Ladies and gentlemen, thank you for standing by. And welcome to the Loews Third Quarter 2016 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. And after the speakers' remarks, there will be a question-and-answer session. Thank you. I would now turn the conference over to Mary Skafidas. You may begin your call.

Thank you, Paula, and good morning, everyone. And welcome to Loews Corporation third quarter earnings conference call. A copy of our earnings release, earnings supplement and company overview 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, David Edelson. Following our prepared remarks this morning, we will have a question-and-answer session, which will include a selection of questions submitted via email by our shareholders. The shareholders, who would like to submit a question for consideration, please email me at mskafidas@loews.com. 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 made or implied of any forward-looking statements, due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made, 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 and earnings supplement for reconciliation to the most comparable GAAP measures. In a few minutes, our CFO, David Edelson will walk you through the key drivers for the quarter, as well as the quarterly progress of each of our subsidiaries in detail. But before he does, Jim Tisch, our CEO will kick-off the call. Jim, over to you.

Thank you, Mary, and good morning. The contrasting fortunes of CNA and Diamond Offshore are the proverbial corporate tale of two cities. Well, not exactly, but almost. While it may be the worst of times for Diamond and the offshore drilling industry, for CNA, we hope and expect to see even more improvement from its already stellar performance. Let's focus on the positive first and take a look at CNA and the commercial property/casualty insurance market. CNA has come a long way since 2009 when Tom Motamed first took over as its CEO. Today, CNA is a consistently profitable insurance carrier, with strong operating results and an intense focus on underwriting fundamentals. As previously announced, Tom will be retiring next month. And today marks his last CNA quarterly conference call, on which I made a surprise cameo appearance to sing his praises. I don't want to say that Tom took CNA from worst to first, but there certainly have been a vast improvement on his watch. And I think it's abundantly clear that this improvement is due to the herculean efforts of Tom and his team. While, I could spend the entire call listing all of Tom's accomplishments, let's focus on just a few key highlights. During his tenure, Tom has strengthened CNA's branch network, enhanced CNA's competitive position, dramatically upgraded CNA's talent, tremendously improved the commercial lines business, maintained specialty lines preeminent market standing, mitigated operational and financial risks, significantly fortified CNA's balance sheet. And oh yes – paid out about $2.5 billion of dividends in the past five years. Tom would be the first one to point out that there is still work to be done. However, the indisputable fact remains that Tom leaves CNA at a time when its capital competitive position and its brand have never…

Thank you, Jim, and good morning. For the third quarter, Loews reported net income of $327 million or $0.97 per share, as compared to net income of $182 million or $0.50 per share in last year's third quarter. The year-over-year increase in our third quarter earnings came almost entirely from higher contributions from CNA Financial and from the parent company investment portfolio. Let me start by walking through the key drivers of our year-over-year quarterly improvement. For your information, these key drivers are set forth on page 12 of our Q3 2015 earnings supplement, which can be found on loews.com. The first key driver was net investment income, both at the parent company and at CNA. The parent company portfolio generated a pre-tax gain of $36 million in Q3 2016 versus a pre-tax loss of $35 million last year. The gain was driven by alternative investments and gold-related equities while last year's loss was primarily caused by equities including gold-related equities and alternatives. The $71 million pre-tax improvement accounted for a $46 million after-tax improvement year-over-year. At CNA, the year-over-year swing in net investment income of $170 million pre-tax was driven by LP investments, which swung from a $93 million pre-tax loss in Q3 2015 to a $65 million gain this past quarter. This $158 million pre-tax swing resulted in a $92 million increase in net income at the Loews level. The second key driver was the meaningful improvement in CNA's Life & Group segment, which swung from a $30 million after-tax loss in last year's third quarter to net operating income of $6 million this year. This $36 million year-over-year improvement was mostly attributable to the long-term care reserve unlocking at year-end 2015 that reset the underlying actuarial assumptions on the long-term care reserves. The turnaround in CNA's Life…

Thank you, David. Paula, at this time, we'd like to open up the call for questions.

The floor is now open for your questions. Your first question comes from Bob Glasspiegel of Janney.

Good morning, Loews team. Quick question on Hotels. Is there a search on place for a permanent CEO, or is Jon going to be approved?

So, Jon is currently the CEO, and we're very happy with the way it's running like that. So, that's where it is.

Okay. Your year-to-date share repurchase of 3 million shares, I went back to 2007, that's the least active you've been through nine months for at least that long, if not longer. I'm curious, you mentioned – I think, David mentioned in the press release, acquisitions are a possibility. Years back, you said that the acquisitions were expensive and not that interesting, although you're kicking a lot of tires all the time. Wondering if you could sort of – where are we in your desire or need or opportunity to do a deal?

