x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
|
|
|
|
THE
SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d)
|
|
|
|
OF
THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
13-2646102
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer
|
incorporation
or organization)
|
|
Identification
No.)
|
|
Yes
|
X
|
|
No
|
|
|
Yes
|
X
|
|
No
|
|
Class
|
Outstanding
at July 22, 2005
|
|
Common
stock, $1.00 par value
|
185,695,995
shares
|
|
Carolina
Group stock, $0.01 par value
|
68,049,559
shares
|
Page
|
||
No.
|
||
Part
I. Financial Information
|
||
Item
1. Financial Statements
|
||
Consolidated
Condensed Balance Sheets June 30, 2005 and December 31,
2004
|
3
|
|
Consolidated
Condensed Statements of Income Three and six months ended June
30, 2005
and 2004 Restated
|
4
|
|
Consolidated
Condensed Statements of Cash Flows Six months ended June 30, 2005
and 2004
Restated
|
5
|
|
Notes
to Consolidated Condensed Financial Statements
|
6
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
64
|
|
Item
3. Quantitative and Qualitative Disclosures about
Market
Risk
|
121
|
|
Item
4. Controls and Procedures
|
124
|
|
Part
II. Other Information
|
125
|
|
Item
1. Legal Proceedings
|
125
|
|
Item
4. Submission of Matters to a Vote of Security
Holders
|
126
|
|
Item
6. Exhibits
|
127
|
June
30,
|
December
31,
|
||||||
2005
|
2004
|
||||||
(In
millions)
|
|||||||
Assets:
|
|||||||
Investments:
|
|||||||
Fixed
maturities, amortized cost of $31,805.6 and $32,435.1
|
$
|
33,067.3
|
$
|
33,502.1
|
|||
Equity
securities, cost of $706.6 and $501.5
|
833.8
|
664.1
|
|||||
Limited
partnership investments
|
1,829.0
|
1,783.4
|
|||||
Other
investments
|
45.0
|
42.1
|
|||||
Short-term
investments
|
9,506.1
|
8,306.8
|
|||||
Total
investments
|
45,281.2
|
44,298.5
|
|||||
Cash
|
326.4
|
219.9
|
|||||
Receivables
|
18,089.7
|
18,696.2
|
|||||
Property,
plant and equipment
|
4,864.4
|
4,840.7
|
|||||
Deferred
income taxes
|
654.2
|
640.9
|
|||||
Goodwill
and other intangible assets
|
284.4
|
294.1
|
|||||
Other
assets
|
2,865.4
|
2,808.7
|
|||||
Deferred
acquisition costs of insurance subsidiaries
|
1,248.1
|
1,268.1
|
|||||
Separate
account business
|
571.1
|
567.8
|
|||||
Total
assets
|
$
|
74,184.9
|
$
|
73,634.9
|
|||
Liabilities
and Shareholders’ Equity:
|
|||||||
Insurance
reserves:
|
|||||||
Claim
and claim adjustment expense
|
$
|
30,798.2
|
$
|
31,523.0
|
|||
Future
policy benefits
|
6,068.6
|
5,882.5
|
|||||
Unearned
premiums
|
4,413.7
|
4,522.1
|
|||||
Policyholders’
funds
|
1,653.8
|
1,724.6
|
|||||
Total
insurance reserves
|
42,934.3
|
43,652.2
|
|||||
Payable
for securities purchased
|
2,317.8
|
595.5
|
|||||
Collateral
on loaned securities and derivatives
|
1,372.6
|
918.0
|
|||||
Short-term
debt
|
99.1
|
1,010.1
|
|||||
Long-term
debt
|
5,139.6
|
5,980.2
|
|||||
Reinsurance
balances payable
|
2,781.8
|
2,980.8
|
|||||
Other
liabilities
|
4,316.4
|
4,094.5
|
|||||
Separate
account business
|
571.1
|
567.8
|
|||||
Total
liabilities
|
59,532.7
|
59,799.1
|
|||||
Minority
interest
|
1,750.4
|
1,679.8
|
|||||
Shareholders’
equity
|
12,901.8
|
12,156.0
|
|||||
Total
liabilities and shareholders’ equity
|
$
|
74,184.9
|
$
|
73,634.9
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions, except per share data)
|
(Restated
-
|
(Restated
-
|
|||||||||||
See
Note 17)
|
See
Note 17)
|
||||||||||||
Revenues:
|
|||||||||||||
Insurance
premiums
|
$
|
1,911.7
|
$
|
2,105.3
|
$
|
3,810.8
|
$
|
4,272.3
|
|||||
Net
investment income
|
406.3
|
410.7
|
860.5
|
942.2
|
|||||||||
Investment
gains (losses)
|
32.5
|
92.2
|
9.7
|
(359.8
|
)
|
||||||||
Manufactured
products (including excise taxes of $179.0, $169.5,
$335.2 and
$325.7)
|
968.7
|
899.3
|
1,802.9
|
1,707.5
|
|||||||||
Other
|
711.5
|
408.2
|
1,288.0
|
846.8
|
|||||||||
Total
|
4,030.7
|
3,915.7
|
7,771.9
|
7,409.0
|
|||||||||
Expenses:
|
|||||||||||||
Insurance
claims and policyholders’ benefits
|
1,581.8
|
1,620.5
|
3,015.0
|
3,258.7
|
|||||||||
Amortization
of deferred acquisition costs
|
374.5
|
307.1
|
752.1
|
740.3
|
|||||||||
Cost
of manufactured products sold
|
594.1
|
547.4
|
1,099.8
|
1,034.9
|
|||||||||
Other
operating expenses
|
755.8
|
805.9
|
1,498.8
|
1,560.8
|
|||||||||
Interest
|
85.8
|
73.5
|
215.6
|
172.6
|
|||||||||
Total
|
3,392.0
|
3,354.4
|
6,581.3
|
6,767.3
|
|||||||||
638.7
|
561.3
|
1,190.6
|
641.7
|
||||||||||
Income
tax expense
|
164.7
|
125.0
|
342.0
|
171.2
|
|||||||||
Minority
interest
|
40.2
|
25.8
|
75.1
|
15.1
|
|||||||||
Total
|
204.9
|
150.8
|
417.1
|
186.3
|
|||||||||
Net
income
|
$
|
433.8
|
$
|
410.5
|
$
|
773.5
|
$
|
455.4
|
|||||
Net
income attributable to:
|
|||||||||||||
Loews
common stock
|
$
|
378.1
|
$
|
369.9
|
$
|
671.3
|
$
|
380.4
|
|||||
Carolina
Group stock
|
55.7
|
40.6
|
102.2
|
75.0
|
|||||||||
Total
|
$
|
433.8
|
$
|
410.5
|
$
|
773.5
|
$
|
455.4
|
|||||
Basic
net income per share:
|
|||||||||||||
Loews
common share
|
$
|
2.04
|
$
|
1.99
|
$
|
3.62
|
$
|
2.05
|
|||||
Carolina
Group share
|
$
|
0.82
|
$
|
0.70
|
$
|
1.50
|
$
|
1.29
|
|||||
Diluted
net income per share:
|
|||||||||||||
Loews
common share
|
$
|
2.03
|
$
|
1.99
|
$
|
3.61
|
$
|
2.05
|
|||||
Carolina
Group share
|
$
|
0.82
|
$
|
0.70
|
$
|
1.50
|
$
|
1.29
|
|||||
Basic
weighted average number of shares outstanding:
|
|||||||||||||
Loews
common stock
|
185.65
|
185.49
|
185.63
|
185.48
|
|||||||||
Carolina
Group stock
|
68.03
|
57.97
|
68.01
|
57.97
|
|||||||||
Diluted
weighted average number of shares outstanding
|
|||||||||||||
Loews
common stock
|
185.90
|
185.63
|
185.87
|
185.62
|
|||||||||
Carolina
Group stock
|
68.10
|
57.98
|
68.08
|
57.99
|
Six
Months Ended June 30
|
2005
|
2004
|
|||||
(In
millions)
|
(Restated
-
|
||||||
See
Note 17)
|
|||||||
Operating
Activities:
|
|||||||
Net
income
|
$
|
773.5
|
$
|
455.4
|
|||
Adjustments
to reconcile net income to net cash provided (used) by operating
activities - net
|
127.6
|
333.2
|
|||||
Changes
in operating assets and liabilities-net:
|
|||||||
Reinsurance
receivables
|
1,365.5
|
(1,133.9
|
)
|
||||
Other
receivables
|
(91.8
|
)
|
162.0
|
||||
Federal
income tax
|
327.5
|
633.5
|
|||||
Prepaid
reinsurance premiums
|
161.8
|
72.8
|
|||||
Deferred
acquisition costs
|
20.0
|
118.3
|
|||||
Insurance
reserves and claims
|
(717.9
|
)
|
956.8
|
||||
Reinsurance
balances payable
|
(199.0
|
)
|
(203.4
|
)
|
|||
Other
liabilities
|
(154.5
|
)
|
(564.0
|
)
|
|||
Trading
securities
|
29.6
|
141.5
|
|||||
Other-net
|
(286.4
|
)
|
165.1
|
||||
1,355.9
|
1,137.3
|
||||||
Investing
Activities:
|
|||||||
Purchases
of fixed maturities
|
(43,736.3
|
)
|
(41,868.5
|
)
|
|||
Proceeds
from sales of fixed maturities
|
39,144.2
|
29,410.3
|
|||||
Proceeds
from maturities of fixed maturities
|
5,214.1
|
5,096.4
|
|||||
Purchases
of equity securities
|
(205.9
|
)
|
(128.2
|
)
|
|||
Proceeds
from sales of equity securities
|
150.6
|
318.2
|
|||||
Purchases
of property, plant and equipment
|
(213.7
|
)
|
(124.5
|
)
|
|||
Proceeds
from sales of property and equipment
|
10.8
|
15.4
|
|||||
Change in collateral on loaned securities and derivatives
|
454.6
|
528.3
|
|||||
Sales
of businesses
|
11.6
|
644.5
|
|||||
Change
in short-term investments
|
(250.0
|
)
|
5,261.4
|
||||
Change
in other investments
|
70.4
|
78.0
|
|||||
650.4
|
(768.7
|
)
|
|||||
Financing
Activities:
|
|||||||
Dividends
paid
|
(117.6
|
)
|
(108.4
|
)
|
|||
Dividends
paid to minority interests
|
(7.3
|
)
|
(7.4
|
)
|
|||
Issuance
of common stock
|
6.0
|
0.9
|
|||||
Principal
payments on debt
|
(3,201.1
|
)
|
(554.3
|
)
|
|||
Issuance
of debt
|
1,418.0
|
297.5
|
|||||
Returns
and deposits of policyholder account balances on investment
contracts
|
10.3
|
||||||
Other
|
2.2
|
2.7
|
|||||
(1,899.8
|
)
|
(358.7
|
)
|
||||
Net
change in cash
|
106.5
|
9.9
|
|||||
Cash,
beginning of period
|
219.9
|
180.8
|
|||||
Cash,
end of period
|
$
|
326.4
|
$
|
190.7
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions, except per share data)
|
|||||||||||||
Net
income:
|
|||||||||||||
Loews
common stock:
|
|||||||||||||
Net
income as reported
|
$
|
378.1
|
$
|
369.9
|
$
|
671.3
|
$
|
380.4
|
|||||
Deduct:
Total stock-based employee compensation expense determined
under the
fair value based method, net
|
(1.3
|
)
|
(1.2
|
)
|
(2.6
|
)
|
(2.5
|
)
|
|||||
Pro
forma net income
|
$
|
376.8
|
$
|
368.7
|
$
|
668.7
|
$
|
377.9
|
|||||
Carolina
Group stock:
|
|||||||||||||
Net
income as reported
|
$
|
55.7
|
$
|
40.6
|
$
|
102.2
|
$
|
75.0
|
|||||
Deduct:
Total stock-based employee compensation expense determined under
the fair
value based method, net
|
(0.1
|
)
|
(0.1
|
)
|
(0.1
|
)
|
(0.1
|
)
|
|||||
Pro
forma net income
|
$
|
55.6
|
$
|
40.5
|
$
|
102.1
|
$
|
74.9
|
|||||
Basic
net income per share:
|
|||||||||||||
Loews
common stock:
|
|||||||||||||
As
reported
|
$
|
2.04
|
$
|
1.99
|
$
|
3.62
|
$
|
2.05
|
|||||
Pro
forma
|
2.03
|
1.99
|
3.60
|
2.04
|
|||||||||
Carolina
Group stock:
|
|||||||||||||
As
reported
|
$
|
0.82
|
$
|
0.70
|
$
|
1.50
|
$
|
1.29
|
|||||
Pro
forma
|
0.82
|
0.70
|
1.50
|
1.29
|
|||||||||
Diluted
net income per share:
|
|||||||||||||
Loews
common stock:
|
|||||||||||||
As
reported
|
$
|
2.03
|
$
|
1.99
|
$
|
3.61
|
$
|
2.05
|
|||||
Pro
forma
|
2.03
|
1.99
|
3.60
|
2.04
|
|||||||||
Carolina
Group Stock:
|
|||||||||||||
As
reported
|
$
|
0.82
|
$
|
0.70
|
$
|
1.50
|
$
|
1.29
|
|||||
Pro
forma
|
0.82
|
0.70
|
1.50
|
1.29
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Net
investment income consisted of:
|
|||||||||||||
Fixed
maturity securities
|
$
|
414.4
|
$
|
395.6
|
$
|
797.4
|
$
|
804.2
|
|||||
Short-term
investments
|
36.6
|
15.5
|
75.9
|
30.6
|
|||||||||
Limited
partnerships
|
37.4
|
26.4
|
123.4
|
112.5
|
|||||||||
Equity
securities
|
8.4
|
4.2
|
13.6
|
9.3
|
|||||||||
Income
(loss) from trading portfolio
|
(44.3
|
)
|
31.0
|
(69.0
|
)
|
86.7
|
|||||||
Interest
expense on funds withheld and other deposits
|
(50.5
|
)
|
(54.9
|
)
|
(89.4
|
)
|
(102.7
|
)
|
|||||
Other
|
36.5
|
10.9
|
55.0
|
28.9
|
|||||||||
Total
investment income
|
438.5
|
428.7
|
906.9
|
969.5
|
|||||||||
Investment
expenses
|
(32.2
|
)
|
(18.0
|
)
|
(46.4
|
)
|
(27.3
|
)
|
|||||
Net
investment income
|
$
|
406.3
|
$
|
410.7
|
$
|
860.5
|
$
|
942.2
|
|||||
Investment
gains (losses) are as follows:
|
|||||||||||||
Derivative
instruments
|
$
|
(23.1
|
)
|
$
|
49.3
|
$
|
(18.7
|
)
|
$
|
17.4
|
|||
Fixed
maturities
|
26.8
|
(80.7
|
)
|
0.1
|
51.1
|
||||||||
Equity
securities, including short positions
|
25.4
|
166.1
|
40.2
|
177.2
|
|||||||||
Short-term
investments
|
0.3
|
0.9
|
(3.1
|
)
|
1.0
|
||||||||
Other,
including guaranteed separate account business (a)
|
3.1
|
(43.4
|
)
|
(8.8
|
)
|
(606.5
|
)
|
||||||
Investment
gains (losses)
|
32.5
|
92.2
|
9.7
|
(359.8
|
)
|
||||||||
Income
tax (expense) benefit
|
(11.6
|
)
|
18.1
|
(5.6
|
)
|
140.7
|
|||||||
Minority
interest
|
(1.5
|
)
|
(10.4
|
)
|
0.1
|
18.7
|
|||||||
Investment
gains (losses) -
net
|
$
|
19.4
|
$
|
99.9
|
$
|
4.2
|
$
|
(200.4
|
)
|
(a)
|
Includes
a pretax loss of $618.6 ($352.9 after tax and minority interest)
related
to CNA’s sale of its individual life insurance business for the six months
ended June 30, 2004.
|
Gross
Unrealized Losses
|
Net
|
||||||||||||||||||
Amortized
|
Unrealized
|
Less
Than
|
Greater
Than
|
Unrealized
|
|||||||||||||||
June
30, 2005
|
Cost
|
Gains
|
12
Months
|
12
Months
|
Gain
(Loss)
|
Fair
Value
|
|||||||||||||
(In
millions)
|
|||||||||||||||||||
Fixed
Maturity securities:
|
|||||||||||||||||||
U.S.
government and obligations of government agencies
|
$
|
2,033.3
|
$
|
185.4
|
$
|
1.7
|
$
|
0.4
|
$
|
183.3
|
$
|
2,216.6
|
|||||||
Asset-backed
securities
|
10,034.9
|
100.5
|
28.9
|
7.2
|
64.4
|
10,099.3
|
|||||||||||||
States,
municipalities and political subdivisions- tax
exempt
|
10,737.4
|
316.2
|
3.1
|
2.9
|
310.2
|
11,047.6
|
|||||||||||||
Corporate
|
5,629.6
|
463.3
|
52.9
|
15.3
|
395.1
|
6,024.7
|
|||||||||||||
Other
debt
|
2,453.4
|
312.4
|
7.2
|
4.4
|
300.8
|
2,754.2
|
|||||||||||||
Redeemable
preferred stocks
|
228.3
|
2.5
|
2.4
|
0.1
|
228.4
|
||||||||||||||
Options
embedded in convertible debt securities
|
117.9
|
117.9
|
|||||||||||||||||
Fixed
maturities available-for-sale
|
31,234.8
|
1,380.3
|
96.2
|
30.2
|
1,253.9
|
32,488.7
|
|||||||||||||
Fixed
maturity trading securities
|
570.8
|
10.0
|
1.6
|
0.6
|
7.8
|
578.6
|
|||||||||||||
Total
fixed maturities
|
31,805.6
|
1,390.3
|
97.8
|
30.8
|
1,261.7
|
33,067.3
|
|||||||||||||
Equity
Securities:
|
|||||||||||||||||||
Equity
securities available- for-sale
|
342.1
|
117.2
|
1.6
|
0.2
|
115.4
|
457.5
|
|||||||||||||
Equity
securities, trading portfolio
|
364.5
|
30.5
|
11.6
|
7.1
|
11.8
|
376.3
|
|||||||||||||
Total
equity securities
|
706.6
|
147.7
|
13.2
|
7.3
|
127.2
|
833.8
|
|||||||||||||
Short-term
investments available-for-sale
|
9,506.1
|
9,506.1
|
|||||||||||||||||
$
|
42,018.3
|
$
|
1,538.0
|
$
|
111.0
|
$
|
38.1
|
$
|
1,388.9
|
$
|
43,407.2
|
Gross
Unrealized Losses
|
Net
|
||||||||||||||||||
Amortized
|
Unrealized
|
Less
than
|
Greater
than
|
Unrealized
|
Fair
|
||||||||||||||
December
31, 2004
|
Cost
|
Gains
|
12
Months
|
12
Months
|
Gain
|
Value
|
|||||||||||||
(In
millions)
|
|||||||||||||||||||
Fixed
maturity securities:
|
|||||||||||||||||||
U.S.
