jack-ups."
Loews' net income was $340 million, or 78 cents a share, compared with $4.96 billion, or $9.54, a year earlier when the firm booked a gain on the separation of its Lorillard tobacco business. Loews' book value climbed to $34.60 a share from $30.73 in the first quarter.
Laurence Tisch, father of Jim Tisch, and Preston Robert Tisch, his uncle, started Loews when they bought a New Jersey hotel in 1946. The family owns about 24 percent of the company, according to Bloomberg data. Loews Co-Chairman Jonathan Tisch is an owner of the New York Giants football team.