Loews Corporation (L) Q4 2014 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Loews Fourth Quarter 2014 Earnings Conference Call. [Operator Instructions] Thank you. I will now turn the call over to Mary Skafidas, Vice President, Investor and Public Relations. Please go ahead.

Thank you, Lori, and good morning, everyone. Welcome to the Loews Corporation Fourth Quarter Earnings Conference Call. A copy of our earnings release, earnings snapshot and company overview 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, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session. But before we begin, I would like to remind 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 a reconciliation to the most comparable GAAP measures. I would now like to turn the call over to Loews' Chief Executive Officer, Jim Tisch.

Thank you, Mary. Good morning, and thank you for joining us on our call today. I trust that you all had a chance to look at our press release, which was distributed earlier this morning. David Edelson, our CFO, will provide details on our earnings later on in the call. I want to start by discussing today's dividend-related announcements from Diamond Offshore and CNA Financial, and then touch briefly on each of our subsidiaries and the parent company. The rapid decline in oil prices has severely impacted offshore drilling contractors, and we expect this negative impact to continue. Diamond's customers, the national and international oil companies as well as the independent E&P companies, have been scaling back their exploration and development budgets in light of the recent price plunge and their own cash flow shortfalls. Combined with the influx of new offshore drilling units that continue to enter the market, the oil price decline has led to a supply-demand imbalance that has driven down day rates, shortened contract terms and idled rigs. In view of the decidedly negative conditions in the offshore drilling industry, the Diamond Offshore board has decided not to pay a special dividend this quarter and for the foreseeable future. As Diamond's majority shareholder, we support the board's decision to retain cash so that if opportunities to purchase rigs at attractive prices present themselves, the company is ready to act. Given the company's existing liquidity, its $1.5 billion 5-year revolving credit facility, its modest leverage and its strong credit ratings, we are optimistic that Diamond will be able to capitalize on the current turmoil in the offshore drilling market. For those of you who tuned into our call -- our last call, you'll remember that with respect to Diamond, I said trouble is opportunity. The trouble is certainly here, and Diamond is prepared for the opportunity. At CNA, the company's balance sheet has never been stronger, ending the year with statutory capital of over $11 billion and GAAP shareholders' equity of almost $13 billion. In its most recent writeup on CNA, Standard & Poor's stated that CNA has AAA level capital. As a result of its good earnings and robust capital position, CNA today declared a $2 per share special dividend, which is in addition to its regular $0.25 quarterly dividend. As a point of reference, last year, CNA paid a $1 per share special dividend. The divergent, completely independent paths of CNA's and Diamond's special dividends highlight the benefit to Loews of maintaining a diverse portfolio of subsidiaries. The performance of Loews' stock during 2014 was negatively affected by the declines in the stock prices of Boardwalk and Diamond. We took the opportunity during 2014 to buy back almost 4% of our outstanding shares, spending approximately $620 million in the process. While we're certainly not thrilled with the decline in our share price, we believe that, over the long term, buying our stock at attractive levels will prove to have been the right decision. Similarly, we believe that our purchase during the fourth quarter of 1.9 million shares of Diamond Offshore common stock will benefit our shareholders over the long term as well. Loews ended the year with $5 billion in cash and investments. One of our perennial priorities is to maintain a strong and liquid balance sheet, which gives us the flexibility to move quickly when opportunity knocks without having to rely on external financing sources. Now let's take a look at highlights from our subsidiaries. Then I'll turn the call over to David, who will walk you through our quarterly and annual results in greater detail. Let's start with Diamond. Loews has been in the offshore drilling business for more than 25 years. In that time, we have learned one thing with absolute certainty: offshore drilling is a cyclical business, and Diamond is managed accordingly. 9 years ago when others were paying top dollar for new drilling rigs, Diamond began returning capital to shareholders by paying special dividends. Since January of '06, Diamond has paid over $41 per share in regular and special dividends, returning more than $5.7 billion to shareholders over that time. We believe that the current market downturn is yet another cycle playing out in offshore drilling and that the industry will eventually recover. It's just a matter of time. While no one knows with any certainty when the market will come back, I'm confident that Diamond will withstand this cyclical downturn as it has others. Diamond has the strongest balance sheet in the business, ample liquidity, moderate leverage and a patient majority shareholder that understands the cyclical nature of the offshore drilling industry. Turning to CNA. CNA had a strong quarter and year. Its underlying combined ratio improved for the year due to a better business mix as the company continued to focus on industry segments where it has deep expertise, such as technology, financial services and manufacturing. Additionally, CNA benefited from premium rate increases, although such increases slowed somewhat in 2014. For the coming year, CNA will be operating in a market where rate increases are likely to be relatively modest and investment income will be constrained by the interest rate environment. CNA will not stretch for growth, choosing instead to forego growth in return for a more profitable core book of business. Moving on to Boardwalk. About a year ago, Boardwalk made the difficult decision to reduce its quarterly cash distribution. Fast forward a year and it turned out to be exactly the right decision for the company and for long-term shareholders. Boardwalk has been able to utilize internally generated funds and to take advantage of growth opportunities, avoiding dilution. In fact, almost all of its distributable cash flow has gone towards growth projects or distribution payments. New opportunities for growth continued to materialize in 2014, as Boardwalk secured an impressive $1.5 billion in organic projects to be built over the next 3 to 4 years. While these projects -- when these projects come online, they are expected to generate double-digit, unlevered return for years to come. And last but not least, let's turn to Loews Hotels. Loews Hotels has been focused on building its brand and broadening its customer base by adding properties in gateway cities and resort destinations as well as by renovating existing properties. The financial performance is showing strong improvement, in part as a result of our capital investment over the past several years. We are enhancing our disclosure regarding Loews Hotels this quarter. David will walk you through the company's adjusted EBITDA during his remarks. We're excited that Kirk Kinsell has agreed to lead Loews Hotels for the next phase of its growth. He will join Loews Hotels in March. Kirk has tremendous experience in the hospitality industry, having most recently been President of the Americas for InterContinental Hotels Group, where he had responsibility for 3,700 hotels. Paul Whetsell, who has served as Loews Hotels' CEO for the past 3 years, has done a fantastic job at growing the brand and improving operations. Paul will become Vice Chairman of Loews Hotels once Kirk joins in March. And coincidentally, Mark's (sic) [Kirk] first day as CEO will also be the first day that the Loews Chicago Hotel will be open for business. Make your reservations now. Now I'd like to turn the call over to David.

