NEW YORK--(BUSINESS WIRE)--Feb. 13, 2003--Loews Corporation (NYSE:LTR;CG) today reported consolidated net income (including both the Loews Group and Carolina Group) for the quarter ended December 31, 2002 of $290.2 million, compared to $191.0 million in 2001.
Consolidated net income for the year ended December 31, 2002, was $940.9
million, compared to a net loss of $587.1 million in 2001. The 2001 results
include a restatement of previously reported financial results related to the
life settlement business of the Company's CNA Financial Corporation subsidiary,
as described below.
The following table summarizes the revenues, net income (loss) and earnings
per share information.December 31,
--------------------------------------
Three Months Year Ended
--------------------------------------
(In millions, except per share
data) 2002 2001 (c) 2002 2001 (c)
--------------------------------------
Consolidated:
Revenues (a) $4,021.9 $4,999.0 $17,545.6 $18,769.6
Net income (loss) $290.2 $191.0 $940.9 $(587.1)
Per Share: (b)
Income (loss) per share of
Loews Common Stock:
Income (loss) from continuing
operations $1.37 $0.98 $4.65 $(2.79)
Discontinued operations-net 0.01 (0.17) 0.05
Cumulative effect of changes
in accounting
principles-net (0.21) (0.27)
--------------------------------------
Net income (loss) $1.37 $0.99 $4.27 $(3.01)
======================================
Net income per share of Carolina
Group Stock $0.92 $3.50
======================================================================
(a) Revenue for the three months and year ended 2001 has been restated for
comparative purposes to reflect the adoption of new accounting principles
related to the classification of certain sales incentives by Lorillard and
reimbursements received by Diamond Offshore for "Out-of-Pocket" expenses
incurred. Revenue also includes premiums of $559.0 for the three months ended
2001, and $1,151.0 and $2,218.0 for the years ended 2002 and 2001, respectively,
related to the National Postal Mail Handlers contract at CNA which was
transferred on July 1, 2002.
(b) The Company has two classes of common stock, Loews Common Stock and
Carolina Group Stock, issued in February 2002. Earnings per share data are
presented for each class of Common Stock for the periods they are outstanding.
(c) Restated to reflect an adjustment to the Company's historical accounting
for CNA's investment in life settlement contracts and the related revenue
recognition.
Quarter Ended December 31, 2002 compared with 2001
Consolidated net operating income for the 2002 fourth quarter, which excludes
net investment gains and discontinued operations, was $285.0 million, compared
to a net operating loss of $47.2 million in the fourth quarter of 2001.
Net income attributable to Loews Common Stock for the 2002 fourth quarter was
$253.3 million or $1.37 per share, compared to $191.0 million or $0.99 per share
in the comparable period of the prior year. Net income in the 2002 fourth
quarter includes net investment gains attributable to Loews Common Stock of $4.7
million, compared to $235.5 million in the comparable period of the prior year.
Net operating income attributable to Loews Common Stock for the 2002 fourth
quarter, which excludes net investment gains and discontinued operations, was
$248.6 million, compared to a net operating loss of $47.2 million in the
comparable period of the prior year.
Net income attributable to Carolina Group Stock for the 2002 fourth quarter
was $36.9 million or $0.92 per Carolina Group share. The Company is issuing a
separate press release reporting the actual and pro forma results of the
Carolina Group for the quarter and year ended December 31, 2002 and 2001.
Year Ended December 31, 2002 compared with 2001
Net income for 2002 included a loss from discontinued operations at CNA of
$31.0 million or $0.17 per share of Loews Common Stock, compared to income from
discontinued operations of $9.4 million or $0.05 per share of Loews Common Stock
in the comparable period of the prior year. Results for 2002 also included a
charge for accounting changes of $39.6 million or $0.21 per share of Loews
Common Stock, related to accounting for goodwill and other intangible assets,
compared to a charge of $53.3 million or $0.27 per share of Loews Common Stock
in the comparable period of the prior year, related to accounting for derivative
instruments at CNA.
