Ladies and gentlemen, thank you for standing by and welcome to Loews Corporation’s Second Quarter 2020 Earnings Conference Call. [Operator Instructions] Thank you. It is now my pleasure to turn the call over to Mary Skafidas to begin. Please go ahead, ma’am.

Thank you, Maria. Good morning, everyone. And as Maria said, welcome to Loews Corporation’s second quarter earnings conference call. A copy of our earnings release, earnings supplement and company overview maybe found on our website, loews.com. On this 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 from that has questions from our 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, you may also discuss – we may 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 the key drivers for the quarter. But before he does, Jim Tisch, CEO will kick off the call. Jim, over to you.

Thank you, Mary and good morning everyone. Rather than get into specifics about the quarter, I want to use this call today as an opportunity to get something off my chest. I am beyond frustrated with where the low – where the stock market has been pricing Loews and CNA and I can’t believe how undervalued the stocks are. Loews’ market capitalization, as of this morning, is about $9.8 billion and our stake in CNA plus net cash alone, account for more than $9.4 billion of that number. That leaves the market’s valuation of our non-publicly traded subsidiaries, Boardwalk, Loews Hotels and Altium at less than $500 million, which to my mind is patently absurd. I also think CAN’s value is patently absurd, but more on that later. Let’s look at each of Loews’ privately held subsidiaries to see if I can demonstrate to you that collectively, they are worth dramatically more than $500 million. First, let’s look at Boardwalk pipelines. In July of 2018, Loews purchased the outstanding common units of Boardwalk that we didn’t already own for $1.5 billion, putting the total equity value of Loews’ ownership stake in Boardwalk at $3 billion. Keep in mind that Loews is in litigation over Boardwalk with a trial date set for January of 2021, so we can’t get into too much detail. However, since the time of our purchase of Boardwalk’s remaining public float, nothing has occurred with the performance of the company that would lead us to reconsider that purchase. Boardwalk has successfully made it through the challenge of re-contracting and since going private has reinvested a majority of its distributable cash flow in order to reduce the risk and volatility of future earnings. And since July of 2018, EBITDA for the business is essentially flat despite the significant…

Thank you, Jim and good morning everyone. For the second quarter, Loews reported a net loss of 835 million or $2.96 per share compared to net income of $249 million or $0.82 per share in last year’s second quarter. This year’s second quarter included a net investment loss related to the deconsolidation of Diamond Offshore caused by its bankruptcy filing in late April. This loss totaled $957 million after-tax. Two other items furthered the year over year decline, catastrophe losses at CNA and losses at Loews Hotels stemming from the severe impact of the pandemic on travel. On a positive note, CNA's underlying underwriting results were excellent. Investment results were favorable at both CNA and the parent company and operations at both Boardwalk Pipelines and Altium Packaging were strong. Before I jump into the quarter and the ongoing impact of the COVID-19 pandemic, let me remind you what gave rise to the Diamond related net investment loss. Up to the bankruptcy filing date of April 26, we accounted for Diamond on a consolidated basis, just as we have historically. These results are shown on Page 4 of our earnings release on the Diamond Offshore line. Once Diamond filed for bankruptcy, Loews no longer control Diamond for GAAP purposes. As such, we seized consolidating Diamond and began accounting for Diamond at fair value. Our net GAAP carrying value of Diamond was $988 million as of the bankruptcy date. At quarter end, the carrying value of our stake was $31 million based on the fair value of our shares and a related deferred tax asset. The difference between these two values, are $957 million is included in the corporate segment as the net investment loss. Now, let me turn to the performance of CNA, Boardwalk, Loews Hotels and Altium Packaging. CNA's contribution…

Thank you, David. As is our practice, we have received several questions from shareholders that we will answer. Every quarter we encourage shareholders to send us questions that they would like us to answer and we have received several for this quarter. First question has to do with CNA. Loews has more privately held subsidiaries and publicly held subsidiaries. What is the benefit of CNA as a public company?

So, we have always believed that having a public marker for CNA is beneficial for Loews, especially for our shareholders. And I dare say that if CNA wasn’t public, there would be clamoring for us to take it public. However, it’s really rare for CNA to be trading as drastically undervalued as it is now. The public – my sense is that the public market today doesn’t make much sense and is certainly not an accurate reflection of the value of CNA. Also, all P&C companies, as I said in my remarks, are undervalued. Of course, there are lots of good reasons for keeping CNA as a public company and those outweigh what I consider to be the short-term problem of the undervaluation. Number one, it’s important to regulators and credit rating agencies. It’s important for attracting talent to be able to give them long-term incentive that is based on the stock and it’s also important just for transparency. And as for the added expense of keeping CNA public in the context of the size of Loews and of CNA there really aren’t any significant expenses that could be saved.