government and obligations of government agencies
|
$
|
6,307.4
|
$
|
128.8
|
$
|
13.1
|
$
|
2.1
|
$
|
113.6
|
$
|
6,421.0
|
|||||||
Asset-backed
securities
|
7,706.0
|
104.6
|
19.1
|
3.3
|
82.2
|
7,788.2
|
|||||||||||||
States,
municipalities and political subdivisions-tax exempt
|
8,698.5
|
189.2
|
27.7
|
3.4
|
158.1
|
8,856.6
|
|||||||||||||
Corporate
|
6,092.7
|
476.9
|
51.8
|
4.7
|
420.4
|
6,513.1
|
|||||||||||||
Other
debt
|
2,769.1
|
294.6
|
11.0
|
0.1
|
283.5
|
3,052.6
|
|||||||||||||
Redeemable
preferred stocks
|
141.6
|
5.8
|
0.2
|
1.7
|
3.9
|
145.5
|
|||||||||||||
Options
embedded in convertible debt securities
|
234.3
|
234.3
|
|||||||||||||||||
Fixed
maturities available-for-sale
|
31,949.6
|
1,199.9
|
122.9
|
15.3
|
1,061.7
|
33,011.3
|
|||||||||||||
Fixed
maturity trading securities
|
485.5
|
7.6
|
1.5
|
0.8
|
5.3
|
490.8
|
|||||||||||||
Total
fixed maturities
|
32,435.1
|
1,207.5
|
124.4
|
16.1
|
1,067.0
|
33,502.1
|
|||||||||||||
Equity
Securities:
|
|||||||||||||||||||
Equity
securities available- for-sale
|
274.4
|
136.3
|
0.4
|
0.2
|
135.7
|
410.1
|
|||||||||||||
Equity
securities, trading portfolio
|
227.1
|
38.4
|
5.4
|
6.1
|
26.9
|
254.0
|
|||||||||||||
Total
equity securities
|
501.5
|
174.7
|
5.8
|
6.3
|
162.6
|
664.1
|
|||||||||||||
Short-term
investments available-for-sale
|
8,306.0
|
0.8
|
0.8
|
8,306.8
|
|||||||||||||||
Total
|
$
|
41,242.6
|
$
|
1,383.0
|
$
|
130.2
|
$
|
22.4
|
$
|
1,230.4
|
$
|
42,473.0
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions, except %)
|
|||||||||||||
Loews
common stock:
|
|||||||||||||
Consolidated
net income
|
$
|
433.8
|
$
|
410.5
|
$
|
773.5
|
$
|
455.4
|
|||||
Less
income attributable to Carolina Group stock
|
55.7
|
40.6
|
102.2
|
75.0
|
|||||||||
Income
attributable to Loews common stock
|
$
|
378.1
|
$
|
369.9
|
$
|
671.3
|
$
|
380.4
|
|||||
Carolina
Group stock:
|
|||||||||||||
Income
available to Carolina Group stock
|
$
|
142.1
|
$
|
121.4
|
$
|
260.6
|
$
|
224.4
|
|||||
Weighted
average economic interest of the Carolina Group
|
39.22
|
%
|
33.43
|
%
|
39.21
|
%
|
33.43
|
%
|
|||||
Income
attributable to Carolina Group stock
|
$
|
55.7
|
$
|
40.6
|
$
|
102.2
|
$
|
75.0
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Weighted
average shares outstanding-basic
|
185.65
|
185.49
|
185.63
|
185.48
|
|||||||||
Stock
options
|
0.25
|
0.14
|
0.24
|
0.14
|
|||||||||
Weighted
average shares outstanding-diluted
|
185.90
|
185.63
|
185.87
|
185.62
|
Adjustments
|
|||||||||||||||||||
Carolina
Group
|
Loews
|
and
|
|||||||||||||||||
June
30, 2005
|
Lorillard
|
Other
|
Consolidated
|
Group
|
Eliminations
|
Total
|
|||||||||||||
(In
millions)
|
|||||||||||||||||||
Assets:
|
|||||||||||||||||||
Investments
|
$
|
1,899.3
|
$
|
199.8
|
$
|
2,099.1
|
$
|
43,182.1
|
$
|
45,281.2
|
|||||||||
Cash
|
202.6
|
0.8
|
203.4
|
123.0
|
326.4
|
||||||||||||||
Receivables
|
32.8
|
32.8
|
18,080.5
|
$
|
(23.6
|
)(a)
|
18,089.7
|
||||||||||||
Property,
plant and equipment
|
230.0
|
230.0
|
4,634.4
|
4,864.4
|
|||||||||||||||
Deferred
income taxes
|
412.9
|
412.9
|
241.3
|
654.2
|
|||||||||||||||
Goodwill
and other intangible
assets
|
284.4
|
284.4
|
|||||||||||||||||
Other
assets
|
369.0
|
369.0
|
2,496.4
|
2,865.4
|
|||||||||||||||
Investment
in combined attributed net assets of the Carolina
Group
|
1,522.1
|
(1,764.7
|
)(a)
|
||||||||||||||||
|
242.6
|
(b)
|
|||||||||||||||||
Deferred
acquisition costs of insurance subsidiaries
|
1,248.1
|
1,248.1
|
|||||||||||||||||
Separate
account business
|
571.1
|
571.1
|
|||||||||||||||||
Total
assets
|
$
|
3,146.6
|
$
|
200.6
|
$
|
3,347.2
|
$
|
72,383.4
|
$
|
(1,545.7
|
)
|
$
|
74,184.9
|
||||||
Liabilities
and Shareholders’ Equity:
|
|||||||||||||||||||
Insurance
reserves
|
$
|
42,934.3
|
$
|
42,934.3
|
|||||||||||||||
Payable
for securities purchased
|
$
|
525.0
|
$
|
99.9
|
$
|
624.9
|
1,692.9
|
2,317.8
|
|||||||||||
Collateral
on loaned securities and derivatives
|
1,372.6
|
1,372.6
|
|||||||||||||||||
Short-term
debt
|
99.1
|
99.1
|
|||||||||||||||||
Long-term
debt
|
1,764.7
|
1,764.7
|
5,139.6
|
$
|
(1,764.7
|
)(a)
|
5,139.6
|
||||||||||||
Reinsurance
balances payable
|
2,781.8
|
2,781.8
|
|||||||||||||||||
Other
liabilities
|
1,342.4
|
14.3
|
1,356.7
|
2,983.3
|
(23.6
|
)(a)
|
4,316.4
|
||||||||||||
Separate
account business
|
571.1
|
571.1
|
|||||||||||||||||
Total
liabilities
|
1,867.4
|
1,878.9
|
3,746.3
|
57,574.7
|
(1,788.3
|
)
|
59,532.7
|
||||||||||||
Minority
interest
|
1,750.4
|
1,750.4
|
|||||||||||||||||
Shareholders’
equity
|
1,279.2
|
(1,678.3
|
)
|
(399.1
|
)
|
13,058.3
|
242.6
|
(b)
|
12,901.8
|
||||||||||
Total
liabilities and shareholders’ equity
|
$
|
3,146.6
|
$
|
200.6
|
$
|
3,347.2
|
$
|
72,383.4
|
$
|
(1,545.7
|
)
|
$
|
74,184.9
|
(a)
|
To
eliminate the intergroup notional debt and interest
payable/receivable.
|
(b)
|
To
eliminate the Loews Group’s 60.78% equity interest in the combined
attributed net assets of the Carolina
Group.
|
Adjustments
|
|||||||||||||||||||
Carolina
Group
|
Loews
|
and
|
|||||||||||||||||
December
31, 2004
|
Lorillard
|
Other
|
Consolidated
|
Group
|
Eliminations
|
Total
|
|||||||||||||
(In
millions)
|
|||||||||||||||||||
Assets:
|
|||||||||||||||||||
Investments
|
$
|
1,545.6
|
$
|
100.0
|
$
|
1,645.6
|
$
|
42,652.9
|
$
|
44,298.5
|
|||||||||
Cash
|
35.5
|
0.5
|
36.0
|
183.9
|
219.9
|
||||||||||||||
Receivables
|
32.1
|
32.1
|
18,689.3
|
$
|
(25.2
|
)(a)
|
18,696.2
|
||||||||||||
Property,
plant and equipment
|
231.5
|
231.5
|
4,609.2
|
4,840.7
|
|||||||||||||||
Deferred
income taxes
|
436.5
|
436.5
|
204.4
|
640.9
|
|||||||||||||||
Goodwill
and other intangible assets
|
294.1
|
294.1
|
|||||||||||||||||
Other
assets
|
396.5
|
396.5
|
2,412.2
|
2,808.7
|
|||||||||||||||
Investment
in combined attributed net assets of the Carolina Group
|
1,566.0
|
(1,871.2
|
)(a)
|
||||||||||||||||
|
305.2
|
(b)
|
|||||||||||||||||
Deferred
acquisition costs of insurance subsidiaries
|
1,268.1
|
1,268.1
|
|||||||||||||||||
Separate
account business
|
567.8
|
567.8
|
|||||||||||||||||
Total
assets
|
$
|
2,677.7
|
$
|
100.5
|
$
|
2,778.2
|
$
|
72,447.9
|
$
|
(1,591.2
|
)
|
$
|
73,634.9
|
||||||
Liabilities
and Shareholders’ Equity:
|
|||||||||||||||||||
Insurance
reserves
|
$
|
43,652.2
|
$
|
43,652.2
|
|||||||||||||||
Payable
for securities purchased
|
595.5
|
595.5
|
|||||||||||||||||
Collateral
on loaned securities and derivatives
|
918.0
|
918.0
|
|||||||||||||||||
Short-term
debt
|
1,010.1
|
1,010.1
|
|||||||||||||||||
Long-term
debt
|
$
|
1,871.2
|
$
|
1,871.2
|
5,980.2
|
$
|
(1,871.2
|
)(a)
|
5,980.2
|
||||||||||
Reinsurance
balances payable
|
2,980.8
|
2,980.8
|
|||||||||||||||||
Other
liabilities
|
$
|
1,392.6
|
16.4
|
1,409.0
|
2,710.7
|
(25.2
|
)(a)
|
4,094.5
|
|||||||||||
Separate
account business
|
567.8
|
567.8
|
|||||||||||||||||
Total
liabilities
|
1,392.6
|
1,887.6
|
3,280.2
|
58,415.3
|
(1,896.4
|
)
|
59,799.1
|
||||||||||||
Minority
interest
|
1,679.8
|
1,679.8
|
|||||||||||||||||
Shareholders’
equity
|
1,285.1
|
(1,787.1
|
)
|
(502.0
|
)
|
12,352.8
|
305.2
|
(b)
|
12,156.0
|
||||||||||
Total
liabilities and shareholders’ equity
|
$
|
2,677.7
|
$
|
100.5
|
$
|
2,778.2
|
$
|
72,447.9
|
$
|
(1,591.2
|
)
|
$
|
73,634.9
|
(a)
|
To
eliminate the intergroup notional debt and interest
payable/receivable.
|
(b)
|
To
eliminate the Loews Group’s 60.81% equity interest in the combined
attributed net assets of the Carolina
Group.
|
Adjustments
|
|||||||||||||||||||
Three
Months Ended
|
Carolina
Group
|
Loews
|
and
|
||||||||||||||||
June
30, 2005
|
Lorillard
|
Other
|
Consolidated
|
Group
|
Eliminations
|
Total
|
|||||||||||||
(In
millions)
|
|||||||||||||||||||
Revenues:
|
|||||||||||||||||||
Insurance
premiums
|
$
|
1,911.7
|
$
|
1,911.7
|
|||||||||||||||
Net
investment income
|
$
|
11.3
|
$
|
1.0
|
$
|
12.3
|
429.6
|
$
|
(35.6
|
)(a)
|
406.3
|
||||||||
Investment
gains (losses)
|
(0.1
|
)
|
(0.1
|
)
|
32.6
|
32.5
|
|||||||||||||
Manufactured
products
|
928.3
|
928.3
|
40.4
|
968.7
|
|||||||||||||||
Other
|
6.1
|
6.1
|
705.4
|
711.5
|
|||||||||||||||
Total
|
945.6
|
1.0
|
946.6
|
3,119.7
|
(35.6
|
)
|
4,030.7
|
||||||||||||
Expenses:
|
|||||||||||||||||||
Insurance
claims and policyholders’ benefits
|
1,581.8
|
1,581.8
|
|||||||||||||||||
Amortization
of deferred acquisition costs
|
374.5
|
374.5
|
|||||||||||||||||
Cost
of manufactured products sold
|
574.4
|
574.4
|
19.7
|
594.1
|
|||||||||||||||
Other
operating expenses
|
97.1
|
0.1
|
97.2
|
658.6
|
755.8
|
||||||||||||||
Interest
|
35.6
|
35.6
|
85.8
|
(35.6
|
)(a)
|
85.8
|
|||||||||||||
Total
|
671.5
|
35.7
|
707.2
|
2,720.4
|
(35.6
|
)
|
3,392.0
|
||||||||||||
274.1
|
(34.7
|
)
|
239.4
|
399.3
|
638.7
|
||||||||||||||
Income
tax expense (benefit)
|
111.5
|
(14.2
|
)
|
97.3
|
67.4
|
164.7
|
|||||||||||||
Minority
interest
|
40.2
|
40.2
|
|||||||||||||||||
Total
|
111.5
|
(14.2
|
)
|
97.3
|
107.6
|
204.9
|
|||||||||||||
Income
(loss) from operations
|
162.6
|
(20.5
|
)
|
142.1
|
291.7
|
433.8
|
|||||||||||||
Equity
in earnings of the Carolina Group
|
86.4
|
(86.4
|
)(b)
|
||||||||||||||||
Net
income (loss)
|
$
|
162.6
|
$
|
(20.5
|
)
|
$
|
142.1
|
$
|
378.1
|
$
|
(86.4
|
)
|
$
|
433.8
|
(a)
|
To
eliminate interest on the intergroup notional
debt.
|
(b)
|
To
eliminate the Loews Group’s intergroup interest in the earnings of the
Carolina Group.
|
Adjustments
|
|||||||||||||||||||
Three
Months Ended
|
Carolina
Group
|
Loews
|
and
|
||||||||||||||||
June
30, 2004
|
Lorillard
|
Other
|
Consolidated
|
Group
|
Eliminations
|
Total
|
|||||||||||||
(In
millions)
|
|||||||||||||||||||
Revenues:
|
|||||||||||||||||||
Insurance
premiums
|
$
|
2,105.3
|
$
|
2,105.3
|
|||||||||||||||
Net
investment income
|
$
|
5.7
|
$
|
0.3
|
$
|
6.0
|
444.5
|
$
|
(39.8
|
)(a)
|
410.7
|
||||||||
Investment
gains
|
0.6
|
0.6
|
91.6
|
92.2
|
|||||||||||||||
Manufactured
products
|
868.1
|
868.1
|
31.2
|
899.3
|
|||||||||||||||
Other
|
0.2
|
0.2
|
408.0
|
408.2
|
|||||||||||||||
Total
|
874.6
|
0.3
|
874.9
|
3,080.6
|
(39.8
|
)
|
3,915.7
|
||||||||||||
Expenses:
|
|||||||||||||||||||
Insurance
claims and policyholders’ benefits
|
1,620.5
|
1,620.5
|
|||||||||||||||||
Amortization
of deferred acquisition costs
|
307.1
|
307.1
|
|||||||||||||||||
Cost
of manufactured products sold
|
532.3
|
532.3
|
15.1
|
547.4
|
|||||||||||||||
Other
operating expenses
|
103.4
|
0.2
|
103.6
|
702.3
|
805.9
|
||||||||||||||
Interest
|
39.8
|
39.8
|
73.5
|
(39.8
|
)(a)
|
73.5
|
|||||||||||||
Total
|
635.7
|
40.0
|
675.7
|
2,718.5
|
(39.8
|
)
|
3,354.4
|
||||||||||||
238.9
|
(39.7
|
)
|
199.2
|
362.1
|
561.3
|
||||||||||||||
Income
tax expense (benefit)
|
93.3
|
(15.5
|
)
|
77.8
|
47.2
|
125.0
|
|||||||||||||
Minority
interest
|
25.8
|
25.8
|
|||||||||||||||||
Total
|
93.3
|
(15.5
|
)
|
77.8
|
73.0
|
150.8
|
|||||||||||||
Income
(loss) from operations
|
145.6
|
(24.2
|
)
|
121.4
|
289.1
|
410.5
|
|||||||||||||
Equity
in earnings of the Carolina Group
|
80.8
|
(80.8
|
)(b)
|
||||||||||||||||
Net
income (loss)
|
$
|
145.6
|
$
|
(24.2
|
)
|
$
|
121.4
|
$
|
369.9
|
$
|
(80.8
|
)
|
$
|
410.5
|
(a)
|
To
eliminate interest on the intergroup notional debt.
|
(b)
|
To
eliminate the Loews Group’s intergroup interest in the earnings of the
Carolina Group.
|
Adjustments
|
|||||||||||||||||||
Six
Months Ended
|
Carolina
Group
|
Loews
|
and
|
||||||||||||||||
June
30, 2005
|
Lorillard
|
Other
|
Consolidated
|
Group
|
Eliminations
|
Total
|
|||||||||||||
(In
millions)
|
|||||||||||||||||||
Revenues:
|
|||||||||||||||||||
Insurance
premiums
|
$
|
3,810.8
|
$
|
3,810.8
|
|||||||||||||||
Net
investment income
|
$
|
24.5
|
$
|
1.9
|
$
|
26.4
|
906.3
|
$
|
(72.2
|
)(a)
|
860.5
|
||||||||
Investment
gains (losses)
|
(2.0
|
)
|
(2.0
|
)
|
11.7
|
9.7
|
|||||||||||||
Manufactured
products
|
1,723.4
|
1,723.4
|
79.5
|
1,802.9
|
|||||||||||||||
Other
|
6.1
|
6.1
|
1,281.9
|
1,288.0
|
|||||||||||||||
Total
|
1,752.0
|
1.9
|
1,753.9
|
6,090.2
|
(72.2
|
)
|
7,771.9
|
||||||||||||
Expenses:
|
|||||||||||||||||||
Insurance
claims and policyholders’ benefits
|
3,015.0
|
3,015.0
|
|||||||||||||||||
Amortization
of deferred acquisition costs
|
752.1
|
752.1
|
|||||||||||||||||
Cost
of manufactured products sold
|
1,061.1
|
1,061.1
|
38.7
|
1,099.8
|
|||||||||||||||
Other
operating expenses
|
187.0
|
0.2
|
187.2
|
1,311.6
|
1,498.8
|
||||||||||||||
Interest
|
72.2
|
72.2
|
215.6
|
(72.2
|
)(a)
|
215.6
|
|||||||||||||
Total
|
1,248.1
|
72.4
|
1,320.5
|
5,333.0
|
(72.2
|
)
|
6,581.3
|
||||||||||||
503.9
|
(70.5
|
)
|
433.4
|
757.2
|
1,190.6
|
||||||||||||||
Income
tax expense (benefit)
|
200.9
|
(28.1
|
)
|
172.8
|
169.2
|
342.0
|
|||||||||||||
Minority
interest
|
75.1
|
75.1
|
|||||||||||||||||
Total
|
200.9
|
(28.1
|
)
|
172.8
|
244.3
|
417.1
|
|||||||||||||
Income
(loss) from operations
|
303.0
|
(42.4
|
)
|
260.6
|
512.9
|
773.5
|
|||||||||||||
Equity
in earnings of the Carolina Group
|
158.4
|
(158.4
|
)(b)
|
||||||||||||||||
Net
income (loss)
|
$
|
303.0
|
$
|
(42.4
|
)
|
$
|
260.6
|
$
|
671.3
|
$
|
(158.4
|
)
|
$
|
773.5
|
(a)
|
To
eliminate interest on the intergroup notional
debt.
|
(b)
|
To
eliminate the Loews Group’s intergroup interest in the earnings of the
Carolina Group.
|
Adjustments
|
|||||||||||||||||||
Six
Months Ended
|
Carolina
Group
|
Loews
|
and
|
||||||||||||||||
June
30, 2004
|
Lorillard
|
Other
|
Consolidated
|
Group
|
Eliminations
|
Total
|
|||||||||||||
(In
millions)
|
|||||||||||||||||||
Revenues:
|
|||||||||||||||||||
Insurance
premiums
|
$
|
4,272.3
|
$
|
4,272.3
|
|||||||||||||||
Net
investment income
|
$
|
13.7
|
$
|
0.7
|
$
|
14.4
|
1,007.9
|
$
|
(80.1
|
)(a)
|
942.2
|
||||||||
Investment
gains (losses)
|
0.6
|
0.6
|
(360.4
|
)
|
(359.8
|
)
|
|||||||||||||
Manufactured
products
|
1,636.0
|
1,636.0
|
71.5
|
1,707.5
|
|||||||||||||||
Other
|
846.8
|
846.8
|
|||||||||||||||||
Total
|
1,650.3
|
0.7
|
1,651.0
|
5,838.1
|
(80.1
|
)
|
7,409.0
|
||||||||||||
Expenses:
|
|||||||||||||||||||
Insurance
claims and policyholders’ benefits
|
3,258.7
|
3,258.7
|
|||||||||||||||||
Amortization
of deferred acquisition costs
|
740.3
|
740.3
|
|||||||||||||||||
Cost
of manufactured products sold
|
999.6
|
999.6
|
35.3
|
1,034.9
|
|||||||||||||||
Other
operating expenses
|
203.0
|
0.3
|
203.3
|
1,357.5
|
1,560.8
|
||||||||||||||
Interest
|
80.1
|
80.1
|
172.6
|
(80.1
|
)(a)
|
172.6
|
|||||||||||||
Total
|
1,202.6
|
80.4
|
1,283.0
|
5,564.4
|
(80.1
|
)
|
6,767.3
|
||||||||||||
447.7
|
(79.7
|
)
|
368.0
|
273.7
|
641.7
|
||||||||||||||
Income
tax expense (benefit)
|
174.7
|
(31.1
|
)
|
143.6
|
27.6
|
171.2
|
|||||||||||||
Minority
interest
|
15.1
|
15.1
|
|||||||||||||||||
Total
|
174.7
|
(31.1
|
)
|
143.6
|
42.7
|
186.3
|
|||||||||||||
Income
(loss) from operations
|
273.0
|
(48.6
|
)
|
224.4
|
231.0
|
455.4
|
|||||||||||||
Equity
in earnings of the Carolina Group
|
149.4
|
(149.4
|
)(b)
|
||||||||||||||||
Net
income (loss)
|
$
|
273.0
|
$
|
(48.6
|
)
|
$
|
224.4
|
$
|
380.4
|
$
|
(149.4
|
)
|
$
|
455.4
|
(a)
|
To
eliminate interest on the intergroup notional
debt.
