Ladies and gentlemen, thank you for standing by, and welcome to the Loews Corporation Q4 2019 Earnings Conference Call. [Operator Instructions] After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I will now turn the call over to Mary Skafidas, Vice President of Investor Relations and Corporate Communications.

Thank you, Laurie. Good morning, everyone. And welcome to Loews Corporation's fourth quarter and year-end earnings conference call. A copy of our earnings release, earnings supplement, and company overview, may be found on our Web site, 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 with question committed by shareholders. 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 made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. 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 and earnings supplement for reconciliation to the most comparable GAAP measures. In a few minutes, our CFO, David Edelson will walk you through key drivers for the quarter. Before he does, Jim Tisch, our CEO, will kick off the call. Jim, over to you.

Thank you, Mary, and good morning. Before we get into the details of the quarter and our year end results, I want to mention share repurchases. For those of you who follow Loews closely, I must sound like a broken record. I've been saying for a while that we believe Loews’ stock looks cheap and trades at a deep discount to our view of its intrinsic value. Rather than complain, we have acted. From January 1st of 2018 through Friday, we repurchased more than 45 million shares of Loews’ common stock for total cost of just under $2.25 billion. That represents more than 15% of our currently outstanding shares. Typically, most of the funds we’ve used to repurchase our shares have come from dividends paid to Loews from our subsidiaries. And in recent years, most of those dividends have come from CNA. However, dividends paid to Loews represent only a portion of the free cash flows generated by our subsidiaries. Our businesses may also decide to use their free cash flow, either to fund growth or to pay down debt. And to the extent that they have the opportunity to profitably reinvest their cash flow into their businesses, we encourage them to do so. However, if there is no other productive use for their free cash flow, more often than not, they'll distribute that cash. To pull back the curtain a bit on this process, in 2019, Loews received more than $180 million from Loews hotels. This cash came both from the sale of hotels and free cash flow from operations, both after Loews hotels invested around $70 million into construction of new properties, we expect Loews hotels to return capital again in 2020 but the amount will likely be smaller because the hotel companies will continue to invest in…

Thank you, Jim and good morning. Today, we reported fourth quarter net income of $217 million or $0.73 per share compared to a net loss of $165 million or $0.53 per share in last year's fourth quarter. For the full year, we reported net income of $932 million or $3.07 per share, up from $636 million or $1.99 per share in 2018. I will start by summarizing our much improved fourth quarter results, and then turn to the full year. The earnings turnaround in Q4 was driven mainly by investment results at both CNA and the parent company, as well as higher P&C underwriting income at CNA. CNA's net income contribution swung from the $75 million loss in Q4 2018 to income of $244 million, an improvement of $319 million. Returns on CNA's holdings of LPs and common stocks accounted for $146 million of the improvement, and a pivot from net investment losses to net investment gains accounted for another $61 million. P&C underwriting income at CNA accounted for $119 million of our year-over-year net income increase, driven by lower cat losses and stronger underlying underwriting results. CNA's overall combined ratio declined almost 10 points from Q4 2018 to 95.6, and its underlying combined ratio, which excludes cats and prior year development, improved 3.1 points to 94.9. Like CAN, Loews parent company investment results benefited from more favorable equity market conditions, as they swung from the $57 million after-tax loss to income of $67 million in Q4. Loews Hotels and CNA's corporate segment were the main year-over-year negatives. Loews Hotels incurred a $69 million after-tax charge from the impairment of two hotel properties in Q4. Absent this charge and other nonrecurring items, such as pre-opening expenses and properties under development, Loews Hotels’ contribution to our net income would have been…

Thank you, David. We'd like to move to our question and answer portion of the call. Laurie, would you please take us through the prompt?

Thank you, Laurie. Our first question is why doesn't Loews purchase the outstanding public shares of CNA? What is the benefit of maintaining CNA as a public company?

So right now, we believe that the public floating CNA while small is very important for a number of reasons. First of all, it provides transparency. Transparency for credit agencies and regulators, which I think they value very much and they like seeing a public start for CNA. Number two, it's a barometer for all Loews shareholders just what the market is valuing CNA. And I dare say if CNA went public, then a lot of people would be asking why don't we take it public so that they can actually see what the value of CNA is in the free market. Additionally, in order to attract the best talent, it's important to have public shares so that it can be, those shares can be used for employee compensation plans. And I dare say if CNA weren't public, if we didn't have those shares directly reflecting the value of CNA it might be more difficult to attract the best and the top talent. One other thing that I'd add is that as long as Loews owns over 80% of CNA, and right now it owns close to 90%. But as long as we own over 80%, we can do a tax consolidation and get all the benefits of owning 100% of the stock. So there's absolutely no penalty vis-à-vis cash income taxes, resulting from Loews’ owning 90% instead of 80% of the stock -- 90% I'm sorry instead of 100% of the stock.

Jim, second question is, what has been the impact of the corona virus on Loews’ hotels business?

So at this point in time, it hasn't had much of an impact at all. Yes, the virus is affecting areas like China and Asia dramatically, but we haven't seen so much of an impact here in the United States. Our hotel people are continuing to monitor the situation. In terms of inbound travel to Loews hotels from China represents less than 1% of our business. So if the status quo continues to hold, I don't see there being much effect of corona virus on our hotel business.

Next question relates to Diamond. What's the role of Diamond in the Loews portfolio?

So Diamond may have a big impact in a GAAP sense on Loews’ results. But our downside is really limited to our stake in the company, which today represents less than $1 per Loews corporation share. I would say that the current share price Diamond is really trading more like an option than it is like a stock. Regarding the offshore drilling industry in '89, knowing that it was highly cyclical when the current downturn started in '14, we thought we've seen this movie before having weathered a number of drilling cycles downside. However, this downturn now has lasted much longer than we are, I dare say anyone could have anticipated. Nevertheless, Diamond, the management continues to focus managing its cost and maximizing earnings potential on the assets through diversification and good operating performance. One other thing, I think the bearishness in Diamond is really -- has been around just since the beginning of the year. At the end of last year, oil prices West Texas Intermediate was $61 a barrel, it traded up to $63 a barrel in early January and now as you all know it's down to $50. And I think that move down to $50, which was due in large part to the corona virus and also a sense that the world production capacity would be a bit higher than demand this year, but not in the future. So those two factors have caused a dark bearishness to overcome the whole offshore drilling industry. I could easily foresee at some point oil prices getting back to the $60 and $65 barrel level. I think that, shale oil cannot be -- the growth will not -- in shale oil production, will not grow significant at those prices. And I ultimately say next year could see oil prices at the $65 to $70 a barrel level, which would I believe lead to significant improvement in the offshore drilling industry. What happened now is that this is an industry-wide phenomenon. What's going on is not just accessing Diamond offshore. The low day rates are going to affect all companies and in order for day rates to improve, I think we need to see an increase in oil prices, which as I said I think is coming in as we say the fullness of time.

Thank you. We have no further questions at this time. We want to thank all of you for your continued interest. A replay will be available on our Web site loews.com in approximately two hours. This concludes Loews call for today.

Thank you for participating in the Loews Corporation Q4 2019 earnings conference call. You may now disconnect.