Consolidated net operating income for the year ended December 31, 2002, which
excludes net investment gains (losses), discontinued operations and the effects
of accounting changes, was $1,099.3 million, compared to a loss of $1,333.1
million in the comparable period of the prior year.
Net operating income attributable to Loews Common Stock for the year ended
December 31, 2002, which excludes net investment (losses) gains, discontinued
operations and the effects of accounting changes, was $963.9 million, compared
to a loss of $1,333.1 million in the comparable period of the prior year.
Net income attributable to Carolina Group Stock for the year ended December
31, 2002 was $140.7 million or $3.50 per Carolina Group share.
CNA's Life Settlement Contract Accounting
As a result of a periodic review of CNA's disclosure filings by the Division
of Corporation Finance of the Securities and Exchange Commission, the Company is
restating its financial statements as of and for the years ended December 31,
2001 to 2000 as well as its interim financial statements for the first three
quarters of 2002. The restated financial statements reflect an adjustment to the
Company's historical accounting for CNA's investment in life settlement
contracts and the related revenue recognition.
The SEC concluded that FASB Technical Bulletin 85-4 "Accounting for Purchases
of Life Insurance" should have been applied to CNA's investment in life
settlement contracts. Under FTB 85-4, the carrying value of CNA's investment in
life settlement contracts is limited to the cash surrender or contract value of
the underlying life insurance policy, and revenues related to life insurance
death benefits are recognized on a cash basis. The Company's historical
accounting was to record an asset for the full amount paid to acquire the life
settlement contract along with other direct costs, and to recognize revenue over
the period the contract is held.
The adjustment related to life settlement contracts reduced both net
operating income and net income in the fourth quarter and the full year of 2002
by $3.4 million and $8.3 million. The comparable impact in the prior period
increased both net operating income and net income by $2.9 and $2.0 million for
the fourth quarter and the full year of 2001. This restatement has reduced the
Company's shareholders' equity at December 31, 2002 by approximately $228.3
million, which is expected to be recognized in operating income in the future as
contracts mature.
At December 31, 2002, the book value per share of Loews Common Stock was
$61.68, compared to $49.24 at December 31, 2001. The increase in book value per
share of Loews Common Stock is primarily due to proceeds from the issuance of
the Carolina Group Stock in February 2002 and the net economic interest
attributable to the Loews Common Stock in the notional intergroup debt
receivable from the Carolina Group.
At December 31, 2002, there were 185,441,200 shares of Loews Common Stock
outstanding. During the year ended December 31, 2002, the Company purchased
6,065,600 shares of Loews Common Stock at an aggregate cost of $343.5 million.
During the year ended December 31, 2002, the Company purchased 2,717,876 shares
of CNA common stock at an aggregate cost of $73.1 million. The Company also
purchased 340,000 shares of Carolina Group stock during the year ended December
31, 2002, for the account of the Carolina Group, at an aggregate cost of $7.7
million. Depending on market conditions, the Company from time to time purchases
shares of its, and its subsidiaries', outstanding common stock in the open
market or otherwise. In addition, in December 2002 the Company purchased $750.0
million of CNA series H cumulative preferred stock.
In February 2002 the Company created a second class of common stock, called
Carolina Group Stock, a tracking stock intended to reflect the economic
performance of a group of the Company's assets and liabilities, called the
Carolina Group, principally consisting of the Company's subsidiary Lorillard,
Inc., and in an initial public offering the Company issued shares of Carolina
Group Stock representing a 23.17% interest in the economic performance of the
Carolina Group. Loews Common Stock will continue to represent the economic
performance of the Company's remaining assets, including the interest in the
Carolina Group not represented by Carolina Group Stock. At December 31, 2002,
the outstanding Carolina Group Stock represents a 23.01% economic interest in
the economic performance of the Carolina Group.
