Loews Corporation

Please stand by, your program is about to begin. If you should need any audio assistance during your call today, please press star and zero. Good day, everyone, and welcome to today's Lowe's Corporation Q4 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, you'll have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing star 1 on your touchtone phone. Please note this call may be recorded, and I will be standing by should you need any audio assistance. It is now my pleasure to turn today's call over to Mary Scafidis, Vice President of Investor Relations and Corporate Communications. Please go ahead.

Thank you, Ashley, and good morning, everyone. Welcome to the Lowe's 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 Edelson. Following our prepared remarks this morning, we will have a question and answer session with questions from shareholders. Before we begin, however, I will remind you that this conference call might include statements that are forward-looking in nature. Actual results achieved by the company may differ materially from those made or implied in any forward-looking statements due to a wide range of risks and uncertainties, including those set forth in our SEC filings. Forward-looking statements reflect circumstances at the time they are made. The company expressly disclaims any obligation to update or revise any forward-looking statement. 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. Lowe's had a strong fourth quarter and year, with our consolidated subsidiaries making good progress in 2021. What's more, these positive results were achieved in a period marred by the persistence of the COVID-19 pandemic, global supply chain disruptions, and the return of inflation. More on inflation later in the Q&A. Before we talk about the financial performance of our subsidiaries, I'd like to provide an update concerning the ongoing boardwalk litigation. Many shareholders are familiar with the class action litigation relating to our 2018 acquisition of the minority master limited partnership interests in boardwalk pipelines. In November, the Delaware Court of Chancery issued a decision stating that Lowe's breached the Boardwalk Partnership Agreement, a decision with which we vehemently disagree. The same court then awarded the class of former Boardwalk unit holders approximately $690 million plus interest. Lowe's has appealed this ruling to the Delaware Supreme Court since we firmly believed that the Chancery Court misapplied the factual underpinnings of the case and misinterpreted the applicable law. There's a lot more I'd like to say, but on advice of counsel, I'm going to limit myself to this brief statement. Moving on to other happier topics, on today's call, I'd like to focus on the performance of CNA and Lowe's Hotels. CNA continues to be a success story for Lowe's. producing record core income of $1.1 billion for the year, in no small part due to the company's laser-like focus on underwriting. CNA's underlying combined ratio decreased by 1.7 points in 2021, driven by the expense ratio. The underlying loss ratio for the year was flat at about 60%. Needless to say, we're pleased with CNA's operational progress. In 2021, CNA benefited from the rate increases resulting in significant premium growth. The company's P&C gross written premiums increased approximately 10%, and net written premiums increased about 5%. As I've mentioned before, the increase in net written premiums is lower than the increase in gross written premiums, due to additional reinsurance that the company purchased in its strategy to protect the insurance portfolio from large loss events. Rate increased more than 9% overall for the year, which is a solid increase. As CNA mentioned on their call earlier today, they expect rate to stay ahead of lost cost trends in 2022. CNA's pre-tax investment income was up from the prior year due to limited partnerships and common stocks, which increased $258 million. On average, CNA reinvests between $300 million and $400 million a month into its fixed income portfolio, so higher interest rates would improve the portfolio's yield over time. Additionally, CNA announced a special dividend of $2 per CNA share, up from 75 cents per share in 2021. As a reminder, from 2015 through 2020, CNA paid a $2 special dividend. In 2021, however, the Board reduced the dividend because CNA's earnings were lowered due to the effects of the pandemic and other catastrophes. The return of the $2 special dividend is reflective of CNA's strong earnings performance, as well as its financial strength and fortress balance sheet. The company also announced a common dividend of 40 cents per share. These dividends represent the payment of $584 million to Lowe's in the first quarter of this year. At Lowe's Hotels, what a difference a year makes. The company reported adjusted EBITDA of $135 million for 2021, a significant turnaround from the adjusted EBITDA loss of $103 million posted in 2020. Lowe's Hotels continues to rebound from the impact of COVID-19, with all hotel properties up and running by the end of the second quarter of 2021. We believe the hotel company will continue to recover from the effects of the pandemic, even though it may be sometime before it sees pre-pandemic levels of occupancy. Lowe's Hotels has continued to see increased demand for leisure travel, as well as improving interest for group travel. For the fourth quarter, owned and joint venture hotels had approximately a 70% occupancy rate, largely in line with the third quarter. However, over that same period, the average daily room rate increased by more than 6%. The company's resort hotels continue to do considerably better than its urban properties, and happily, nearly two-thirds of Lowe's Hotel's rooms are in resort destinations. Lowe's Hotel's distinctive position as an owner and an operator has also played a part in the company's recovery. To illustrate this point, Since the beginning of 2019, a year in which the company earned adjusted EBITDA of $227 million, Lowe's Hotels has added about 3,700 rooms to its system. However, the pandemic has prevented the company from realizing the full earnings potential of these new rooms, the majority of which are in destinations with built-in demand generators like Orlando. As the pandemic wanes and Lowe's Hotels continues to grow, its unique role as an owner and operator should continue to accelerate the recovery that the company has already begun to experience. Before I turn the call over to David, I want to mention share repurchases. In 2021, the company repurchased just over 21 million shares of our common stock for about $1.1 billion. which represents almost 8 percent of the shares outstanding at the beginning of the year. Each year for the last four years, we have spent approximately $1 billion on share repurchases. Over the last four years, we have decreased our shares outstanding by 25 percent. We feel that share repurchases are a great use of the company's capital aimed at creating value over the medium to long term for our shareholders. As long as our shares trade below our view of their intrinsic value, we will continue to buy them in. And with that, let me turn the call over to David.