Loews Corporation

Good day and thank you for standing by. Welcome to the Lowe's Corporation first quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to Mary Scafidas, Vice President of Investor Relations and Corporate Communications for Lowe's.

Thank you, Laurie, and good morning, everyone. Welcome to Lowe's Corporation's first quarter earnings conference call. A copy of our earnings release, earnings supplement, and company overview may be found on our website, lowes.com. On the call this morning, we have our Chief Executive Officer, Jim Tisch, and our Chief Financial Officer, David Adelson. Following our prepared remarks this morning, we will have a question and answer session with questions from shareholders. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statements. This disclaimer is only a brief summary of the company's statutory forward-looking statements disclaimer, which is included in the company's filings with the SEC. During the call today, we might also discuss non-GAAP financial measures. Please refer to our security filings and earnings supplement for reconciliation to the most comparable GAAP measures. With that, I'd like to turn the call over to Jim. Jim, over to you.

Thank you, Mary, and good morning. What a difference a year makes. Twelve months ago, we were all facing tremendous uncertainty about the future. A year later, all the personal, social, and economic effects of COVID-19 are still impacting each of us individually and collectively. The outlook at Lowe's has significantly improved. Each of our subsidiaries has been affected differently by the pandemic, but across the board, their responses have been extraordinary, and each business has found its footing in 2021. First, let's look at our largest subsidiary, CNA. The company's operational strength and resilience is evident not only in its underlying combined ratio and rate increases, but also in its ability to respond nimbly to ongoing challenges. In the first quarter, CNA did experience higher-than-usual cat losses from what I call the Texas freeze-off, but its basic business continued to perform well. CNA's underlying combined ratio of 91.9 improved nearly two points over the prior year quarter of 93.7, with a 1.6 percentage point improvement in the expense ratio. rate continues to be strong with an 11 percent increase in the quarter. CNA's investment portfolio ended the quarter with $4.3 billion in unrealized gains, down from a high of $5.7 billion last quarter, primarily due to higher interest rates. Over the long term, higher interest rates will be beneficial to CNA, allowing it to invest its cash flow at higher rates than today. Boardwalk Pipelines has substantial operations in Texas, but the February storm had little financial impact on the company. Boardwalk's revenues slightly increased due to higher system utilization during the freeze-off, as was the case with other companies in the natural gas transportation industry. The company's solid performance during this crisis was not a lucky accident. Rather, it was a result of significant preparation, planning, and hard work by the BoardWalk team. The company's considerable efforts paid off and BoardWalk was able to deliver gas to its customers with minimal disruption. BoardWalk's revenue increase to $370 million in the first quarter of 2021 was due to growth projects that had been placed into service and the colder winter weather. Of all our subsidiaries, Lowe's Hotels has been hit the hardest by the pandemic. However, as travel picks up across the country, we are seeing gradual progress at Lowe's Hotels, especially at the company's resort destinations. By the end of the first quarter of 21, 23 of the company's 27 hotels were open. In further good news, the company expects to have hotels open in all its markets by the end of the second quarter. Comparing the first quarter of 2021 to the final quarter of 2020, we saw continued improvement in trends. The average daily room rate of our owned and JV hotels that are open increased by 25% to $234. Leisure travel continues to improve at a faster pace than business travel. And while we expect that circumstances will vary by hotel property, Occupancy at hotels should increase gradually as the economy recovers from the pandemic. Lowe's Hotels has an ownership interest in nearly 15,000 rooms, approximately 11,000 of which are located in resort destinations. So we think that Lowe's Hotels is well positioned to benefit from this leisure-led recovery. When acquiring a subsidiary, our long-term goal is to have that subsidiary return capital to Lowe's when the time is appropriate. Lowe's acquired Altium in 2017 for $1.2 billion. That was $600 million in equity and $600 million in debt at the Altium level. In February of 2021, Altium refinanced its term loans and replaced its roughly $850 million of debt with a new $50 million seven-year term loan, allowing the company to pay $200 million dividend to Lowe's. And a month later, on April 1st, Lowe's sold a 47% stake in Altium to GIC, the Singapore Wealth Fund, for gross cash proceeds of $422 million. With these two transactions, Lowe's has recouped its entire initial investment in Altium while still retaining a 53% ownership interest in the company. From a portfolio optimization standpoint, we felt the time was right for us to monetize a portion of Lowe's' ownership stake in Altium. We believe strongly in the long-term prospects of Altium's business, And it's our opinion that the Altium management team is second to none in the industry. By retaining a majority ownership position, Lowe's will be able to capitalize on the future growth trajectory of the company. Additionally, we have gained a strong and like-minded partner in GIC. Under the new ownership structure, Altium has increased in financial flexibility when it comes to larger acquisitions. Finally, so far in 2021, Lowe's has purchased more than 6,150,000 shares of our common stock at an average price of $49.58 per share for a total of $305 million, representing 2.3% of our outstanding shares. Many a time you've heard me bemoan the discount at which Lowe's trades, so I'll spare you the rant this time and just let our repurchase activity speak for itself. David, over to you.