Good morning. My name is Jackie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Loews Fourth Quarter 2012 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mary Skafidas, Vice President of Investor and Private Relations. Please go ahead.

Thank you, Jackie. Good morning, everyone. This is Mary Skafidas, and thank you for joining us on our fourth quarter and year-end 2012 earnings conference call. A copy of our earnings release may be found on our website, loews.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch; and our Chief Financial Officer, Peter Keegan. 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 our 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 filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings for a reconciliation of those comparable GAAP measures. I will now turn the call over to Loews' Chief Executive, Jim Tisch. Jim?

Thank you, Mary. Good morning, and thank you for joining us today to discuss Loews' fourth quarter and year-end results. As you know by now, Loews reported earnings for 2012 of $568 million, or $1.43 per share, as compared to $1.1 billion or $2.62 per share in 2011. Net income included catastrophe losses at CNA and impairment charges at HighMount, which Pete will discuss in more detail later in the call. Absent these charges, our net income for the year would have been $1.2 billion or $3.14 per share. We ended the year with 391.8 million shares outstanding. We purchased 2.1 million shares during the quarter for $83 million and 5.6 million shares during the year for $222 million. Now let's take a closer look at the results of each of our subsidiaries. They've spent the prior year moving the growth strategies forward and strengthening their businesses. Turning first to CNA. Although fourth quarter earnings declined due to higher catastrophe losses primarily due to Superstorm Sandy, CNA has continued to make progress towards improving its underwriting performance through risk selection and pricing discipline while generating premium growth. CNA's underlying P&C loss ratio, excluding catastrophes in prior year development, continues to improve with a year-over-year decrease of about 1 point. To improve its underwriting performance, CNA is focusing on select customer segments where it has specialized underwriting expertise. Submissions, new business and retention continue to be strong in these segments. As of the end of the fourth quarter, more than half of CNA's new business comes from these focused segments, which grew 7% year-over-year and 7% quarter-over-quarter. Rates continued to rise, increasing approximately 6% during the quarter in CNA's P&C operations. For CNA commercial, rates increased 8% for the quarter; and for CNA specialty, they increased 6%. CNA's book value per…

Thanks, Jim, and good morning, everybody. Loews Corporation today reported a net loss of $32 million, or $0.08 per share, for the fourth quarter of 2012 as compared to net income of $271 million, or $0.68 per share, for the fourth quarter of 2011. Loews' net income for the full year was $568 million, or $1.43 per share, compared to $1.1 billion, or $2.62 per share, in 2011. The decrease for the quarter was due to low net income at CNA and Diamond as well as decreased parent company investment income resulting from lower performance of equity investments. These decreases were partially offset by higher earnings at Boardwalk. These same factors also impacted annual results except for parent company investment income, which was higher year-over-year due to improved performance of equity investments. Excluding catastrophe losses of $171 million after-tax and noncontrolling interest at CNA relating primarily to storm Sandy, and the after-tax ceiling test impairment charge of $97 million at HighMount, net income in the 2012 fourth quarter was $236 million as compared to net income of $271 million for the same period in 2011. Net income in 2012 includes catastrophe losses of $243 million after-tax and noncontrolling interest at CNA and after-tax ceiling test impairment charges of $433 million at HighMount related to the carrying value of its natural gas and oil properties. Excluding these charges, net income in 2012 was $1.2 billion as compared to net income of $1.1 billion in 2011. Book value per share increased to $49.67 at December 31, 2012, as compared to $47.33 at December 31, 2011. For the fourth quarter of 2012, CNA had a net loss attributable to Loews of $5 million as compared to income of $195 million in the fourth quarter of 2011. For the full year 2012, net income…

Thanks, Pete. Before we open up the call to questions, I'd just like to close with some observation. Economic conditions in the U.S. for 2012 remained challenging with the pace of recovery is sluggish and intermittent. We expect more of the same for 2013. Our consolidated results were impacted by a few, large, unusual items such as the impact of Superstorm Sandy on CNA and the impact of continued low natural gas prices at HighMount. Absent these items, we are pleased with the progress that all 5 of our subsidiaries are making toward meeting our strategic objectives. Now I'll turn the call back over to Mary.

Thanks, Jim. Jackie, at this time, we'd like to open up the call for questions.

[Operator Instructions] Your first question comes from the line of Bob Glasspiegel with Langen McAlenney.

Let's see. I'd like to go after hotels with my first question. I think I know how to go about trying to value most of your other subsidiaries, but this segment, which is smaller, is a bit more challenging for me. And once every couple years, maybe at an Investor Day or at a call, you give us a little bit of help with thinking about valuing the operations. But as this business is getting more emphasis with growth dynamics, maybe you can give us a little help with either what the EBITDA is or how we should think about what the value is with this operation.