Thank you, Jim, and good morning, everyone. For the fourth quarter of 2014, Loews reported income from continuing operations of $215 million or $0.57 per share compared to $248 million or $0.64 per share last year. For full year 2014, income from continuing operations was $962 million or $2.52 per share as compared to $1.1 billion or $2.95 per share in 2013. Our reduction in parent company investment income drove the quarter-over-quarter decline. For the full year, the main drivers were lower earnings contributions from CNA, Diamond and Boardwalk. CNA contributed $186 million to Loews' income from continuing operations before realized losses in the fourth quarter of 2014, essentially flat with last year's fourth quarter. Onetime items affected the quarterly results in both years. A CNA pension settlement charge reduced Loews' Q4 2014 income by $49 million, while a charge related to retroactive reinsurance accounting for the Loss Portfolio Transfer transaction reduced our Q4 2013 income by $111 million. CNA's net investment income in Q4 2014 was down versus the prior year, driven primarily by limited partnership investments. Offsetting positives included higher net favorable prior year development, together with improved current accident year underwriting results and lower catastrophe losses. In Q4 2014, CNA posted slight realized investment losses versus modest gains in the prior year quarter. For full year 2014, CNA contributed $770 million to Loews' income from continuing operations before realized gains, down from $817 million in 2013. Reduced net investment income and lower net favorable prior year development drove the year-over-year decline. Partially offsetting these declines were improved current accident year underwriting results and lower catastrophes. Onetime items also affected the 2 years. In 2014, a coinsurance transaction related to the sale of CNA's annuity and pension deposit business reduced CNA's earnings contribution to Loews by $31 million. And in 2013, as just mentioned, the charge related to the Loss Portfolio Transfer, reduced our income by $111 million. CNA posted a higher level of realized investment gains in 2014 than in 2013. Diamond Offshore contributed $47 million to Loews' income from continuing operations during Q4 2014, up from $44 million last year. Diamond's pretax income was actually down versus prior year. A slight increase in EBITDA was more than offset by higher depreciation and interest expense. Further, in last year's fourth quarter, Diamond's net income was impacted by a high effective tax rate, driven by a provision for an uncertain tax position. This reduced Diamond's after tax contribution to Loews last year by $27 million. For full year 2014, Diamond contributed $183 million to Loews' net income, down from $257 million in 2013. The company's third quarter 2014 rig impairment charge drove the decline, together with lower rig operating income, higher depreciation and interest expense and higher G&A expenses. Partially offsetting the decline in pretax income was a 4 point reduction in the company's tax rate caused by various factors, including a Q4 2013 tax provision previously mentioned; and in the third quarter of 2014, the benefit to Diamond from settling uncertain tax positions related to several foreign jurisdictions. Diamond took delivery of 3 drillships and 2 semisubmersibles in 2014. In 2015 and 2016, the company expects to take delivery of the Ocean BlackLion, its fourth new drillship; and the Ocean GreatWhite, its new build, harsh environment semisubmersible. Both of these units are already contracted. Between its balance sheet liquidity and its $1.5 billion bank revolver, Diamond has ample liquidity for its current capital projects. Additionally, halting the special dividend will enable Diamond to retain, on an annualized basis, over $400 million of cash to bolster its available liquidity. Boardwalk Pipeline contributed $11 million to Loews' net income during Q4 2014, up from $4 million last year. After adjusting for a goodwill impairment charge in last year's fourth quarter, however, Boardwalk's contribution declined from $20 million last year to this year's $11 million. Boardwalk's fourth quarter 2014 results were negatively impacted by lower storage and park and loan revenue as well as by higher operating expenses. For full year 2014, Boardwalk contributed $18 million to Loews' net income versus $78 million for 2013. The major onetime items impacting this year-over-year comparison in 2013 were the just mentioned goodwill impairment charge and a partially offsetting gain on the sale of operating gas. The write-off during 2014 of the previously capitalized costs associated with the Bluegrass project reduced Loews' net income by $55 million. Excluding these 3 onetime items, Boardwalk's contribution to our net income declined from $85 million in 2013 to $73 million in 2014. Loews Hotels generated net income of $3 million during Q4 2014 versus a net loss of $5 million last year. For the full year, Loews Hotels posted net income of $11 million, up meaningfully from a $3 million net loss in 2013. This quarter, we are providing additional information about Loews Hotels, which can be found in the company overview document posted on our IR website. In particular, I wanted to highlight our disclosure of adjusted EBITDA. We define adjusted EBITDA as the sum of the EBITDA from our wholly owned properties and our pro rata share of the EBITDA generated by our joint venture properties. Management company results are also included. Excluded are nonrecurring items such as transaction costs. The company overview also includes a table that reconciles Loews Hotels reported pretax income to its adjusted EBITDA for the past 3 years. We would be happy to walk you through it offline. And to anticipate a question, we will not be disclosing EBITDA on a property-by-property basis. For full year 2014, Loews Hotels generated adjusted EBITDA of $123 million, up from $66 million in 2013. The main drivers of the increase were the addition of new hotels, the reopening in January 2014 of the Loews Regency and higher profitability at numerous properties, including our joint venture hotels located at the Universal Orlando Resort. I would hasten to add that in 2014, several hotels were in the portfolio for only part of the year, including the 1,800-room Cabana Bay Beach Resort, the Loews Minneapolis Hotel and the Loews Chicago O'Hare Hotel. During the 3-year period from 2012 to 2014, Loews Corp.'s net cash contribution to Loews Hotels was $182 million. In October, we completed the sale of HighMount E&P. The NOL generated by the sale should enable Loews to realize federal tax benefits of approximately $500 million in 2014 and future periods. Turning to the parent company. After tax investment income during the fourth quarter declined from $54 million to $17 million in 2014, driven by reduced performance from equities and limited partnerships. For the full year, after tax investment income was down from $93 million in 2013 to $63 million in 2014, as favorable year-over-year results in gold-related equities were offset by a decline in year-over-year results for limited partnerships and other equities. At year end, cash and investments totaled $5.1 billion as compared to $5.2 billion at the end of September and $4.7 billion at the end of 2013. We received $135 million in dividends from our subsidiaries in the quarter, which breaks down as follows: $60 million from CNA, $62 million from Diamond and $13 million from Boardwalk. During all of 2014, we received $782 million in dividends from our subsidiaries, up from $736 million in 2013. As Jim mentioned, today, CNA declared a $2 per share special dividend. Loews will receive $485 million upon its payment. As a reminder, during the first quarter of 2014, CNA paid a special dividend of $1 per share. Separately, Diamond announced today that it is not declaring a special dividend this quarter and for the foreseeable future. Loews received special dividends totaling $210 million from Diamond during 2014. As for returning capital to our shareholders, during the fourth quarter, we paid $23 million in cash dividends and spent $207 million buying back 5 million shares of our common stock. We also spent $61 million during the quarter buying 1.9 million shares of Diamond stock, taking our ownership to over 52%. For all of 2014, we spent $622 million repurchasing 14.6 million shares of Loews common stock or nearly 4% of our shares outstanding. Over the past 5 years, we have bought back almost 13% of our shares. I will now hand the call back to Jim.

