Good morning. My name is Melissa, and I'll be your be yourconference operator today. At this time, I would like to welcome everyone to theLoews' Third Quarter 2007 Earnings Conference Call. All lines have been placedon mute to prevent any background noise. After the speaker's remarks, therewill be a question-and-answer period. (Operator Instructions) Thank you. It is now my pleasure to turn the floor over toyour host, Darren Daugherty, Head of Investor Relations. Sir, you may beginyour conference.

Thank you, Melissa. Good morning everyone, and welcome toLoews Corporation's third quarter 2007 earnings conference call. A copy of theearnings releases for Loews Corporation and Carolina Group may be found on ourwebsite, Loews.com. On the call this morning are Jim Tisch, the Chief ExecutiveOfficer of Loews; and Peter Keegan, the Chief Financial Officer of Loews. Theywill be joined by Marty Orlowsky, Chief Executive Officer of Lorillard. Before we begin, I would like to make a few briefdisclosures concerning forward-looking statements. This conference call willinclude the use of statements that are forward-looking in nature. Actualresults achieved by the company may differ materially from those projectionsmade in any forward-looking statements. Forward-looking statements reflect circumstances at the timethey are made, and the company expressly disclaims any obligation to update orrevise any forward-looking statements. This disclaimer is only a brief summaryof the company's statutory forward-looking statements disclaimer. We urge youto read the full disclaimer, which is included in the company's 10-K and 10-Qfilings with the SEC. I'd also like to remind you that during this call today, wemay discuss certain non-GAAP financial measures. With regard to such, pleaserefer to our Securities filings for reconciliation to the most comparable GAAPmeasures. After Jim, Peter, and Marty have discussed our results, wewill have a question-and-answer session. If you would like to ask questions andare listening via the webcast, please use the dial-in number to participate:877-692-2592. I would now like to turn the call over to Loews' ChiefExecutive Officer, Jim Tisch.

Thanks, Darren, and good morning everybody and welcome.Loews' had a reasonably good third quarter. Each of our subsidiary companies performedwell during the period. However, the otherwise excellent results for thequarter were somewhat diminished by a previously announced $96 millionafter-tax charge to earnings related to the settlement of arbitration CNAinsurance subsidiary. In August, we completed the acquisition of HighMountExploration & Production Company. HighMount is the name of the company weformed to hold the natural gas assets acquired this summer from DominionResources. The company hit the ground running and performed well during itsfirst two months operations. In addition to making a successful transition to astandalone company, HighMount was able to achieve a 100% success rate for the 103wells it drilled during the quarter. Hopefully this will be a sign of things tocome. Also, during the quarter, we announced our plan to divestour Bulova Watch subsidiary. Bulova has been a steady performer ever sinceLoews' acquired a controlling interest in 1979. The price we are receiving forour smaller subsidiary will ease the pain of parting with Bulova. Thetransaction is expected to close in January of '08. CNA reported another very solid quarter in its core P&Coperations, although its bottom line was negatively impacted by the arbitrationsettlements and by realized investment losses. In recognition of CNA's improvedfundamental Fitch upgraded CNA's insurance financial strength ratings to A fromA minus earlier this month. Like last year's third quarter, a mild hurricane season keptcatastrophe losses to very modest level. CNA has exercised enormous disciplinein its underwriting and is more focused than ever underwriting good business inthe softening insurance market. Good underwriting aided by favorable prior year development,led to improvement of the combined ratio, which decreased to 91.6% for P&Coperations in the third quarter. This represents a 3 percentage pointimprovement versus a comparable prior year period. Additionally, in view…

