Robert Glasspiegel - Langen McAlenney Michael Millman - Millman Research Associates David Adelman - Morgan Stanley Josh Class [ph] - Manikay Partners

Good morning. My name is Jackie and I will be your conference operator today. At this time I would like to welcome everyone to the Loews second quarter earnings conference call (Operator Instructions) I would now like to turn the call over to Darren Daugherty, Director of Investor Relations. Please go ahead sir.

Thank you Jackie. Good morning everyone. Welcome to Loews Corporation’s second quarter 2010 earnings conference call. A copy of the earnings release maybe found on our website at www.loews.com. On the call this morning are Jim Tisch, the Chief Executive Officer of Loews and Peter Keegan, the Chief Financial Officer of Loews. Before we begin, I’d like to make a few brief disclosures concerning forward-looking statements. This conference call will include the use of statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those projections made in any forward-looking statements. Forward-looking statements reflect circumstances at the time they are made and the company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company’s statutory forward-looking statements disclaimer. We urge you to read the full disclaimer, which is included in the company’s 10-K and 10-Q filings with the SEC. I’d also like to remind you that during this call today we may discuss certain non-GAAP financial measures. Please refer to our security filings for a reconciliation to the most comparable GAAP measures. After Jim and Peter have discussed our results, we will have a question-and-answer session. I will now turn the call over to Loews Chief Executive Officer, Jim Tisch.

Thank you Darren and good morning and thanks all of you for joining us on our call today. For the second quarter, Loews net income increased to $356 million from $340 in the second quarter of 2009. This increase reflects an investment gain of $1 million this year, versus a net investment loss of $178 million in the second quarter of 2009. Loews reported income before the investment gains and losses was $365 million versus $518 million in the second quarter of 2009. This decline is primarily the result of decreased earnings from Diamond Offshore, CNA and HighMount and a lower investment incomes from Loews trading portfolio. CNA reported overall solid operating and financial performance for the second quarter, although it’s net operating income declined versus the prior year quarter. The primary drivers of this decline was decreased limited partnership results and decreased current accident year underwriting results, which were partially offset by favorable net prior year development. Subsequent to the close of the quarter, CNA announced an agreement to transform its legacy asbestos and pollution liability for National Indemnity, a subsidiary of Berkshire Hathaway. We believe that this transaction will effectively eliminate CNA’s asbestos and pollution reserve risks, as well as any reinsurance dispute and credit risks. In the past, our earnings conference call has given me an opportunity to do a quarterly lectures theory on current topics in insurance accounting, and I consider the proposed changes to the accounting rules proposed by the FASB to be a worthy topic for today. On May 26 the FASB published an exposure draft of an accounting standards updates that would significantly change mark-to-market accounting rules for insurance companies and other financial institutions. The proposed rule changes would require insurance companies to mark substantially all of their investments to market each quarter…

Thanks Jim and good morning everyone. For the quarter, earnings per share improved $0.87 from $0.78 in the prior year quarter, primarily as the result of realized investment gains at CNA, compared to investment losses in the prior period. Offsetting this were a decline in results with three of our subsidiary companies, and a decline in holding company investment income. Book value for Loews common share increased to $43.53 as of June 30, from $39.76 at the beginning of the year. For the quarter, realized investment gains at CNA totaled $12 million after tax and non-controlling interest, versus realized investment losses of $178 million in the prior year quarter. The driver of improvement was a reduction in other than temporary impairment losses. CNA’s contribution to Loews net income before investment gains and losses decreased to $247 million for the quarter from $277 million in the prior year quarter. The decrease resulted mainly from lower investment income, which included a significant decrease and limited partnership results, versus the prior year period, in which CNA recorded exceptional limited partnership investment results. CNA’S results for the quarter benefited from a favorable net prior year development in its core property and casualty operations. For second quarter combined ratio for PNC operations was 89.4 compared with 98.1 in the second quarter 2009, with the difference primarily attributable to 18.4 points of favorable prior year development. CNA has reported favorable prior year development for 14 consecutive quarters, reflecting disciplined underwriting and reserving practices. In his comments, Jim mentioned that CNA has entered into an agreement with National Indemnity, under which CNA’s legacy asbestos and environmental pollution liabilities will be reinsured. The closing of the transaction is expected to occur in the third quarter of 2010, at which time Loews expects to recognize a loss of approximately…

Thank you, Pete. Operator at this time we’ll open it up for questions.

(Operator Instructions) Your first question comes from the line of Bob Glasspiegel with Langen McAlenney

Thank you for your monolog on accounting. I testified at FASB against realized gains and losses going above along the income statement a long time ago, and I can tell you, they seem to have very little interest in usability and functionality for insurance investors and their thought process, so I am pessimistic that you’ll be able to change their thought process, but I agree with the intent and your prediction of what will happen is certainly right on.

Rob, if you want to pessimistic then don’t send your cards and letters. If you want a chance of changing it, then let your voice be heard, because my guess is that a lot of tabloids [ph] are expressing their opinion loud and clear to the FASB, but investment professionals who are actually responsible for managing money and doing serious published investment analysis are not being heard, and those are the people that really need to communicate with FASB.

Okay. On Diamond, are property starting to float around yet or is this just a prediction for the future. Is there much traffic of the inventories yet?

I assume you are talking about rigs available for sale.

Right.