|
(b)
|
To
eliminate the Loews Group’s intergroup interest in the earnings of the
Carolina Group.
|
Adjustments
|
|||||||||||||||||||
Six
Months Ended
|
Carolina
Group
|
Loews
|
and
|
||||||||||||||||
June
30, 2005
|
Lorillard
|
Other
|
Consolidated
|
Group
|
Eliminations
|
Total
|
|||||||||||||
(In
millions)
|
|||||||||||||||||||
Net
cash (used) provided by operating activities
|
$
|
316.8
|
$
|
55.6
|
$
|
372.4
|
$
|
1,079.5
|
$
|
(96.0
|
)
|
$
|
1,355.9
|
||||||
Investing
activities:
|
|||||||||||||||||||
Purchases
of property and equipment
|
(23.0
|
)
|
(23.0
|
)
|
(190.7
|
)
|
(213.7
|
)
|
|||||||||||
Change
in short-term investments
|
182.3
|
(99.9
|
)
|
82.4
|
(332.4
|
)
|
(250.0
|
)
|
|||||||||||
Other
investing activities
|
1,220.6
|
(106.5
|
)
|
1,114.1
|
|||||||||||||||
159.3
|
(99.9
|
)
|
59.4
|
697.5
|
(106.5
|
)
|
650.4
|
||||||||||||
Financing
activities:
|
|||||||||||||||||||
Dividends
paid to shareholders
|
(309.0
|
)
|
151.1
|
(157.9
|
)
|
(55.7
|
)
|
96.0
|
(117.6
|
)
|
|||||||||
Reduction
of intergroup notional debt
|
(106.5
|
)
|
(106.5
|
)
|
106.5
|
||||||||||||||
Other
financing activities
|
(1,782.2
|
)
|
(1,782.2
|
)
|
|||||||||||||||
(309.0
|
)
|
44.6
|
(264.4
|
)
|
(1,837.9
|
)
|
202.5
|
(1,899.8
|
)
|
||||||||||
Net
change in cash
|
167.1
|
0.3
|
167.4
|
(60.9
|
)
|
106.5
|
|||||||||||||
Cash,
beginning of period
|
35.5
|
0.5
|
36.0
|
183.9
|
219.9
|
||||||||||||||
Cash,
end of period
|
$
|
202.6
|
$
|
0.8
|
$
|
203.4
|
$
|
123.0
|
$
|
326.4
|
Six
Months Ended
|
|||||||||||||||||||
June
30, 2004
|
|||||||||||||||||||
Net
cash (used) provided by operating activities
|
$
|
184.9
|
$
|
(49.6
|
)
|
$
|
135.3
|
$
|
1,107.0
|
$
|
(105.0
|
)
|
$
|
1,137.3
|
|||||
Investing
activities:
|
|||||||||||||||||||
Purchases
of property and equipment
|
(33.3
|
)
|
(33.3
|
)
|
(91.2
|
)
|
(124.5
|
)
|
|||||||||||
Change
in short-term investments
|
108.5
|
108.5
|
5,152.9
|
5,261.4
|
|||||||||||||||
Other
investing activities
|
0.4
|
0.4
|
(5,854.3
|
)
|
(51.7
|
)
|
(5,905.6
|
)
|
|||||||||||
75.6
|
75.6
|
(792.6
|
)
|
(51.7
|
)
|
(768.7
|
)
|
||||||||||||
Financing
activities:
|
|||||||||||||||||||
Dividends
paid to shareholders
|
(259.0
|
)
|
101.2
|
(157.8
|
)
|
(55.6
|
)
|
105.0
|
(108.4
|
)
|
|||||||||
Reduction
of intergroup notional debt
|
(51.7
|
)
|
(51.7
|
)
|
51.7
|
||||||||||||||
Other
financing activities
|
(250.3
|
)
|
(250.3
|
)
|
|||||||||||||||
(259.0
|
)
|
49.5
|
(209.5
|
)
|
(305.9
|
)
|
156.7
|
(358.7
|
)
|
||||||||||
Net
change in cash
|
1.5
|
(0.1
|
)
|
1.4
|
8.5
|
9.9
|
|||||||||||||
Cash,
beginning of period
|
1.5
|
0.4
|
1.9
|
178.9
|
180.8
|
||||||||||||||
Cash,
end of period
|
$
|
3.0
|
$
|
0.3
|
$
|
3.3
|
$
|
187.4
|
$
|
190.7
|
June
30,
|
December
31,
|
||||||
2005
|
2004
|
||||||
(In
millions)
|
|||||||
Reinsurance
receivables related to insurance reserves:
|
|||||||
Ceded
claim and claim adjustment expense
|
$
|
12,630.7
|
$
|
13,878.4
|
|||
Ceded
future policy benefits
|
1,224.6
|
1,259.6
|
|||||
Ceded
policyholders’ funds
|
61.2
|
64.8
|
|||||
Billed
reinsurance receivables
|
606.0
|
685.2
|
|||||
Reinsurance
receivables
|
14,522.5
|
15,888.0
|
|||||
Less
allowance for uncollectible reinsurance
|
551.1
|
546.3
|
|||||
Reinsurance
receivables-net
|
$
|
13,971.4
|
$
|
15,341.7
|
Direct
|
Assumed
|
Ceded
|
Net
|
||||||||||
(In
millions)
|
|||||||||||||
Three
Months Ended June 30, 2005
|
|||||||||||||
Property
and casualty
|
$
|
2,530.0
|
$
|
1.0
|
$
|
824.0
|
$
|
1,707.0
|
|||||
Accident
and health
|
252.0
|
10.0
|
57.0
|
205.0
|
|||||||||
Life
|
37.0
|
37.0
|
|||||||||||
Total
|
$
|
2,819.0
|
$
|
11.0
|
$
|
918.0
|
$
|
1,912.0
|
|||||
Three
Months Ended June 30, 2004
|
|||||||||||||
Property
and casualty
|
$
|
2,750.0
|
$
|
49.0
|
$
|
895.0
|
$
|
1,904.0
|
|||||
Accident
and health
|
315.0
|
10.0
|
136.0
|
189.0
|
|||||||||
Life
|
83.0
|
71.0
|
12.0
|
||||||||||
Total
|
$
|
3,148.0
|
$
|
59.0
|
$
|
1,102.0
|
$
|
2,105.0
|
Direct
|
Assumed
|
Ceded
|
Net
|
||||||||||
(In
millions)
|
|||||||||||||
Six
Months Ended June 30, 2005
|
|||||||||||||
Property
and casualty
|
$
|
5,052.0
|
$
|
59.0
|
$
|
1,670.0
|
$
|
3,441.0
|
|||||
Accident
and health
|
560.0
|
24.0
|
215.0
|
369.0
|
|||||||||
Life
|
82.0
|
81.0
|
1.0
|
||||||||||
Total
|
$
|
5,694.0
|
$
|
83.0
|
$
|
1,966.0
|
$
|
3,811.0
|
|||||
Six
Months Ended June 30, 2004
|
|||||||||||||
Property
and casualty
|
$
|
5,393.0
|
$
|
127.0
|
$
|
1,758.0
|
$
|
3,762.0
|
|||||
Accident
and health
|
657.0
|
26.0
|
291.0
|
392.0
|
|||||||||
Life
|
323.0
|
205.0
|
118.0
|
||||||||||
Total
|
$
|
6,373.0
|
$
|
153.0
|
$
|
2,254.0
|
$
|
4,272.0
|
Aggregate
|
|||||||||||||
Three
Months Ended June 30, 2005
|
Cover
|
CCC
Cover
|
All
Other
|
Total
|
|||||||||
(In
millions)
|
|||||||||||||
Ceded
earned premium
|
$
|
(6.0
|
)
|
$
|
3.0
|
$
|
(3.0
|
)
|
|||||
Ceded
claim and claim adjustment expense
|
2.0
|
2.0
|
|||||||||||
Ceding
commissions
|
3.0
|
3.0
|
|||||||||||
Interest
charges
|
(18.0
|
)
|
$
|
(16.0
|
)
|
(12.0
|
)
|
(46.0
|
)
|
||||
Pretax
(expense) benefit
|
$
|
(24.0
|
)
|
$
|
(16.0
|
)
|
$
|
(4.0
|
)
|
$
|
(44.0
|
)
|
|
Three
Months Ended June 30, 2004
|
|||||||||||||
Ceded
earned premium
|
$
|
(3.0
|
)
|
$
|
6.0
|
$
|
3.0
|
||||||
Ceded
claim and claim adjustment expense
|
(12.0
|
)
|
(12.0
|
)
|
|||||||||
Interest
charges
|
(22.0
|
)
|
$
|
(11.0
|
)
|
(17.0
|
)
|
(50.0
|
)
|
||||
Pretax
(expense) benefit
|
$
|
(25.0
|
)
|
$
|
(11.0
|
)
|
$
|
(23.0
|
)
|
$
|
(59.0
|
)
|
|
Six
Months Ended June 30, 2005
|
|||||||||||||
Ceded
earned premium
|
$
|
(18.0
|
)
|
$
|
65.0
|
$
|
47.0
|
||||||
Ceded
claim and claim adjustment expense
|
(67.0
|
)
|
(67.0
|
)
|
|||||||||
Ceding
commissions
|
(30.0
|
)
|
(30.0
|
)
|
|||||||||
Interest
charges
|
(42.0
|
)
|
$
|
(32.0
|
)
|
(10.0
|
)
|
(84.0
|
)
|
||||
Pretax
(expense) benefit
|
$
|
(60.0
|
)
|
$
|
(32.0
|
)
|
$
|
(42.0
|
)
|
$
|
(134.0
|
)
|
|
Six
Months Ended June 30, 2004
|
|||||||||||||
Ceded
earned premium
|
$
|
(3.0
|
)
|
$
|
8.0
|
$
|
5.0
|
||||||
Ceded
claim and claim adjustment expense
|
(17.0
|
)
|
(17.0
|
)
|
|||||||||
Ceding
commissions
|
3.0
|
3.0
|
|||||||||||
Interest
charges
|
(42.0
|
)
|
$
|
(22.0
|
)
|
(33.0
|
)
|
(97.0
|
)
|
||||
Pretax
(expense) benefit
|
$
|
(45.0
|
)
|
$
|
(22.0
|
)
|
$
|
(39.0
|
)
|
$
|
(106.0
|
)
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Standard
Lines
|
$
|
(30.0
|
)
|
$
|
(43.0
|
)
|
$
|
(96.0
|
)
|
$
|
(80.0
|
)
|
|
Specialty
Lines
|
(2.0
|
)
|
(7.0
|
)
|
(4.0
|
)
|
|||||||
Other
Insurance
|
(14.0
|
)
|
(14.0
|
)
|
(31.0
|
)
|
(22.0
|
)
|
|||||
Pretax
expense
|
$
|
(44.0
|
)
|
$
|
(59.0
|
)
|
$
|
(134.0
|
)
|
$
|
(106.0
|
)
|
June
30,
|
December
31,
|
||||||
2005
|
2004
|
||||||
(In
millions)
|
|||||||
Reinsurance
|
$
|
14,522.5
|
$
|
15,888.0
|
|||
Other
insurance
|
2,551.4
|
2,567.2
|
|||||
Security
sales
|
1,246.1
|
540.3
|
|||||
Accrued
investment income
|
312.8
|
304.9
|
|||||
Other
|
473.5
|
453.0
|
|||||
Total
|
19,106.3
|
19,753.4
|
|||||
Less: allowance
for doubtful accounts on reinsurance receivables
|
551.1
|
546.3
|
|||||
allowance
for other doubtful accounts and cash discounts
|
465.5
|
510.9
|
|||||
Receivables
|
$
|
18,089.7
|
$
|
18,696.2
|
Life
and
|
||||||||||||||||
Standard
|
Specialty
|
Group
|
Other
|
|||||||||||||
June
30, 2005
|
Lines
|
Lines
|
Non-Core
|
Insurance
|
Total
|
|||||||||||
(In
millions)
|
||||||||||||||||
|
||||||||||||||||
Gross
Case Reserves
|
$
|
6,720.0
|
$
|
1,765.0
|
$
|
2,753.0
|
$
|
3,562.0
|
$
|
14,800.0
|
||||||
Gross
IBNR Reserves
|
7,451.0
|
3,231.0
|
839.0
|
4,477.0
|
15,998.0
|
|||||||||||
Total
Gross Carried Claim and Claim Adjustment Expense
Reserves
|
$
|
14,171.0
|
$
|
4,996.0
|
$
|
3,592.0
|
$
|
8,039.0
|
$
|
30,798.0
|
||||||
Net
Case Reserves
|
$
|
4,406.0
|
$
|
1,178.0
|
$
|
1,420.0
|
$
|
1,537.0
|
$
|
8,541.0
|
||||||
Net
IBNR Reserves
|
5,157.0
|
2,268.0
|
415.0
|
1,786.0
|
9,626.0
|
|||||||||||
Total
Net Carried Claim and Claim Adjustment Expense
Reserves
|
$
|
9,563.0
|
$
|
3,446.0
|
$
|
1,835.0
|
$
|
3,323.0
|
$
|
18,167.0
|
December
31, 2004
|
||||||||||||||||
|
||||||||||||||||
Gross
Case Reserves
|
$
|
6,904.0
|
$
|
1,659.0
|
$
|
2,800.0
|
$
|
3,806.0
|
$
|
15,169.0
|
||||||
Gross
IBNR Reserves
|
7,398.0
|
3,201.0
|
880.0
|
4,875.0
|
16,354.0
|
|||||||||||
Total
Gross Carried Claim and Claim Adjustment Expense Reserves
|
$
|
14,302.0
|
$
|
4,860.0
|
$
|
3,680.0
|
$
|
8,681.0
|
$
|
31,523.0
|
||||||
Net
Case Reserves
|
$
|
4,761.0
|
$
|
1,191.0
|
$
|
1,394.0
|
$
|
1,588.0
|
$
|
8,934.0
|
||||||
Net
IBNR Reserves
|
4,547.0
|
2,042.0
|
430.0
|
1,691.0
|
8,710.0
|
|||||||||||
Total
Net Carried Claim and Claim Adjustment Expense Reserves
|
$
|
9,308.0
|
$
|
3,233.0
|
$
|
1,824.0
|
$
|
3,279.0
|
$
|
17,644.0
|
June
30, 2005
|
December
31, 2004
|
||||||||||||
Environmental
|
Environmental
|
||||||||||||
Pollution
and
|
Pollution
and
|
||||||||||||
Asbestos
|
Mass
Tort
|
Asbestos
|
Mass
Tort
|
||||||||||
(In
millions)
|
|||||||||||||
Gross
reserves
|
$
|
3,132.0
|
$
|
663.0
|
$
|
3,218.0
|
$
|
755.0
|
|||||
Ceded
reserves
|
(1,512.0
|
)
|
(234.0
|
)
|
(1,532.0
|
)
|
(258.0
|
)
|
|||||
Net
reserves
|
$
|
1,620.0
|
$
|
429.0
|
$
|
1,686.0
|
$
|
497.0
|
Standard
|
Specialty
|
Other
|
|||||||||||
Six
Months Ended June 30, 2005
|
Lines
|
Lines
|
Insurance
|
Total
|
|||||||||
(In
millions)
|
|||||||||||||
Pretax
unfavorable net prior year claim and allocated claim adjustment expense
development excluding the impact of corporate aggregate reinsurance
treaties:
|
|||||||||||||
Core
(Non-APMT)
|
$
|
165.0
|
$
|
63.0
|
$
|
58.0
|
$
|
286.0
|
|||||
APMT
|
10.0
|
10.0
|
|||||||||||
Total
|
165.0
|
63.0
|
68.0
|
296.0
|
|||||||||
Ceded
losses related to corporate aggregate reinsurance
treaties
|
19.0
|
(25.0
|
)
|
6.0
|
|||||||||
Pretax
unfavorable net prior year development before impact of premium
development
|
184.0
|
38.0
|
74.0
|
296.0
|
|||||||||
Unfavorable
(favorable) premium development, excluding impact of corporate aggregate
reinsurance treaties
|
(107.0
|
)
|
(15.0
|
)
|
10.0
|
(112.0
|
)
|
||||||
Ceded
premiums related to corporate aggregate reinsurance
treaties
|
(5.0
|
)
|
19.0
|
4.0
|
18.0
|
||||||||
Total
premium development
|
(112.0
|
)
|
4.0
|
14.0
|
(94.0
|
)
|
|||||||
Total
unfavorable net prior year development (pretax)
|
$
|
72.0
|
$
|
42.0
|
$
|
88.0
|
$
|
202.0
|
|||||
Six
Months Ended June 30, 2004
|
|||||||||||||
Pretax
unfavorable net prior year claim and allocated claim adjustment expense
development excluding the impact of corporate aggregate reinsurance
treaties:
|
|||||||||||||
Core
(Non-APMT)
|
$
|
113.0
|
$
|
74.0
|
$
|
9.0
|
$
|
196.0
|
|||||
APMT
|
40.0
|
40.0
|
|||||||||||
Pretax
unfavorable net prior year development before impact of premium
development
|
113.0
|
74.0
|
49.0
|
236.0
|
|||||||||
Unfavorable
(favorable) premium development, excluding impact of corporate aggregate
reinsurance treaties
|
(108.0
|
)
|
(14.0
|
)
|
10.0
|
(112.0
|
)
|
||||||
Ceded
premiums related to corporate aggregate reinsurance
treaties
|
2.0
|
1.0
|
3.0
|
||||||||||
Total
premium development
|
(106.0
|
)
|
(14.0
|
)
|
11.0
|
(109.0
|
)
|
||||||
Total
unfavorable net prior year development (pretax)
|
$
|
7.0
|
$
|
60.0
|
$
|
60.0
|
$
|
127.0
|
June
30,
|
December
31,
|
||||||
2005
|
2004
|
||||||
(In
millions of dollars, except per share data)
|
|||||||
Preferred
stock, $0.10 par value,
|
|||||||
Authorized
- 100,000,000 shares
|
|||||||
Common
stock:
|
|||||||
Loews
common stock, $1.00 par value:
|
|||||||
Authorized
- 600,000,000 shares
|
|||||||
Issued
and outstanding -185,688,595 and 185,584,575 shares
|
$
|
185.7
|
$
|
185.6
|
|||
Carolina
Group stock, $0.01 par value:
|
|||||||
Authorized
- 600,000,000 shares
|
|||||||
Issued
- 68,374,559 and 68,307,250 shares
|
0.7
|
0.7
|
|||||
Additional
paid-in capital
|
1,808.2
|
1,801.2
|
|||||
Earnings
retained in the business
|
10,245.2
|
9,589.3
|
|||||
Accumulated
other comprehensive income
|
669.7
|
586.9
|
|||||
12,909.5
|
12,163.7
|
||||||
Less
treasury stock, at cost (340,000 shares of Carolina Group
stock)
|
7.7
|
7.7
|
|||||
Total
shareholders’ equity
|
$
|
12,901.8
|
$
|
12,156.0
|
Unamortized
|
Short-Term
|
Long-Term
|
||||||||||||||
June
30, 2005
|
Principal
|
Discount
|
Net
|
Debt
|
Debt
|
|||||||||||
(In
millions)
|
||||||||||||||||
Loews
Corporation
|
$
|
1,175.0
|
$
|
10.6
|
$
|
1,164.4
|
$
|
1,164.4
|
||||||||
CNA
Financial
|
1,760.6
|
9.7
|
1,750.9
|
$
|
82.5
|
1,668.4
|
||||||||||
Diamond
Offshore
|
991.2
|
10.6
|
980.6
|
12.8
|
967.8
|
|||||||||||
Boardwalk
Pipelines
|
1,110.0
|
9.1
|
1,100.9
|
1,100.9
|
||||||||||||
Loews
Hotels
|
241.9
|
241.9
|
3.8
|
238.1
|
||||||||||||
Total
|
$
|
5,278.7
|
$
|
40.0
|
$
|
5,238.7
|
$
|
99.1
|
$
|
5,139.6
|
June
30,
|
December
31,
|
||||||
2005
|
2004
|
||||||
(In
millions)
|
|||||||
Loews
Corporation (Parent Company):
|
|||||||
Senior:
|
|||||||
6.8%
notes due 2006 (effective interest rate of 6.8%) (authorized,
$300)
|
$
|
300.0
|
$
|
300.0
|
|||
8.9%
debentures due 2011 (effective interest rate of 9.0%) (authorized,
$175)
|
175.0
|
175.0
|
|||||
5.3%
notes due 2016 (effective interest rate of 5.4%) (authorized, $400
and
$300) (a)
|
400.0
|
300.0
|
|||||
7.0%
notes due 2023 (effective interest rate of 7.2%) (authorized,
$400)
|
400.0
|
||||||
6.0%
notes due 2035 (effective interest rate of 6.2%) (authorized, $300)
(a)
|
300.0
|
||||||
Subordinated:
|
|||||||
3.1%
exchangeable subordinated notes due 2007 (effective interest rate
of 3.4%)
(authorized, $1,150)
|
1,150.0
|
||||||
CNA
Financial:
|
|||||||
Senior:
|
|||||||
6.5%
notes due 2005 (effective interest rate of 6.6%) (authorized,
$500)
|
492.8
|
||||||
6.8%
notes due 2006 (effective interest rate of 6.8%) (authorized,
$250)
|
250.0
|
250.0
|
|||||
6.5%
notes due 2008 (effective interest rate of 6.6%) (authorized,
$150)
|
150.0
|
150.0
|
|||||
6.6%
notes due 2008 (effective interest rate of 6.7%) (authorized,
$200)
|
200.0
|
200.0
|
|||||
8.4%
notes due 2012 (effective interest rate of 8.6%) (authorized,
$100)
|
69.6
|
69.6
|
|||||
5.9%
notes due 2014 (effective interest rate of 6.0%) (authorized,
$549)
|
549.0
|
549.0
|
|||||
7.0%
notes due 2018 (effective interest rate of 7.1%) (authorized,
$150)
|
150.0
|
150.0
|
|||||
7.3%
debentures due 2023 (effective interest rate of 7.3%) (authorized,
$250)
|
243.0
|
243.0
|
|||||
5.1%
debentures due 2034 (effective interest rate of 4.3%) (authorized,
$31)
|
30.9
|
30.9
|
|||||
Term
loan due 2005 (effective interest rate of 2.8% and 2.8%)
|
5.0
|
10.0
|
|||||
Revolving
credit facility due 2005 (effective interest rate of 4.6% and
3.5%)
|
25.0
|
25.0
|
|||||
2.5%
Corporate note due 2006 (effective interest rate of 2.5%)
|
50.0
|
50.0
|
|||||
Other
senior debt (effective interest rates approximate 5.8% and
7.5%)
|
38.1
|
47.5
|
|||||
Diamond
Offshore:
|
|||||||
Senior:
|
|||||||
5.2%
notes, due 2014 (effective interest rate of 5.2%) (authorized, $250)
(a)
|
250.0
|
250.0
|
|||||
4.9%
notes, due 2015 (effective interest rate of 5.0%) (authorized, $250)
(a)
|
250.0
|
||||||
Zero
coupon convertible debentures due 2020, net of discount of $12.5
and
$333.8 (effective interest rate of 3.6%)
|
18.4
|
471.2
|
|||||
1.5%
convertible senior debentures due 2031 (effective interest rate of
1.6%)
(authorized, $460) (b)
|
460.0
|
460.0
|
|||||
Subordinated
debt due 2005 (effective interest rate of 7.1%)
|
12.8
|
12.8
|
|||||
Boardwalk
Pipelines:
|
|||||||
Senior:
|
|||||||
Term
loan due 2005 (effective interest rate of 3.3%)
|
575.0
|
||||||
5.5%
notes due 2017 (effective interest of rate 5.6%) (authorized, $300)
(a)
|
300.0
|
||||||
5.2%
notes due 2018 (effective interest rate of 5.4%) (authorized, $185)
(a)
|
185.0
|
185.0
|
|||||
Texas
Gas:
|
|||||||
Senior:
|
|||||||
4.6%
notes due 2015 (effective interest rate of 5.1%) (authorized, $250)
(a)
|
250.0
|
250.0
|
|||||
7.3%
debentures due 2027 (effective interest rate of 8.1%) (authorized,
$100)
|
100.0
|
100.0
|
|||||
Gulf
South:
|
|||||||
Senior:
|
|||||||
5.1%
notes due 2015 (effective interest rate of 5.2%) (authorized, $275)
(a)
|
275.0
|
||||||
Loews
Hotels:
|
|||||||
Senior
debt, principally mortgages (effective interest rates approximate
4.7% and
4.1%)
|
241.9
|
144.4
|
|||||
5,278.7
|
7,041.2
|
||||||
Less
unamortized discount
|
40.0
|
50.9
|
|||||
Debt
|
$
|
5,238.7
|
$
|
6,990.3
|
(a)
|
Redeemable
in whole or in part at the greater of the principal amount or the
net
present value of scheduled payments discounted at the specified treasury
rate plus a margin.