Thank you, David. Before we open up the call to questions, we wanted to summarize our focus as we think about our businesses. For Diamond, the offshore drilling industry is in the throes of a challenging cyclical downturn. We've seen this movie before, and we are encouraging Diamond to use this downturn to seize opportunities to strengthen and expand its business. The U.S. energy markets are experiencing tremendous changes, which have affected Boardwalk. U.S. natural gas and liquids production is forecast to continue growing meaningfully over the coming years. We expect the accompanying growth and demand for transportation and storage will present attractive opportunities for Boardwalk to expand the utilization of its existing network while also extending the network's reach. CNA enters 2015 laser-focused on improving its underwriting performance. The company's underlying combined ratio continues to decline, but there remains room for improvement as CNA works towards the goal of becoming a top quartile underwriter. We will be keeping a close eye on underwriting profitability especially at CNA Commercial. And finally, Loews Hotels is welcoming a new CEO and continuing its focus on growth and profitability. As always, we stand ready to help Loews Hotels fund its growth plan. Overall, there is tremendous change happening across our portfolio of businesses. This coming year will continue to be challenging for some of our subsidiaries, and we are focusing on turning those challenges into opportunities that will benefit our shareholders well into the future. As always, Loews is focused on managing capital to achieve the best long-term return for our shareholders, whether it's through share repurchases, investing in one of our subsidiaries or adding another business to our portfolio. We have found that disciplined capital management, coupled with a diverse portfolio of businesses, is an exceptional way to create value over time. Now I'd like to turn the call back over to Mary.