Thanks, Jim and good morning everyone. In the third quarter,Loews reported consolidated net income of $555.7 million versus $635.1 millionin the third quarter of 2006. Net income for Loews' common stock was $410million or $0.77 per share, compared to $517.2 million, or $0.94 per share inthe third quarter of 2006. Net investment losses were 31.1 million versus gains of $30.7million in the prior year's third quarter. Losses mainly consisted of otherthan temporary impairment losses in CNA's portfolio, largely earned securitiesfor which CNA did not have an intent to hold until it anticipated recovery inthe value. Net income for Carolina Group stock increased to $145.7million or $1.34 per share from $117.9 million or $1.17 per share in the thirdquarter of 2006. The main drivers were higher effective unit pricing and theincreased weighted average number of Carolina Group shares outstanding afterthe sales of Carolina Group stock in August of last year. The change in thenumber of shares outstanding does not affect per share results. Lorillard contributed $97.4 million to net income for Loewscommon stock during the quarter versus $100.9 million in the prior year thirdquarter. Lorillard's contribution was impacted by the reduction of Loews's economicinterest in the Carolina Group resulting from the sale of Carolina Group stock.Loews Corporation owns $65.4 million share equivalents, representing a 37.6%economic interest in the Carolina Group. Lorillard recorded charges of $177.5 million and $149.3million after taxes for the third quarters of 2007 and 2006 respectively toaccrue for obligations under the state settlement agreements. CNA contributed$189.2 million to Loews's net income in the third quarter versus $257 millionin the prior year third quarter. CNA previously disclosed a settlement relatedto a run-off book of business, which decreased Loews's net income by $96.4million. Diamond Offshore's contribution to net income rose to $95million from $81.8 million in the third quarter of…

Thanks, Peter. Good morning, everyone. For the third quarterof 2007 as compared with the third quarter of 2006, Lorillard's operatingincome and net income increased 5.9% and 11.3% respectively. These increaseswere achieved despite total Lorillard wholesale units shipments being down 1.6%for the third quarter of '07 versus Q3 '06. Offsetting the effects of the negative unit shipment onoperating profits, were higher effective unit prices, due to lower promotionalspending, and higher pricing related to primarily a price increase taken inDecember 2006 and secondarily in September of '07. Contributing to the increasein net income, in addition to the aforementioned was higher investment incomeand a lower effective tax rate as compared with the previous year's period. Lorillard's wholesale shipment decline of 1.6% for the thirdquarter of '07 versus the third quarter of '06 was inline with the industry'soverall rate of decline. Wholesale's market share of 9.97% for the thirdquarter of '07 was flat as compared with the third quarter of '06. For the nine months ending September 2007, wholesale unitshipments were up 0.3% and market share was up 0.39% comparing the prior-yearperiod. Newport'swholesale shipment share was flat at about 9.14% of the market and volume wasoff 1.6% for Q3 '07 compared with Q3 '06. Wholesale purchase patterns ininventory levels during the third quarter of '07 were affected by distributorsbuying in anticipation of price increases and new brand introductions. Comparing Q3 with Q3'06 performance at retail, Lorillardexperienced 1.1% decline in unit shipped from wholesalers to their retailaccounts. And the industry declined by 3.8%. Newport'sretail volume was up 1.1% and gained 0.26 of the share point at retail for thesame periods of comparison. The menthol segment accounted for 28.4% of retail sales inthe third quarter of '07, according to our data, reflecting an increase of 0.6of the share point versus last years third quarter. Newport's33.8% share of the menthol segment represented of 0.2 of the segment sharepoint increases compared with Q3'06. Lorillard performance during the thirdquarter of 2007 was consistent with the Company's core strategy of balancing Newport's marketplaceperformance and the Company's overall profitability. Depending on market conditions, brand trends and competitivefactors, Lorillard will continue to consider making appropriate adjustments,periodically towards promotional spending. I would also add that Lorillard is pleased that in additionto its regular third quarter earnings related dividend, it declared anadditional special dividend this month as Peter indicated. In considering thisdividend for Lorillard Broad reviewed its current ongoing cash and capitalneeds of the Company in light of its current cash balances. However, as I've stated many times in the past, whether ornot the [escrow] agreement is in effect, Lorillard's will have ongoing cash,working capital and other capital needs that the Lorillard Board will carefullyconsider before making any future dividend declarations. Thank you and I'll now turn it back to Darren.