|
(b)
|
The
debentures are convertible into Diamond Offshore’s common stock at an
initial conversion rate of 20.3978 shares per one thousand dollars
principal amount, subject to adjustment in certain circumstances.
Upon
conversion, Diamond Offshore has the right to deliver cash in lieu
of
shares of its common stock. Diamond Offshore may redeem all or a
portion
of the debentures at any time on or after April 15, 2008 at a price
equal
to 100% of the principal amount. Holders may require Diamond Offshore
to
purchase all or a portion of the debentures on April 15, 2008, at
a price
equal to 100% of the principal amount. Diamond Offshore, at its option,
may elect to pay the purchase price in cash or shares of common stock,
or
in certain combinations thereof.
|
Three
Months Ended
|
Six
Months Ended
|
||||||
June
30, 2004
|
June
30, 2004
|
||||||
(In
millions, except per share data)
|
|||||||
Total
revenues
|
$
|
3,970.7
|
$
|
7,526.1
|
|||
Net
income
|
370.5
|
384.2
|
|||||
Basic
net income per share of Loews common stock
|
$
|
2.00
|
$
|
2.07
|
|||
Diluted
net income per share of Loews common stock
|
$
|
2.00
|
$
|
2.07
|
Statutory
Capital and Surplus
|
|||||||
June
30, 2005
|
December
31, 2004
|
||||||
(In
millions)
|
|||||||
Property
and casualty companies
|
$
|
7,374.0
|
$
|
6,998.0
|
|||
Life
and group insurance companies (a)
|
742.0
|
1,177.0
|
Statutory
Net Income
|
|||||||||||||
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Property
and casualty companies
|
$
|
287.0
|
$
|
220.0
|
$
|
867.0
|
$
|
403.0
|
|||||
Life
and group insurance companies (a)
|
32.0
|
370.0
|
54.0
|
394.0
|
(a)
|
Statutory
capital and surplus for the property and casualty insurance companies
includes the property and casualty companies’ equity ownership of the life
and group companies’ capital and surplus. The Statutory Net Income for the
three and six months ended June 30, 2004 includes the individual
life
business which was sold on April 30,
2004.
|
Pension
Benefits
|
|||||||||||||
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Service
cost
|
$
|
12.8
|
$
|
21.6
|
$
|
28.1
|
$
|
37.4
|
|||||
Interest
cost
|
52.3
|
93.1
|
105.4
|
154.1
|
|||||||||
Expected
return on plan assets
|
(59.7
|
)
|
(102.4
|
)
|
(117.4
|
)
|
(166.7
|
)
|
|||||
Amortization
of unrecognized net loss
|
1.4
|
0.7
|
2.8
|
1.4
|
|||||||||
Amortization
of unrecognized prior service cost
|
1.8
|
3.2
|
3.7
|
4.5
|
|||||||||
Actuarial
loss
|
3.5
|
3.5
|
10.6
|
10.5
|
|||||||||
Net
periodic benefit cost
|
$
|
12.1
|
$
|
19.7
|
$
|
33.2
|
$
|
41.2
|
Other
Postretirement Benefits
|
|||||||||||||
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Service
cost
|
$
|
2.8
|
$
|
4.1
|
$
|
5.3
|
$
|
7.8
|
|||||
Interest
cost
|
7.7
|
17.3
|
15.4
|
28.2
|
|||||||||
Expected
return on plan assets
|
(1.1
|
)
|
(1.3
|
)
|
(2.3
|
)
|
(2.6
|
)
|
|||||
Amortization
of unrecognized net loss (gain)
|
0.2
|
(0.2
|
)
|
0.4
|
(0.4
|
)
|
|||||||
Amortization
of unrecognized prior service benefit
|
(7.4
|
)
|
(12.7
|
)
|
(15.0
|
)
|
(18.1
|
)
|
|||||
Actuarial
loss
|
1.1
|
1.3
|
2.1
|
2.9
|
|||||||||
Net
periodic benefit cost
|
$
|
3.3
|
$
|
8.5
|
$
|
5.9
|
$
|
17.8
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Revenues
(a):
|
|||||||||||||
CNA
Financial:
|
|||||||||||||
Standard
Lines
|
$
|
1,307.1
|
$
|
1,542.2
|
$
|
2,675.1
|
$
|
3,035.0
|
|||||
Specialty
Lines
|
733.9
|
686.7
|
1,395.0
|
1,323.4
|
|||||||||
Life
and Group Non-Core
|
373.7
|
313.8
|
674.4
|
321.7
|
|||||||||
Other
Insurance
|
154.7
|
122.2
|
192.0
|
254.5
|
|||||||||
Total
CNA Financial
|
2,569.4
|
2,664.9
|
4,936.5
|
4,934.6
|
|||||||||
Lorillard
|
945.7
|
873.8
|
1,754.0
|
1,649.5
|
|||||||||
Boardwalk
Pipelines
|
119.4
|
52.1
|
270.7
|
138.1
|
|||||||||
Diamond
Offshore
|
298.2
|
187.7
|
562.9
|
373.6
|
|||||||||
Loews
Hotels
|
93.8
|
86.3
|
185.9
|
167.0
|
|||||||||
Corporate
and other
|
4.2
|
50.9
|
61.9
|
146.2
|
|||||||||
Total
|
$
|
4,030.7
|
$
|
3,915.7
|
$
|
7,771.9
|
$
|
7,409.0
|
|||||
Pretax
income (loss) (a):
|
|||||||||||||
CNA
Financial:
|
|||||||||||||
Standard
Lines
|
$
|
154.9
|
$
|
203.2
|
$
|
284.3
|
$
|
410.0
|
|||||
Specialty
Lines
|
117.1
|
149.0
|
238.0
|
282.4
|
|||||||||
Life
and Group Non-Core
|
(2.7
|
)
|
(100.6
|
)
|
(11.2
|
)
|
(634.9
|
)
|
|||||
Other
Insurance
|
67.4
|
83.0
|
73.3
|
113.4
|
|||||||||
Total
CNA Financial
|
336.7
|
334.6
|
584.4
|
170.9
|
|||||||||
Lorillard
|
274.2
|
238.3
|
505.9
|
447.1
|
|||||||||
Boardwalk
Pipelines
|
22.8
|
8.4
|
85.6
|
51.5
|
|||||||||
Diamond
Offshore
|
54.2
|
(14.4
|
)
|
97.2
|
(30.5
|
)
|
|||||||
Loews
Hotels
|
18.3
|
13.0
|
39.6
|
24.3
|
|||||||||
Corporate
and other
|
(67.5
|
)
|
(18.6
|
)
|
(122.1
|
)
|
(21.6
|
)
|
|||||
Total
|
$
|
638.7
|
$
|
561.3
|
$
|
1,190.6
|
$
|
641.7
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Net
income (loss) (a):
|
|||||||||||||
CNA
Financial:
|
|||||||||||||
Standard
Lines
|
$
|
106.3
|
$
|
135.2
|
$
|
191.3
|
$
|
273.6
|
|||||
Specialty
Lines
|
78.7
|
90.1
|
153.6
|
170.6
|
|||||||||
Life
and Group Non-Core
|
3.3
|
(11.0
|
)
|
1.8
|
(357.4
|
)
|
|||||||
Other
Insurance
|
78.2
|
56.8
|
88.1
|
77.6
|
|||||||||
Total
CNA Financial
|
266.5
|
271.1
|
434.8
|
164.4
|
|||||||||
Lorillard
|
162.7
|
145.2
|
304.3
|
272.6
|
|||||||||
Boardwalk
Pipelines
|
13.7
|
5.0
|
51.6
|
31.0
|
|||||||||
Diamond
Offshore
|
19.9
|
(6.7
|
)
|
34.1
|
(13.6
|
)
|
|||||||
Loews
Hotels
|
15.8
|
7.9
|
29.0
|
14.8
|
|||||||||
Corporate
and other
|
(44.8
|
)
|
(12.0
|
)
|
(80.3
|
)
|
(13.8
|
)
|
|||||
Total
|
$
|
433.8
|
$
|
410.5
|
$
|
773.5
|
$
|
455.4
|
(a)
|
Investment
gains (losses) included in Revenues, Pretax income (loss) and Net
income
(loss) are as follows:
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Revenues
and pretax income (loss):
|
|||||||||||||
CNA
Financial:
|
|||||||||||||
Standard
Lines
|
$
|
25.5
|
$
|
77.5
|
$
|
20.3
|
$
|
134.4
|
|||||
Specialty
Lines
|
8.3
|
29.3
|
9.0
|
49.6
|
|||||||||
Life
and Group Non-Core
|
(1.0
|
)
|
(56.3
|
)
|
(5.7
|
)
|
(614.7
|
)
|
|||||
Other
Insurance
|
(6.9
|
)
|
55.3
|
(14.4
|
)
|
81.5
|
|||||||
Total
CNA Financial
|
25.9
|
105.8
|
9.2
|
(349.2
|
)
|
||||||||
Corporate
and other
|
6.6
|
(13.6
|
)
|
0.5
|
(10.6
|
)
|
|||||||
Total
|
$
|
32.5
|
$
|
92.2
|
$
|
9.7
|
$
|
(359.8
|
)
|
||||
Net
income (loss):
|
|||||||||||||
CNA
Financial:
|
|||||||||||||
Standard
Lines
|
$
|
15.4
|
$
|
45.9
|
$
|
7.8
|
$
|
80.1
|
|||||
Specialty
Lines
|
4.9
|
16.8
|
7.9
|
28.7
|
|||||||||
Life
and Group Non-Core
|
(0.6
|
)
|
13.3
|
(3.4
|
)
|
(350.6
|
)
|
||||||
Other
Insurance
|
(4.5
|
)
|
32.8
|
(8.8
|
)
|
48.4
|
|||||||
Total
CNA Financial
|
15.2
|
108.8
|
3.5
|
(193.4
|
)
|
||||||||
Corporate
and other
|
4.2
|
(8.9
|
)
|
0.7
|
(7.0
|
)
|
|||||||
Total
|
$
|
19.4
|
$
|
99.9
|
$
|
4.2
|
$
|
(200.4
|
)
|
Previously
|
||||||||||
Three
Months Ended June 30, 2004
|
Reported
|
Adjustment
|
Restated
|
|||||||
(In
millions, except per share data)
|
||||||||||
Net
investment income
|
$
|
409.5
|
$
|
1.2
|
$
|
410.7
|
||||
Insurance
claims and policyholders’ benefits
|
1,624.5
|
4.0
|
1,620.5
|
|||||||
Income
tax expense
|
123.2
|
1.8
|
125.0
|
|||||||
Minority
interest
|
25.5
|
0.3
|
25.8
|
|||||||
Net
income
|
407.3
|
3.2
|
410.5
|
|||||||
Basic
net income per Loews common share
|
$
|
1.98
|
$
|
0.01
|
$
|
1.99
|
||||
Diluted
net income per Loews common share
|
$
|
1.98
|
$
|
0.01
|
$
|
1.99
|
Six
Months Ended June 30, 2004
|
||||||||||
Net
investment income
|
$
|
938.9
|
$
|
3.3
|
$
|
942.2
|
||||
Insurance
claims and policyholders’ benefits
|
3,262.9
|
4.2
|
3,258.7
|
|||||||
Income
tax expense
|
168.6
|
2.6
|
171.2
|
|||||||
Minority
interest
|
14.7
|
0.4
|
15.1
|
|||||||
Net
income
|
450.9
|
4.5
|
455.4
|
|||||||
Basic
net income per Loews common share
|
$
|
2.03
|
$
|
0.02
|
$
|
2.05
|
||||
Diluted
net income per Loews common share
|
$
|
2.03
|
$
|
0.02
|
$
|
2.05
|
CNA
|
Boardwalk
|
Diamond
|
Loews
|
Corporate
|
|||||||||||||||||||||
June
30, 2005
|
Financial
|
Lorillard
|
Pipelines
|
Offshore
|
Hotels
|
and
Other
|
Eliminations
|
Total
|
|||||||||||||||||
(In
millions)
|
|||||||||||||||||||||||||
Assets:
|
|||||||||||||||||||||||||
Investments
|
$
|
39,936.3
|
$
|
1,899.3
|
$
|
44.0
|
$
|
969.5
|
$
|
57.0
|
$
|
2,375.1
|
$
|
45,281.2
|
|||||||||||
Cash
|
70.4
|
202.6
|
5.5
|
20.7
|
4.9
|
22.3
|
326.4
|
||||||||||||||||||
Receivables
|
17,594.9
|
32.8
|
75.2
|
263.2
|
21.8
|
103.9
|
$
|
(2.1
|
)
|
18,089.7
|
|||||||||||||||
Property,
plant and equipment
|
169.2
|
230.0
|
1,847.0
|
2,226.4
|
370.9
|
20.9
|
4,864.4
|
||||||||||||||||||
Deferred
income taxes
|
805.5
|
412.9
|
23.0
|
25.6
|
(612.8
|
)
|
654.2
|
||||||||||||||||||
Goodwill
and other intangible assets
|
103.6
|
163.5
|
9.7
|
2.6
|
5.0
|
284.4
|
|||||||||||||||||||
Investments
in capital stocks of subsidiaries
|
12,613.9
|
(12,613.9
|
)
|
||||||||||||||||||||||
Other
assets
|
2,058.3
|
369.0
|
289.0
|
95.4
|
34.8
|
51.8
|
(32.9
|
)
|
2,865.4
|
||||||||||||||||
Deferred
acquisition costs of insurance subsidiaries
|
1,248.1
|
1,248.1
|
|||||||||||||||||||||||
Separate
account business
|
571.1
|
571.1
|
|||||||||||||||||||||||
Total
assets
|
$
|
62,557.4
|
$
|
3,146.6
|
$
|
2,447.2
|
$
|
3,584.9
|
$
|
492.0
|
$
|
15,218.5
|
$
|
(13,261.7
|
)
|
$
|
74,184.9
|
||||||||
Liabilities
and Shareholders’ Equity:
|
|||||||||||||||||||||||||
Insurance
reserves
|
$
|
42,934.3
|
$
|
42,934.3
|
|||||||||||||||||||||
Payable
for securities purchased
|
1,213.7
|
$
|
525.0
|
$
|
299.7
|
$
|
279.4
|
2,317.8
|
|||||||||||||||||
Collateral
on loaned securities and
derivatives
|
981.4
|
391.2
|
1,372.6
|
||||||||||||||||||||||
Short-term
debt
|
82.5
|
12.8
|
$
|
3.8
|
99.1
|
||||||||||||||||||||
Long-term
debt
|
1,668.4
|
$
|
1,100.9
|
967.8
|
238.1
|
1,164.4
|
5,139.6
|
||||||||||||||||||
Reinsurance
balances payable
|
2,781.8
|
2,781.8
|
|||||||||||||||||||||||
Deferred
income taxes
|
386.9
|
46.6
|
179.3
|
$
|
(612.8
|
)
|
|||||||||||||||||||
Other
liabilities
|
2,373.3
|
1,342.4
|
240.5
|
190.7
|
23.1
|
186.2
|
(39.8
|
)
|
4,316.4
|
||||||||||||||||
Separate
account business
|
571.1
|
571.1
|
|||||||||||||||||||||||
Total
liabilities
|
52,606.5
|
1,867.4
|
1,341.4
|
1,857.9
|
311.6
|
2,200.5
|
(652.6
|
)
|
59,532.7
|
||||||||||||||||
Minority
interest
|
983.6
|
766.8
|
1,750.4
|
||||||||||||||||||||||
Shareholders’
equity
|
8,967.3
|
1,279.2
|
1,105.8
|
960.2
|
180.4
|
13,018.0
|
(12,609.1
|
)
|
12,901.8
|
||||||||||||||||
Total
liabilities and shareholders’ equity