Loews Corporation and Subsidiaries
Financial Review
December 31,
--------------------------------------
Three Months Years Ended
--------------------------------------
2002 2001 (g) 2002 2001 (g)
--------------------------------------
(Amounts in millions, except per share
data)
Revenues:
Insurance premiums and net
investment income (a) $2,740.7 $3,554.4 $11,918.3 $12,779.3
Manufactured products (b) 886.3 958.6 3,963.5 4,011.9
Other 394.9 486.0 1,663.8 1,978.4
--------------------------------------
Total 4,021.9 4,999.0 17,545.6 18,769.6
--------------------------------------
Expenses:
Insurance claims &
policyholders' benefits 1,849.6 2,513.9 8,392.0 11,279.8
Cost of manufactured products
sold (b) 465.1 516.8 2,226.5 2,282.9
Other (c) 1,241.0 1,610.7 5,229.8 6,029.1
--------------------------------------
Total 3,555.7 4,641.4 15,848.3 19,591.8
--------------------------------------
466.2 357.6 1,697.3 (822.2)
--------------------------------------
Income tax expense (benefit) 149.6 150.7 600.2 (176.0)
Minority interest 26.4 18.6 85.6 (103.0)
--------------------------------------
Total 176.0 169.3 685.8 (279.0)
--------------------------------------
Income (loss) from continuing
operations 290.2 188.3 1,011.5 (543.2)
Discontinued operations-net 2.7 (31.0) 9.4
Cumulative effect of change in
accounting principles-net (d) (39.6) (53.3)
--------------------------------------
Net income (loss) $290.2 $191.0 $940.9 $(587.1)
======================================
Net income (loss) attributable
to:
Loews Common Stock:
Income (loss) from continuing
operations $253.3 $188.3 $870.8 $(543.2)
Discontinued operations-net 2.7 (31.0) 9.4
Cumulative effect of change in
accounting principles-net (d) (39.6) (53.3)
--------------------------------------
Loews Common Stock 253.3 191.0 800.2 (587.1)
Carolina Group Stock (e) 36.9 140.7
--------------------------------------
$290.2 $191.0 $940.9 $(587.1)
======================================
Income (loss) per Loews common
stock (f):
Income (loss) from continuing
operations $1.37 $0.98 $4.65 $(2.79)
Discontinued operations-net 0.01 (0.17) 0.05
Cumulative effect of changes in
accounting principles-net (d) (0.21) (0.27)
--------------------------------------
Net income (loss) $1.37 $0.99 $4.27 $(3.01)
======================================
Net income per Carolina Group
common stock (f) $0.92 $3.50
======================================
Weighted number of shares
outstanding:
Loews Common Stock 185.44 191.49 187.59 195.33
Carolina Group Stock 39.91 40.15
(a) Includes investment (losses) gains of $(13.5), $326.6, $(158.5) and
$1,390.4 for the respective periods.
(b) Includes excise taxes of $149.6, $141.7, $667.6 and $618.1 paid on sales
of manufactured products for the respective periods. (c) Includes a $200.0
charge related to an agreement with the Engle class for the year ended December
31, 2001.
(d) Adoption of SFAS No. 142, accounting for goodwill and other intangible
assets in 2002 and SFAS No. 133, accounting for derivative instruments and
hedging activities in 2001, at the CNA subsidiary.
(e) Represents 23.01% and 23.12% of the economic interest in the Carolina
Group for the three month and eleven month period ended December 31, 2002 from
the February 2002 initial public offering of Carolina Group Stock.
(f) Earnings per common share-assuming dilution is not presented because
securities that could potentially dilute basic earnings per common share in the
future would have been insignificant or antidilutive for the periods presented.
(g) Restated to reflect an adjustment to the Company's historical accounting
for CNA's investment in life settlement contracts and the related revenue
recognition.