I can't answer that question directly since we're not going to give you a value. However, Bob, when you see our 10-K this year, we are trying to change some of the metrics that we're going to be showing you going forward starting in 2013 and beginning with the K, which will be filed about the end of the February. So hopefully, we can start to answer your question with a little more clarity. Obviously, some hotel companies are valued at multiples of EBITDA. We'll start presenting more of that data publicly, starting about the end of this month, and we'll be providing some more overall chain metrics so that you can compare the broader performance of the hotel group, including the non-owned hotels in terms of their revenue and their RevPAR. So I can't answer your question directly today. Hopefully, we'll be giving you a little better metrics going forward.

If you don't have EBITDA numbers today, won't you give us your rough guesstimates of how it's running if you're...

It's -- we haven't made it public yet. We will be making it more public going forward.

Okay. And do I read it right that this could be an area for a decent amount of cap spending prospectively or...

Yes. We are helping the hotel's growth strategy and really providing some level of bridge financing on individual hotel purchases. As Jim mentioned, the goal here is to bring in some investment partners in some of those purchases, as we already have done on the Hollywood Hotel.

Okay. And just a clarification question. The -- I always get a little bit nailed on my model. You had a decent amount of partnership income at CNA, but the trading portfolio generated outsized loss in the quarter. Is that bond marks [ph]? Or is there anything that you'd characterize that hit the quarter? And first quarter is off to a better start as far as partnership income, I suspect.

I think it was just generally stocks that were -- had a -- equities that we held at the Loews portfolio were down for the quarter.

Okay. So as I think about Q1, it's more the -- how the equities might be doing in than bond marks [ph] that would drive trading?

We do not have too much in the bond market. We are generally bearish on bonds, and we think that equities could do reasonably well. We also have a number of gold stocks that did not perform well in the quarter.

Okay. So I should look at gold and some of your other equity holdings that are public as a guesstimate if I don't want to use the market for...

Yes.

And that's reported real time? No lag?

The equities? Yes.

Okay, the partnerships, I know, do have a little bit of lag at CNA. And any...

Not all of them. Some of them do.

Some of them. .

But they are each consistent.

Your next question comes from the line of David Adelman with Morgan Stanley.

Jim, can you -- you mentioned the statistics about the new drilling program, but you didn't really characterize the performance of those new wells. How are they doing? How are they performing versus what other companies are drilling in that region?

So you're talking about the wells in the Mississippian Lime?

Yes.

They're -- we've drilled 30 wells there, and we've had -- when you average out all the wells that we drilled, our performance is similar to the performance of wells drilled by people in our area. What we're doing is we want to drill another set of wells so that we can begin to really delineate the area and understand what we have. Right now, our belief is that this area is commercial, and we just have to wait and see how the other wells come out to prove up whether that thought is accurate.

Okay. And then can you give us a rough indication of how much the annual depreciation in that division is going to come down because of the sizable ceiling test impairment you took this year?

I don't have that readily available, David. Let's get back to you on that.

Okay. And then lastly, also a question on the hotel business. If you look forward 2 or 3 years, could you characterize or define what success will be in that business unit from a strategic and financial perspective given the efforts under way? You'll have evolved Loews Hotels into what?

So we are looking to grow Loews Hotels. We are looking to do it in what I would call an asset-like manner in that we would like to own 25% to 50% of the properties that we acquire with investors owning the other 50% to 75%. We'd like to build the hotel chain into one where hotel owners would want us to manage the hotel without actually owning it. In terms of earnings and EBITDA, we'd be looking for that to grow. And we're looking to take the hotel company from an enterprise that's been rather stable over the past decade or so to one that's got growth in its future.

Your next question comes from the line of Michael Millman with Millman Research.

Just following up on that last. Most of the hotel companies seem to either be owners of many of the REITS or managers of fee-for-service. You seem to be somewhere in the middle. Is that correct? And is that very difficult to manage, if that's the case? And I also have a question on the gas.

It's really a benefit to us because we can invest the equity capital that's needed to build hotels, and then once they've been built, we can sell off a significant portion of it to investors. We can react to any situation that presents itself so that we can economically grow our business. So at Loews Corp., we are willing to consider using the cash that we have to help grow our hotel business. And what we do for each project is we make sure that the economics to those transactions look promising. And if they do, we're happy to invest in them.

Okay. On the gas, in order for gas values to increase, does gas have to become liquefied? And if that's the case, does that seem to be economically feasible?

Let me try to understand what you're saying.