|
$
|
62,557.4
|
$
|
3,146.6
|
$
|
2,447.2
|
$
|
3,584.9
|
$
|
492.0
|
$
|
15,218.5
|
$
|
(13,261.7
|
)
|
$
|
74,184.9
|
CNA
|
Boardwalk
|
Diamond
|
Loews
|
Corporate
|
|||||||||||||||||||||
December
31, 2004
|
Financial
|
Lorillard
|
Pipelines
|
Offshore
|
Hotels
|
and
Other
|
Eliminations
|
Total
|
|||||||||||||||||
(In
millions)
|
|||||||||||||||||||||||||
Assets:
|
|||||||||||||||||||||||||
Investments
|
$
|
39,227.3
|
$
|
1,545.6
|
$
|
9.0
|
$
|
876.9
|
$
|
63.8
|
$
|
2,575.9
|
$
|
44,298.5
|
|||||||||||
Cash
|
95.3
|
35.5
|
7.5
|
51.0
|
4.6
|
26.0
|
219.9
|
||||||||||||||||||
Receivables
|
18,200.3
|
32.1
|
131.6
|
187.6
|
19.1
|
144.3
|
$
|
(18.8
|
)
|
18,696.2
|
|||||||||||||||
Property,
plant and equipment
|
175.6
|
231.5
|
1,842.1
|
2,192.8
|
376.9
|
21.8
|
4,840.7
|
||||||||||||||||||
Deferred
income taxes
|
748.8
|
436.5
|
48.9
|
31.9
|
(625.2
|
)
|
640.9
|
||||||||||||||||||
Goodwill
and other intangible assets
|
118.3
|
163.5
|
9.7
|
2.6
|
294.1
|
||||||||||||||||||||
Investments
in capital stocks of subsidiaries
|
12,061.0
|
(12,061.0
|
)
|
||||||||||||||||||||||
Other
assets
|
1,943.5
|
396.5
|
250.0
|
88.2
|
95.2
|
240.5
|
(205.2
|
)
|
2,808.7
|
||||||||||||||||
Deferred
acquisition costs of insurance subsidiaries
|
1,268.1
|
1,268.1
|
|||||||||||||||||||||||
Separate
account business
|
567.8
|
567.8
|
|||||||||||||||||||||||
Total
assets
|
$
|
62,345.0
|
$
|
2,677.7
|
$
|
2,452.6
|
$
|
3,406.2
|
$
|
562.2
|
$
|
15,101.4
|
$
|
(12,910.2
|
)
|
$
|
73,634.9
|
||||||||
Liabilities
and Shareholders’ Equity:
|
|||||||||||||||||||||||||
Insurance
reserves
|
$
|
43,652.2
|
$
|
43,652.2
|
|||||||||||||||||||||
Payable
for securities purchased
|
494.1
|
$
|
101.4
|
595.5
|
|||||||||||||||||||||
Collateral
on loaned securities and derivatives
|
918.0
|
918.0
|
|||||||||||||||||||||||
Short-term
debt
|
530.9
|
$
|
477.1
|
$
|
2.1
|
1,010.1
|
|||||||||||||||||||
Long-term
debt
|
1,726.5
|
$
|
1,106.1
|
700.0
|
142.3
|
2,305.3
|
5,980.2
|
||||||||||||||||||
Reinsurance
balances payable
|
2,980.8
|
2,980.8
|
|||||||||||||||||||||||
Deferred
income taxes
|
361.5
|
38.0
|
225.7
|
$
|
(625.2
|
)
|
|||||||||||||||||||
Other
liabilities
|
2,091.2
|
$
|
1,392.6
|
253.5
|
193.2
|
166.3
|
208.1
|
(210.4
|
)
|
4,094.5
|
|||||||||||||||
Separate
account business
|
567.8
|
567.8
|
|||||||||||||||||||||||
Total
liabilities
|
52,961.5
|
1,392.6
|
1,359.6
|
1,731.8
|
348.7
|
2,840.5
|
(835.6
|
)
|
59,799.1
|
||||||||||||||||
Minority
interest
|
934.9
|
739.3
|
5.6
|
1,679.8
|
|||||||||||||||||||||
Shareholders’
equity
|
8,448.6
|
1,285.1
|
1,093.0
|
935.1
|
213.5
|
12,255.3
|
(12,074.6
|
)
|
12,156.0
|
||||||||||||||||
Total
liabilities and shareholders’ equity
|
$
|
62,345.0
|
$
|
2,677.7
|
$
|
2,452.6
|
$
|
3,406.2
|
$
|
562.2
|
$
|
15,101.4
|
$
|
(12,910.2
|
)
|
$
|
73,634.9
|
CNA
|
Boardwalk
|
Diamond
|
Loews
|
Corporate
|
|||||||||||||||||||||
Six
Months Ended June 30, 2005
|
Financial
|
Lorillard
|
Pipelines
|
Offshore
|
Hotels
|
and
Other
|
Eliminations
|
Total
|
|||||||||||||||||
(In
millions)
|
|||||||||||||||||||||||||
Revenues:
|
|||||||||||||||||||||||||
Insurance
premiums
|
$
|
3,811.4
|
$
|
(0.6
|
)
|
$
|
3,810.8
|
||||||||||||||||||
Net
investment income
|
845.3
|
$
|
24.5
|
$
|
1.4
|
$
|
11.9
|
$
|
5.4
|
$
|
(28.0
|
)
|
860.5
|
||||||||||||
Intercompany
interest and dividends
|
425.1
|
(425.1
|
)
|
||||||||||||||||||||||
Investment
gains (losses)
|
9.2
|
(2.0
|
)
|
(1.3
|
)
|
3.8
|
9.7
|
||||||||||||||||||
Manufactured
products
|
1,723.4
|
79.5
|
1,802.9
|
||||||||||||||||||||||
Other
|
270.6
|
6.1
|
269.3
|
551.0
|
180.5
|
10.5
|
1,288.0
|
||||||||||||||||||
Total
|
4,936.5
|
1,752.0
|
270.7
|
561.6
|
185.9
|
490.9
|
(425.7
|
)
|
7,771.9
|
||||||||||||||||
Expenses:
|
|||||||||||||||||||||||||
Insurance
claims and policyholders’ benefits
|
3,015.0
|
3,015.0
|
|||||||||||||||||||||||
Amortization
of deferred acquisition costs
|
752.1
|
752.1
|
|||||||||||||||||||||||
Cost
of manufactured products sold
|
1,061.1
|
38.7
|
1,099.8
|
||||||||||||||||||||||
Other
operating expenses
|
517.8
|
187.0
|
155.4
|
440.4
|
141.5
|
57.3
|
(0.6
|
)
|
1,498.8
|
||||||||||||||||
Interest
|
67.2
|
29.7
|
25.3
|
4.8
|
88.6
|
215.6
|
|||||||||||||||||||
Total
|
4,352.1
|
1,248.1
|
185.1
|
465.7
|
146.3
|
184.6
|
(0.6
|
)
|
6,581.3
|
||||||||||||||||
584.4
|
503.9
|
85.6
|
95.9
|
39.6
|
306.3
|
(425.1
|
)
|
1,190.6
|
|||||||||||||||||
Income
tax expense (benefit)
|
107.0
|
200.9
|
34.0
|
29.8
|
10.6
|
(40.3
|
)
|
342.0
|
|||||||||||||||||
Minority
interest
|
42.6
|
32.5
|
75.1
|
||||||||||||||||||||||
Total
|
149.6
|
200.9
|
34.0
|
62.3
|
10.6
|
(40.3
|
)
|
417.1
|
|||||||||||||||||
Net
income
|
$
|
434.8
|
$
|
303.0
|
$
|
51.6
|
$
|
33.6
|
$
|
29.0
|
$
|
346.6
|
$
|
(425.1
|
)
|
$
|
773.5
|
CNA
|
Boardwalk
|
Diamond
|
Loews
|
Corporate
|
|||||||||||||||||||||
Six
Months Ended June 30, 2004
|
Financial
|
Lorillard
|
Pipelines
|
Offshore
|
Hotels
|
and
Other
|
Eliminations
|
Total
|
|||||||||||||||||
(In
millions)
|
|||||||||||||||||||||||||
Revenues:
|
|||||||||||||||||||||||||
Insurance
premiums
|
$
|
4,274.1
|
$
|
(1.8
|
)
|
$
|
4,272.3
|
||||||||||||||||||
Net
investment income
|
856.0
|
$
|
13.7
|
$
|
4.7
|
$
|
1.1
|
$
|
66.7
|
942.2
|
|||||||||||||||
Intercompany
interest and dividends
|
303.0
|
(303.0
|
)
|
||||||||||||||||||||||
Investment
gains (losses)
|
(349.2
|
)
|
0.6
|
0.3
|
(11.5
|
)
|
(359.8
|
)
|
|||||||||||||||||
Manufactured
products
|
1,636.0
|
71.5
|
1,707.5
|
||||||||||||||||||||||
Other
|
153.7
|
$
|
138.1
|
368.9
|
165.9
|
20.2
|
846.8
|
||||||||||||||||||
Total
|
4,934.6
|
1,650.3
|
138.1
|
373.9
|
167.0
|
449.9
|
(304.8
|
)
|
7,409.0
|
||||||||||||||||
Expenses:
|
|||||||||||||||||||||||||
Insurance
claims and policyholders’ benefits
|
3,258.7
|
3,258.7
|
|||||||||||||||||||||||
Amortization
of deferred acquisition costs
|
740.3
|
740.3
|
|||||||||||||||||||||||
Cost
of manufactured products sold
|
999.6
|
35.3
|
1,034.9
|
||||||||||||||||||||||
Other
operating expenses
|
698.7
|
203.0
|
71.4
|
391.4
|
139.4
|
58.7
|
(1.8
|
)
|
1,560.8
|
||||||||||||||||
Interest
|
66.0
|
15.2
|
12.7
|
3.3
|
80.7
|
(5.3
|
)
|
172.6
|
|||||||||||||||||
Total
|
4,763.7
|
1,202.6
|
86.6
|
404.1
|
142.7
|
174.7
|
(7.1
|
)
|
6,767.3
|
||||||||||||||||
170.9
|
447.7
|
51.5
|
(30.2
|
)
|
24.3
|
275.2
|
(297.7
|
)
|
641.7
|
||||||||||||||||
Income
tax expense (benefit)
|
(18.3
|
)
|
174.7
|
20.5
|
(6.8
|
)
|
9.5
|
(8.4
|
)
|
171.2
|
|||||||||||||||
Minority
interest
|
24.8
|
(9.8
|
)
|
0.1
|
15.1
|
||||||||||||||||||||
Total
|
6.5
|
174.7
|
20.5
|
(16.6
|
)
|
9.5
|
(8.3
|
)
|
186.3
|
||||||||||||||||
Net
income (loss)
|
$
|
164.4
|
$
|
273.0
|
$
|
31.0
|
$
|
(13.6
|
)
|
$
|
14.8
|
$
|
283.5
|
$
|
(297.7
|
)
|
$
|
455.4
|
Page
|
||
No.
|
||
Overview
|
||
Consolidated
Financial Results
|
65
|
|
Classes
of Common Stock
|
66
|
|
Parent
Company Structure
|
66
|
|
Critical
Accounting Estimates
|
67
|
|
Results
of Operations by Business Segment
|
70
|
|
CNA
Financial
|
70
|
|
Reserves
- Estimates and Uncertainties
|
70
|
|
Reinsurance
|
72
|
|
Terrorism
Insurance
|
76
|
|
Restructuring
|
77
|
|
Standard
Lines
|
77
|
|
Specialty
Lines
|
80
|
|
Life
and Group Non-Core
|
83
|
|
Other
Insurance
|
84
|
|
APMT
Reserves
|
85
|
|
Lorillard
|
95
|
|
Results
of Operations
|
95
|
|
Business
Environment
|
97
|
|
Boardwalk
Pipelines
|
99
|
|
Diamond
Offshore
|
100
|
|
Loews
Hotels
|
101
|
|
Corporate
and Other
|
102
|
|
Liquidity
and Capital Resources
|
103
|
|
CNA
Financial
|
103
|
|
Lorillard
|
106
|
|
Boardwalk
Pipelines
|
107
|
|
Diamond
Offshore
|
107
|
|
Loews
Hotels
|
108
|
|
Corporate
and Other
|
108
|
|
Investments
|
109
|
|
Accounting
Standards
|
118
|
|
Forward-Looking
Statements Disclaimer
|
118
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions, except per share data)
|
|||||||||||||
Net
income attributable to Loews common stock:
|
|||||||||||||
Income
before net investment (losses) gains
|
$
|
358.6
|
$
|
269.9
|
$
|
666.6
|
$
|
580.7
|
|||||
Net
investment (losses) gains (a)
|
19.5
|
100.0
|
4.7
|
(200.3
|
)
|
||||||||
Net
income attributable to Loews common stock
|
378.1
|
369.9
|
671.3
|
380.4
|
|||||||||
Net
income attributable to Carolina Group stock
|
55.7
|
40.6
|
102.2
|
75.0
|
|||||||||
Consolidated
net income
|
$
|
433.8
|
$
|
410.5
|
$
|
773.5
|
$
|
455.4
|
|||||
Net
income per share:
|
|||||||||||||
Loews
common stock
|
$
|
2.03
|
$
|
1.99
|
$
|
3.61
|
$
|
2.05
|
|||||
Carolina
Group stock
|
$
|
0.82
|
$
|
0.70
|
$
|
1.50
|
$
|
1.29
|
(a)
|
Includes
a loss of $352.9 (after tax and minority interest) for the six
months
ended June 30, 2004 related to CNA’s sale of its individual life insurance
business.
|
· |
increases
in the number and size of water damage claims, including those
related to
expenses for testing and remediation of mold
conditions;
|
·
|
increases
in the number and size of claims relating to injuries from medical
products, and exposure to lead;
|
·
|
the
effects of accounting and financial reporting scandals and other
major
corporate governance failures, which have resulted in an increase
in the
number and size of claims, including director and officer and errors
and
omissions insurance claims;
|
·
|
class
action litigation relating to claims handling and other practices;
|
·
|
increases
in the number of construction defect claims, including claims for
a broad
range of additional insured endorsements on policies;
and
|
·
|
increases
in the number of claims alleging abuse by members of the clergy,
including
passage of legislation to reopen or extend various statutes of
limitations.
|
·
|
coverage
issues, including whether certain costs are covered under the policies
and
whether policy limits apply;
|
·
|
inconsistent
court decisions and developing legal
theories;
|
·
|
increasingly
aggressive tactics of plaintiffs’
lawyers;
|
·
|
the
risks and lack of predictability inherent in major
litigation;
|
·
|
changes
in the volume of asbestos and environmental pollution and mass
tort claims
which cannot now be anticipated;
|
·
|
continued
increase in mass tort claims relating to silica and silica-containing
products;
|
·
|
the
impact of the exhaustion of primary limits and the resulting increase
in
claims on any umbrella or excess policies CNA has
issued;
|
·
|
the
number and outcome of direct actions against CNA;
and
|
·
|
CNA’s
ability to recover reinsurance for asbestos and environmental pollution
and mass tort claims.