We are completely unchanged in terms of our desire or need to do a deal. We kicked – as I've said previously, we kicked lots of tires. We look at lots of things. We do due diligence and explore different options. But to-date, we haven't found anything in the past few years that fully makes sense for us at a price that also makes sense for us. But in terms of desire or need, that's not a factor in our looking at businesses, nor in setting prices for them. The sole thing that we think about when evaluating different opportunities is whether we believe it will create a good value over the intermediate-term to long-term for those shareholders. And on that score, I admit we've been wholly unsuccessful in executing a transaction, but you can be sure that we put 100% of our effort into looking for that transaction.

Am I over analyzing, Jimmy, by just connecting the dots of no share repurchase and I thought David mentioning acquisitions in his text for the first time in a while. When you put those two dots, connect those two dots, the chance that you're looking at a deal certainly seems to be a possibility for explaining it.

Over the years, I would say that trying to evaluate what we're thinking in terms of share repurchases by looking at what we've done is akin to looking at the entrails or the tea leaves. It's just there is no one factor that can fully describe or explain why does we buy or don't buy – repurchase our shares. When we think about share repurchases, there are an enormous number of factors that go into the equation: there's the price of Loews, there's the price of our subsidiaries, the value that we ascribe to our non-public businesses. There are times when even if we want to buy in the shares for one reason or another we're not allowed to repurchase the shares. There is what's going on in the wider market, both the market for interest rates and the market for shares. And there's not just what's going on today but our outlook for the future. So, we put all of these factors and more into our own special computer, which is collectively the brains of a few people around here, and we discuss it and decide what to do with respect to share repurchases. Like acquisitions, the one factor that drives us in determining whether to repurchase shares or not is our assessment of how it will contribute to the intermediate-term to long-term value for the remaining Loews' shareholders. So, it's all a long way of saying that we look at lots and lots of factors in determining whether to purchase shares. And as I'd like to say, we have a long and glorious history of share repurchases where we have, I think, 80% of the shares outstanding – sorry, 20% – 30% of the shares outstanding today that we had in the 1970s. And just since 2007, we've purchased 40% of the shares outstanding in 2007. So, my advice, try not to make too much of what we do one quarter or one year, look at the long-term picture because that's what we're looking at as well.

Your answer hasn't changed too much over the last quarter century. Thank you.

Thank you.

Your next question comes from Josh Shanker of Deutsche Dank.

Yeah, thank you. I've more hard questions about acquisitions and whatnot. Is there an overarching philosophy – Buffet says that he wants to be the buyer of choice for things and never sell anything. So when you think about Diamond, whether – when shares were at $100, do you have the rightsize holding in Diamond? Now that shares are at $20, do you have the rightsize holding? I mean, you could buy the whole thing, and you'd still have less of a stake in the overall Loews' empire than it was back when the stock was more pricy. How should we think of what the right amount of Diamond or any other stock for that matter that Loews should be owning?

So, we're very happy with our ownership in Diamond. A fun fact is that from 2006 to today, Diamond has paid more than twice the current share price of Diamond in dividends. So, we and all other Diamond shareholders, since 2006, have gotten over $40 in dividends from Diamond. I'm pleased to say that, notwithstanding those dividends, Diamond is still in very good, very strong financial shape. In terms of our desire to acquire more Diamond shares, I don't want to comment on it, because we'll let our actions speak for themselves. But I can just tell you that we are very pleased with our current level of holdings in Diamond Offshore. And there's no doubt in my mind that when as and if the offshore drilling market improves and shares of Diamond follow that that Loews' shareholders will be beneficiaries of it.

So, putting it another way, is there correct amount of Loews capital that should be exposed to the energy sector, and are you below that? Or was there ever a thought that at a certain point maybe in retrospect you realize that at peak pricing maybe the capital was overexposed, but how does that calculus go into your thinking of the rightsize the holding?

So, we don't feel a need to be invested in energy. We happen to have significant investments in energy as denoted by our shares of Diamond and our shares of Boardwalk. And we are very happy with those investments. We think that they will return very good returns for our shareholders over the coming years. But like I said, we don't feel that we have to be in energy per se or that we have to add to our investments in energy.

But for an investment you already have at the right price, you would not be against it?

Say again?

At the right price, you wouldn't be against owning more of something you already have that you know very well?

That's not what I said. I'm saying that we're very comfortable with what we own now, and I'm not stating whether or not we want to own more now or in the future.

Okay, all right. I'll let it rest. In the non-controlling parts of the investment portfolio, what are the benchmarks that you're using to determine whether or not you're being successful in bond investing and whatnot? Is there – and then, do you think that you've done a good job and how do you measure it?

So, are you referring primarily to the CNA investment portfolio or without...?

So, that would be CNA and the $5 billion or so of change you have over at Loews?

