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 2012 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mary Skafidas, Vice President of Investor and Public Relations. Please go ahead.

Thank you, Jackie. Good morning, everyone. I'd like to welcome you to Loews Corporation Second Quarter 2012 Earnings Conference Call. A copy of our earnings release may be found on our website, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, Peter Keegan. Following their prepared remarks this morning, we will have a question-and-answer session. Before we begin, however, I will remind you that this conference call might include 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, which is included in the company's filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings for reconciliation to the most comparable GAAP measures. I will now turn the call over to Loews' Chief Executive Officer, Jim Tisch.

Thank you, Mary. Good morning, and thank you for joining us today to discuss Loews' second quarter results. As you know by now, we reported earnings of $56 million for the quarter, as compared to $250 million of Loews earned in the second quarter of 2011. Net income for the quarter includes after-tax, noncash fueling test impairment charges of $142 million at HighMount, related to the carrying value of its natural gas properties. These charges were the results of declines in natural gas and natural gas liquids pricing. Loews ended the second quarter with $3.7 billion in cash and investments at the holding company level. This quarter, we spent approximately $51 million buying back about 1.3 million shares of Loews' stock. During the second quarter, Moody's Investors Service upgraded by 1 notch the senior unsecured ratings of Loews, CNA Financial and Diamond Offshore. According to Moody's, Loews' upgrade to A2 reflects the strengthening credit profile of our primary operating subsidiaries and our standalone financial strength and conservative financial policies. Moody's also affirmed the CNA insurance company's financial strength ratings and revised the outlook on these ratings to positive from stable. So now, both Moody's and S&P have CNA's financial strength on positive outlook, which is a real credit to the progress that's being made by the management team at CNA. In addition to the good news from the rating agencies, CNA had a solid quarter, which was favorably impacted by lower catastrophe losses and improved non-catastrophe current accident year underwriting results. Lower net investment income from CNA's limited partnership investments created a drag on an otherwise strong improvement in net operating income. ELP investment produced a second quarter pretax loss of $35 million in 2012 as compared to pretax income of $11 million in 2011. The combined ratio for the…

Thank you, Jim, and good morning, everyone. Loews Corporation today reported net income of $56 million or $0.14 per share for the second quarter of 2012 as compared to $250 million or $0.61 per share in the second quarter of 2011. As Jim mentioned, net income for the quarter includes a noncash, ceiling test impairment charge of $142 million after-tax at HighMount Exploration & Production, as a result of declines in natural gas and natural gas liquid prices. Excluding the ceiling test impairment charge, Loews' net income for 2012 would have been $198 million as compared to $250 million in the second quarter of 2011. The change is due primarily to lower earnings of Diamond Offshore Drilling and decreased performance of equity and limited partnership investments at the parent company. These decreases were partially offset by higher earnings of CNA Financial and Boardwalk Pipeline partners. CNA's contribution to Loews' net income for the second quarter was $138 million as compared to $101 million in 2012 -- in 2011. Period-over-period comparisons were favorable due to lower catastrophe losses, improved underwriting results and premium rate increases in CNA's core P&C operations, as well as lower losses in its run-off businesses. Results were partially offset by lower net investment income due to decreased limited partnership results. CNA continues to sustain positive rate momentum across its P&C portfolio. A 6% rate increase in the quarter, which was up 2 points from the 4% CNA reported in the first quarter and up 5 points from the second quarter last year. Diamond Offshore's contribution to net income for the second quarter of 2012 was $94 million compared to $125 million in the prior year's quarter. Diamond Offshore's earnings decrease resulted primarily from lower rig utilization as more rigs were undergoing special surveys, the decrease in average…

Thank you, Peter. Jackie, at this time, I would like to open up for questions.

[Operator Instructions] Your first question comes from the line of Bob Glasspiegel with Langen McAlenney.

You guys have spoiled me over the years with a very good long-term record and how your partnerships have generated excess returns. So I'm not questioning that. But just looking at the year-to-date -- your investment income at the parent is negative $6 million. And that's in a stock market that's up 8% through the first 6 months and a bond market that was very strong. Is it fair to say that maybe your position for rates to go higher or was there something else that generated the subpar returns year-to-date?

I would just say, it was more about not being in the strong sectors of the stock market. We didn't really have any significant bets in fixed income. And part of the problem is that cash earned were pretty close to 0, so you don't get any benefit from -- to your income statement for having cash. So this was all about just being in the wrong sectors in the stock market.

I think you've made some public comments about the relative lack of attractiveness of bonds, and bonds have rallied. So I'm just surmising that maybe you have more of a negative bet towards fixed income than you traditionally had? Or is that not factored into the partnership or parent income at all?