|
June
30,
|
December
31,
|
||||||
2005
|
2004
|
||||||
(In
millions)
|
|||||||
Reinsurance
receivables related to insurance reserves:
|
|||||||
Ceded
claim and claim adjustment expense
|
$
|
12,630.7
|
$
|
13,878.4
|
|||
Ceded
future policy benefits
|
1,224.6
|
1,259.6
|
|||||
Ceded
policyholders’ funds
|
61.2
|
64.8
|
|||||
Billed
reinsurance receivables
|
606.0
|
685.2
|
|||||
Reinsurance
receivables
|
14,522.5
|
15,888.0
|
|||||
Less
allowance for uncollectible reinsurance
|
551.1
|
546.3
|
|||||
Reinsurance
receivables, net
|
$
|
13,971.4
|
$
|
15,341.7
|
Aggregate
|
|||||||||||||
Three
Months Ended June 30, 2005
|
Cover
|
CCC
Cover
|
All
Other
|
Total
|
|||||||||
(In
millions)
|
|||||||||||||
Ceded
earned premium
|
$
|
(6.0
|
)
|
$
|
3.0
|
$
|
(3.0
|
)
|
|||||
Ceded
claim and claim adjustment expense
|
2.0
|
2.0
|
|||||||||||
Ceding
commissions
|
3.0
|
3.0
|
|||||||||||
Interest
charges
|
(18.0
|
)
|
$
|
(16.0
|
)
|
(12.0
|
)
|
(46.0
|
)
|
||||
Pretax
(expense) benefit
|
$
|
(24.0
|
)
|
$
|
(16.0
|
)
|
$
|
(4.0
|
)
|
$
|
(44.0
|
)
|
|
Three
Months Ended June 30, 2004
|
|||||||||||||
Ceded
earned premium
|
$
|
(3.0
|
)
|
$
|
6.0
|
$
|
3.0
|
||||||
Ceded
claim and claim adjustment expense
|
(12.0
|
)
|
(12.0
|
)
|
|||||||||
Ceding
commissions
|
|||||||||||||
Interest
charges
|
(22.0
|
)
|
$
|
(11.0
|
)
|
(17.0
|
)
|
(50.0
|
)
|
||||
Pretax
(expense) benefit
|
$
|
(25.0
|
)
|
$
|
(11.0
|
)
|
$
|
(23.0
|
)
|
$
|
(59.0
|
)
|
Six
Months Ended June 30, 2005
|
|||||||||||||
Ceded
earned premium
|
$
|
(18.0
|
)
|
$
|
65.0
|
$
|
47.0
|
||||||
Ceded
claim and claim adjustment expense
|
(67.0
|
)
|
(67.0
|
)
|
|||||||||
Ceding
commissions
|
(30.0
|
)
|
(30.0
|
)
|
|||||||||
Interest
charges
|
(42.0
|
)
|
$
|
(32.0
|
)
|
(10.0
|
)
|
(84.0
|
)
|
||||
Pretax
(expense) benefit
|
$
|
(60.0
|
)
|
$
|
(32.0
|
)
|
$
|
(42.0
|
)
|
$
|
(134.0
|
)
|
|
Six
Months Ended June 30, 2004
|
|||||||||||||
Ceded
earned premium
|
$
|
(3.0
|
)
|
$
|
8.0
|
$
|
5.0
|
||||||
Ceded
claim and claim adjustment expense
|
(17.0
|
)
|
(17.0
|
)
|
|||||||||
Ceding
commissions
|
3.0
|
3.0
|
|||||||||||
Interest
charges
|
(42.0
|
)
|
$
|
(22.0
|
)
|
(33.0
|
)
|
(97.0
|
)
|
||||
Pretax
(expense) benefit
|
$
|
(45.0
|
)
|
$
|
(22.0
|
)
|
$
|
(39.0
|
)
|
$
|
(106.0
|
)
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Standard
Lines
|
$
|
(30.0
|
)
|
$
|
(43.0
|
)
|
$
|
(96.0
|
)
|
$
|
(80.0
|
)
|
|
Specialty
Lines
|
(2.0
|
)
|
(7.0
|
)
|
(4.0
|
)
|
|||||||
Other
Insurance
|
(14.0
|
)
|
(14.0
|
)
|
(31.0
|
)
|
(22.0
|
)
|
|||||
Pretax
expense
|
$
|
(44.0
|
)
|
$
|
(59.0
|
)
|
$
|
(134.0
|
)
|
$
|
(106.0
|
)
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions, except %)
|
|||||||||||||
Net
written premiums
|
$
|
1,134.0
|
$
|
1,209.0
|
$
|
2,305.0
|
$
|
2,474.0
|
|||||
Net
earned premiums
|
1,084.0
|
1,315.0
|
2,253.0
|
2,573.0
|
|||||||||
Income
before net realized investment gains
|
90.9
|
89.3
|
183.5
|
193.5
|
|||||||||
Net
realized investment gains
|
15.4
|
45.9
|
7.8
|
80.1
|
|||||||||
Net
income
|
106.3
|
135.2
|
191.3
|
273.6
|
|||||||||
Ratios:
|
|||||||||||||
Loss
and loss adjustment expense
|
71.2
|
%
|
70.5
|
%
|
71.1
|
%
|
68.0
|
%
|
|||||
Expense
|
31.4
|
30.3
|
31.8
|
31.9
|
|||||||||
Dividend
|
0.8
|
(1.1
|
)
|
0.6
|
(0.2
|
)
|
|||||||
Combined
|
103.4
|
%
|
99.7
|
%
|
103.5
|
%
|
99.7
|
%
|
June
30,
|
December
31,
|
||||||
2005
|
2004
|
||||||
(In
millions)
|
|||||||
Gross
Case Reserves
|
$
|
6,720.0
|
$
|
6,904.0
|
|||
Gross
IBNR Reserves
|
7,451.0
|
7,398.0
|
|||||
Total
Gross Carried Claim and Claim Adjustment Expense Reserves
|
$
|
14,171.0
|
$
|
14,302.0
|
|||
Net
Case Reserves
|
$
|
4,406.0
|
$
|
4,761.0
|
|||
Net
IBNR Reserves
|
5,157.0
|
4,547.0
|
|||||
Total
Net Carried Claim and Claim Adjustment Expense Reserves
|
$
|
9,563.0
|
$
|
9,308.0
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions, except %)
|
|||||||||||||
Net
written premiums
|
$
|
595.0
|
$
|
592.0
|
$
|
1,189.0
|
$
|
1,173.0
|
|||||
Net
earned premiums
|
630.0
|
567.0
|
1,203.0
|
1,096.0
|
|||||||||
Income
before net realized investment gains
|
73.8
|
73.3
|
145.7
|
141.9
|
|||||||||
Net
realized investment gains
|
4.9
|
16.8
|
7.9
|
28.7
|
|||||||||
Net
income
|
78.7
|
90.1
|
153.6
|
170.6
|
|||||||||
Ratios:
|
|||||||||||||
Loss
and loss adjustment expense
|
69.0
|
%
|
64.2
|
%
|
65.8
|
%
|
63.6
|
%
|
|||||
Expense
|
24.8
|
25.6
|
25.8
|
26.1
|
|||||||||
Dividend
|
0.2
|
0.2
|
0.2
|
0.3
|
|||||||||
Combined
|
94.0
|
%
|
90.0
|
%
|
91.8
|
%
|
90.0
|
%
|
June
30,
|
December
31,
|
||||||
2005
|
2004
|
||||||
(In
millions)
|
|||||||
Gross
Case Reserves
|
$
|
1,765.0
|
$
|
1,659.0
|
|||
Gross
IBNR Reserves
|
3,231.0
|
3,201.0
|
|||||
Total
Gross Carried Claim and Claim Adjustment Expense Reserves
|
$
|
4,996.0
|
$
|
4,860.0
|
|||
Net
Case Reserves
|
$
|
1,178.0
|
$
|
1,191.0
|
|||
Net
IBNR Reserves
|
2,268.0
|
2,042.0
|
|||||
Total
Net Carried Claim and Claim Adjustment Expense Reserves
|
$
|
3,446.0
|
$
|
3,233.0
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Net
earned premiums
|
$
|
204.0
|
$
|
202.0
|
$
|
370.0
|
$
|
528.0
|
|||||
Income
(loss) before net realized investment
(losses)
gains
|
3.9
|
(24.3
|
)
|
5.2
|
(6.8
|
)
|
|||||||
Net
realized investment (losses) gains
|
(0.6
|
)
|
13.3
|
(3.4
|
)
|
(350.6
|
)
|
||||||
Net
income (loss)
|
3.3
|
(11.0
|
)
|
1.8
|
(357.4
|
)
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Net
investment income
|
$
|
55.0
|
$
|
61.0
|
$
|
116.0
|
$
|
130.0
|
|||||
Revenues
|
154.7
|
122.2
|
192.0
|
254.5
|
|||||||||
Income
before net realized investment (losses) gains
|
82.7
|
24.0
|
96.9
|
29.2
|
|||||||||
Net
realized investment (losses) gains
|
(4.5
|
)
|
32.8
|
(8.8
|
)
|
48.4
|
|||||||
Net
income
|
78.2
|
56.8
|
88.1
|
77.6
|
June
30,
|
December
31,
|
||||||
2005
|
2004
|
||||||
(In
millions)
|
|||||||
Gross
Case Reserves
|
$
|
3,562.0
|
$
|
3,806.0
|
|||
Gross
IBNR Reserves
|
4,477.0
|
4,875.0
|
|||||
Total
Gross Carried Claim and Claim Adjustment Expense Reserves
|
$
|
8,039.0
|
$
|
8,681.0
|
|||
Net
Case Reserves
|
$
|
1,537.0
|
$
|
1,588.0
|
|||
Net
IBNR Reserves
|
1,786.0
|
1,691.0
|
|||||
Total
Net Carried Claim and Claim Adjustment Expense Reserves
|
$
|
3,323.0
|
$
|
3,279.0
|
June
30, 2005
|
December
31, 2004
|
||||||||||||
Environmental
|
|
Environmental
|
|||||||||||
Pollution
and
|
Pollution
and
|
||||||||||||
Asbestos
|
Mass
Tort
|
Asbestos
|
Mass
Tort
|
||||||||||
(In
millions)
|
|||||||||||||
Gross
reserves
|
$
|
3,132.0
|
$
|
663.0
|
$
|
3,218.0
|
$
|
755.0
|
|||||
Ceded
reserves
|
(1,512.0
|
)
|
(234.0
|
)
|
(1,532.0
|
)
|
(258.0
|
)
|
|||||
Net
reserves
|
$
|
1,620.0
|
$
|
429.0
|
$
|
1,686.0
|
$
|
497.0
|
Percent
of
|
|||||||||||||
Number
of
|
Net
Paid
|
Net
Asbestos
|
Asbestos
Net
|
||||||||||
June
30, 2005
|
Policyholders
|
Losses
|
Reserves
|
Reserves
|
|||||||||
(In
millions of dollars)
|
|||||||||||||
Policyholders
with settlement agreements
|
|||||||||||||
Structured
settlements
|
13
|
$
|
18.0
|
$
|
159.0
|
9.8
|
%
|
||||||
Wellington
|
4
|
2.0
|
16.0
|
1.0
|
|||||||||
Coverage
in place
|
34
|
7.0
|
70.0
|
4.3
|
|||||||||
Fibreboard
|
1
|
54.0
|
3.3
|
||||||||||
Total
with settlement agreements
|
52
|
27.0
|
299.0
|
18.4
|
|||||||||
Other
policyholders with active accounts
|
|||||||||||||
Large
asbestos accounts
|
187
|
29.0
|
304.0
|
18.8
|
|||||||||
Small
asbestos accounts
|
1,060
|
14.0
|
120.0
|
7.4
|
|||||||||
Total
other policyholders
|
1,247
|
43.0
|
424.0
|
26.2
|
|||||||||
Assumed
reinsurance and pools
|
3.0
|
146.0
|
9.0
|
||||||||||
Unassigned
IBNR
|
751.0
|
46.4
|
|||||||||||
Total
|
1,299
|
$
|
73.0
|
$
|
1,620.0
|
100.0
|
%
|
December
31, 2004
|
|||||||||||||
Policyholders
with settlement agreements
|
|||||||||||||
Structured
settlements
|
11
|
$
|
39.0
|
$
|
175.0
|
10.4
|
%
|
||||||
Wellington
|
4
|
4.0
|
17.0
|
1.0
|
|||||||||
Coverage
in place
|
33
|
14.0
|
76.0
|
4.5
|
|||||||||
Fibreboard
|
1
|
54.0
|
3.2
|
||||||||||
Total
with settlement agreements
|
49
|
57.0
|
322.0
|
19.1
|
|||||||||
Other
policyholders with active accounts
|
|||||||||||||
Large
asbestos accounts
|
180
|
47.0
|
368.0
|
21.8
|
|||||||||
Small
asbestos accounts
|
1,109
|
23.0
|
141.0
|
8.4
|
|||||||||
Total
other policyholders
|
1,289
|
70.0
|
509.0
|
30.2
|
|||||||||
Assumed
reinsurance and pools
|
8.0
|
148.0
|
8.8
|
||||||||||
Unassigned
IBNR
|
707.0
|
41.9
|
|||||||||||
Total
|
1,338
|
$
|
135.0
|
$
|
1,686.0
|
100.0
|
%
|
·
|
inconsistency
of court decisions, jury attitudes and future court
decisions
|
·
|
specific
policy provisions
|
·
|
allocation
of liability among insurers and insureds
|
·
|
missing
policies and proof of coverage
|
·
|
the
proliferation of bankruptcy proceedings and attendant
uncertainties
|
·
|
novel
theories asserted by policyholders and their counsel
|
·
|
the
targeting of a broader range of businesses and entities as defendants
|
·
|
the
uncertainty as to which other insureds may be targeted in the
future and
the uncertainties inherent in predicting the number of future
claims
|
·
|
volatility
in claim numbers and settlement demands
|
·
|
increases
in the number of non-impaired claimants and the extent to which
they can
be precluded from making claims
|
·
|
the
efforts by insureds to obtain coverage not subject to aggregate
limits
|
·
|
long
latency period between asbestos exposure and disease manifestation
and the
resulting potential for involvement of multiple policy periods
for
individual claims
|
·
|
medical
inflation trends
|
·
|
the
mix of asbestos-related diseases presented
and
|
·
|
the
ability to recover reinsurance.
|
Net
|
Percent
of
|
||||||||||||
Environmental
|
Environmental
|
||||||||||||
Number
of
|
Net
|
Pollution
|
Pollution
Net
|
||||||||||
June
30, 2005
|
Policyholders
|
Paid
Losses
|
Reserves
|
Reserve
|
|||||||||
(In
millions of dollars)
|
|||||||||||||
Policyholders
with Settlement Agreements
|
|||||||||||||
Structured
settlements
|
4
|
$
|
4.0
|
$
|
9.0
|
3.0
|
%
|
||||||
Coverage
in place
|
16
|
3.0
|
16.0
|
5.2
|
|||||||||
Total
with Settlement Agreements
|
20
|
7.0
|
25.0
|
8.2
|
|||||||||
Other
Policyholders with Active Accounts
|
|||||||||||||
Large
pollution accounts
|
132
|
17.0
|
72.0
|
23.6
|
|||||||||
Small
pollution accounts
|
386
|
10.0
|
44.0
|
14.4
|
|||||||||
Total
Other Policyholders
|
518
|
27.0
|
116.0
|
38.0
|
|||||||||
Assumed
Reinsurance & Pools
|
2.0
|
34.0
|
11.2
|
||||||||||
Unassigned
IBNR
|
130.0
|
42.6
|
|||||||||||
Total
|
538
|
$
|
36.0
|
$
|
305.0
|
$
|
100.0
|
%
|
Net
|
Percent
of
|
||||||||||||
Environmental
|
Environmental
|
||||||||||||
Number
of
|
Net
|
Pollution
|
Pollution
Net
|
||||||||||
December
31, 2004
|
Policyholders
|
Paid
Losses
|
Reserves
|
Reserve
|
|||||||||
(In
millions of dollars)
|
|||||||||||||
Policyholders
with Settlement Agreements
|
|||||||||||||
Structured
settlements
|
2
|
$
|
14.0
|
$
|
5.0
|
1.5
|
%
|
||||||
Coverage
in place
|
15
|
5.0
|
16.0
|
4.7
|
|||||||||
Total
with Settlement Agreements
|
17
|
19.0
|
21.0
|
6.2
|
|||||||||
Other
Policyholders with Active Accounts
|
|||||||||||||
Large
pollution accounts
|
134
|
18.0
|
75.0
|
21.9
|
|||||||||
Small
pollution accounts
|
405
|
14.0
|
47.0
|
13.7
|
|||||||||
Total
Other Policyholders
|
539
|
32.0
|
122.0
|
35.6
|
|||||||||
Assumed
Reinsurance & Pools
|
2.0
|
36.0
|
10.5
|
||||||||||
Unassigned
IBNR
|
163.0
|
47.7
|
|||||||||||
Total
|
556
|
$
|
53.0
|
$
|
342.0
|
100.0
|
%
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Revenues:
|
|||||||||||||
Manufactured
products
|
$
|
928.3
|
$
|
868.1
|
$
|
1,723.4
|
$
|
1,636.0
|
|||||
Net
investment income
|
11.3
|
5.7
|
24.5
|
13.7
|
|||||||||
Investment
(losses) gains
|
(0.1
|
)
|
0.6
|
(2.0
|
)
|
0.6
|
|||||||
Other
|
6.1
|
0.2
|
6.1
|
||||||||||
Total
|
945.6
|
874.6
|
1,752.0
|
1,650.3
|
|||||||||
Expenses:
|
|||||||||||||
Cost
of sales
|
574.4
|
532.3
|
1,061.1
|
999.6
|
|||||||||
Other
operating
|
97.1
|
103.4
|
187.0
|
203.0
|
|||||||||
Total
|
671.5
|
635.7
|
1,248.1
|
1,202.6
|
|||||||||
274.1
|
238.9
|
503.9
|
447.7
|
||||||||||
Income
tax expense
|
111.5
|
93.3
|
200.9
|
174.7
|
|||||||||
Net
income
|
$
|
162.6
|
$
|
145.6
|
$
|
303.0
|
$
|
273.0
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(Units
in billions)
|
|||||||||||||
Total
domestic Lorillard unit volume (1)
|
9.395
|
8.932
|
17.609
|
17.071
|
|||||||||
Total
domestic industry unit volume (1)
|
99.798
|
102.500
|
187.740
|
194.368
|
|||||||||
Lorillard’s
share of the domestic market (1)
|
9.4
|
8.7
|
9.4
|
8.8
|
|||||||||
Lorillard’s
premium segment as a percentage of its total domestic volume (1)
|
95.3
|
95.3
|
95.4
|
95.4
|
|||||||||
Newport
share of the domestic segment (1)
|
8.6
|
7.9
|
8.6
|
8.0
|
|||||||||
Newport
share of the premium segment (1)
|
12.0
|
11.4
|
12.0
|
11.5
|
|||||||||
Total
menthol segment market share for the industry (2)
|
27.1
|
26.8
|
27.1
|
26.9
|
|||||||||
Newport’s
share of the menthol segment (2)
|
33.1
|
30.7
|
32.9
|
30.8
|
|||||||||
Newport
as a percentage of Lorillard’s (3):
|
|||||||||||||
Total
volume
|
91.8
|
90.9
|
91.7
|
90.9
|
|||||||||
Net
sales
|
93.0
|
92.2
|
92.9
|
92.2
|
(1)
|
Management
Science Associates, Inc.
|
(2)
|
Lorillard
proprietary data
|
(3)
|
Lorillard
shipment reports
|
·
|
A
substantial volume of litigation seeking compensatory and punitive
damages
ranging into the billions of dollars, as well as equitable and
injunctive
relief, arising out of allegations of cancer and other health effects
resulting from the use of cigarettes, addiction to smoking or exposure
to
environmental tobacco smoke, including claims for reimbursement
of health
care costs allegedly incurred as a result of smoking, as well as
other
alleged damages. Pending litigation
includes:
|
·
|
A
jury award in Florida of $16.3 billion in punitive damages against
Lorillard in Engle
v. R.J. Reynolds Tobacco Company, et al.,
a
judgment which was vacated by the Florida Third District Court
of Appeal
in September of 2003. The Florida Supreme Court heard argument
of
plaintiffs’ appeal on November 3,
2004.
|
·
|
In
Scott v. The American Tobacco Company, et al.,
a
jury awarded $591.0 million against the defendants, including Lorillard,
to fund cessation programs for Louisiana smokers. Lorillard’s share of the
Scott
judgment has not been determined. The court’s final judgment also reflects
its award of judicial interest. As of July 1, 2005, judicial interest
totaled approximately $375.0 million. Judicial interest will continue
to
accrue until the judgment is paid or dismissed on appeal. Lorillard
and
the other defendants have appealed the Scott
judgment to the Louisiana Court of
Appeals.
|
·
|
The
U.S. Department of Justice has brought an action against Lorillard
and
other tobacco companies. The government sought, pursuant to the
federal
Racketeer Influenced and Corrupt Organization Act, disgorgement
of profits
from the industry of $280.0 billion that the government contends
were
earned as a consequence of a racketeering “enterprise.” On February 4,
2005, the United States Court of Appeals for the District of Columbia
Circuit ruled that disgorgement was not a proper remedy in this
case. On
July 18, 2005, the government filed a petition for a writ of certiorari
to
the U.S. Supreme Court seeking review of that decision. The government
now
seeks funding for a smoking cessation and educational or counter-marketing
programs and various injunctive relief. Trial of the case has been
completed and post-trial briefings are
continuing.
|
·
|
Substantial
annual payments by Lorillard, continuing in perpetuity, and significant
restrictions on marketing and advertising agreed to under the terms
of the
State Settlement Agreements. The State Settlement Agreements impose
a
stream of future payment obligations on Lorillard and the other
major U.S.
cigarette manufacturers and place significant restrictions on their
ability to market and sell
cigarettes.
|
·
|
The
cigarette market is highly concentrated with Lorillard’s two major
competitors, Philip Morris USA and Reynolds American Inc. having
a
combined market share of approximately 77.1% in the first half
of 2005. In
addition, Reynolds American Inc. owns the third and fourth leading
menthol
brands, Kool and Salem, which have a combined share of the menthol
segment
of approximately 18.9%. The concentration of U.S. market share
could make
it more difficult for Lorillard to compete for shelf space in retail
outlets, which is already exacerbated by restrictive marketing
programs of
Lorillard’s larger competitors, and could impact price competition among
menthol brands.
|
·
|
The
continuing contraction of the U.S. cigarette market, in which Lorillard
currently conducts its only significant business. As a result of
price
increases, restrictions on advertising and promotions, increases
in
regulation and excise taxes, health concerns, a decline in the
social
acceptability of smoking, increased pressure from anti-tobacco
groups and
other factors, U.S. cigarette shipments among the three major U.S.
cigarette manufacturers have decreased at a compound annual rate
of
approximately 2.3% over the period 1984 through the first six months
of
2005 according to information provided by
MSAI.
|
·
|
Competition
from deep discounters who enjoy competitive cost and pricing advantages
because they are not subject to the same payment obligations under
the
State Settlement Agreements as Lorillard. Market share for the
deep
discount brands decreased 1.4 share points from 14.2% in the first
six
months of 2004 to 12.8% in the first six months of 2005, as estimated
by
MSAI. Lorillard’s focus on the premium market and its obligations under
the State Settlement Agreements make it very difficult to compete
successfully in the deep discount
market.
|
·
|
Continuing
sizable industry-wide promotional expenses and sales incentives
are being
implemented in response to declining unit volume, state excise
tax
increases and continuing competition among the three largest cigarette
manufacturers, including Lorillard, and smaller participants who
have
established a competitive level of market share in recent years,
principally in the deep discount cigarette segment. As a result
of
on-going high levels of competition based on the retail price of
brands
and the competitive price advantages of deep discounters, the ability
of
Lorillard and the other major manufacturers to raise prices has
been
adversely affected. In light of this environment, Lorillard’s ability to
raise prices of its brands has been substantially affected to the
extent
that from March of 2002 through December of 2004 Lorillard did
not
increase wholesale prices. During this period,
|
|
increases
by manufacturers in wholesale and retail price promotion allowances
served
to effectively reduce the prices of many key brands. While the
environment
remains highly price competitive, in December of 2004 and January
of 2005,
several manufacturers, including Lorillard, implemented price
changes in
terms of increased wholesale list prices and/or lower promotional
discounts on select brands.
|
·
|
Substantial
federal, state and local excise taxes which are reflected in the
retail
price of cigarettes. In 1999, federal excise taxes were $0.24 per
pack and
state excise taxes ranged from $0.03 to $1.00 per pack. In the
first half
of 2005, the federal excise tax was $0.39 per pack and combined
state and
local excise taxes range from $0.03 to $3.00 per pack. In the first
six
months of 2005, excise tax increases ranging from $0.27 to $1.00
per pack
were implemented in five states. Proposals continue to be made
to increase
federal, state and local excise taxes. Lorillard believes that
increases
in excise and similar taxes have had an adverse impact on sales
of
cigarettes and that future increases, the extent of which cannot
be
predicted, could result in further volume declines for the cigarette
industry, including Lorillard, and an increased sales shift toward
lower
priced discount cigarettes rather than premium brands. In addition,
Lorillard and other cigarette manufacturers are required to pay
an
assessment under a federal law designed to fund payments to tobacco
quota
holders and growers.
|
·
|
Increases
in actual and proposed state and local regulation of the tobacco
industry
relating to the manufacture, sale, distribution, advertising, labeling
and
use of tobacco products and government restrictions on
smoking.
|
·
|
Substantial
and increasing regulation of the tobacco industry and governmental
restrictions on smoking. Bills have been introduced in the U.S.