The for-sale signs are not ours. But having said that there are indicators that seems to be signaling that rig transactions will take place over the next six months to a year. First of all day-rates are down significantly from their peak, there are a number of rigs floaters that are in the yard scheduled to come out of the yard that don’t have contracts. There are many rigs where the owners are highly levered and now this latest event, the blow out in the Gulf of Mexico, that I believe has sent fifth and sixth generation rig rates down yet even lower. And so all of those factors lead me to believe that, as I said over the next six to twelve months there will be rigs that become available for sales.

Will Loews be willing to commit more money to Diamond if there was an opportunity that was too big for Diamond itself to finance.

I don’t know. I will never say never, and I don’t like answering hypothetical questions. What I should say is that Diamond has already bought two rigs. With the current dividend policy, Diamond will continue to accumulate significant amount of cash and my thinking, and I think the Board of Diamond, their thinking is that Diamond will have the wherewithal to be able to make acquisition on their own without any outside help.

Okay last question. Is HighMount’s quarter sort of representative of the run rate of current earnings or is there something -- I know there is seasonality as well, but just looking at the year over year trends, as we look for, if the current status of the markets continue for rough comparisons.

It’s a function of what our drilling program going forward is going to be. So, I don’t think – and you don’t know what that is and we are not going to state what that is. We are not going to make projection going forward. So, I wouldn’t assume that this is necessarily a run rate. Obviously Bob there is also noise in the quarter for the departure of the Michigan and Alabama assets.

There was cost for the disposition.

You just have the noise of the revenue decline, because those assets left in the quarter. We totally settled out in the third quarter.

Okay, I think I understand your answer. Thank you.

Thank you. And don’t forget, send your cards and letters.

Your next question comes from the line of Michael Millman with Millman Research Associates.

Thank you. A sort of follow up on the last, the company’s $3.4 billion, it doesn’t appear that at this point -- well maybe, I should ask this question. Do you see any of the subs needing, maybe need is too strong, using some of the company’s $3.4 billion?

Look, each of our subsidiaries, their marching orders are to finance their own capital needs. And what happened in ‘08 were really extraordinary events, and I would expect that only in very, very extraordinary times will the subsidiary need to come to the parent hat in hand looking for financing. Otherwise, for the public subsidiaries we expect them to finance themselves.

So, is it fair to say then that cash will accumulate until the company finds some outside investment?

Yes, we’ve said before, we obviously hold some cash in reserve just because you never know what’s going to happen in this world, but we have cash in excess of that reserve amount that we feel even that can be used to repurchase shares, that can be used to buy other assets, either companies or individual assets. Or it can just stay and accumulate on our balance sheet. We don’t let it burn a hole in our pockets.

And regarding the hotel RevPAR, if I got the right numbers, it looks like it was up about 10% and yet the earnings were up very little. Was there something else going on?

Nothing material to talk about, no.

Is there any reason for us to believe that if RevPAR was up 10%, earning should grow better than $1 million?

There is nothing extraordinary to talk about.

Okay, thank you.

Your next question comes from the line of David Adelman with Morgan Stanley.

Good morning.

Good morning, David.

Were there any noteworthy changes first of all in the makeup of the holding company investment portfolio during the quarter?

No, nothing, nothing of any great significance.

Okay, and then Jim from time to time in the last couple of years you’ve updated the market place on your sort of overall views about the economy and sort of the appetite internally for acquisitions. Could you just bring us up to date on your thinking there as we stay on today?

My view on the economy actually is the same that it’s been for the past two or three years. The decline that we had in ’08 and going into ‘09 came about, because of an over levered U.S. economy and as a result of the economy being over levered it is very difficult to get that bounce of the bottom that you would ordinarily expect from a recession. So, we are now growing probably over the last quarter, the second quarter I think came in at 2.4% and many analysts are now forecasting that going forward in the second half of the year, we could have growth of less than that amount because of the fiscal drag coming about from state, government as well as the way the stimulus money starts to ebb as well. So, I am generally in agreement. I think that the second half of the year, growth should probably be in the zero to 2% and I think going forward its going to be very difficult to get this economy cranking at a faster rate growth because of the continued high levels of debts. So, when we factor that into our forecast for individual companies, I just don’t understand how the bottoms up analysis of earnings that gets you to this enormous growth in [S&P] earnings is actually going to come to fruition, and so when we think about acquisition, we think about it in the context of full growth [ph] economy as opposed to an economy that’s going to take off.

Okay, thank you.

Thank you.

(Operator Instructions) Your next question comes from Josh Class [ph] with Manikay Partners.

Hi, Jim. I was wondering if you could update us to the extent, the CNA transaction with Berkshire expedites CNA’s ability to repay the preferred shares?

The Berkshire transaction significantly de-risks the CNA balance sheet by taking hopefully forever CNA’s fastest liabilities off the table, and I think that a number of CNA’s regulatory and rating constituencies understand that as well. We Loews, are hopeful that CNA will pay down the preferred. It’s nice to receive the 10% dividend on that preferred, and it will be missed when the preferred is paid down, but remember once that preferred is paid down then depending upon a lot of factors, but CNA could be capable of paying a dividend to all its shareholders, and so Loews could receive cash flow from a CNA dividend on its common stock as opposed to dividend on its preferred stock. So, I heard the CNA call, I heard people worrying that the repayment of Loews preferred had to be mutually agreed by Loews and CNA and I’ll just remind everyone that CNA has already paid off $250 million of that preferred by mutual agreement of the two companies.

Great. Thank you.

Thank you. At this time we have no further questions, so I’ll now turn the call back over to Darren Daugherty for any closing remarks.

Thank you for joining us on the call today. A replay will be available on our website, www.loews.com, in approximately two hours. That concludes today’s call.

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