We are -- first of all, we are not short in the bond market, but the partnerships that we've invested in the quarter, as you saw at CNA, were down. And the market for -- even though -- first of all, I think as of June, the market was not up very much -- at the end of June, as of July 1. And I think that the problem is the market is pretty directionless. And so it's been difficult, I think, for all participants in the equity markets to generate returns.

Okay. And any -- it seems like the subsidiaries are doing a lot which suggests that you're not so bearish about the macro environment in total. But the parent is not doing much either on your own stock or elsewhere. So where are you on the global economy? Things are fine or are you concerned?

I'm very concerned. And in fact, I find it actually quite extraordinary that we find ourselves with attractive investment opportunities at the subsidiary level in view of just how poorly, I think, the U.S. economy and the global economy is doing. I think that's driven by the fact that each one of our individual businesses has been able to find attractive bolt-on acquisitions that we hope will generate very attractive returns for us. But in the United States, we've got 1.5% economic growth. The Eurozone is not growing. The emerging markets are not emerging as fast as they had been before. And nobody -- you don't see anybody really expressing optimism about what's going on in the economy either here in the United States or overseas. So for a whole host of reasons, I don't see growth picking up any time soon. But having said that, I'm very pleased with the opportunities that we're seeing in our individual businesses.

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

A couple of things. First, do you think that the moderate pace of parent company share repurchases over the last several quarters played a part in, or contributed to, the credit rating upgrade of Loews?

No, I don't think so. I think this is a long time coming. They have rated us A2. Just for a little perspective, we have $700 million of debt and we have $3.7 billion of cash and investments. So our cash and investments covers our debt by a factor of 5x. I do not know what we need to do to get an upgrade from here. But it just seems that the metrics for an upgrade on Loews debt is crazy, and this one was long overdue. But again, I think of Loews as a AA-rated company.

Okay. Secondly, can you give us a sense of the status of the drilling program on the newly acquired HighMount properties? How much -- how long has it been going on? What are the early learnings? And how did they -- how are they relative to the expectations by this point?

So we've just started in the past several months, in the Mississippian lime. It took some time because permitting work and disposal well drilling that we had to do. And I'm hopeful that in the next quarter, we'll be able to report some preliminary results that we're seeing there, as well as possibly report on how we're doing in the Wolfcamp zone, so we're drilling in the Permian Basin in our Sonora properties.

Okay. And then just a quick question on the hotels, maybe for Pete. Were there large or material one-off costs associated with the acquisition during the quarter? Because I'm just curious, revenue's up $5 million, operating income is basically flat.

No. There were not material costs related to that. There were some, but they weren't material.

So why isn't -- and again, it's obviously not your biggest business, but why isn't that division, overall, demonstrating operating leverage?

Well, they are showing some improvement, but the rounding, you lose it at the moment. But going forward, I hope to see some more improvement.

[Operator Instructions] Your next question comes from the line of Andrew Baker with Barclays.

Jim, just a question. You mentioned earlier, again talking about your confidence in the rebound of natural gas prices over time, as you go to increased utilization there. Obviously, the forward curve always -- just had been consistently wrong in the short term, obviously. In the long term, things have yet to play out. I'm just wondering, are there ways you can position yourself or investments you can make now based on valuations in the market with gas down where it is, such that you'd be positioned not just to, sort of, have HighMount to return to the levels that we're looking at when it was first acquired, but also to benefit from getting it at the low levels as well.

So first of all, gas is actually been staging a pretty significant rally. The 12-month strip in the past 4 or 5 months is up about, I think, $0.90 -- hold on 1 second. The strip is up to $3.56, whereas in April, it was about $1 lower. So there has been a significant rally in gas prices already. Spike gas prices, last I looked, about just under $3.20 an Mcf. Just as a reminder, that's the equivalent to about $19 a barrel of oil. So even though gas has had a significant rally, it is still very, very cheap relative to oil. And at the $3.20 level, it's still at a price where, for most people drilling for natural gas -- for dry gas, it is generally uneconomic to drill at these prices. So we've seen the rig count -- the natural gas rig count in the past year or so virtually cut in half as people are laying down natural gas rigs. I think that the rally in natural gas has already started, but it still has a ways to go. And I think, as I've said before on these calls, I think that the steady state equilibrium price for natural gas in the United States is probably somewhere between $4 and $4.50 an Mcf. We have, at HighMount, we've been looking to diversify our portfolio. We have plenty of gas in the ground that can be produced at higher natural gas prices. And so we've been -- we have acquired, last year, properties that we think are rich in oil. And our drilling programs have been focused on drilling for oil and natural gas liquids. And so we are moving to diversify HighMount away from just being focused on natural gas.

Thank you. That was our final question. And I would now like to turn the floor back over to Mary for any closing remarks.

Great. Thank you, Jackie, and thank you, all, for your continued interest. A replay will be available in our website, loews.com, in approximately 2 hours. And that concludes today's call.

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