So, we're constantly comparing both those portfolios to different indices of performance. At CNA, I would say there is less latitude for significant outperformance because we have very strict benchmarks of the amount of equity like and equity-like investments that we can have at CNA. So most of the portfolio is investment grade. And also, we have important guidelines for duration for the different portfolios within CNA. So that when we measure the performance of CNA versus the benchmarks that we use to measure the performance, outperformance could mean a 100 basis points of outperformance. So, the numbers aren't – the numbers are – in terms of outperformance aren't that significant. With respect to our non-investment grade investments and our equity investments at Loews and at CNA, we use all manner of different indices. We look at hedge fund returns, industry hedge fund returns. We look at high yield bond returns. We look at equity returns. And overall I would say that we are very pleased with the returns that we've had in all our portfolios. Yes, from time to time, we see underperformance in one portfolio or another, but like I said, overall we're very pleased with where we are.

And then, coming back to Bob's question. Is there any time that you didn't necessarily have a large acquisition in mind but you preferred to make investment in the non-controlling area of Loews rather than use the cash to buy back stock?

Wait, repeat that again.

Is there a period of time when you're not looking to take a controlling stake in the business but you do find something out there in the market that's attractive from a non-controlling perspective that would keep you from buying your own shares?

That generally doesn't happen.

Okay. Thank you very much.

My pleasure.

At this time, there are no further audio questions. I will turn the floor back over to Mary for any pre-submitted questions.

Great. Thank you, Paula. We do have a few questions from our shareholders. The first one has to do with capital allocation. Jim, when allocating capital, how do you think about share repurchases versus other investments?

So, I guess, I think I already answered the question vis-à-vis our share repurchases. Let me just talk about how we think about buying businesses for Loews. And a benchmark that we use is, whether an acquisition would be accretive in terms of value over the intermediate to long-term for all our shareholders. As I've said before and I'll say it again, there are things we do look at and other things that we don't look at. The things we don't look at are things where a bad CEO in the course of a year or two could cause tremendous damage to a business. So, we tend not to look at retailing businesses, we tend not to look at businesses where a technological disruption could be an important factor. We tend not to look at technology businesses, where if you miss one relatively quick cycle in terms of the technology, you could be out of business. So we're looking for businesses that we believe can stand the test of time and be with us for a long time to create value. We're also generally looking for businesses that are based here in the United States. They could have international operations, but we'd like them to be based here in the U.S. And, as I said before, we've kicked an awful lot of tires. We've gone down the path pretty far with a number of businesses. But, in recent history, we haven't been able to close anything. When we think about buying businesses versus share repurchases, that's an important comparison that we make. We think about what is the future for Loews with the business and what would be the future of Loews without the business. And we think whether – we think how compelling it is to repurchase shares at any point in time versus the value that we can get in buying a business that we don't already control. And we're also – think very carefully about what we don't know concerning any business that we might buy. And we compare that to what we do know about our own businesses that we own and control with respect to share repurchases. There's no given formula that we use in assessing repurchases – purchases of businesses, just as there's no formula that we use in assessing whether to repurchase shares. But I would say that what we're doing is generally what any other portfolio manager does when they think about adding new securities to their portfolio. That's how I was trained. That's how a lot of people here were trained. And that's how we think about buying new businesses, repurchasing our own shares or investing in any of our individual businesses.

Thank you, Jim. That was very helpful. The next question has to do with CNA. Even though CNA had another strong quarter, it's still trading at such a discount to its book value per share. What do you think accounts for that discount?

I think there are a number of things that accounts for the discount to book value per share. First of all, CNA stock – CNA shares have moved up rather significantly, almost 20%, in the past few months or quarters. And I ascribe that to the fact that people are starting to recognize that CNA is a changed company, that it's got underwriting discipline, all the things that I spoke about with respect to my comments about Tom and CNA. Additionally, I think, a very important factor is that people are starting to see that the dividend that CNA has paid out, which is for the past two years at least have totaled $3 a share, makes it that at $30 a share. CNA was trading at a 10% yield, which is just too high a yield to be passed off. So I think that the 20% improvement over the past several quarters has been a recognition of those factors. I think a problem for people investing in CNA is that there is not significant liquidity. Loews owns 90% of CNA. We don't worry about the price from day-to-day, week-to-week or month-to-month. But the assuming lack of liquidity, I think, has kept a number of large purchasers from CNA. I think the other reason is that some people might be concerned about the long-term care book of business. I would say that we, at Loews, are very comfortable with it, but there's no doubt that some investors may be scared off a bit by it. The thing that – the thing that I would say is that the long-term care book of business at CNA is being very aggressively managed in terms of the attention that it is get – the management attention that it is getting and the focus on the part of senior management. I think all that and who knows what other factors may be out there that are affecting the overall valuation of CNA.

Great. Wonderful. Thank you, Jim.

Thank you, Jim and David. That's all the time we have for today. And thank you all, always for your continued interest in Loews. A replay will be available on our website, loews.com in approximately two hours. That concludes Loews' call for today.

Thank you. This does conclude today's conference. You may now disconnect.