Thank you. (Operator Instructions) We'll pause for just amoment to compile the Q&A roster. Your first question is coming from BonnieHerzog with Citigroup. Please go ahead.

All right. Thank you. Good morning.

Good morning.

I have certainly a few questions. Let me start off with CarolinaGroup, Marty. I was hoping you could answer for me what the main reason was forthe decreased promotional spending this quarter? I am curious, was it becauseyou were all having such difficult volume counts, and you thought that that wasa faster way to achieve the earnings growth that you wanted? And, so depending on how you answer that question, I amcurious if we should expect lower commercial spending in the future? And then,it's very intriguing because I'm also curious about how you think about balancingyour promotional spending in volume growth, especially of a likely federalasset tax increase?

Okay. Let me try to answer the first part. First, theconsideration in terms of our spending levels in promotion are not based onanything to do with how difficult the prior year's quarter was. We don't takethat into consideration. As I've said repeatedly, our decisions are based onwhere we see the outlook. And again, we're not looking at a quarter-to-quarter.We don't take a quarter-to-quarter viewpoint. We're looking at, as I've also said repeatedly, a long-termperspective. So from the long-term perspective, we've felt that given thebrands strength and competitive factors that we were in a position to lower ourspending to balance out the profitability side. And that doesn't imply anythingbeyond, for that period of time, the decision we make given the circumstancesof the trends and competitive factors that were occurring. So, we are looking at the long-term. It doesn't make -- thethird quarter of '07 obviously is important. We want to optimize ourperformance in any given quarter, but we're also taking a much longer termview. And over the longer haul for this year, on a year-to-date basis throughthe end of September as I indicated, we're in a pretty positive position. Andwe strongly have outperformed the industry in terms of unit shipped and marketshare performance. So I think you have to look at it on a more holistic basisthan just the quarter. Relative to the FET, I'm really not going to comment, Idon't know whether, in fact, there will be an FET increase. And we will makewhatever decisions we feel appropriate, depending on whatever occurs on thefederal tax level to be consistent with our strategy. And we will attempt to thedegree possible to balance the profitability factor and the Newport brand's performance factor.

Okay. That's helpful. And certainly I do appreciate that,because I know you do think the long-term view. And that does dig anotherquestion just in terms of the fourth quarter because your comps are also quitetough, specifically for Newport. And just based on my back of the envelope calculation, Ithink you're going to have to generate, or Newport is going to have to generate volumegrowth in the range of at least 8% to sort of generate the full year brandvolume growth that we've seen for that, I guess, that brand for the lastseveral years. Is that fair, Marty, so you're facing some difficult comps?

Well, to be honest with you, Bonnie, I haven't truly donethe calculation because it really would be inconsistent with what I've justsaid. We're not looking at comparative performance per se to drive ourdecision-making. So I honestly have not done that comparison. I'll take yourword for it that we need an 8% increase in volume.

Roughly, yeah.

But that's not really the point. The point is, we're lookingto have a very positive year. And as you well know, we don't say guidelines orprovide guidance. So, we hope to be able to deliver a positive performancefactor. And that will be the best balance between profitability in the Newport brand'sperformance that we feel we can generate.

Okay. And then, Jim, can I turn to you for just a moment,just with one final question. And it certainly relates to Marty, of course,with the notional debt and the pay down on very positive something that I thinka lot of us have been expecting, so it doesn't necessarily come as a greatsurprise. But, I'm curious when you are anticipating all of the notional debtto be paid down, is that still a goal for Loews?

Absolutely, positively. We've said that. We've been sayingthat for a long time that our goal is to pay down all of the notional debt. Andthen, once all that is paid down, then the cash flow of Carolina Group will beavailable for dividends for all shareholders.

Did you just do -- am I understanding correctly that youpaid down half of the notional debt roughly, is that correct, Jim, and then --but you're you still paying a dividend?