December 31,
---------------------------------------
Three Months Years Ended
---------------------------------------
2002 2001(g) 2002 2001(g)
---------------------------------------
(In millions)
Revenues:
CNA Financial $2,856.2 $3,358.7 $12,538.8 $11,826.6
Lorillard (a) 843.8 928.2 3,843.8 3,955.3
Loews Hotels 75.7 74.7 305.3 321.8
Diamond Offshore 189.9 243.6 783.9 981.1
Investment income-net
and other (b) 69.8 67.2 232.3 294.4
---------------------------------------
4,035.4 4,672.4 17,704.1 17,379.2
---------------------------------------
Investment gains (losses):
CNA Financial (64.6) 323.9 (202.0) 1,262.0
Corporate and other 51.1 2.7 43.5 128.4
---------------------------------------
(13.5) 326.6 (158.5) 1,390.4
---------------------------------------
Total $4,021.9 $4,999.0 $17,545.6 $18,769.6
=======================================
Income (Loss) Before Taxes:
CNA Financial (c) $175.1 $(326.6) $607.6 $(3,560.4)
Lorillard (d) (e) 246.7 323.1 1,038.5 1,104.3
Loews Hotels 1.2 6.4 20.6 29.8
Diamond Offshore 9.6 52.4 54.2 228.1
Investment income-net
and other (b) (12.0) (24.3) (88.3) (14.4)
---------------------------------------
420.6 31.0 1,632.6 (2,212.6)
---------------------------------------
Investment gains (losses):
CNA Financial (64.6) 323.9 (202.0) 1,262.0
Corporate and other 50.3 2.7 35.3 128.4
---------------------------------------
(14.3) 326.6 (166.7) 1,390.4
---------------------------------------
Loews Common Stock 406.3 357.6 1,465.9 (822.2)
Carolina Group Stock (f) 59.9 231.4
---------------------------------------
Total $466.2 $357.6 $1,697.3 $(822.2)
=======================================
Net Income (Loss):
CNA Financial (c) $102.2 $(252.4) $363.4 $(2,088.7)
Lorillard (d) (e) 151.8 197.8 630.4 672.2
Loews Hotels 0.1 4.3 12.7 19.5
Diamond Offshore 0.9 15.8 14.1 71.0
Investment income-net
and other (b) (6.4) (12.7) (56.7) (7.1)
---------------------------------------
248.6 (47.2) 963.9 (1,333.1)
---------------------------------------
Investment gains (losses):
CNA Financial (27.2) 236.1 (104.1) 714.8
Corporate and other 31.9 (0.6) 11.0 75.1
---------------------------------------
4.7 235.5 (93.1) 789.9
---------------------------------------
Income (loss) from continuing
operations 253.3 188.3 870.8 (543.2)
Discontinued operations-net 2.7 (31.0) 9.4
Cumulative effect of changes in
accounting principles-net (39.6) (53.3)
---------------------------------------
Loews Common Stock 253.3 191.0 800.2 (587.1)
Carolina Group Stock (f) 36.9 140.7
---------------------------------------
Total $290.2 $191.0 $940.9 $(587.1)
=======================================
(a) Includes excise taxes of $149.6, $141.7, $667.6 and $618.1 paid on sales
of manufactured products for the respective periods.
(b) Consists primarily of corporate investment income, interest expenses,
watch and clock operations and other unallocated expenses.
(c) Includes charges of $189.0, $79.5 and $76.0 ($110.8, $46.1 and $61.2
after taxes and minority interest) for the three months and year ended December
31, 2001 related to restructuring and other related charges, Enron related
losses, and reserve strengthening primarily for the current accident year,
respectively, and $467.7 and $3,200.0 ($264.6 and $1,809.8 after taxes and
minority interest) for the year ended December 31, 2001 related to the World
Trade Center attack and a change in estimate of prior year net loss and
allocated loss adjustment expense reserves and retrospective premium accruals,
respectively.
(d) Represents the Loews Group's intergroup interest in the earnings of the
Carolina Group.
(e) Includes a $200.0 charge ($121.0 after taxes) related to an agreement
with the Engle class for the year ended December 31, 2001.
(f) Represents 23.01% and 23.12% of the economic interest in the Carolina
Group for the three month and eleven month period ended December 31, 2002 from
the February 2002 initial public offering of Carolina Group Stock.
(g) Restated to reflect an adjustment to the Company's historical accounting
for CNA's investment in life settlement contracts and the related revenue
recognition.