Okay, great. The next question has to do with the deal environment. Jim, is Loews is looking to add another subsidiary right now?

No, we are not. We are not actively looking at any deals right now in these uncertain times. As I said in my remarks, our focus is on conserving cash. Both CNA and Loews are so cheap that when we think the time is right, we will continue to buy in Loews shares. But as I say all the time, we like to keep an open mind. And if the relative values of Loews and the deal markets change, then it is very possible that we could switch from repurchasing our own shares to hunting for new businesses to buy.

Jim, you said in your remarks that this year is probably a washout for the hotel travel industry can you talk a little bit about what recovery in the hotel industry looks like?

Washout, it certainly is. First, let me start by saying something that was told to me when I was in college, it’s an old expression. He who lives by the crystal ball must learn to eat ground glass. And with that as a caveat, let me add that I think 2020 will be the bottom of the hotel industry in terms of the effects of the pandemic and I believe that 2021 will be dramatically better than 2020 and if I am going to forecast longer than that, I think that ‘22 will even be better than ‘21. Currently, we are seeing more of a pickup in driving leisure type travel at our resorts destinations. The business travel and hotels and city centers are lagging the resorts at this point in time. My guess is that this will persist for some time as companies weigh employee safety and security as well as reassess their travel budgets. But I believe that in the fullness of time, those – that travel and those budgets will be come back at similar levels to where they were before this all began. Keep in mind that we are seeing a pickup in occupancy from a few months ago, but occupancy is still very, very low measured at 10%, 20%, 30% or 40% most of the time. We opened the hotels, because we found that we lose less cash by keeping the hotel hotels open rather than keeping them closed, but we are still losing money in those hotels.

Okay. The next question has to do with capital allocation. Loews has plenty have cash on its balance sheet. And with Loews’ stock trading where it is, why not use $1 billion or $2 billion towards share repurchases?

So, that’s a very good question. We keep – as you all know, we keep our level of cash and investments above our debt levels, because it’s important for the company to maintain its bond ratings and the rating agencies like to see us have more cash and investments than debt. The Loews rating provides an uplift to some of our subsidiary ratings giving them among other things, access to cheaper debt. So under exceptional circumstances, we would certainly consider allowing our cash and our investment balances to go below our debt levels, but buying in Loews’ shares at an exceptional price isn’t yet included in my definition of an exceptional circumstance. Currently, given the ongoing uncertainty in the world, we think it makes a lot of sense to be cautious and maintain ample liquidity. But as Loews shares continue to be remarkably undervalued, my calculus on this is very possible to change.

Okay. And the last question we have is we just received this question even though you answered this topic earlier in the call, we wanted to ask it again. The question is the market is giving Loews almost no value for its privately held subsidiaries. How should investors think of Loews’ debt value?

Well, you are right, I did cover it in my opening remarks and for people that are just reading a transcript, I’d recommend that you go back – sorry, just reading the Q&A of the transcript, I recommend that you go back and read those remarks. But I will just go over this briefly. Over the – our purchase say 2 years ago of the outstanding common units of Boardwalk, not placed an equity valuation of about $3 billion on Boardwalk. And as I said previously, nothing has occurred in the performance of the company that would lead us to reconsider that purchase at all. Prior to the COVID pandemic devaluation of our hotel business was measured in the billions of dollars and I still feel comfortable that in the recovery from the pandemic, which I see coming, certainly in the next year or so, we will see that valuation again. And finally, our equity check for Altium was $600 million, as we said in my remarks. And due to the good results and the good investments at Altium, I believe the valuation should be higher now. So, when you add all that up, in my mind, the market valuation of $500 million for all of our non-publicly traded subsidiaries is to me ludicrous when they are clearly worth dramatically more than that.

Okay, great. Thank you, Jim. Thank you, David and thank you everyone for listening. That concludes the Loews call. Please feel free to reach out to me with any additional questions at mskafidas@loews.com and a replay will be available on our website, loews.com in approximately 2 hours.

And thank you, ladies and gentlemen. This does conclude today’s conference call. You may now disconnect.