So gas -- on a BTU value is selling way below oil or petroleum. And one way to get it up there is to liquefy it. I'm not sure...

Okay, let me try to explain. Natural gas at Henry Hub trades for the equivalent of about $20 per barrel of oil. So it's trading at less than 25% on a BTU basis of WTI, and it's trading at less than 20% of oil value for Brent, which is another major index for oil. You talked about liquefying. Generally, the only time -- there are only 2 times when you would liquefy natural gas. To liquefy natural gas, you have to cool it down to minus 250 degrees or so, and you do that in order to ship natural gas to export markets. There is currently a debate going on in Washington and within the energy community about whether or not the United States should allow natural gas to be exported. And that debate will play out, I believe, over the coming year. Currently, I think one license has been granted and others are pending. That could increase the demand for natural gas by a few billion cubic feet of natural gas per day. Those contracts generally will not kick in until 3 or 4 years from now because there are developers that have to put in the substantial capital necessary in order to build the export facility. The other place where liquefied natural gas, or LNG, may be used is for over-the-road trucks and locomotives on railroads. That is something that is currently being tested and experimented with, and it's my guess that similar to the export of LNG, that's something that will start to be more prevalent in the marketplace in the next 2 to 3 years. My guess is that at first, the LNG as a motor fuel will not make a significant difference in daily production of natural gas. But over time, say, over the next 5 to 10 years, it could actually be a very significant factor for demand. We'll only know that in the next 5 to 10 years when we see what the price of natural gas is compared to the price for oil. So we've got to stay tuned for that.

So if that's, I guess, the way -- at least from the stock market's standpoint, it seems very long term and unclear that there'll be a call it fair valuation for natural gas.

Well, the valuation in natural gas is determined by 2 things: number one, demand; and number two is supply. Demand has been actually growing very rapidly, and my guess is it will continue to grow. And natural gas has been taking market share away from oil. But the issue is that the supply of natural gas has grown rapidly as well. My guess, and I stated this before, is that the equilibrium price for natural gas is about somewhere between $4 and $4.50 per Mcf, which is the equivalent of $25 to $30 per barrel of oil. So it still is, as I like to call it, BTUs on the cheap. And the thing that's happened is that we have gone from an era, a long era, where natural gas was seen as a commodity that's in short supply or very scarce to one that's in abundant supply. So I think as more and more people understand that and factor it into their capital spending, you will continue to see a natural gas consumption increase without natural gas prices running away because, as I said, there is so much supply that's available at that price range of $4 to $4.50 per Mcf.

[Operator Instructions] Your next question comes from the line of Andy Baker with Barclays.

Just a question. Jim, you were talking just a second ago about natural gas taking share from oil. Where do you see that happening? And I guess over the next 5 to 10 years as this pricing plays out, where do you think the -- which industries do you think are most likely to make this switch or can realize the best benefit from [indiscernible] to the low-cost BTUs?

So the only place generally where there's been this direct head-to-head competition of natural gas and oil is in transportation fuels. But when you look at the energy mix of the U.S. economy, you see that oil has come down and natural gas has gone up. The price where natural gas is taking very significant market share over the past several years has been in power production. And there, natural gas has taken market share from coal. The other thing that's happened is that oil consumption has declined -- steadily declined in the United States since about '07. And the reason for that is either improved miles per gallon on cars or flat -- or miles driven not increasing so dramatically. But it hasn't really been so much gas on oil competition.

And just one other question on hotels. I guess the question is why now, why we make such a big investment. Or why are there more opportunities coming to you now than there have in the past? I mean, this is something we've talked about for a number of years and hoping that the -- you are well poised with your liquidity to take advantage of opportunities during the fiscal crisis. Now as we emerge, are there just more opportunities coming your way now or -- so that you are more comfortable with the outlook for the properties that are on the market? I mean, how do we think about the timing decisions here?

I'd say it's 2 things. Number one, we do see opportunities. There are not many hotels that are being built now even though the hotel business is reasonably good. So that's an environment where we like to be developing hotels, combined with the fact that we have a management team now that is very adept at acquiring hotels. They understand very well how to finance hotels not only with debt but also with equity investors. And so we're making use of their expertise.

And just one last for Pete. I missed what you said on the call what the year-end corporate cash and debt balances were.

It's about 3.9 billion.

And the debt on Loews is about $700 million.

The debt is yes, $700 million.

That was our final question. Now I'd like to turn the floor back over to Mary Skafidas for any closing remarks.

Great. Thank you, everyone. Thank you for your continued interest. A replay is going to be available on our website in the next 2 hours. And this concludes our call for today.

Thank you. This concludes today's conference call. You may now disconnect.