Congress
to grant the Food and Drug Administration (“FDA”) authority to regulate
tobacco products under the Federal Food, Drug and Cosmetic Act.
Lorillard
believes that FDA regulations, if enacted, could among other things
result
in new restrictions on the manner in which cigarettes can be advertised
and marketed, and may alter the way cigarette products are developed
and
manufactured. Lorillard also believes that any such proposals,
if enacted,
would provide Philip Morris, as the largest tobacco company in
the
country, with a competitive
advantage.
|
·
|
Sales
of counterfeit cigarettes in the United States continue to adversely
impact sales by the manufacturer of the counterfeited brands, including
Lorillard, and potentially damage the value and reputation of those
brands.
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Revenues:
|
|||||||||||||
Operating
|
$
|
118.5
|
$
|
52.2
|
$
|
269.3
|
$
|
138.1
|
|||||
Net
investment income (loss)
|
0.9
|
(0.1
|
)
|
1.4
|
|||||||||
Total
|
119.4
|
52.1
|
270.7
|
138.1
|
|||||||||
Expenses:
|
|||||||||||||
Operating
|
81.5
|
36.3
|
155.4
|
71.4
|
|||||||||
Interest
|
15.1
|
7.4
|
29.7
|
15.2
|
|||||||||
Total
|
96.6
|
43.7
|
185.1
|
86.6
|
|||||||||
22.8
|
8.4
|
85.6
|
51.5
|
||||||||||
Income
tax expense
|
9.1
|
3.4
|
34.0
|
20.5
|
|||||||||
Net
income
|
$
|
13.7
|
$
|
5.0
|
$
|
51.6
|
$
|
31.0
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Revenues:
|
|||||||||||||
Operating
|
$
|
292.1
|
$
|
184.6
|
$
|
551.0
|
$
|
368.9
|
|||||
Net
investment income
|
6.1
|
3.1
|
11.9
|
4.7
|
|||||||||
Investment
gains (losses)
|
0.3
|
(1.3
|
)
|
0.3
|
|||||||||
Total
|
298.2
|
188.0
|
561.6
|
373.9
|
|||||||||
Expenses:
|
|||||||||||||
Operating
|
228.3
|
195.8
|
440.4
|
391.4
|
|||||||||
Interest
|
15.7
|
6.3
|
25.3
|
12.7
|
|||||||||
Total
|
244.0
|
202.1
|
465.7
|
404.1
|
|||||||||
54.2
|
(14.1
|
)
|
95.9
|
(30.2
|
)
|
||||||||
Income
tax expense (benefit)
|
15.6
|
(2.6
|
)
|
29.8
|
(6.8
|
)
|
|||||||
Minority
interest
|
18.8
|
(4.8
|
)
|
32.5
|
(9.8
|
)
|
|||||||
Net
income (loss)
|
$
|
19.8
|
$
|
(6.7
|
)
|
$
|
33.6
|
$
|
(13.6
|
)
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
In
millions)
|
|||||||||||||
Revenues:
|
|||||||||||||
Operating
|
$
|
93.3
|
$
|
85.7
|
$
|
180.5
|
$
|
165.9
|
|||||
Net
investment income
|
0.5
|
0.6
|
5.4
|
1.1
|
|||||||||
Total
|
93.8
|
86.3
|
185.9
|
167.0
|
|||||||||
Expenses:
|
|||||||||||||
Operating
|
72.6
|
71.6
|
141.5
|
139.4
|
|||||||||
Interest
|
2.9
|
1.7
|
4.8
|
3.3
|
|||||||||
Total
|
75.5
|
73.3
|
146.3
|
142.7
|
|||||||||
18.3
|
13.0
|
39.6
|
24.3
|
||||||||||
Income
tax expense
|
2.5
|
5.1
|
10.6
|
9.5
|
|||||||||
Net
income
|
$
|
15.8
|
$
|
7.9
|
$
|
29.0
|
$
|
14.8
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30, 2005
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Revenues:
|
|||||||||||||
Manufactured
products
|
$
|
40.4
|
$
|
31.2
|
$
|
79.5
|
$
|
71.5
|
|||||
Net
investment income
|
(51.8
|
)
|
20.6
|
(28.0
|
)
|
66.7
|
|||||||
Investment
gains (losses)
|
6.7
|
(14.5
|
)
|
3.8
|
(11.5
|
)
|
|||||||
Other
|
9.0
|
12.5
|
9.9
|
18.4
|
|||||||||
Total
|
4.3
|
49.8
|
65.2
|
145.1
|
|||||||||
Expenses:
|
|||||||||||||
Cost
of sales
|
19.7
|
15.1
|
38.7
|
35.3
|
|||||||||
Operating
|
30.5
|
27.1
|
56.7
|
56.9
|
|||||||||
Interest
|
21.5
|
27.1
|
88.6
|
75.4
|
|||||||||
Total
|
71.7
|
69.3
|
184.0
|
167.6
|
|||||||||
(67.4
|
)
|
(19.5
|
)
|
(118.8
|
)
|
(22.5
|
)
|
||||||
Income
tax expense (benefit)
|
(22.8
|
)
|
(7.1
|
)
|
(40.3
|
)
|
(8.4
|
)
|
|||||
Minority
interest
|
0.1
|
||||||||||||
Net
income (loss)
|
$
|
(44.6
|
)
|
$
|
(12.4
|
)
|
$
|
(78.5
|
)
|
$
|
(14.2
|
)
|
Insurance
Financial Strength Ratings
|
Debt
Ratings
|
||||
Property
& Casualty (a)
|
Life
|
CNA
|
Continental
|
||
CCC
|
CIC
|
Senior
|
Senior
|
||
Group
|
Group
|
CAC(b)
|
Debt
|
Debt
|
|
A.M.
Best
|
A
|
A
|
A-
|
bbb
|
Not
rated
|
Fitch
|
A-
|
A-
|
A-
|
BBB-
|
BBB-
|
Moody’s
|
A3
|
A3
|
Baa1
|
Baa3
|
Baa3
|
S&P
|
A-
|
A-
|
BBB+
|
BBB-
|
BBB-
|
(a)
|
Fitch’s
outlook for the Property & Casualty companies’ financial strength and
holding company debt ratings is stable. All others are
negative.
|
(b)
|
A.M.
Best, Fitch and Moody’s have a stable outlook while S&P has a negative
outlook on the CAC rating.
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Fixed
maturity securities
|
$
|
410.0
|
$
|
385.5
|
$
|
773.8
|
$
|
792.8
|
|||||
Short-term
investments
|
28.5
|
9.7
|
60.7
|
25.4
|
|||||||||
Limited
partnerships
|
37.6
|
30.4
|
116.9
|
105.1
|
|||||||||
Equity
securities
|
7.5
|
3.6
|
12.0
|
8.0
|
|||||||||
Income
(loss) from trading portfolio (a)
|
14.1
|
13.8
|
(16.2
|
)
|
33.6
|
||||||||
Interest
on funds withheld and other deposits
|
(50.5
|
)
|
(54.9
|
)
|
(89.4
|
)
|
(102.7
|
)
|
|||||
Other
|
6.4
|
1.4
|
12.8
|
11.2
|
|||||||||
Total
investment income
|
453.6
|
389.5
|
870.6
|
873.4
|
|||||||||
Investment
expenses
|
(14.3
|
)
|
(8.6
|
)
|
(25.3
|
)
|
(17.4
|
)
|
|||||
Net
investment income
|
$
|
439.3
|
$
|
380.9
|
$
|
845.3
|
$
|
856.0
|
(a)
|
The
change in net unrealized gains (losses) on trading securities,
included in
net investment income, was $1.0 million, $(2.0) million, $(7.0)
million
and $2.0 million for the three and six months ended June 30, 2005
and
2004.
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30, 2005
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Realized
investment (losses) gains:
|
|||||||||||||
Fixed
maturity securities:
|
|||||||||||||
U.S.
Government bonds
|
$
|
13.6
|
$
|
(1.0
|
)
|
$
|
(12.4
|
)
|
$
|
9.2
|
|||
Corporate
and other taxable bonds
|
(24.3
|
)
|
27.7
|
(45.7
|
)
|
33.2
|
|||||||
Tax-exempt
bonds
|
27.5
|
(92.1
|
)
|
34.4
|
(19.4
|
)
|
|||||||
Asset-backed
bonds
|
4.6
|
(3.8
|
)
|
11.4
|
35.2
|
||||||||
Redeemable
preferred stock
|
(0.2
|
)
|
2.8
|
10.2
|
4.3
|
||||||||
Total
fixed maturity securities
|
21.2
|
(66.4
|
)
|
(2.1
|
)
|
62.5
|
|||||||
Equity
securities
|
24.5
|
166.1
|
38.8
|
177.2
|
|||||||||
Derivative
securities
|
(23.0
|
)
|
49.4
|
(18.7
|
)
|
17.4
|
|||||||
Short-term
investments
|
0.4
|
0.2
|
|||||||||||
Other
invested assets, including dispositions
|
3.4
|
14.7
|
(11.0
|
)
|
18.1
|
||||||||
Impairment
loss on Individual Life business net of participating
policyholders’interest
|
(52.7
|
)
|
(618.6
|
)
|
|||||||||
Allocated
to participating policyholders’ and minority interests
|
(0.6
|
)
|
(5.3
|
)
|
2.0
|
(5.8
|
)
|
||||||
Total
realized investment gains (losses)
|
25.9
|
105.8
|
9.2
|
(349.2
|
)
|
||||||||
Income
tax (expense) benefit
|
(9.2
|
)
|
13.4
|
(5.5
|
)
|
137.1
|
|||||||
Minority
interest
|
(1.5
|
)
|
(10.4
|
)
|
(0.2
|
)
|
18.7
|
||||||
Net
realized investment gains (losses)
|
$
|
15.2
|
$
|
108.8
|
$
|
3.5
|
$
|
(193.4
|
)
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(In
millions)
|
|||||||||||||
Net
realized gains (losses) on fixed maturity
|
|||||||||||||
and
equity securities:
|
|||||||||||||
Fixed
maturity securities:
|
|||||||||||||
Gross
realized gains
|
$
|
89.0
|
$
|
88.0
|
$
|
265.0
|
$
|
313.0
|
|||||
Gross
realized losses
|
(68.0
|
)
|
(155.0
|
)
|
(267.0
|
)
|
(250.0
|
) | |||||
Net
realized (losses) gains on fixed maturity securities
|
21.0
|
(67.0
|
)
|
(2.0
|
)
|
63.0
|
|||||||
Equity
securities:
|
|||||||||||||
Gross
realized gains
|
34.0
|
169.0
|
54.0
|
182.0
|
|||||||||
Gross
realized losses
|
(9.0
|
)
|
(3.0
|
)
|
(15.0
|
)
|
(5.0
|
)
|
|||||
Net
realized gains on equity securities
|
25.0
|
166.0
|
39.0
|
177.0
|
|||||||||
Net
realized gains (losses) on fixed maturity and equity
securities
|
$
|
46.0
|
$
|
99.0
|
$
|
37.0
|
$
|
240.0
|
Months
in
|
||||||||
Fair
Value
|
Unrealized
|
|||||||
Date
of
|
Loss
|
Loss
Prior
|
||||||
Issuer
Description and Discussion
|
Sale
|
On
Sale
|
To
Sale
|
|||||
(In
millions)
|
||||||||
Various
notes and bonds issued by the United States Treasury.
|
||||||||
Volatility
of interest rates prompted movement to other asset
classes.
|
$10,932.0
|
$44.0
|
0-12+
|
|||||
Manufactures
and sells vehicles worldwide under various brand
|
||||||||
names.
The company also has financing and insurance operations.
|
||||||||
The
company is experiencing inventory capacity issues. Losses
relate
|
||||||||
to
actions to reduce issuer exposure.
|
324.0
|
43.0
|
0-12+
|
|||||
Issuer
of high grade state general obligation bonds. Loss was
incurred
|
||||||||
as
a result of unfavorable interest rate change.
|
227.0
|
5.0
|
0-12
|
|||||
Total
|
$11,483.0
|
$92.0
|
June
30, 2005
|
December
31, 2004
|
||||||||||||
(In
millions of dollars)
|
|||||||||||||
General
account investments:
|
|||||||||||||
Fixed
maturity securities available-for-sale:
|
|||||||||||||
U.S.
Treasury securities and obligations of government agencies
|
$
|
1,810.0
|
4.5
|
%
|
$
|
4,346.0
|
11.1
|
%
|
|||||
Asset-backed
securities
|
10,099.0
|
25.3
|
7,788.0
|
19.9
|
|||||||||
States,
municipalities and political subdivisions-tax-exempt
|
11,048.0
|
27.7
|
8,857.0
|
22.6
|
|||||||||
Corporate
securities
|
6,025.0
|
15.1
|
6,513.0
|
16.6
|
|||||||||
Other
debt securities
|
2,754.0
|
6.9
|
3,053.0
|
7.8
|
|||||||||
Redeemable
preferred stock
|
228.0
|
0.6
|
146.0
|
0.3
|
|||||||||
Options
embedded in convertible debt securities
|
118.0
|
0.3
|
234.0
|
0.6
|
|||||||||
Total
fixed maturity securities available-for-sale
|
32,082.0
|
80.4
|
30,937.0
|
78.9
|
|||||||||
Fixed
maturity securities trading:
|
|||||||||||||
U.S.
Treasury securities and obligations of government agencies
|
53.0
|
0.1
|
27.0
|
0.1
|
|||||||||
Asset-backed
securities
|
125.0
|
0.3
|
125.0
|
0.3
|
|||||||||
Corporate
securities
|
231.0
|
0.6
|
199.0
|
0.5
|
|||||||||
Other
debt securities
|
46.0
|
0.1
|
35.0
|
0.1
|
|||||||||
Redeemable
preferred stock
|
5.0
|
4.0
|
|||||||||||
Total
fixed maturity securities trading
|
460.0
|
1.1
|
390.0
|
1.0
|
|||||||||
Equity
securities available-for-sale:
|
|||||||||||||
Common
stock
|
299.0
|
0.7
|
260.0
|
0.7
|
|||||||||
Non-redeemable
preferred stock
|
158.0
|
0.4
|
150.0
|
0.3
|
|||||||||
Total
equity securities available-for-sale
|
457.0
|
1.1
|
410.0
|
1.0
|
|||||||||
Total
equity securities trading
|
35.0
|
0.1
|
46.0
|
0.1
|
|||||||||
Short-term
investments available-for-sale
|
4,859.0
|
12.2
|
5,404.0
|
13.8
|
|||||||||
Short-term
investments trading
|
441.0
|
1.1
|
459.0
|
1.2
|
|||||||||
Limited
partnerships
|
1,562.0
|
3.9
|
1,549.0
|
3.9
|
|||||||||
Other
investments
|
44.0
|
0.1
|
36.0
|
0.1
|
|||||||||
Total
general account investments
|
$
|
39,940.0
|
100.0
|
%
|
$
|
39,231.0
|
100.0
|
%
|
Gross
Unrealized Losses
|
||||||||||||||||
Cost
or
|
Gross
|
Greater
|
Net
|
|||||||||||||
Amortized
|
Unrealized
|
Less
than
|
than
|
Unrealized
|
||||||||||||
June
30, 2005
|
Cost
|
Gains
|
12
Months
|
12
Months
|
Gain
|
|||||||||||
(In
millions)
|
||||||||||||||||
Fixed
maturity securities available-for-sale:
|
||||||||||||||||
U.S.
Treasury securities and obligations of government
agencies
|
$
|
1,629.0
|
$
|
183.0
|
$
|
2.0
|
$
|
181.0
|
||||||||
Asset-backed
securities
|
10,034.0
|
101.0
|
28.0
|
$
|
8.0
|
65.0
|
||||||||||
States,
municipalities and political
subdivisions-tax-exempt
|
10,738.0
|
316.0
|
3.0
|
3.0
|
310.0
|
|||||||||||
Corporate
securities
|
5,630.0
|
463.0
|
53.0
|
15.0
|
395.0
|
|||||||||||
Other
debt securities
|
2,453.0
|
313.0
|
8.0
|
4.0
|
301.0
|
|||||||||||
Redeemable
preferred stock
|
228.0
|
2.0
|
2.0
|
|||||||||||||
Options
embedded in convertible debt securities
|
118.0
|
|||||||||||||||
Total
fixed maturity securities available-for-sale
|
30,830.0
|
1,378.0
|
96.0
|
30.0
|
1,252.0
|
|||||||||||
Fixed
maturity securities trading
|
460.0
|
|||||||||||||||
Equity
securities available-for-sale:
|
||||||||||||||||
Common
stock
|
203.0
|
98.0
|
2.0
|
96.0
|
||||||||||||
Non-redeemable
preferred stock
|
139.0
|
19.0
|
19.0
|
|||||||||||||
Total
equity securities available-for-sale
|
342.0
|
117.0
|
2.0
|
115.0
|
||||||||||||
Equity
securities trading
|
35.0
|
|||||||||||||||
Total
fixed maturity and equity securities
|
$
|
31,667.0
|
$
|
1,495.0
|
$
|
98.0
|
$
|
30.0
|
$
|
1,367.0
|
Gross
Unrealized Losses
|
||||||||||||||||
Cost
or
|
Gross
|
Greater
|
Net
|
|||||||||||||
Amortized
|
Unrealized
|
Less
than
|
than
|
Unrealized
|
||||||||||||
December
31, 2004
|
Cost
|
Gains
|
12
Months
|
12
Months
|
Gain
|
|||||||||||
Fixed
maturity securities available-for-sale:
|
||||||||||||||||
U.S.