Thank you, Jim. This concludes the prepared remarks portion of our call. Lori, I'd like to hand the call back over to you so you can open it up for questions.

[Operator Instructions] Your first question comes from the line of Bob Glasspiegel of Janney Capital.

A couple of quick questions. Am I right that there was no buyback in 2015 to-date at Loews?

We don't answer that question. We'll let our filings speak for themselves.

Okay. And in prior quarters, you've put year-to-date -- quarter-to-date purchases on the release, so that seemed to be a change.

All right. So you can assume that if there's no quarter-to-date specified on the release, that there weren't any.

Okay. On the Diamond Offshore purchase, I think this is your first purchase of shares from them in a long, long time. What's your buy thesis on increasing your stake? Given that this is a semipermanent acquisition, you're a little bit more careful in how you buy sub-stocks traditionally.

So we bought the shares simply because we thought they were very cheap and inexpensive relative to where the stock had been over the past 7 or 8 years and also where it is today in the marketplace. It's our -- I think it reflects our belief that there is a future for the offshore drilling industry.

What sort of time frame do you think about their fundamental's improving because, clearly, when they're cutting the dividend and the conditions that you described are not robust currently, obviously?

Look, I think it can take several years for the offshore drilling industry to improve. My guess is it's still declining. But where stock is priced is oftentimes different than how an industry is behaving. And we just felt comfortable buying shares when we did.

Is there an asset value backdrop to the analysis? Or is it just an earning -- future earnings power in a better world?

There have been very few asset transactions in the industry recently other than scrapping of rigs. So it really is quite difficult to say what is the fair market value today for something like a fifth- or sixth-generation rig. So since there have been no transactions, we don't fully know what the asset values, as determined by the market, currently are.

Okay. So you've been very successful in investing in this arena in the past. Any intelligence that you're able to provide, much appreciated.

