Ladies and gentlemen, thank you for standing by, and welcome to the Loews Second Quarter 2013 Earnings Conference Call. [Operator Instructions] Thank you. I'll now turn the call over to Mary Skafidas, Vice President of Investor and Public Relations. Please go ahead.

Thank you, Laurie, and good morning, everyone. I'd like to welcome you to Loews Corporation Second Quarter 2013 Earnings Conference Call. A copy of our earnings release and snapshot 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 may 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 filings with the SEC. During the call today, we might also discuss 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. Jim?

Thank you, Mary. Good morning, and thank you for joining us on our call today. Loews had net income of $269 million, or $0.69 per share, for the second quarter of 2013 as compared to $56 million, or $0.14 per share, for the same quarter last year. Last year's second quarter was impacted by an after-tax ceiling test impairment charge at HighMount of $142 million, or $0.36 per share. Before we take a closer look at the results and the progress of each of our subsidiaries, I want to address the rise in interest rates since May 3 and the impact these rates -- rate increases have had and will have on our investment strategy and our fixed income portfolio. Let's take a trip down memory lane. In February of 2011, I stated on our earnings call that interest rates in the U.S. would inevitably rise. I remarked that rising interest rates would result in a decline in the market value of CNA's investment portfolio, given that CNA's portfolio is comprised predominantly of fixed income securities. Such a decline would in turn negatively impact GAAP book value. Fast forward to today, and that's exactly what's happening. CNA's unrealized gain decreased by 41%, or $1.8 billion, during the second quarter, from $4.3 billion at March 31 to $2.5 billion at June 30. There is, however, a silver lining to higher interest rates, which is that CNA will have the opportunity to invest its significant operating and investment cash flows into higher-yielding securities. As a reminder, CNA manages its investments within 2 distinct portfolios: the property/casualty portfolio, which supports the core P&C liabilities; and the Life & Group portfolio, which supports the longer duration liabilities in CNA's Life & Group segment. The ability to invest at higher yields ultimately benefits both portfolios.…

Thanks, Jim, and good morning, everyone. Loews Corporation today reported net income for the 2013 second quarter of $269 million compared to $56 million in the 2012 second quarter. Net income for the second quarter of 2012 includes an after-tax noncash impairment charge of $142 million at HighMount related to the carrying value of its natural gas and oil properties. Excluding this impairment charge, net income for the second quarter of 2012 was $198 million. Net income for the 6 months ended June 30, 2013, was $511 million, or $1.31 per share, as compared to $423 million, or $1.06 per share, in the prior year period. Net income for the 6 months ended June 30, 2013 and 2012, includes after-tax noncash ceiling test impairment charges of $92 million and $170 million at HighMount. Excluding these noncash impairment charges, net income for the 6 months ended June 30, 2013 and 2012, was $603 million and $593 million, respectively. CNA's contribution to Loews' net income for the second quarter was $175 million as compared to $151 million last year. CNA's earnings increased primarily from higher net investment income due to increased limited partnership results, improved non-catastrophe current accident year underwriting results and a legal settlement benefit of $27 million after-tax and noncontrolling interest. These increases were partially offset by lower favorable net prior year development and reduced results from the Life & Group Non-Core segment. Diamond Offshore's contribution to net income for the second quarter of 2013 was $87 million compared to $94 million in the prior year quarter. Results for the second quarter decreased primarily as a result of a prior year gain of $23 million after-tax and noncontrolling interest from the sale of 5 jack-up rigs partially offset by higher day rates and utilization, as well as lower contract drilling…

Great. Thank you, Pete. Laurie, at this time, we would like to open up the call for any questions.

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

Jim, were there any material changes in Loews' investment portfolio and its composition during the quarter?

No, not significant. You're talking about the holding company level, I assume?

Yes.

Yes. Nothing significant. No.

So the bond proceeds, more or less, were allocated as pro rata with the existing mix and make up?

No. They are generally being held in cash instruments. So roughly, I would say the amount of hedge funds and equities that we own did not increase.

Okay. And then, Jim, with respect to HighMount and the effort with respect to oil production and the process you're going through and the test drilling and so forth that's being done, what, over the next year or 2, are going to be the key milestones that will indicate to you the prospects of success?

So in both the Mississippian Lime and also in the Permian Basin, in the Wolfcamp Shale, we are looking to see if we can produce oil from those 2 regions at economic rates. We know there is oil down there because we have drilled wells and we have and we still are producing it, but the question is whether we can figure out how to extract the oil and earn at least a reasonable rate of return on our investment. It will take us another several quarters to be able to determine whether or not we can do that. But we do know that the oil is down there.