Treasury securities and obligations
of government agencies
|
$
|
4,233.0
|
$
|
126.0
|
$
|
13.0
|
$
|
113.0
|
||||||||
Asset-backed
securities
|
7,706.0
|
105.0
|
19.0
|
$
|
4.0
|
82.0
|
||||||||||
States,
municipalities and political subdivisions-tax-exempt
|
8,699.0
|
189.0
|
28.0
|
3.0
|
158.0
|
|||||||||||
Corporate
securities
|
6,093.0
|
477.0
|
52.0
|
5.0
|
420.0
|
|||||||||||
Other
debt securities
|
2,769.0
|
295.0
|
11.0
|
284.0
|
||||||||||||
Redeemable
preferred stock
|
142.0
|
6.0
|
2.0
|
4.0
|
||||||||||||
Options
embedded in convertible debt securities
|
234.0
|
|||||||||||||||
Total
fixed maturity securities available-for-sale
|
29,876.0
|
1,198.0
|
123.0
|
14.0
|
1,061.0
|
|||||||||||
Fixed
maturity securities trading
|
390.0
|
|||||||||||||||
Equity
securities available-for-sale:
|
||||||||||||||||
Common
stock
|
148.0
|
112.0
|
112.0
|
|||||||||||||
Non-redeemable
preferred stock
|
126.0
|
24.0
|
24.0
|
|||||||||||||
Total
equity securities available-for-sale
|
274.0
|
136.0
|
136.0
|
|||||||||||||
Equity
securities trading
|
46.0
|
|||||||||||||||
Total
fixed maturity and equity securities
|
$
|
30,586.0
|
$
|
1,334.0
|
$
|
123.0
|
$
|
14.0
|
$
|
1,197.0
|
Percent
of
|
Percent
of
|
||||||
Market
|
Unrealized
|
||||||
Value
|
Loss
|
||||||
Due
in one year or less
|
1.0
|
%
|
1.0
|
%
|
|||
Due
after one year through five years
|
7.0
|
14.0
|
|||||
Due
after five years through ten years
|
10.0
|
27.0
|
|||||
Due
after ten years
|
19.0
|
29.0
|
|||||
Asset-backed
securities
|
63.0
|
29.0
|
|||||
Total
|
100.0
|
%
|
100.0
|
%
|
June
30, 2005
|
December
31, 2004
|
||||||||||||
Gross
|
Gross
|
||||||||||||
Estimated
|
Unrealized
|
Estimated
|
Unrealized
|
||||||||||
Fair
Value
|
Loss
|
Fair
Value
|
Loss
|
||||||||||
(In
millions)
|
|||||||||||||
Fixed
maturity securities:
|
|||||||||||||
Investment
grade:
|
|||||||||||||
0-6
months
|
$
|
5,312.0
|
$
|
34.0
|
$
|
7,742.0
|
$
|
53.0
|
|||||
7-12
months
|
1,115.0
|
13.0
|
2,448.0
|
59.0
|
|||||||||
13-24
months
|
882.0
|
17.0
|
368.0
|
12.0
|
|||||||||
Greater
than 24 months
|
102.0
|
2.0
|
2.0
|
||||||||||
Total
investment grade
|
7,411.0
|
66.0
|
10,560.0
|
124.0
|
|||||||||
Non-investment
grade:
|
|||||||||||||
0-6
months
|
686.0
|
42.0
|
188.0
|
7.0
|
|||||||||
7-12
months
|
76.0
|
7.0
|
69.0
|
4.0
|
|||||||||
13-24
months
|
130.0
|
11.0
|
20.0
|
2.0
|
|||||||||
Greater
than 24 months
|
5.0
|
||||||||||||
Total
non-investment grade
|
897.0
|
60.0
|
277.0
|
13.0
|
|||||||||
Total
fixed maturity securities
|
8,308.0
|
126.0
|
10,837.0
|
137.0
|
|||||||||
Equity
securities:
|
|||||||||||||
0-6
months
|
79.0
|
2.0
|
4.0
|
||||||||||
7-12
months
|
3.0
|
1.0
|
|||||||||||
13-24
months
|
2.0
|
1.0
|
|||||||||||
Greater
than 24 months
|
3.0
|
3.0
|
|||||||||||
Total
equity securities
|
87.0
|
2.0
|
9.0
|
||||||||||
Total
fixed maturity and equity securities
|
$
|
8,395.0
|
$
|
128.0
|
$
|
10,846.0
|
$
|
137.0
|
Estimated
|
Fair
Value as a Percentage of Book Value
|
Unrealized
|
|||||||||||||||||
June
30, 2005
|
Fair
Value
|
90-99%
|
80-89%
|
70-79%
|
<70%
|
Loss
|
|||||||||||||
(In
millions)
|
|||||||||||||||||||
Fixed
maturity securities:
|
|||||||||||||||||||
Non-investment
grade:
|
|||||||||||||||||||
0-6
months
|
$
|
686.0
|
$
|
17.0
|
$
|
13.0
|
$
|
11.0
|
$
|
1.0
|
$
|
42.0
|
|||||||
7-12
months
|
76.0
|
4.0
|
3.0
|
7.0
|
|||||||||||||||
13-24
months
|
130.0
|
5.0
|
5.0
|
1.0
|
11.0
|
||||||||||||||
Greater
than 24 months
|
5.0
|
||||||||||||||||||
Total
non-investment grade
|
$
|
897.0
|
$
|
26.0
|
$
|
21.0
|
$
|
12.0
|
$
|
1.0
|
$
|
60.0
|
|||||||
December
31, 2004
|
|||||||||||||||||||
Fixed
maturity securities:
|
|||||||||||||||||||
Non-
investment grade:
|
|||||||||||||||||||
0-6
months
|
$
|
188.0
|
$
|
6.0
|
$
|
1.0
|
$
|
7.0
|
|||||||||||
7-12
months
|
69.0
|
3.0
|
1.0
|
4.0
|
|||||||||||||||
13-24
months
|
20.0
|
1.0
|
1.0
|
2.0
|
|||||||||||||||
Greater
than 24 months
|
|||||||||||||||||||
Total
non-investment grade
|
$
|
277.0
|
$
|
10.0
|
$
|
3.0
|
$
|
13.0
|
June
30, 2005
|
December
31, 2004
|
||||||||||||
(In
millions of dollars)
|
|||||||||||||
U.S.
Government and affiliated agency securities
|
$
|
2,086.0
|
|
6.5
|
%
|
$
|
4,640.0
|
14.9
|
%
|
||||
Other
rated
|
17,966.0
|
55.6
|
14,628.0
|
46.9
|
|||||||||
AA
and A rated
|
5,520.0
|
17.1
|
5,597.0
|
17.9
|
|||||||||
BBB
rated
|
3,912.0
|
12.1
|
4,072.0
|
13.1
|
|||||||||
Non
investment-grade
|
2,825.0
|
8.7
|
2,240.0
|
7.2
|
|||||||||
Total
|
$
|
32,309.0
|
100.0
|
%
|
$
|
31,177.0
|
100.0
|
%
|
June
30,
|
December
31,
|
||||||
2005
|
2004
|
||||||
(In
millions)
|
|||||||
Short-term
investments available-for-sale:
|
|||||||
Commercial
paper
|
$
|
2,371.0
|
$
|
1,655.0
|
|||
U.S.
Treasury securities
|
681.0
|
2,382.0
|
|||||
Money
market funds
|
222.0
|
174.0
|
|||||
Other
|
1,585.0
|
1,193.0
|
|||||
Total
short-term investments available-for-sale
|
4,859.0
|
5,404.0
|
|||||
Short-term
investments trading:
|
|||||||
Commercial
paper
|
45.0
|
46.0
|
|||||
U.S.
Treasury securities
|
65.0
|
300.0
|
|||||
Money
market funds
|
326.0
|
99.0
|
|||||
Other
|
5.0
|
14.0
|
|||||
Total
short-term investments trading
|
441.0
|
459.0
|
|||||
Total
short-term investments
|
$
|
5,300.0
|
$
|
5,863.0
|
·
|
the
impact of competitive products, policies and pricing and the competitive
environment in which CNA operates, including the ability to implement
and
maintain price increases and changes in CNA’s book of business;
|
·
|
product
and policy availability and demand and market responses, including
the
level of CNA’s ability to obtain rate increases and decline or non-renew
underpriced accounts to achieve premium targets and profitability
and to
realize growth and retention
estimates;
|
·
|
the
possibility that the Terrorism Risk Insurance Act of 2002 will
not be
extended beyond the end of 2005, as a result of which CNA could
incur
substantial additional exposure to losses resulting from terrorist
attacks, which could be increased by current state regulatory restrictions
on terrorism policy exclusions and by regulatory unwillingness
to approve
such exclusions prospectively;
|
·
|
development
of claims and the impact on loss reserves, including changes in
claim
settlement policies, and additional charges to earnings if loss
reserves
are insufficient, including among others, loss reserves related
to
|
|
APMT
exposure which are more uncertain and therefore more difficult
to estimate
than loss reserves respecting traditional property and casualty
exposures;
|
·
|
the
impact of regular and ongoing insurance reserve reviews by CNA
and ongoing
state regulatory exams of CNA’s primary insurance company subsidiaries,
and CNA’s responses to the results of those reviews and
exams;
|
·
|
the
effects upon insurance markets and upon industry business practices
and
relationships of current litigation, investigations and regulatory
activity by the New York State Attorney General’s office and other
authorities concerning contingent commission arrangements with
brokers and
bid solicitation activities;
|
·
|
exposure
to catastrophic events, natural and man-made, which are inherently
unpredictable, with a frequency or severity that exceeds CNA’s
expectations and results in material losses, or the occurrence
of
epidemics;
|
·
|
exposure
to liabilities due to claims made by insureds and others relating
to
asbestos remediation and health-based asbestos impairments, as
well as
exposure to liabilities for environmental pollution, mass tort
and
construction defect claims;
|
·
|
whether
a national privately financed trust to replace litigation of asbestos
claims with payments to claimants from the trust will be established
or
approved through federal legislation, or, if established and approved,
whether it will contain funding requirements in excess of CNA’s
established loss reserves or carried loss
reserves;
|
·
|
the
availability and adequacy of reinsurance and the creditworthiness
and
performance of reinsurance companies under reinsurance
contracts;
|
·
|
regulatory
limitations, impositions and restrictions upon CNA and its insurance
subsidiaries, including limitations imposed by state regulatory
agencies
upon CNA’s ability to receive dividends from its insurance subsidiaries
and to pay dividends to the Company, and minimum risk-based capital
standards established by the National Association of Insurance
Commissioners;
|
·
|
the
possibility of further changes in CNA’s ratings by ratings agencies,
including the inability to obtain business from certain major insurance
brokers, the inability of CNA to access certain markets or distribution
channels, and the required collateralization of future payment
obligations
as a result of such changes, and changes in rating agency policies
and
practices;
|
·
|
the
effects of corporate bankruptcies and/or accounting restatements
(such as
Enron and WorldCom) on surety bond claims, as well as on the capital
markets, including the resulting decline in value of securities
held and
possible additional charges for
impairments;
|
·
|
the
effects of corporate bankruptcies and/or accounting restatements
(such as
Enron and WorldCom) on the markets for directors and officers and
errors
and omissions coverages;
|
·
|
the
effects of assessments and other surcharges for guaranty funds
and
second-injury funds and other mandatory pooling
arrangements;
|
·
|
general
economic and business conditions, including inflationary pressures
on
medical care costs, construction costs and other economic sectors
that
increase the severity of claims and the impact of current economic
conditions on companies on whose behalf CNA’s subsidiaries have issued
surety bonds;
|
·
|
regulatory
initiatives and compliance with governmental regulations, judicial
decisions, including interpretations of policy provisions, decisions
regarding coverage and theories of liability, trends in litigation
and the
outcome of any litigation involving CNA, and rulings and changes
in tax
laws and regulations;
|
·
|
legal
and regulatory activities with respect to certain non-traditional
and
finite-risk insurance products and possible resulting changes in
accounting and financial reporting in relation to such products,
including
the Company's restatement of financial results in May of 2005 and
its
relationship with Accord Re Ltd. as disclosed in connection with
that
restatement;
|
·
|
the
effectiveness of current initiatives by claims management to reduce
loss
and expense ratio through more efficacious claims handling techniques;
and
|
·
|
changes
in the composition of CNA’s operating
segments.
|
·
|
health
concerns, claims and regulations relating to the use of tobacco
products
and exposure to environmental tobacco smoke;
|
·
|
legislation,
including actual and potential excise tax increases, and the effects
of
tobacco litigation settlements on pricing and consumption
rates;
|
·
|
continued
intense competition from other cigarette manufacturers, including
increased promotional activity and the continued growth of the
deep-discount category;
|
·
|
the
continuing decline in volume in the domestic cigarette
industry;
|
·
|
increasing
marketing and regulatory restrictions, governmental regulation
and
privately imposed smoking
restrictions;
|
·
|
litigation,
including risks associated with adverse jury and judicial determinations,
courts reaching conclusions at variance with the general understandings
of
applicable law, bonding requirements and the absence of adequate
appellate
remedies to get timely relief from any of the foregoing;
and
|
·
|
the
impact of each of the factors described under “Results of
Operations-Lorillard” in the MD&A portion of this
Report.
|
·
|
the
impact of changes in demand for oil and natural gas and oil and
gas price
fluctuations on exploration and production
activity;
|
·
|
costs
and timing of rig upgrades;
|
·
|
utilization
levels and dayrates for offshore oil and gas drilling
rigs;
|
·
|
regulatory
issues affecting natural gas transmission, including ratemaking
and other
proceedings particularly affecting the Company’s gas transmission
subsidiaries;
|
·
|
the
ability of Texas Gas and Gulf South to renegotiate, extend or replace
existing customer contracts on favorable
terms;
|
·
|
the
successful development and projected cost of planned expansion
projects
and investments; and
|
·
|
the
development of additional natural gas reserves and the completion
of
projected new liquefied natural gas facilities and expansion of
existing
facilities.
|
·
|
general
economic and business conditions;
|
·
|
changes
in financial markets (such as interest rate, credit, currency,
commodities
and equities markets) or in the value of specific
investments;
|
·
|
changes
in domestic and foreign political, social and economic conditions,
including the impact of the global war on terrorism, the war in
Iraq, the
future outbreak of hostilities and future acts of
terrorism;
|
·
|
the
economic effects of the September 11, 2001 terrorist attacks, other
terrorist attacks and the war in
Iraq;
|
·
|
potential
changes in accounting policies by the Financial Accounting Standards
Board, the SEC or regulatory agencies for any of the Company’s
subsidiaries’ industries which may cause the Company or the Company’s
|
|
subsidiaries
to revise their financial accounting and/or disclosures in the
future, and
which may change the way analysts measure the business or financial
performance of the Company and the Company’s
subsidiaries;
|
·
|
the
impact of regulatory initiatives and compliance with governmental
regulations, judicial rulings and jury
verdicts;
|
·
|
the
results of financing efforts;
|
·
|
the
Company and its subsidiaries’ level of success in integrating the
operations of acquired businesses and in consolidating, or selling
existing ones;
|
·
|
the
closing of any contemplated transactions and agreements;
and
|
·
|
the
outcome of pending litigation.
|
Category
of risk exposure:
|
Fair
Value Asset (Liability)
|
Market
Risk
|
|||||||||||
June
30,
|
December
31,
|
June
30,
|
December
31,
|
||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(Amounts
in millions)
|
|||||||||||||
Equity
markets (1):
|
|||||||||||||
Equity
securities
|
$
|
350.0
|
$
|
233.1
|
$
|
(88.0
|
)
|
$
|
(59.0
|
)
|
|||
Options
- purchased
|
25.1
|
19.9
|
(4.0
|
)
|
(2.0
|
)
|
|||||||
- written
|
(4.4
|
)
|
(2.6
|
)
|
(2.0
|
)
|
1.0
|
||||||
Warrants
|
1.3
|
1.0
|
|||||||||||
Short
sales
|
(72.7
|
)
|
(77.6
|
)
|
18.0
|
19.0
|
|||||||
Limited
partnership investments
|
482.6
|
427.7
|
(37.0
|
)
|
(30.0
|
)
|
|||||||
Interest
rate (2):
|
|||||||||||||
Fixed
maturities-short
|
(28.0
|
)
|
(2.0
|
)
|
|||||||||
Futures-long
|
27.0
|
||||||||||||
Futures
- short
|
(33.0
|
)
|
(10.0
|
)
|
|||||||||
Interest
rate swaps-long
|
2.0
|
||||||||||||
Interest
rate swaps-short
|
(44.0
|
) |
(5.5
|
)
|
(141.0
|
)
|
(46.0
|
)
|
|||||
Fixed
maturities
|
459.6
|
390.0
|
5.0
|
4.0
|
|||||||||
Short-term
investments
|
441.5
|
459.2
|
|||||||||||
Other
derivatives
|
4.4
|
2.1
|
7.0 |
(6.0
|
)
|
||||||||
Gold
(3):
|
|||||||||||||
Options
- purchased
|
0.5
|
0.2
|
19.0
|
11.0
|
|||||||||
- written
|
(0.5
|
)
|
(0.1
|
)
|
(33.0
|
)
|
(15.0
|
)
|
Note:
|
The
calculation of estimated market risk exposure is based on assumed
adverse
changes in the underlying reference price or index of (1) a decrease
in
equity prices of 25%, (2) a decrease in interest rates of 100 basis
points
and (3) a decrease in gold prices of 20%. Adverse changes on options
which
differ from those presented above would not necessarily result
in a
proportionate change to the estimated market risk
exposure.
|
(a)
|
In
addition, the Separate Accounts carry positions in equity index
futures. A
decrease in equity prices of 25% would result in market risk amounting
to
$(288.0) and $(289.0) at June 30, 2005 and December 31, 2004,
respectively. This market risk would be offset by decreases in
liabilities
to customers under variable insurance
contracts.
|
Category
of risk exposure:
|
Fair
Value Asset (Liability)
|
Market
Risk
|
|||||||||||
June
30,
|
December
31,
|
June
30,
|
December
31,
|
||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
(Amounts
in millions)
|
|||||||||||||
Equity
markets (1):
|
|||||||||||||
Equity
securities:
|
|||||||||||||
General
accounts (a)
|
$
|
457.4
|
$
|
410.1
|
$
|
(113.0
|
)
|
$
|
(103.0
|
)
|
|||
Separate
accounts
|
54.4
|
55.0
|
(14.0
|
)
|
(14.0
|
)
|
|||||||
Limited
partnership investments
|
1,346.4
|
1,355.7
|
(77.0
|
)
|
(75.0
|
)
|
|||||||
Interest
rate (2):
|
|||||||||||||
Fixed
maturities (a)(b)
|
32,607.7
|
33,112.1
|
(2,112.0
|
)
|
(1,855.0
|
)
|
|||||||
Short-term
investments (a)
|
9,064.6
|
7,847.6
|
(5.0
|
)
|
(7.0
|
)
|
|||||||
Other
invested assets
|
37.6
|
47.8
|
|||||||||||
Other
derivative securities
|
1.9
|
(7.9
|
)
|
134.0
|
9.0
|
||||||||
Separate
accounts (a):
|
|||||||||||||
Fixed
maturities
|
490.4
|
486.3
|
(23.0
|
)
|
(24.0
|
)
|
|||||||
Short-term
investments
|
19.1
|
19.8
|
|||||||||||
Debt
|
(5,590.0
|
)
|
(7,101.0
|
)
|
Note:
|
The
calculation of estimated market risk exposure is based on assumed
adverse
changes in the underlying reference price or index of (1) a decrease
in
equity prices of 25% and (2) an increase in interest rates of 100
basis
points.
|
(a)
|
Certain
securities are denominated in foreign currencies. An assumed 20%
decline
in the underlying exchange rates would result in an aggregate foreign
currency exchange rate risk of $(226.0), and $(254.0) at June 30,
2005 and
December 31, 2004, respectively.
|
(b)
|
Certain
fixed maturities positions include options embedded in convertible
debt
securities. A decrease in underlying equity prices of 25% would
result in
market risk amounting to $(57.0) and $(64.0) at June 30, 2005 and
December
31, 2004, respectively.
|
1.
|
Insurance
Related.
|
2.
|
Tobacco
Related.
|
Votes
For
|
Votes
Withheld
|
||
Joseph
L. Bower
|
178,230,380
|
2,958,505
|
|
John
Brademas
|
176,946,636
|
4,242,249
|
|
Charles
M. Diker
|
178,963,975
|
2,224,910
|
|
Paul
J. Fribourg
|
178,999,904
|
2,188,981
|
|
Walter
L. Harris
|
177,540,174
|
3,648,711
|
|
Philip
A. Laskawy
|
176,678,421
|
4,510,464
|
|
Gloria
R. Scott
|
177,019,182
|
4,169,703
|
|
Andrew
H. Tisch
|
173,055,240
|
8,133,645
|
|
James
S. Tisch
|
175,742,249
|
5,446,636
|
|
Jonathan
M. Tisch
|
175,647,822
|
5,541,063
|
|
Preston
R. Tisch
|
175,566,304
|
5,622,581
|
Description
of Exhibit
|
Number
|
Certification
by the Chief Executive Officer of the Company pursuant to Rule
13a-14(a)
and Rule 15d-14(a)
|
31.1*
|
Certification
by the Chief Financial Officer of the Company pursuant to Rule
13a-14(a)
and Rule 15d-14(a)
|
31.2*
|
Certification
by the Chief Executive Officer of the Company pursuant to 18 U.S.C.
Section 1350 (as adopted by Section 906 of the Sarbanes-Oxley Act
of
2002)
|
32.1*
|
Certification
by the Chief Financial Officer of the Company pursuant to 18 U.S.C.
Section 1350 (as adopted by Section 906 of the Sarbanes-Oxley Act
of
2002)
|
32.2*
|
Pending
Tobacco Litigation, incorporated by reference to Exhibit 99.01
to
Registrant’s Report on Form 10-K for the year ended December 31,
2004
|
99.1
|
*Filed
or furnished herewith.
|
|
LOEWS
CORPORATION
|
|
|
(Registrant)
|
|
|
||
|
||
|
||
Dated: July
29, 2005
|
By:
|
/s/
Peter W. Keegan
|
|
PETER
W. KEEGAN
|
|
|
Senior
Vice President and
|
|
Chief
Financial Officer
|
||
(Duly
authorized officer
|
||
and
principal financial
|
||
officer)
|
Exhibit
31.1
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
(b)
|
Designed
such internal controls over financial reporting, or caused such internal
controls over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Dated: July
29, 2005
|
By:
|
/s/
James S. Tisch
|
JAMES
S. TISCH
|
||
Chief
Executive Officer
|
Exhibit
31.2
|
(a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
(b)
|
Designed
such internal controls over financial reporting, or caused such internal
controls over financial reporting to be designed under our supervision,
to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
|
(c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
(d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
(a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
(b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Dated: July
29, 2005
|
By:
|
/s/Peter
W. Keegan
|
PETER
W. KEEGAN
|
||
Chief
Financial Officer
|
Exhibit
32.1
|
Dated: July
29, 2005
|
By:
|
/s/
James S. Tisch
|
JAMES
S. TISCH
|
||
Chief
Executive Officer
|
Exhibit
32.2
|
Dated: July
29, 2005
|
By:
|
/s/
Peter W. Keegan
|
PETER
W. KEEGAN
|
||
Chief
Financial Officer
|