Good day, everyone, and welcome to today's Loews Corporation Q4 2021 Earnings Conference Call. At this time all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions]. Please note this call maybe recorded and I will be standing by should you need any assistance. It is now my pleasure to turn today’s call over to Mary Skafidas, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Ashley, and good morning, everyone. Welcome to the Loews call. A copy of our earnings release, earnings supplement and company overview may be found on our website, loews.com. On this call -- 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 with questions from shareholders. 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 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 in earnings supplement for reconciliation to the most comparable GAAP measures. With that, I'd like to turn the call over to Jim. Jim, over to you.

Thank you, Mary, and good morning. Loews had a strong fourth quarter and year with our consolidated subsidiaries making good progress in 2021. What's more, these positive results were achieved in a period marred by the persistence of the COVID-19 pandemic, global supply chain disruptions and the return of inflation. More on inflation later in the Q&A. Before we talk about the financial performance of our subsidiaries, I'd like to provide an update concerning the ongoing Boardwalk litigation. Many shareholders are familiar with the class action litigation relating to our 2018 acquisition of the minority Master Limited Partnership interest in Boardwalk Pipelines. In November, the Delaware Court of Chancery issued a decision stating that Loews' breached the Boardwalk partnership agreement, a decision with which we vehemently disagree. The same court then awarded the class of former Boardwalk unitholders approximately $690 million plus interest. Loews has appealed this ruling to the Delaware Supreme Court since we firmly believe that the Chancery Court misapplied the factual underpinnings of the case and misinterpreted the applicable law. There's a lot more I'd like to say, but on advice of counsel, I'm going to limit myself to this brief statement. Moving on to other happier topics. On today's call, I'd like to focus on the performance of CNA and Loews Hotels. CNA continues to be a success story for Loews, producing record core income of $1.1 billion for the year and no small part due to the company's laser-like focus on underwriting. CNA's underlying combined ratio decreased by 1.7 points in 2021, driven by the expense ratio. The underlying loss ratio for the year was flat at about 60%. Needless to say, we're pleased with CNA's operational progress. In 2021, CNA benefited from the rate increases resulting in significant premium growth. The company's P&C gross…

Thank you, Jim, and good morning, everyone. Today, we reported fourth quarter net income of $343 million or $1.37 per share compared to $397 million or $1.45 per share in last year's fourth quarter. For the full year, we reported net income of $1.58 billion or $6.07 per share, while in 2020, we posted a net loss of $931 million or $3.32 per share. I will briefly review our fourth quarter results and then turn to the full year. The year-over-year decline in our fourth quarter net income obscured impressive operating improvements at CNA and Boardwalk Pipelines as well as a continued rebound at Loews Hotels. Underwriting results in CNA's core P&C business were outstanding. CNA's pretax underwriting gain rose 13% on the back of an 8% increase in net earned premium and a 50 basis point year-over-year improvement in the combined ratio to 92.9%. The underlying combined ratio, which excludes catastrophe losses and prior year development, improved 1.4 points to 91.2% in this year's fourth quarter. CNA's consolidated net investment income was basically flat compared to the prior year quarter. By segment, it was higher in Life & Group and lower in P&C and Corporate. The decline in CNA's year-over-year contribution to our net income was mainly due to lower net investment gains as well as to the Life & Group and Corporate segments. Investment gains were significant in last year's Q4, driven mainly by the mark-to-market on CNA's holdings of nonredeemable preferred stock. Gains were de minimis this year. In the Life & Group segment, the long-term care block experienced slightly adverse morbidity trends this year after experiencing favorable morbidity last year. And in the Corporate segment, aside from the previously mentioned drop in net investment income, two other factors contributed to the year-over-year decline, a higher noneconomic…

Great. Thank you, David. We are going to move on to the Q&A portion of the call. We have a number of questions from shareholders. The first question is for Jim. Jim, can you please give us more color on your view of share repurchases?

I sure can. Loews a long-established policy of share repurchases represents a key element of our capital allocation strategy. In 2021, we bought back 21.1 million shares of Loews common stock for a total of $1.1 billion, which was the equivalent of almost 8% of the shares outstanding at the start of the year. During the 10-year period for January of 2012 through December of 2021, Loews has spent $6.8 billion on repurchases, retiring about 37% of our common shares outstanding at the beginning of 2012. Stated another way, 10 years ago, we had about 60% more shares outstanding than we do today. In certain political circle, share buybacks have come under fire, especially over the last few months. It is our strong belief that restricting the company's ability to repurchase their shares would be detrimental to all investors. Stock repurchases benefit investors, promote efficient capital allocation and significantly reduce volatility in the market. The market stabilization, the results from allowing companies to buy back their shares benefits all shareholders, including retail investors. Capital that flows to shareholders from these repurchases may be reinvested, not just in S&P 500 companies, but rather in companies of all shapes and sizes. We believe actions that limit or restrict allocation of capital, either through regulation or by tax will have a negative effect on stock market valuations.