Your next question comes from the line of Bob Glasspiegel of Janney.

I was wondering if you could, number one, give me what your debt balances were 6/30?

We had $1.7 billion in debt at the holding company level, Bob.

Okay. So you raised $1 billion and you're earning -- as great as the rates are that you borrowed, congratulations on timing it brilliantly...

Like I said, I'd rather be lucky than smart.

Right. But you're in a negative carry on it, so I was wondering -- should we think, over the next 3 to 5 years, the $1 billion is just going to be used on your trading portfolio, or this gets your sort set of acquisition team to a different level that you can do deals that you might not have done before? I mean, what do you anticipate the primary use is going to be over the sort of intermediate term?

Bob, I don't know. But the thing I do know is that over the past 15 years or so at least, we've had cash balances of $2 billion, $3 billion, $4 billion, $5 billion or $6 billion. We never worried about spending it. But lo and behold, the incoming cash that we had coming into Loews was spent either buying businesses or buying our shares or supplying capital at attractive returns to the businesses that we own. So somehow or other, we're able to find investments to make. And the thing that's driving us, though, is, like I said in my prepared remarks, we find it's much better to raise capital when the rates are attractive rather than to raise it when you need it. When you need it, the debt or the equity capital can be very, very expensive.

Totally understood. But you didn't mention buying stocks. You're buying bonds with the money as sort of a potential avenue to employ over the next 3 to 5 years. I mean, I know -- public comments about bonds, I would think rates would have to go up a decent bit to think about putting money at the corporate level there.

Here's what I'd say. If you want to buy the stock of a company that's got a significant equity portfolio, go to Berkshire Hathaway. We do not think that we are going to generate significant long-term returns for our shareholders by having a large equity portfolio. We're looking to either buy in our shares, buy another business or invest in our own businesses. That's the main way that we're going to build value for our shareholders. We have...

You do have a trading portfolio for a reason, though. Right?

Say again?

You do have a trading portfolio for a reason.

Yes, yes. We have an equity portfolio of about $500 million, $600 million. We have that because we do want -- we do have expertise in investing in equities, and we do think we can do a good job at it, combined with the fact that by having the equity portfolio, it keeps us closely in touch with the markets and what's going on. But in terms of that being a line of business or an avenue to significant shareholder value growth, I just don't think that's going to be the place.

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

I guess very recently, the -- there's been some federal investigation of financial companies involved in commodity movement. I was wondering if you're seeing anything regarding the gas pipelines and this connection?

No. To my knowledge, we've seen nothing like that at all. My understanding is that, with respect to the commodities that was written about in the New York Times, it was both commodities, typically metals, being delivered back and forth from one warehouse to another for Lord knows what reason. We haul natural gas under contract from one location to another, usually distant location, based on the orders from our customers. So my strong supposition is that, that is dramatically different than what you're seeing in the metals markets.

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

Two questions, I guess. First, lapping with [ph] last call, where you were talking about the impact of the exposure to gold in your portfolio, just wondering if you have maintained that same level of exposure to gold, both through the ETFs and the minors.

Yes, we have, and that's why the return in our investment portfolio was as low as it was this quarter. It was basically breakeven. That's because of the losses that we experienced on those gold-related investments, offset the gains we made from the rest of the portfolio.

Great. And could you just sort of explain a little bit more -- I don't think we've talked about this in the past, but how -- what the ROI is on the hotel renovation investment dollar? I mean, you put -- you lose the revenues, you spend the money. And then how does this come back to you? Is this -- I mean, higher room rates? Is it higher occupancy? Is it -- I assume it's not a cost cut.

So for some hotels where there's maintenance CapEx, you have to do that just to keep the property up to snuff. For other hotels -- and there isn't a significant additional ROI from that. On the other hand, for a hotel like the Regency, we're expecting a very significant return on our investment, as this is really the first major, major upgrade that we've had in the hotel in 50 years. And we expect a significant increase in the hotels' EBITDA. So we believe that the investment will have a significant double-digit rate of return. The other place where we invest for the hotel company, other than maintenance CapEx and rehabilitation CapEx, is in new hotels. And there, we're doing that in the form of hotels that we're developing, either in Orlando or Chicago, or hotels that we're purchasing. And there, again, we don't put a number on the ROI that we expect out of the investment, but we think those ROIs will be very attractive for us.

At this time, there are no further questions. I'll now turn the call over to Mary Skafidas for any closing remarks.

Thank you, Laurie, and thank you all for your continued interest. A replay will be available on our website, loews.com, in approximately 2 hours, and that concludes today's call.

Thank you for participating in Loews' Second Quarter 2013 Earnings Conference Call. You may now disconnect.