Yeah. That's what we've always done. We've paid quarterlydividend, and then we use the -- first, we pay the interest expense, then onthe notional debt, then we pay the dividend, and then whatever cash isleftover, we use to reduce the notional debt. Over the years that notional debthas been reduced from $2.5 billion, when Carolina Group went public, to nowjust over $400 million. And what I said was that the notional debt has been reducedin this latest period from just over $800 million to just over $400 million. Sowe have $400 million more to go before all the cash flow of Carolina Group canbe used for only dividends as opposed to dividends and repayment of debt.

Okay.

Finally, I just want a technical qualification. The LoewsBoard has not yet declared these dividends.

Okay.

So, we are making an assumption here.

I appreciate that. That helps me. Thank you very much.

Thank you. Your next question is coming from Judy Hong withGoldman Sachs. Please go ahead.

Thanks. Good morning, everyone. First question, again goingback to the notional paid out in the quarter, the fact that you chose todeclare to pay down the half of the existing notional debt that's outstanding,does that imply that the net worth requirement under the agreement is still inplace even though the US Supreme Court rejected this request?

Well, I'm going to speak for Lorillard. I'm not going tospeak for paying down half the debt. That's a Carolina Group decision at Loews.The net worth requirement is not necessarily a factor that we're dealing withhere. We determined -- it so happens we're still above the net worthrequirement as per the annual agreement in declaring the special dividend. But the reality is we made a decision based on all of thefactors that I mentioned in terms of our requirements for cash and otherconsiderations. So it really isn't tied necessarily to the net worth covenant.However, we're still in the conformance with it.

Okay. So then, following up on that, when do you expect tosee net worth requirement to be lifted? Is it after the industry -- I think theindustry filed for a rehearing on this, if the US Supreme Court comes back andthey reject the rehearing, at that point is the net worth requirement lifted?

Well, you are correct. There was a filing for a rehearing onFriday. However, I'm going to put it in these terms. The way this has evolvedin terms of the issue as it relates to this completeness of review question,which is the factor that triggers the agreement, I think we're really comingout is when the trial court in Florida that has responsibility for thedisposition and determination of completeness of review relative to the Inglecase makes its decision, then I would have to say that that would be the pointin time. I don't think it's for us to comment any further than thatregarding the specifics of the issue, but it really does come down to the judgein the trial court making that ultimate determination.

And is the decision by the trial court to say that the networth requirement is no longer in play, is that in any way tied to the escrowagreement that also exist both on the refundable and the nonrefundable side, orwould that matter be taken care by the trial court separately?

Well, I think it's all one -- look, the agreement is onlytied to the completeness of review. If the trial court determines that it givescompleteness of review, then the agreement, the terms of the agreement are nolonger in effect. So, whatever aspect that implies, that's what happens. Andthat would obviously imply that there is no longer need for a net worth kind oflimitation. And it would also -- the court would then have to decide howto dispose off the dollars that are being held as part of this agreement. Butthe essential part here is a determination as to whether or not

Judy, one slight correction on to what you asked. None ofthe $200 million of enhanced bond is refundable to us.

You were referring to that though, right.

Yeah, you’ve indicated in the past that, that non-refundableportion you are not likely to go after.

No, what we were saying is there is really no refundableportion to us.

It’s just the net worth requirement portion for you guys.Okay. And then, Marty, just in terms of your business, it seems like in thequarter, even sort of looking at more of the retail takeaway numbers, the sharegrowth was a little bit softer than kind of what we are been seeing in the pastfew quarters, and I’m just curious, does that reflect even more heightenedcompetitive landscape in the menthol segment? And is the share growth justbecoming a little bit more difficult to achieve in the current competitivelandscape in the menthol segment?

No, I wouldn’t conclude that necessarily. It’s more of anindication of the relative promotional levels behind Newport as opposed to anything else. Andshare, obviously is affected, because there was a major line extensionintroduced in the third quarter that inflated if you will the universe. So, itwould sort of proportionately affect the lack of promotional affect on Newport's volume. So, Iwould say it’s more a result of Newport’sdecision as opposed to anything else.

