2009 Loews Annual Meeting

The Inoculated Investor

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2009 Loews (LTR) Annual Meeting Disclaimer: These notes were taken in real time at the Loews Annual Meeting in New York, NY on Tuesday, May12th, 2009 without the use of a recorder. The goal was to get the gist of the questions and as much of the answer as possible. Unfortunately this was a very brief meeting and there was only one question asked by a shareholder of any substance. Please excuse any mistakes or omissions. Speaker: CEO Jim Tisch 1.

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Introductory Remarks a. 2008 was a tough year for businesses and investors alike b. LTR was not unscathed but overall they feel as though they weathered the storm pretty well i. This was a result of their strong balance sheet and strong cash flows from operating subsidiaries c. They were very happy with the performance of their two energy subsidiaries Boardwalk Pipeline and Diamond Offshore i. Both had record earnings in 2008 1. At Diamond they saw high utilization and day rates ii. Highmount, however, has been hurt by the large drop in the price of natural gas d. CNA posted solid underwriting profit in 2008 i. But they had severe losses in their securities portfolio e. Loews Hotels performed well in 2008, given the experience of the competitors and the industry as a whole i. Are expecting an extremely challenging 2009 f. In 2008 they completed the spinoff of Lolliard g. In 2008 they reduced the number of shares outstanding by 18% through an exchange Individual Subsidiary discussion a. Boardwalk i. Reached a milestone in 2008 as all of its expansion projects were in the process of being completed 1. When they are complete the company will have doubled their capacity since 2005 ii. As a result of some anomalies found in the pipeline, revenues for Q1 2009 were depressed 1. Will continue to be depressed in the near future 2. Have had to shutdown portions of the pipeline to address these anomalies a. There will also be some costs associated with fixing these b. However, the overall expansion budget will not go up meaningfully 3. Still had solid cash flow a. In Q1 2009 they paid a 48.5 cent distribution i. Represented their 13th consecutive quarterly distribution increase b. CNA i. The good news is that CNA has continued to improve its claims management and operations 1. However, losses in the investment portfolio as a result of the dislocation in the securities market have been severe a. Unrealized losses have improved since the end of 2008 b. Book value per share is up as well ii. CNA has new strategic initiatives being implemented by Tom Motamed 1. Are expecting great things from him in the future

The Inoculated Investor c.

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Diamond i. Overall 2008 was a very solid year for Diamond 1. However, the dramatic fall in natural gas prices at the end of 2008 has impacted the company in 2009 2. Saw record day rates and utilization rates in 2008 a. In Q1 2009 day rates were up again but utilization rates were down 3. Paid a special dividend of $1.87 in addition to the normal $.125 dividend a. This provided LTR with $140M in cash d. Highmount i. Since becoming a subsidiary of LTR in 2007, Highmount has already been through and entire natural gas cycle 1. Went from $7 to $13 then down to $3.75 and now back over $4 2. As a result of the fall in natural gas prices the company had to take a non-cash impairment in Q1 2009 a. Based on the spot price of natural gas they were forced to write down some assets 3. In the long run LTR believes that natural gas is a great investment a. They bought long lived assets in order to offset their inability to predict short term fluctuations in natural gas prices e. Loews Hotels i. Cutbacks in leisure, business and luxury travel have recently hurt Loews Hotels 1. However, they feel they are well situated to weather the storm Overview a. Loews has always focused on having a strong balance sheet i. This is in order to take advantage of attractive investment opportunities and to be able to assist their subsidiaries when they cannot access the capital markets ii. Had to $2.3B in cash at the end of 2008 and that was up to $2.5B at the end of Q1 2009 b. Have lived through some tough times (over the last 50 years) since the company was first listed in 1959 i. They know things are tough now but they expect that the economy will eventually get better and night will give way to some daylight Q&A a. Q1: 4 directors do not own any shares of LTR. While they do own some options, would a minimum ownership guideline that some other companies use for directors be appropriate for LTR in order to align the Board with shareholders? i. Tisch 1. Each and every director has the welfare of shareholders entirely in mind 2. They do own options that provide wealth and income a. Serve to align the interests of the Board and shareholders sufficiently