Loews Corporation — 2023 Q1

[ The transcript was presubmitted by Loews Corporation. No live call was conducted for the first quarter earnings call. ]

For the first quarter of 2023, Loews reported net income of $375 million or $1.61 per share, compared with net income of $322 million or $1.29 per share in last year's first quarter. This year-over-year increase was driven by higher investment income at the Parent Company, as well as higher income from Loews Hotels. A slight increase in CNA's net income was offset by a small decrease in Boardwalk's net income.

discount rates now run through the balance sheet under AOCI, and changes in operating assumptions run through the income statement. Discount rate assumptions are based on single A-rated yields and updated on a quarterly basis. Operating assumptions such as morbidity and persistency are reviewed at least annually.

at December 31, 2022, total shareholders' equity declined by less than 2% from $15.5 billion to $15.2 billion, driven by lower retained earnings due to lower adjusted net income for the prior periods; Loews's first quarter 2022 net income was adjusted from $338 million, or $1.36 per share to $322 million, or $1.29 per share; this $16 million decrease was driven by favorable experience in long-term care being deferred into future periods.

CNA contributed net income of $268 million to Loews in the first quarter of 2023, compared to $265 million in the first quarter of last year. The year-over-year increase was driven by higher net investment income and a larger underlying underwriting gain, partially offset by higher catastrophe losses, unfavorable prior period development and realized investment losses.

first, new business grew by 12%; second, retention increased by two points to 86%; and third, renewal premiums increased by 7%, comprised of five points of rate and two points of exposure growth.

Loews recorded after-tax investment income of $33 million in the first quarter of 2023 compared to losses of $13 million in the prior year's first quarter. This improvement was driven by positive income from equities versus losses last year, as well as higher income from our portfolio of short-term cash equivalents.

Every quarter, we encourage shareholders to send us questions in advance of earnings that they would like us to answer in our remarks. Please see below for the questions we have received, along with some additional questions we found relevant.

We are planning to repay the $500 million maturity. In 2020, at the height of the COVID pandemic, we issued a $500 million bond to have extra liquidity in light of the unprecedented level of uncertainty in the economy. At the time we stated that we would use the funds to repay our 2023 maturity if there was no need for incremental liquidity. Given that our subsidiaries are all performing well and are mostly self-funding their growth, there is no need to refinance this maturity.

When I started making these remarks on the economy more than two years ago, I never expected that things would get so exciting in the usually staid world of economic forecasting. In our last quarter's remarks, I made the argument that the Fed should consider pausing their rate increases to assess the economy over the next three months, cautioning the Fed to be careful not to raise rates too far too fast, lest it cause a calamity.

I would certainly classify what happened in the U.S. banking system in the first few weeks of March as a calamity.

should the Fed raise rates and if so, how much higher will rates have to go in order to slay the inflation dragon? My answer to that question is the same as it was last quarter: announce that there will be no increase in the Fed funds rate for the next three months so the Fed can assess all the data and make a proper determination of the direction of inflation. There are plenty of signs that our economy is weakening, and managing monetary policy by reacting to every monthly tick of the CPI or other indicators is not a productive way to manage monetary policy.