Okay. And, then just one final question for you, Jim. WhenLoews issued a tracking stock of Carolina Group years ago, and then IPO, therewere a number of factors why you choose to go with the tracking stockstructure, the tax implications, the ability for Loews to have full control ofLorillard's capital structure. I'm just wondering if all those factors arestill in place in terms of maintaining their current tracking stock structurefor Carolina Group. And at what point or what factors will prompt you to maybechange the tracking stock structure to a common stock structure?

Judy, we're very happy with a tracking stock structure. Itwas done, I believe, for all the right reasons and it has served both the Loewsshareholders' well and the Carolina Group shareholders' well, so we're veryhappy with how it has workout.

Okay. Thank you.

Thank you. Your next question is coming from FilippeGoossens with Credit Suisse. Please go ahead.

Yes. Good morning. Most of my questions have been answeredalready, but let me just kind of add a couple here. Marty, last week one ofyour competitors decided to move forward in terms of moving towards morefire-resistant paper by 2009. Can you just kind of share with us what yourplans would be for that issue? And what is the availability of papers and whatextra if any; cost would be to make that switch?

I'm really not going to comment on it, Filippe, I'm awarethat Reynolds made that announcement, but I have no real comment to make on anyspecific basis.

Okay.

Obviously, we're moving along in accordance with whateverthe state laws are and whatever other decisions we make we'll do as we go alonghere, but I don't have any other comment on it.

Okay. That's fine. Then Maverick, good growth there again,in that side of the portfolio, can you just kind of refresh our minds what thelonger-term strategy is with some of the, what I would call perhaps thenon-core brands including Maverick?

Well, essentially nothing has changed, as you've described,the non-core brands Kent,True, Max, Satin and Old Gold for that matter, which is one of the otherdiscount brands, in addition to Maverick. We are basically optimizing theirprofitability. Maverick has shown growth, it was up a healthy almost 32% inthe third quarter. It’s a low margin proposition, we've always said that we aremaintaining that as sort of a place holder, if you will, in that segment of themarket, it has done well for us. We don't loose money on it obviously, but it'salso obviously modestly profitable. And for the other brands long-term, theygenerate profit for us, and that hasn't changed for the last many, many years.

Okay. Then the next question, Marty, have you seen anychange in the pricing structure of Commonwealth and to what extend do youactively actually monitor Commonwealth given that there menthol brands arereally not at all that relevant in the space?

Well, we monitor all brands, regardless of whether they arementhol or non-menthol, that doesn't mean we take action obviously to allbrands. Yeah, I think, I am not actually factually certain, but I believethey've had some price increases at the Commonwealth level for their discountbrands. I think, I am correct in that. Other than that, we don't reallymaintain too close sort of an evaluation on those brands.

Okay. Then my final question, if I may, Marty. Somethingthat has come up in the past, but it just happens to come back during our conversationswith investors. It’s again the joint venture with Swedish Match. And I am notgoing to ask you what you are doing at this current juncture or when we willhear something perhaps. The question that comes back to me from investors is,given that nothing has happened and given that it was really not a materialevent, what made you to disclose that joint venture to begin with? And not towait until there was really a product to be rolled out?

There was no sort of magic formulae here; we just decidedthat since we entered into a joint venture it was a unique occurrence for us.That we would let the public know that we were in such a venture, I don’t thinkit was anything more than that, just information.

Okay, fair enough. Thank you so much, Marty.

Thank you.

Thank you. Your next question is coming from David Adelmanwith Morgan Stanley. Please go ahead.

Good morning, everyone.

Good morning.

