Executive Summary / Key Takeaways

• Loews Corporation ($L) operates as a resilient, diversified holding company with core strengths in commercial insurance (CNA), energy infrastructure (Boardwalk Pipelines), and hospitality (Loews Hotels), underpinned by a strategic focus on operational excellence and shareholder returns.
• Recent performance, while showing a decrease in consolidated net income in Q1 2025 compared to the prior year primarily due to insurance reserve development and hotel joint venture performance, highlights underlying operational strength and growth momentum in key segments like Boardwalk Pipelines.
• The company is executing a significant growth strategy, particularly in its retail operations (Boardwalk Pipelines and Loews Hotels), with planned investments exceeding $10 billion over five years, including opening 80 new stores and 100 pharmacist care clinics in 2025, and completing major hotel developments.
• Management anticipates high single-digit adjusted EPS growth in 2025 (excluding a 53rd week benefit), driven by retail earnings growth outpacing sales, supported by new store contributions and operational efficiencies from investments like the new automated distribution center.
• Despite facing industry-specific risks such as insurance reserve volatility, litigation, and regulatory hurdles, Loews' diversified structure and disciplined capital allocation, including ongoing share repurchases, position it for long-term value creation, although competitive pressures and technological adaptation remain key factors to monitor.

Loews Corporation: A Foundation of Diversified Strength

Loews Corporation, established in 1969, operates as a holding company with a strategic portfolio of businesses primarily spanning commercial property and casualty insurance through its majority-owned subsidiary CNA Financial Corporation (CNA), energy infrastructure via wholly-owned Boardwalk Pipeline Partners, LP, and hospitality through wholly-owned Loews Hotels Holding Corporation. This diversified structure is not merely a collection of assets but a deliberate strategy aimed at providing resilience across economic cycles and generating consistent value for shareholders, a principle that has guided the company's journey for decades.

The company's history is marked by strategic evolution within its core segments. CNA, the largest contributor, has undergone significant transformation, focusing on enhancing underwriting profitability and proactively managing long-tail risks like its run-off long-term care business and legacy asbestos and environmental pollution liabilities. Efforts since 2015 have included substantial reductions in active LTC policies and strategic rate increases, alongside a significant loss portfolio transfer in 2010. This focus on operational improvement has yielded tangible results, with CNA achieving robust premium growth and more than doubling underwriting income over the five years leading up to 2023.

Boardwalk Pipelines has expanded its footprint and strategic focus under recent leadership, notably building out its natural gas liquids business and shifting its customer base towards more stable end-users. The acquisition of the Bayou Ethane pipeline in 2023 exemplifies its targeted growth in complementary assets. While navigating the challenging regulatory environment for new pipeline construction, Boardwalk leverages its existing, well-located infrastructure to capitalize on demand.

Loews Hotels has significantly enhanced its profitability, strategically adding new properties and divesting less profitable ones. Recent substantial equity investments in major developments, such as the Loews Arlington Hotel and the expansion at Universal Orlando Resort, underscore a commitment to growth in key markets, aiming for attractive cash-on-cash returns once stabilized.

This historical context of strategic adaptation and operational focus sets the stage for understanding Loews' current positioning and competitive dynamics.

Competitive Positioning and Operational Technology

In the competitive landscape, Loews' diversified model sets it apart from more focused peers. Within the commercial insurance sector, CNA competes with major players like American International Group (AIG), Markel Group (MKL), Cincinnati Financial Corporation (CINF), and Erie Indemnity Company (ERIE). While AIG boasts greater global scale and is actively pursuing portfolio simplification and digital innovation, and companies like MKL and CINF demonstrate strong profitability and niche expertise in specialty or regional markets, CNA's strength lies in its established market presence, disciplined underwriting, and proactive risk management, particularly in its legacy books. Loews' overall structure provides a degree of insulation from sector-specific downturns that pure-play insurers might face. However, CNA's margins have recently trailed some peers, indicating areas for potential operational efficiency gains or pricing power challenges in certain lines. Insurtech firms represent an indirect competitive threat, leveraging technology like AI for potentially cheaper underwriting, which could pressure traditional models, although Loews' scale and established agent relationships provide a counter-balance.

Boardwalk Pipelines operates in a market characterized by high barriers to entry due to onerous regulatory and permitting requirements for new construction. This environment generally benefits existing infrastructure owners like Boardwalk by increasing demand for their services. Boardwalk's strategic focus on fee-based contracts with end-users provides revenue stability compared to competitors more exposed to volatile commodity prices or producer-centric contracts. Its asset location, particularly near the Gulf Coast, positions it favorably to capture demand growth, including potential opportunities arising from increased natural gas usage for power generation driven by data center proliferation and coal-to-gas switching.