Thank you, Jim. Next question has to do with Boardwalk. Over the past several years, there has been an increased focus on the importance of reducing methane emissions, both by regulators and by the public. Can you please share with us what Boardwalk has done to reduce their emissions?

Sure. Boardwalk is focused on reducing methane emissions from its natural gas pipeline system, not only because it's the right thing to do for the environment, but also because we believe it's the right thing to do for Boardwalk's business. Boardwalk has been focused on meeting and in certain cases, exceeding regulatory obligations by reducing emissions from its pipeline and storage assets. In 2020, Boardwalk achieved about a 30% year-over-year reduction in methane emissions at certain key sites. Boardwalk is also an active member of a coalition whose goal is to lower methane emissions by 2025 to less than 1% of total natural gas produced nationwide. Boardwalk uses a number of strategies to reduce their methane emissions. These strategies include replacing older compression equipment as appropriate with low-emission -- low-emission fuel-efficient units, modifying older fuel systems as necessary on certain reciprocating compression equipment to lower fuel consumption and emissions, and conducting emission surveys and performing maintenance and repairs on identified component leaks. Reducing methane emissions is and will remain a priority for Boardwalk.

Great. Thank you, Jim. The next question has to do with how Loews computes the value with non-publicly traded assets, specifically for its hotel business and its interest in Altium?

So we look at a number of factors when determining intrinsic value, including industry outlook, our subsidiary's growth potential, operational efficiency and management. When evaluating the industry outlook, we consider cyclical opportunities and risks, potential for technological disruption and how the subsidiary is positioned compared to its peers. When looking at growth potential, we evaluate both organic and inorganic growth opportunities. And consider whether or not the subsidiary can self-fund those opportunities. In terms of operational efficiency, we analyze potential opportunities for improvements and the role of technology in driving efficiency. Our assessment of the die of our subsidiaries is not static, but rather is adjusted as markets and circumstances change. Each subsidiary have metrics that are specific to this industry. For example, one important metric for Loews Hotels is adjusted EBITDA, which we believe is more meaningful to the lodging industry than net income. Keep in mind, however, that in the last full year of non-pandemic affected operations for our hotels in 2019. Since then, Loews Hotels has added about 3,700 rooms and the full earnings potential of these rooms have yet to be realized. We believe that in 2022, Loews hotels will continue to recover from the effects of the pandemic, but it's still uncertain when occupancy rates will return to pre-pandemic levels. In terms of Altium Packaging, we don't make a lot of information public. Instead, we report Altium as part of the Corporate segment. Altium does not have a material impact on Loews, not only due to the size of the company, but also as a result of our reduced stake since the sale of 47% of this subsidiary. However, we continue to believe in the long-term growth potential of the business.

Great. Thank you, Jim. Next question, some of our shareholders are starting to call the desert of our earnings call, which has to do with inflation. So Jim, for the past three quarters, you have ended our earnings conference call with your views on inflation interest rate. Can you please update us on these topics?

Mary, I'd be delighted to give you my rant. First, let me recap my comments over the last year. On the earnings call for the first quarter of 2021, I spoke about the nascent cost push and demand pull inflation that was going to be brought about by the easy monetary policy and big deficit spending. For the second quarter, I spoke about the cycle of inflation that was developing along with growing labor shortages. On the third quarter call, I spoke about the wage price spiral and how interest rates were too damn low. At the time, the inflation rate was 5.4%, and that said, still have their head in the sand with respect to the almost 0% Fed funds rate and their monthly $120 billion purchase of federal and mortgage securities. So here we are on the fourth quarter call and the Fed has finally woken up to the problem that they should have foreseen a year ago. The problem now is that the Fed is taking its sweet time putting in place their action plan to deal with the sky rocketing inflation and the overheating economy. Instead of doing something about the 7% year-over-year increase in the CPI, the Fed is only talking about it. And the Fed has led the market to perceive that they will raise Fed funds rates four times in the course of this year. That's 100 basis points this year, meaning that at this pace, it will take them seven years to get Fed funds to the current level of inflation. While I don't think that inflation will stay at the 7% level, I do believe that with our quicker and more decisive action by the Fed, it will be seen that they are fighting a forest fire with a water pistol.…

Great. That concludes the Loews call for today. As always, thank you, Jim. Thank you, David, and thanks to all of you for your continued interest. Please feel free to reach out to me with any additional questions at mskafidas@loews.com. A replay will be available on our website, loews.com, in approximately two hours. You may now disconnect.

Thank you. And this does conclude today's program. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.