Marty, let me ask you a few things first, if the $921million Lorillard net worth requirement is not by any constraint, I am a littlepuzzled, why you wouldn't have paid down substantially more debt this month. Inother words, if you had made these divided payments during the third quarter,looks to me like Lorillard's book value would be about $1 billion, its cashlevel would be a about $1.2 billion. Even less the MSA accrual, since March,you probably have $700 million in cash, and I am just curious, what do youthink in the current legal and regulatory environment the appropriate cashbalances is for Lorillard?

David, I am going to leave my comment as I made on it andthat is we took into consideration, the Lorillard Board. All of, whatevercapital and cash needs we have in light of the cash on hand, and relative toworking capital and other contingent needs factored into this thing. I am notgoing get into any detail about that. And other than to say that the Lorillardboard sells that, we could make a $250 million special dividend declarationgiven that we had that money to declare. And I’m really not going to get intoany other specifics about it.

Lorillard's Board Marty typically meets once a quarter?

That’s correct.

Okay. And then in terms of your promotional spending in themarket place, did it tweak up just slightly, sequentially from the secondquarter level?

I actually don’t know or can. I don’t think so I don’t knowthat we’ll get back to you on that.

Okay. And then Marty the retail market share of Newport during the thirdquarter was what?

The retail?

Yeah.

Retail market share during the third quarter was 9.59%.

Okay. Thank you. And then, Jim, if I could, have there beenany material changes during the last several months in Loews investmentportfolio in light of all of the volatility and asset prices in the Capitalmarkets?

No, not all. The Loews portfolio which is now about $3.5billion has been invested primarily in treasuries and some equities, but theearnings of that portfolio are reported every quarter on a mark-to-market basisin our income statement. And I’m being corrected here, it’s a $3.2 billion not$3.5 billion, high round up.

And then, Jim, as it relates to the actual mechanics goingforward after the remaining notional intercompany debt has been paid down, as apractical matter, given the intent to pay out to all Carolina Groupshareholders the available cash, and assuming that there is no further increasein that layer of CG reserves, which I think is $100 million, does that mean asa practical matter the mechanics is that a CG shareholder or a non-CGshareholder essential will have 100% pay out of the prior quarters cash flowassuming that that's been fully paid up to Loews?

That makes sense, yes. There will be no more interestexpense on the notional debt and there will be no more amortization to getitself. So all the cash flow coming up to CG will be available subject to thediscussion of the Board to be paid out to all the CG shareholders.

Okay. And then lastly, Jim, could you comment for a momenton high amount, what exactly over the last several months has transpired? Inother words, I don't think it was actually an operating entity. What kind ofstructure has been created and the, sort of, the revenue and then the operatingprofit levels that were generated from that business during this stub period,how did those compare versus your internal expectations when you did thetransaction?

We have two months of operations timeout. And it performedbasically as we expected. The main thing that drove it, also of ourexpectations, was the change that occurred this summer in natural gas prices.But we have about 30% of our gas prices hedged for this year and about, Ithink, another 30% hedged for next year. So it's 20% that's hedged for thisyear and 30% hedged for next year. We basically took properties that we received from Dominionand put them into HighMount, which is our corporation that holds our gasexploration and production properties. And we've taken over a substantialnumber of the employees from Dominion, and now it's operating within Loews as astandalone subsidiary in that business.

Okay. Thank you.

Thank you. Your next question is coming from Bob Glasspiegelwith Langen McAlenney. Please go ahead.

Good morning. Following up on the HighMount questions, is thereany seasonality in the business as we think about modeling and what are theother sort of important factors that will cause sort of monthly pattern tochange from what you reported this quarter?

The prime factor in seasonality relates to gas prices. Andif you look at the gas futures, you'd see the gas prices tend to peak inDecember, January, February. Then they tend to go down into the spring, ormaybe go up a bit in the summer when there is air-conditioning demand, and thendecline again in the early fall before going up again into the winter time.

I assume it's all related to sales of the stuff in theground, the net asset value doesn't flow through the income statement likebuns?

No. Definitely no. That's right.

Okay. So, it's all operationally driven by the patterns. So,the first quarter should be the big seasonal quarter?

That's correct.

