Good morning. My name is Melissa, and I will be your conference operator today. At this time, I would like to welcome everyone to the Loews First Quarter 2011 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Darren Daugherty, Director of Investor Relations. Please go ahead.

Thank you, Melissa. Good morning, everyone. Welcome to Loews Corporation's First Quarter 2010 (sic) [2011] Earnings Conference Call. A copy of the earnings release may be found on our website, loews.com. On the call this morning are Jim Tisch, Chief Executive Officer of Loews; and Peter Keegan, Chief Financial Officer of Loews. Following our prepared remarks this morning, we will have a question and answer session. 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 projections made in any forward-looking statements. Forward-looking statements reflect circumstances at the time they are made, and 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 10-K and 10-Q filings with the SEC. During the call today, we might also discuss certain non-GAAP financial measures. Please refer to our security filings for reconciliation to the most comparable GAAP measures. I will now turn the call over to Loews' Chief Executive Officer, Jim Tisch.

Thank you, Darren. Good morning, and thank you for joining us on our call today. For the first quarter of 2011, Loews reported net income of $382 million, a decline from net income of $420 million in last year's first quarter. The decline in Loews' earnings resulted primarily from lower average day rates at Diamond Offshore and a decline in earnings at CNA. We started off 2011 with a relatively quiet first quarter, but rest assured, all of our subsidiaries are working hard towards achieving their long term strategic goals. While CNA reported solid results, net income for the quarter declined modestly versus the same period in 2010. CNA's core property and casualty operations performed well, posting higher operating income for the quarter. An increase in catastrophe losses was more than offset by higher investment income and improved underwriting results before catastrophes. CNA continues to improve the financial performance of its core property and casualty operations, while seeking to grow in its focus areas. The work that has been done over the past 2 years is gaining traction is evidenced by net written premium growth of 13% in CNA's Specialty segment in the first quarter, while rate was essentially flat. In its Commercial segment, CNA gained 2 points of rate as it continued to push for improved pricing and risk selection. CNA has now achieved rate increases for 6 consecutive quarters in its Commercial segment even as it works to exit lower tier, less profitable business. By now, you have probably seen the announcement of CNA's definitive merger agreement with CNA Surety. This transaction offers compelling benefits for both companies. It will allow the minority shareholders of CNA Surety to monetize their investment at a substantial premium to their historical stock price, and for CNA, it's an opportunity to expand…

Thanks, Jim, and good morning, everyone. Loews reported first quarter earnings of $0.92 per share versus $0.99 per share in the prior year first quarter. CNA's contribution to Loews' first quarter net operating income declined to $190 million from $206 million in the prior year quarter. Results were impacted by increased interest expense from use of debt to fund part of the preferred stock redemption, as well as from costs associated with early retirement of senior notes. CNA also experienced modestly higher catastrophe losses, which were partially offset by a $30 million increase in net investment income primarily from limited partnership investments. Favorable net prior year development for the quarter was flat at $35 million as compared to the prior year quarter. In the first quarter of 2011, realized investment gains from CNA declined to $12 million from $19 million after-tax and noncontrolling interests. In February 2011, CNA completed a $400 million debt offering and used the proceeds to prepay senior notes due in August. CNA's next major maturity is not until 2014. Diamond Offshore's contribution to net income for the quarter declined to $117 million from $136 million in the first quarter of 2010, primarily due to a decline in day rates earned across Diamond's fleet of rigs and a decline in utilization for Diamond's jack up rigs. Diamond Offshore continues to feel the impact from regulatory uncertainty in the U.S. Gulf of Mexico in the post Macondo environment and has relocated rigs to capitalize on stronger demand in international markets. These factors were partially offset by a decrease in income tax expense. The decrease in Diamond Offshore's effective tax rate versus the prior year quarter resulted from differences in Diamond's mix of pretax earnings and losses in various international and domestic tax jurisdictions and a tax law change.…

Thank you, Pete. Operator, at this time, we'll open it up for questions.

[Operator Instructions] Your first question comes from David Adelman of Morgan Stanley.

Pete, you might have said it or maybe I missed it, the total dividends to the holding company during the quarter from the subsidiaries was what?

It was $155 million.

$155 million, okay. And then, Jim, can you comment on the relative attraction of the acquisition environment, the things that you're seeing broadly and then perhaps in natural gas and specifics?

So broadly, what we're seeing is that the world has changed dramatically over the past 20 or 30 years. I mean, that's not a revolutionary statement. But it's one that I've really noticed. 20 and 30 years ago, there weren't a lot of LBO firms around, there were not too many conglomerates. And so when something became available for sale, it was relatively easy to step in and buy it, or even if something didn't become available for sale, it was, again, relatively easy to buy a business. Today, as soon as a business decides it want to sell itself for whatever reason, unless they go to Warren Buffett, they go to an investment banker and there's an auction. And so there are lots of bidders with lots of sharp pencils and analysts who know how to work Excel, and the prices paid are usually very, very high. And so what we're seeing now is the pencils are yet even sharper and the prices paid seem to be yet even higher. In large part, I would imagine, because private equity firms have a lot of cash that they want to invest and there's not an awful lot that's for sale. So right now, as you might imagine, we don't see a lot of opportunity in the buy a company world. In terms of investments for our individual businesses, we are seeing opportunity. First of all, there's CNA that is spending a few hundred million dollars to buy in the minority interest in CNA Surety. At Diamond Offshore, we've got investment opportunities on the order of $1 billion in buying 2 new drill ships and we have a fill an option to buy a fold [ph] that expires later this month. And likewise, we'll see at HighMount lots of, what I would call bite-sized investment opportunity, not companies as much as they are properties either producing or nonproducing that are for sale that could possibly be attractive acquisitions for HighMount. So I'd sum up by saying that there isn't we haven't yet found anything for Loews Corp. to do, but having said that, we're seeing plenty of opportunities for our subsidiaries.