Yes. Like I said, I think the industry is still declining. I think day rates can continue to go down for a while. Certainly, oil companies are not anxious about drilling now, combined with the fact that there continue to be new rigs that are entering the fleet, rigs that had been ordered 2, 2.5 and 3 years ago. So there is more supply coming on to the market in an environment where oil companies are stepping back. That says to me that day rates can continue to move down. But oil at $40, $50 or, in my opinion, $60 a barrel is not what I would call a steady-state price for oil. I think it has to be -- my guess is it has to be somewhere between $70 and $90 per barrel. And my guess is that, as they say, in the fullness of time, once we get to -- when and if we get to those prices and some stability returns to the oil market, I think that utilization will start to increase. Like I said, I don't know the timing, but I certainly believe that it will happen. The other thing that the oil industry overall has going for it is depletion. The world today produces about 95 million barrels a day of oil. And the estimates are that growth in demand is about 1 million barrels per day every year. So that means that next year instead of demand being 95 million barrels, demand will be 96 million barrels a day. But that doesn't mean that the industry has to find an additional 1 million barrels a day. What it means, in fact, is the industry probably has to find 6 million barrels a day. Because in the course of the year, if no exploration is done, productive capacity worldwide will drop from 95 million to 90 million. So the industry needs to find the 5 million just to make up for what was depleted and then find an additional 1 million barrels of capacity. My sense is that at the price that we have for oil today, we are not replacing all the oil that is depleting. And so my guess is over the next few years, if prices stay down here, we will start to see declines in productive capability.

Your next question comes from the line of Matthew Grainger of Morgan Stanley.

So Jim, I just wanted to come back to CNA and get your thoughts on the pricing environment across both the commercial and the specialty landscapes. I mean, rates seem to be similar to Q3. Retention was similar to slightly up. You talked about being mindful of profitability. But are you seeing anything that would make you concerned about CNA's ability to fully offset inflation going forward?

I think that -- actually, I'm -- I've been fairly sanguine about pricing in the commercial P&C space. And the reason for it is because of the extraordinary capital discipline that has been in place for the past 5 or 10 years in the industry. The industry generates lots of excess capital. And what we see from a lot of companies in the industry is that with the combination of share repurchases and dividends, companies are returning their -- the entire amount of capital that they've earned in the past year. And in fact, some companies are returning more than they're earning. So in the old days, we used to have exaggerated cycles in this industry because companies retained so much capital. But now that, that capital is being recycled through share repurchases and dividends, I just don't see the capacity pressure that drives down prices like we've seen in prior cycles. So prices now, we're still getting probably 2% to 4% price increases. That's generally good enough to cover inflation, which the federal government tells us, is about 1.5%. CNA is also busily re-underwriting its commercial book of business. So I'm hopeful that even in this price environment, over time, CNA can continue to bring down its combined ratio as we strive to become a top quartile commercial lines underwriter.

Okay. And as you -- just one other question. As you think about the range of options you have for allocating capital at the parent company level, I'd assume that given the concentration of energy in the portfolio right now, you might prefer to diversify. But at the same time, you repeated this sort of trouble-is-opportunity mantra that I think would probably lead you back to consideration of energy assets right now. So just curious how you balance those conflicting factors and how open you would be to making a material or semi-material allocation of capital back into energy.

I would say been there, done that, got the T-shirt. We were in the E&P business, and we have no desire to go back in. We are very happy with our 2 energy subsidiaries, Boardwalk and Diamond. For the most part, they are capable of financing themselves. If for some reason, one or both might need some financing, we would seriously consider it. But those 2 companies, going forward, are going to be our exposure to energy. And in particular, with respect to Boardwalk, it tends not to move on the base -- its business isn't affected based upon the price of the commodity that it's transporting. But unlike Boardwalk, Diamond Offshore, as we all well know, can move dramatically based on the price of oil. So to the extent that the oil market is going to recover, I strongly believe that we will benefit from that through improvements in Diamond's business and hopefully its stock price.

Okay. And then just without being too specific, I suppose, anywhere else in the market that you see that, I guess, a heightened level of opportunity right now?