And I would assume the third quarter would be late, right?

That's correct.

Okay. So, this should be sort of a below trend run rate on amonthly basis from a seasonal point of view?

We certainly hope that. Yes. For example, in September, wegot down to gas prices with a $5 handle on it, and now we're up to $7.5 or $8.

And were there any sort of frontloaded expenses to get goingto press things or any sort of one timers that…

Well, there are some transition expenses that are actuallygoing to going on for a few quarters.

So this quarter's run rate is a little bit late for themonth or so, but it will continue for a bit?

It's kind of hard to answer that question because we don'thave prior year comps at this point. We're really looking at two months ofactivity with no prior year. But we do have some transitional expenses whichare going to go well into the first and second quarter of next year.

Okay. Canyou give the limited and general split in dividends received in the thirdquarter from Boardwalk?

Yeah. Well, we are just fumbling through our book to getthat.

Because the general is now starting to be immaterial.

I just got the total.

Bob, we don't have that right now.

Okay. Well,I'll get that Darren later, hopefully. Thank you.

Well, the total dividend we received, this includes the GPin the third quarter, was $39.8 million.

Do you have the prior quarter maybe that would help me?

Well, I can give you year-to-date. The year-to-date is$115.4 million. that's nine months.

Okay. Youmight be doing some work probably I can get it from there. Thank you.

Thank you. Your next question is coming from Andy Baker withJefferies & Company. Please go ahead. Andy Baker -Jefferies & Company: Thanks for taking the question. Going back to HighMountagain and sticking with the theme, can you sort of give us a sense of thelevels of these transition expenses? And then also, how do the operatingexpenses vary quarter-to-quarter along with gas prices? In other words, isthere a lot more leverage as gas prices rise in the winter months here, evenyour ordinary operating expenses to stay flat so you get much expense in themargin in that period?

Transition expenses, we don't really want to give thatnumber out right now. Andy Baker -Jefferies & Company: Thank you.

What was the other question? Andy Baker -Jefferies & Company: How much operating leverage you see in the model based onpricing? So if pricing doubles, do operative expenses stay the same as price…

We should produce in the course of the year between 100 and125 Bcf of natural gas. So every dollar in Mcf change in price for natural gasleads to a pre-tax income change of $100 million to $125 million. Andy Baker -Jefferies & Company: Okay. So no extra expenses, that's good. And could you givethe prices at which you have hedged your gas this year and next?

We don't have that available right now. And as I think aboutit, I really don't want to put ourselves in a position where we're constantlydisclosing our hedge pricing. Andy Baker -Jefferies & Company: Fair enough. Can you give the reserve levels currently orare we going to get that quarterly, annually?

We don't have that at hand right now. Andy Baker -Jefferies & Company: All right. Can you just repeat the barrels of oil that youproduced?

We don't produce any oil. We produce natural gas liquids.And that's about 582,000 barrels for the third quarter, which represents twomonths. Andy Baker -Jefferies & Company: Alright. Thank you very much.

Thank you. Your next question is coming from [David Siniscalchiwith Renaissance Technology]

Good morning, guys. I have two questions. First question isfor Marty, and that is given how seldom, you have launched line extension tocompare to your competitors, can you talk about new about Newport Medium andhow that compliments the Newportfranchise? The second question is probably for Jim, and that is can youdiscuss your intentions with respect to succession planning for the CEOposition at Lorillard, is this process handled by the Lowes' Board or theLorillard Board? Is there any preference to hire internally or externallywithin or outside the industry? And if the latter, is there a search ongoing?Thanks a lot.