Your next question comes from Michael Millman of Millman Research.

[indiscernible] pockets, I was kind of wondering if there's too much energy, too much concentration in those pockets. And so maybe you can talk about that. And maybe also, what changes you'd expect the new CEO to bring to Boardwalk?

So in terms of our specifying pockets and our energy investments, what we are looking for is total return for shareholders. And right now, those opportunities happen to be in the energy area. So we're happy to take on those investments where we feel we can earn a significant return for not only the subsidiaries but also for Loews as a shareholder in those subsidiaries. In terms of the management change at Boardwalk, as we said, Rolf Gafvert has been with Boardwalk and its predecessor for 18 years. He had expressed to us, about 9 months ago or so, a desire to retire at some point in the future. We had an extensive search process and Stan Horton quickly bubbled to the top of that search process. When we first got into the natural gas pipeline business in '03, Stan Horton was, as best I could tell and recollect, a legend in the industry, having run many of the Enron pipelines and put together and managed their, I would say, enviable position in the pipeline business. So if you'll remember, it was the pipeline business that was really the the very strong, positive cash flow generating business for Enron. And Stan stayed on for a few years after Enron blew up and then went on to other things in the pipeline business. And so when his name came forth through our search process, I was very interested. And I think that Stan would be a great leader for Boardwalk. I think that he obviously has the experience in the business. He knows people in the business, customers and other pipeline operators. He has a strong understanding of MLPs and value creation. And so we're just very positive. We're happy that he's coming to Boardwalk and positive about Boardwalk's prospects under his leadership.

So it sounds like suggesting that he should produce very well, but not necessarily any specific things you see or that we're, on the outside, going to see in the next year or 2?

That's right. There is nothing in specific but in general, I'm very positive about his leadership.

[Operator Instructions] Your next question comes from Bob Glasspiegel of Langen McAlenney.

This question may suggest otherwise, but I have a lot of respect that you know the Gas business much better than I do. But it's been 4 years since we've taken our first step into creating HighMount and there's been a decent amount of write-off of goodwill and gas prices haven't done much in the context of pretty favorable environment for oil. What has to happen for your investment to pay off from a macro point of view? Does it require the U.S. to change the infrastructure to allow more things to run on gas? You seem to be very positive about doing more of this, so clearly, you're seeing something that maybe the rest of the world isn't seeing.

Well, you're actually very generous in your question. You could have said, "Jim, you bought HighMount when natural gas prices were $8 an Mcf. You looked like a hero for a year as they went to $14 and now you're a bum because they're $4." So thank you for not saying that. What happened very simply is that something happened in the gas business that we never expected, which was that all of a sudden, technology changed and gas, which had been thought to be a scarce commodity, all of a sudden became a principal commodity. Now having said that, we've taken our lump [ph] for getting in at $8 and the price now being at $4, and with the price at $4, we're seeing opportunities. First of all, we're seeing some opportunities in gas, but we're also seeing opportunities in liquids. And when I talk about liquids, I'm talking about not only crude oil, but also wet gas, which includes a whole slate of natural gas liquids, a number of which trade at prices relative to oil, rather than prices relative to natural gas and as I said, we're seeing lots of opportunities in this natural gas area and also the liquids areas. And as I said before, we're seeing that in bite sized pieces. So I'm hopeful that we will be able to take advantage of some of those opportunities. What's going on what I think is going on in the natural gas business is that natural gas trades at, what I would call, a crazy, ridiculous price relative to oil. Gas trades at about a ratio of 25:1 to oil, notwithstanding the fact that gas should trade on a BTU basis at 6:1. So gas is trading at about 25% to 30% per BTU of what oil trades at. So gas is a very, very cheap energy commodity. And I strongly believe the statement in economics that goes, what has to happen happens. And I think that we are going to see significant increases in gas consumption just outright, but also relative to oil consumption. I think oil consumption in the United States peaked in '06 and '07 and has been flat to declining ever since and natural gas consumption has been increasing, and I think that will continue. I think we'll see continued use of natural gas as a fuel for power plants. And I think we'll see more natural gas vehicles. It is just so cheap that I think consumption will continue to increase and I think that over the longer term, gas and liquids investments in the United States should be very attractive.

Very thoughtful answer. Just a quick follow up, do you -- are you with Boone Pickens that's it's going to take government action to unlock that value?

No.

Or the private market can make it happen on its own?

The private market can make it happen. If the government gets involved, it might happen 3 weeks sooner. But beyond that, I think it's going to happen because the economics are just so compelling.

At this time, there are no further questions. I'll now turn the call back to Darren Daugherty for closing remarks

That concludes today's call. A replay will be available on our website in approximately 2 hours.