Ladies and gentlemen, thank you for standing by and welcome to the Loews Corporation Quarter Three 2017 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will open the call for your questions. It is now my pleasure to hand over program over to Mary Skafidas. Please go ahead.

Thank you, Kristen. Good morning, everyone, and welcome to Loews Corporation's quarterly 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. 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 in any forward-looking statements due to a wide range of risks, 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 a 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. However, before he does, Jim Tisch, our CEO, will kick off our call. Jim, over to you.

Thank you, Mary. Good morning, and thank you for joining us today. This quarter I'd like to focus primarily on Loews Hotels and the latest developments that are going on there. But before I do, I want to give a brief update on the impact of hurricanes, Irma and Harvey, on Loews' subsidiaries in Houston and Florida. First and foremost, we're counting our blessings that all our employees are safe and fully accounted for. But of course, many were severely affected by these catastrophic storms. We're hoping to provide support to those employees and their families and happy to report that Boardwalk, Diamond Offshore, and Loews Hotels were minimally impacted from an operations perspective. Our CFO, David Edelson, will share details later in our call about the impact that these storms have had on CNA and its results. But I would be remiss if I didn't highlight how well the company has navigated this challenging, catastrophe-filled quarter. CNA's posted net operating income of $159 million despite losses from hurricanes Harvey, Irma and Maria, and the company's capital position actually improved during the quarter. And now on to Loews Hotels. Over the last two years, Loews Hotels has experienced dynamic growth. At the end of 2015, we had 23 hotels with almost 11,500 rooms. Since then, 2 hotels have been sold and we have opened and/or committed to opening 7 new hotels, which will add about 5,000 keys to our room count. Even while the chain has been expanding, operating margins have been increasing steadily. Additionally, Jon Tisch step back into his role as CEO of Loews Hotels last fall, just in time to leave this charge. There is no one we trust more at the helm. Notwithstanding the company's impressive growth, the hospitality industry is facing an increasingly challenging environment.…

Thank you, Jim, and good morning. For the third quarter, Loews reported net income of $157 million or $0.46 per share, down from $327 million or $0.97 per share in last year's third quarter. Page 17 of our earnings supplement sets forth the key quarterly and year-to-date drivers. Two principal factors caused the $170 million year-over-year decline in our third quarter net income. Catastrophe losses at CNA, related largely to hurricanes Harvey, Irma and Maria, reduced our third quarter net income by a $170 million. Last year, the negative impact of catastrophes was only $10 million. Additionally, both CNA and Diamond incurred debt redemption charges during the quarter, which combined to reduce our net income by $35 million. Absent CNA's catastrophe losses and the debt redemption charges, our pro forma net income was $362 million, up 7% from last year's third quarter. Now for more on CNA. The company had a strong quarter operationally, which isn't obvious from the $178 million year-to-year decline in CNA's contribution to our third quarter net income. Let me say a bit more about CNA's catastrophe losses and debt redemption charge before highlighting the company's continued underwriting progress. CNA is in the insurance business, so catastrophe losses are par for the course. The good news is that CNA's losses were very much in line with, if not somewhat below, its market share in the affected areas. We believe this highlights the company's strong risk management. Overall, CNA incurred $269 million pre-tax of catastrophe losses in the quarter versus only $16 million in Q3 2016. As previously mentioned, these cat losses reduced our net income by a $170 million this quarter as compared to $10 million last year. Now for the debt redemption charge. During the quarter, CNA issued $500 million of tenure notes and redeemed…

Wonderful. Thanks, David. Kristen, we're ready to begin the question-and-answer portion of our call.

Thank you. Our first question comes from the line of Josh Shanker with Deutsche Bank.

Good morning.

Hello?

How are you doing there? I wanted to ask some questions about incentive compensation and whatnot. It's an interesting sort of year quarter. CNA is doing great, but you can't account for the weather. And so, I want to know how you think about – obviously, CNA reduced their own compensation scheme and year-over-year you lose money or you lose money a quarter, because by the way the December's an ROE year-to-date, but we're not doing as well as you want to. That affects competition. How should that affect compensation at Loews? Is it purely the performance of the underlying assets, is it the operational performance? What do we think there?

For the Loews – incentive compensation?

Yeah. In a year where one of your major assets still maybe performing well, but for some reason lose a significant amount of money due to something like the weather?

So, what I would direct you to do is take a look at our proxy statement, which has a very long and detailed explanation not only of our incentive compensation system, but also of our incentive compensation philosophy. And I think that that's really important. I look at that section often every year to make sure it reflects management's view of how our compensation system works here, and I think that what we have put together while unconventional, really suits us just fine.