Well, let me answer. Maybe I'll answer both questions actually.Newport Medium has been out for a while as a line extension, I assume that'swhat you're referring to. And it was simply a matter of establishing an optionin terms of the choice of the taste of the Newport brand. That was relatively somewhatconsistent with what other menthol brands that didn't offer, and you are milesout there for competitive products, and so we felt that we would introducesomething in that taste range. We do have a brand in test right now called [EmBlend], whichis unique blend it's in a small market in test. And again, our philosophy to line extensions is to try to round out, theappeal of the Newportline in the terms of what we believe or hope that the smokers have preferencesfor us regarding the different taste and flavor levels of the product. We are not that active, we don't introduce line extensions,simply to generate volume out there. So, when we do, we try to do it in adiscipline way, where it offers some tangible benefit that we think mighttranslate into incremental volume and truly incremental volume, as apposed tojust volume that cost money. Let me respond to the succession since, Lorillard deals withsuccession for it self. We obviously have a succession plan in place, whetheror not, we go inside or outside. We will always look to see if we can get thebest candidate for the job. There is no active search going on at the moment.And since I don't have any plans to retire literally at the moment.

Okay. Thanks.

I hope that answers your question?

It does, thanks..

Okay.

Thank you. Your next question is coming from Michael Millmanwith Soleil Securities. Please go ahead.

Thank you. I’ve got a couple of questions. On the Highmount,on the gas properties, what have you seen in terms of the market for gasproperties over the last six months or so, since you first bought it and now?

I would say to some extent we've seen an up tick in pricedriven by the master limited partnerships, that are trying to buy property fortheir MLPs. So, there is been a slight up tick in price.

Okay. And regarding the hotels, you seem to or I thinkyou've talked about a bit, moving more towards emphasizing brands, can you talkabout or give us some color as to how you think this changes the operationgoing on?

There really hasn’t been a change. We have one brand whichis a Loews Hotels brand and there's been no change in the way we promote thatbrand or our individual hotels.

Are you trying to broaden that brand into getting into someof the resort properties, that you have this Las Vegas property and to maybe even to timeshare?

Well, as you know, we are constantly trying to expand thebrand in both cities and resorts. We've already got a number of resortproperties, five of them in Florida,and then few others scattered around the country. And Las Vegas is the latestresort property, so those that are going to head of the strips, looking for theLowes hotel, you are not going to find it on the strip, you'll find it about 30minutes away in a place called Lake Las Vegas, that can give people that wantto go to Las Vegas access to the city without actually being there.

Any plans to get into time share or fraction ofcondominiums?

No. We have no plans.

And I apologize, but can you repeat what the cash and debtposition, and take into account the Diamond special?

At the end of the quarter, we have $3.2 billion. We had debtof $855 million and now what we do the addition for the dividends that we arereceiving.

Anything else we should be adding on to that?

Not anything, that will make a significant difference.

Okay. Thank you.

Thank you. Your next question is coming from Judy Hong with GoldmanSachs. Please go ahead.

Yeah hi, I just had a follow-up question on how Lorillardcash gets [dived] up the Carolina Group. Right now the policy is that 100% of Lorillardcash gets split up to Carolina Group on a quarterly basis. Is that correct?

Yes.

Okay. And would there be any reason to think that that wouldchange in your evaluation of what the right capital structure for Lorillardwould be going forward?

Well, Judy. I'm going to give you the same answer I gaverelative to anything to do with how we declared dividends or/and what factorswe take into consideration. Anything relative to dividend policy or the amountof the dividend, it will be based on the Lorillard's Boards determination atgiven points in time, to its needs and what opportunities there might be. So, I really can't speak to anything in terms of specifics,relative to the future. What we did this time around as a Board does notnecessarily imply anything in the future either, So, look there is nodifference in our approach just because we declared the special dividend today.It is consistent frankly with our policy of declaring dividends up to Lowesbased on our ability to do so. And our ability to do so is predicated on thevariables that I have mentioned several times today. So, whatever the futurepolicy is that will depend on those variables.

Okay. Thanks.

Okay.

Thank you. At time I would like to turn the floor back overto Darren Daugherty for any closing remarks.

Thank you for joining us on the call today. A replay will beavailable on our website, loews.com, in approximately two hours. That concludestoday's call.

Thank you. This concludes today's Loews' conference call.You may now disconnect.