Loews Hotels competes in the dynamic hospitality market, facing large chains and independent properties. Its strategy involves developing large-scale, destination-focused hotels, often through joint ventures, which require significant capital but aim for high returns upon stabilization. The competitive edge here lies in brand recognition, location strategy, and the ability to manage complex properties and partnerships.

While Loews' competitive advantages are primarily rooted in its diversified structure, operational execution, and strategic asset positioning, the company is also leveraging technology to enhance efficiency and customer engagement, particularly within its retail operations. The planned migration to a new 1.2 million square foot fully automated distribution center in East Guillenborough, Ontario, in 2025 is a significant operational technology investment aimed at enhancing the supply chain and delivering efficiencies. This facility, notably featuring what is expected to be the largest rooftop solar array in Canada, underscores a commitment to both operational improvement and ESG principles. Furthermore, digital engagement tools, such as personalized offers, members-only pricing, and features like "Swap and Save" and "Swap and Shop Canadian tap," are being deployed to enhance customer experience and drive sales, demonstrating a focus on leveraging digital platforms in its consumer-facing businesses. While not detailing proprietary underwriting AI like some insurtechs, these investments in automation and digital tools are critical for maintaining competitive relevance and driving operational leverage.

Recent Performance and Financial Health

Loews Corporation's financial performance in the first quarter of 2025 reflected a decrease in consolidated net income attributable to Loews Corporation, falling to $370 million or $1.74 per share, compared to $457 million or $2.05 per share in the comparable 2024 period. This decline was primarily attributed to lower contributions from CNA and Loews Hotels Co, alongside reduced investment income at the parent company, partially offset by stronger results from Boardwalk Pipelines.

CNA's performance was impacted by lower underwriting income, specifically driven by unfavorable net prior year loss reserve development of $61 million in Property Casualty Operations (compared to favorable development in the prior year) and a $17 million after-tax charge in Other Insurance Operations related to legacy mass tort abuse claims. Higher catastrophe losses also contributed to the decline in underwriting results. Despite these headwinds, CNA saw growth in net written premiums, indicating continued business generation, and its net investment income remained substantial, albeit slightly lower due to reduced common stock returns offsetting gains in fixed income.

Boardwalk Pipelines, in contrast, delivered a strong quarter, with net income attributable to Loews Corporation increasing to $152 million from $121 million. This improvement was fueled by a significant $105 million increase in total revenues, driven by favorable re-contracting rates, contributions from recently completed growth projects, and higher ethane volumes. This performance underscores the benefits of Boardwalk's strategic investments and market positioning.

Loews Hotels Co's net income contribution remained flat year-over-year at $16 million, but the underlying drivers shifted. While operating revenues increased, primarily due to the full quarter's operation of the new Loews Arlington Hotel, equity income from joint ventures decreased significantly ($21 million). This was primarily due to lower occupancy and average daily rates at Universal Orlando Resort hotels (partly due to renovations), reduced distributions from one joint venture for property improvements, costs associated with opening new hotels, and a $9 million impairment charge at a joint venture property. Higher interest expense related to the new Arlington hotel and refinanced debt also impacted results.

At the Corporate level, lower investment income, primarily due to unfavorable changes in the fair value of equity-based investments, contributed to the overall decrease in consolidated net income.

Despite the dip in Q1 2025 net income, the company's balance sheet remains robust. As of March 31, 2025, Parent Company cash and investments totaled $3.5 billion, supporting liquidity needs and capital allocation priorities. The company received substantial dividends from subsidiaries in the quarter, including a $497 million special dividend from CNA and a $75 million distribution from Boardwalk Pipelines. CNA's operating cash flow also saw a significant increase, partly due to timing shifts in reinsurance premium payments. Boardwalk Pipelines maintains ample liquidity with $1.0 billion available under its revolving credit facility and anticipates existing resources will fund its 2025 capital expenditures.

Outlook and Strategic Initiatives

Looking ahead, Loews Corporation is poised for continued growth, underpinned by significant planned investments and strategic initiatives across its segments. Management has articulated a clear outlook for 2025, anticipating high single-digit adjusted earnings per share growth, excluding the benefit of a 53rd week in the fiscal year which is expected to add approximately 2% to full-year EPS. This growth is projected to be driven by the retail businesses (Boardwalk and Hotels), where earnings are expected to grow faster than sales.