Okay. And does it reflect these unusual items? I mean, maybe I'll go back and take a look, but maybe what (23:04)

Let me describe briefly what it is. We have a very collegial group of senior executives here. We are managing here for the intermediate to the long term. We are not managing for an individual year. As I constantly say, our goal is to increase long-term value. And so, the thing that we do not want to do is encourage actions that might lead to spiking earnings in one year or the next, or doing things that might not lead to long-term value, but instead might just lead to a short-term pop. So we've constructed a compensation system that focuses on generally consistent earnings for senior executives, that compensates them fairly for what they do and generally results in compensation that does not have spikes because of one action or another. By doing that, we have a very collegial group here at the Loews senior management team, because everybody knows that this is a team effort to build value. And additionally, because I think in part of the way our compensation system works, there is absolutely no desire on anybody's part to spike earnings in one year or the next. And so, it's a system that is different than many other systems. We do give, to senior executives and other Loews' employees, restricted stock units that hopefully will reflect – hopefully and ultimately will reflect the value that has been created and provide some incentive, not that it's needed, but provide some incentive to the senior executives to focus on long-term value at Loews.

Okay. Well, I appreciate that. And on the investments you're making in hotels, how should I think about the impact on 2018, 2019 cash flow?

In terms of what, I'm sorry?

The investments in hotels?

The investments in Loews Hotels is entirely manageable. Loews Corporation will be providing some of the planned investments, but it's not going to be significant draw on the Loews treasury.

Okay. Thank you very much.

Thank you.

Our next question comes from Bob Glasspiegel with Janney.

Good morning, Loews.

Good morning.

Good morning, Bob.

The hotel discussion, I appreciate both the discussion and increased disclosure. When we think about how to value it, I'm just curious what you look at adjusted EBITDA as sort of what I look at. But is there something beyond that like asset value or per room value or off balance sheet, assets that you're generating that we should think of in terms of the valuation?

So in order to determine the value, I think what you have to do is look at it on a case-by-case basis, right. If you want to do a sum of the parts for Loews Hotels, you've got – for some hotels, it's fine to look at EBITDA; for a lot of them it is, but you have to understand the marketplace in which they're operating. There are other hotels that for one reason or another might not be earning in one year or multiple years significant EBITDA, but that can nonetheless be worth a lot of money. So, it's really a difficult job for someone to value all the hotels. It takes a lot of time, attention and focus. Oftentimes, it means going and visiting properties and just understanding what the potential value might be. It's something that really needs to be done by someone who is well immersed in the hotel business, who understands relative values and they should be able to come up with a pretty accurate number of what each of the individual hotels might be worth.

Great. That's very helpful. You said Jon had some challenges in the hotel that he's facing, but that's probably less than what he's facing in his other operation he's involved with these days. Sorry, I had to go there.

Yeah.

That's okay.

On oil, you were – on the fourth quarter 2015, kudos to you for saying oil was bouncing along in the bottom and I think you threw out somewhere between $60 and $70 as a price in three to five years, and we're more than halfway towards that target. Where does it have to get before we start to see kernels of positive in your businesses?

First of all, some self-promotion. It's more than half way there. In fact, Brent is already over $60. So as I like to say, I'm going to declare victory and retreat. In terms of what has to happen now for there to be increased investment, I think it's going to happen. And as opposed to the CEO of Diamond Offshore, I think it's going to happen in fact more rapidly than Mark Edwards does. We allow different executives here to have different views. I think what's going to happen – what's happened is that there has been an enormous, enormous underinvestment in productive capacity worldwide. It's breathtaking how big that underinvestment has been. And it is my belief, based on study and research that shale oil produced in the United States, we'll not be able to fully supply worldwide oil demand over the next 5 to 10 years that there is a limit to the shale productive capacity in the United States. I know that that statement may be going against history and the trend so far, but I think that what you will see is that there is a limit to how much shale oil can be produced here. Yes, it can increase by 1 million barrels this year and 1 million barrels next year, and maybe even 1 million barrels for one or two years after that. But at some point in time, shale production will level off in the United States. And then what the world will need is more productive capacity. Typically, that productive capacity can take three to five years to come online. And already for the past 2 1/2 or 3 years, the world has been seriously under investing in that productive capacity. So, my overall view is that oil companies need – major oil companies will be forced by the market to invest in productive capacity. To date, they've had to decide between dividends and capital investing and they've come down squarely on the side of dividends. But it is my guess that with Brent trading over $60 and with WTI at $53 or $54 a barrel, this is going to start to accumulate the cash flow that will enable them to crank up some of their offshore exploration and development projects. So, while I don't expect a flood of waters this quarter into Diamond Offshore, my guess is that over the coming year or two, the offshore drilling industry will see a significant increase in inquiries for offshore drilling services.

Well, I didn't mean to under-congratulate you, but it's nice to hear that there could be light at the end of the tunnel within a couple of years. Is that what you're saying?

Yes. Yes, yes. Yes, I think we've seen – this is not hard to say, I think we've seen the low in oil prices that – look, that was $27 a barrel, but...

Fourth quarter 2015 call, yeah.

Yeah. But most important, I think that I'm starting to hear a bell ringing that investment in productive capacity beyond shale oil is going to start to increase.

Appreciate the answers, Jimmy.

My pleasure.

That will conclude the question-and-answer portion of today's call. I will hand the program back over to Mary.

Great. Thanks, Kristen. Always thanks to all of you for your continued interest. A replay will be available on our website at loews.com in approximately two hours. That concludes our call. Thank you.

Ladies and gentlemen, thank you for joining the Loews Corporation quarter three 2017 earnings conference call. You may now disconnect your lines, and have a wonderful day.