I think the biggest level of opportunity, for those that want to pursue things that are down and out, is the energy market. And we read in the newspapers lots of people who -- lots of people and organizations that are loading their gun, looking to make investments in the energy market. Beyond that, I don't see anything that's as obvious. And I think part of the problem goes back to interest rates. Interest rates are extraordinarily low. With 10-year notes trading below 2% and long bonds trading at 2.5%, there's no doubt in my mind that the -- what the Federal Reserve has done through its quantitative easing is created a squeeze in the long end of the market. There are plenty of investors that need long-dated securities for pension funds and other types of products that they offer. And they just can't get enough of those securities. The Fed owns probably $4 trillion, $3.5 trillion or $4 trillion of long-dated securities. Those are securities that are out of the market. So as a result, there is a squeeze as people clamor for securities that just are not available. So I believe that intermediate to long rates are at manipulated low rates. And the problem with that is that the 10- and 30-year treasury act as benchmarks for all manner of investments in the financial markets and the real estate markets and the capital spending market. So those that are making the decision on either stocks, capital spending or real estate are using a benchmark that, in my opinion, is below its free-market rate. And that's going to cause -- that causes many, many assets to be overpriced compared to where we would think the fair market value of those assets is.

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

Some more Diamond questions. Assuming oil is at $80 or $90, what would that suggest should be the drilling rate cost or price, daily rate? And how does that compare with where the market is currently?

So it's an interesting question, but I can't give you an exact answer. Because in fact, I can't tell you right now what is the market day rate for, say, a new fifth- or sixth-generation drillship. There haven't been any fixtures recently. My guess is it's between $300,000 and $400,000 a day, but it's really difficult to say. What I would say is that in an environment of oil prices that are, number one, $30 higher than they are today; and number two, where the volatility has -- or much of the volatility has left the oil market, in that environment, I could see that day rates would be higher than they are today. These assets cost about $600 million to build. And in order for someone to buy -- to order a new one, they have to get a return on their investment that makes it worthwhile for them to take that risk. So my guess is that for someone to order a new rig, they would need to anticipate that they could earn, say, $100 million -- at least $100 million on that investment. $100 million is about $250,000 to $300,000 a day that has to be earned. You pile on top of that the daily operating costs of approximately $200,000. And what you see is that before anybody is going to go out and order a new rig, they have to be pretty sure that they're going to be able to earn between $450,000 and $500,000 a day on that asset. And my expectation is that we are not going to be seeing significant new construction for a long time until we do get to that place where pricing is at, what I would call, replacement price levels.

And so with higher prices required in the future, is it going to be economic for the oil companies to be -- to want to drill at $80 or $90? And sort of related to that, if we look over the next 5 years, there seems to be more movement away from oil. How does that all factor into this?

So I think the general agreement by those that study the oil markets, be it the AEI, the IEA or private forecasters, there's general agreement that oil consumption is going to -- worldwide oil consumption is going to continue to grow for the foreseeable future. So I'm not worried about that. And likewise, when we think about -- as I said before, when we think about consumption growing, we have to remember that it's not just 1 million barrels a day of new capacity that you have to add. It's more like 5 million, 6 million or 7 million barrels a day of new capacity that you have to add. So the marketplace, once it reaches an equilibrium, will -- the market price for oil will set to a level that makes it such that enough oil can be found in order to supply the world with what's being demanded. And like I said, my guess is that, that's somewhere between $75 and $90 a barrel. And my guess is that, at those levels, offshore drilling will be very attractive for oil companies.

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

Can you just give us a breakdown of where your corporate cash and investment is -- investments are right now in terms of how much in equity, debt, cash, et cetera?

Yes. At year end, we had $250 million to $300 million of equity. We had another $900 million or so of limited partnership investments and the rest was in primarily fixed income or money market instruments.

And as you look at that over the course of the year, what leads you to change that? I mean, is it interest rate hikes? How's that going to impact your allocation?

So my guess is if the stock market goes down, you'll see us buying more stock. If we spend a significant amount of cash, you might see us reduce our investment in hedge funds. The hedge funds that were invested in for the Loews account are -- there are about 12 or 13 different funds that were invested in. They're all -- those investments were all made with an eye for being able to get our funds back relatively quickly. So to the extent that we were to spend a significant amount of money, we might liquidate some of those investments.

Great. And in terms of the equity exposure, I know in the past we've talked -- there were certain times when it was better or worse to be in gold-related stock sometimes. Is there anything now that is particularly appealing? Or are we still large-cap dividend paying, dividend growing type of equities that you think you continue to grow in and can utilize their own capital in a way that can lead to further growth?

We have no -- there are no particular sectors that we're looking at right now, nothing that's really caught our fancy.

Thank you. I will now return the call to Mary Skafidas for any additional or closing remarks.

Great. Thanks, Lori. We just want to thank you, all, for your continued interest. And remind you that a replay will be available on our website, loews.com in approximately 2 hours. That concludes today's call.