A key driver of this anticipated growth is the planned acceleration of retail network expansion. The company intends to open approximately 80 new stores in 2025, with a strong focus on adding around 50 hard discount locations and approximately 30 Shoppers Drug Mart pharmacies. This expansion builds on the momentum from stores opened late in 2024, which are already contributing meaningfully to sales. The hard discount format, in particular, continues to outperform conventional stores and gain market share, validating the strategy of expanding this offering to meet consumer demand for value. The new Shoppers Drug Mart locations, including approximately 100 new in-store pharmacist care clinics, align with the strategy to enhance healthcare services and convenience.

Capital expenditures in 2025 are planned at approximately $2.2 billion ($1.9 billion net of planned property disposals), reflecting the scale of these investment initiatives in stores, distribution infrastructure, and hotel developments. The ramp-up of the new automated distribution center is expected to contribute to operational efficiencies over time, supporting the goal of growing earnings faster than sales despite some initial ramp-up costs.

In the hospitality segment, the completion and opening of the three new hotels at Universal Orlando Resort throughout 2025 will significantly expand Loews Hotels' presence in this key market, bringing the total managed properties in Orlando to 11 with 11,000 rooms by year-end. These properties are expected to contribute to earnings as they stabilize over the next three to four years.

Boardwalk Pipelines anticipates continued strong performance, benefiting from favorable re-contracting dynamics and the full-year impact of recently completed growth projects and the Bayou Ethane acquisition. The company's substantial backlog of future revenue from outstanding performance obligations, estimated at $18.7 billion as of March 31, 2025 (with $2.3 billion expected in the remainder of 2025 and $2.4 billion in 2026), provides a degree of revenue visibility and stability.

Share repurchases remain a core component of Loews' capital allocation strategy, reflecting management's belief that the stock trades at a discount to its intrinsic value. The company repurchased 4.50 million shares for $380 million in Q1 2025 and plans to return most of its free cash flow to shareholders through buybacks and dividends.

Risks and Challenges

Despite the positive outlook and strategic momentum, Loews faces several notable risks inherent in its diversified operations. In the insurance segment, the estimation of claim and claim adjustment expense reserves remains a critical process subject to significant uncertainty, particularly for long-tail liabilities and legacy exposures like AEP and mass tort claims. Adverse development in these reserves can materially impact earnings, as seen in Q1 2025. Catastrophe losses, driven by severe weather events, are an inherent and unpredictable risk that can cause significant period-to-period fluctuations in results. The run-off long-term care business, while actively managed, still carries significant estimation risk over its long duration.

Boardwalk Pipelines faces risks related to the regulatory environment for new construction, which, while currently benefiting existing assets, could shift. Litigation, such as the ongoing case regarding the purchase of common units, presents potential financial uncertainty, although management does not believe current pending litigation will materially affect overall results or equity. Operational risks include compliance costs with pipeline safety regulations.

Loews Hotels is exposed to fluctuations in travel demand, economic conditions, and the performance of joint venture partnerships. The decrease in equity income from joint ventures in Q1 2025 highlights the sensitivity to factors like occupancy levels, average daily rates, property improvement costs, and potential impairment charges. Higher interest rates could also impact financing costs for hotel properties.

At the corporate level, investment income is subject to market volatility, particularly for equity-based investments. As a holding company, Loews relies on dividends from subsidiaries, which are subject to the subsidiaries' earnings, liquidity, and regulatory constraints.

Furthermore, broader economic factors such as inflation, interest rate changes, and foreign currency fluctuations (like the weakening Canadian dollar impacting import costs) can affect all segments. Competitive pressures across all industries require continuous investment and adaptation to maintain market position and profitability.

Conclusion

Loews Corporation's investment thesis is rooted in its strategically diversified portfolio, operational execution within its core businesses, and a disciplined approach to capital allocation. While the first quarter of 2025 saw a dip in consolidated net income driven by specific challenges in insurance reserving and hotel joint ventures, the underlying operational performance, particularly the strong growth momentum at Boardwalk Pipelines and the strategic expansion initiatives across the retail footprint, underscores the company's potential.

The planned significant investments in new stores, distribution infrastructure, and hotel developments, coupled with management's guidance for high single-digit adjusted EPS growth in 2025, signal confidence in the ability to drive future earnings growth. The company's focus on leveraging operational technology, such as the new automated distribution center and digital customer engagement tools, alongside its core strengths in insurance underwriting and energy infrastructure management, positions it to navigate competitive pressures and capitalize on market opportunities. Investors should weigh the inherent risks of reserve volatility, litigation, and market fluctuations against the long-term value creation potential offered by Loews' diversified structure and growth-oriented strategy, supported by consistent shareholder returns through buybacks and dividends. The ongoing execution of its expansion plans and the performance of its core segments will be key factors to monitor.